Good Financial Governance

Project description

Title: Good Financial Governance
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Mozambique
Lead executing agency: Ministério da Administração Estatal e Função Pública (MAEFP) – Ministry of State Administration and Public Service, Tribunal Administrativo (TA) – Mozambican Supreme Audit Institution
Overall term: 2019 bis 2021

Context

The decentralisation reform is a key priority issue within Mozambique’s ongoing peace process. The constitutional reform of June 2018 was a crucial step in the redistribution of power from the central government level to the sub-national level. However, the reform also presents a challenge for ministries and local administrations, as legislation now needs to be adapted, and complex reform steps have to be planned and implemented. This also requires the clarification of responsibilities for the different administrative units and individual areas of competence. The same applies to the decentralised system of public finance.

Until now, municipalities in Mozambique have been unable to meet the needs of their citizens to an adequate extent. In most cases, they do not have sufficient funds. Transfer payments from the central government to the municipalities are too small and municipalities do not realize their full potential in collecting their own taxes and fees. What is more, municipalities frequently use their budget funds in an inefficient or intransparent manner, and the degree to which administrations are monitored and held accountable is limited. 

This issue also pertains to other sectors: Development in the country is hampered by the fact that there is no effective and transparent government strategy for making use of the increasingly important extractive industries. To date, inefficient administration and a lack of transparency have meant that it has not been possible to use the income from this sector for the benefit of the local population. Despite an existing mandate of the Supreme Audit Institution, audits in strategic areas such as natural resources and construction projects are still limited.

Objective

Financial governance processes have been improved regarding transparency, sustainability and effectiveness.

Approach

The project supports the Mozambique Ministry of Finance (MEF), the Ministry of State Administration and Public Service (MAEFP), the Ministry of Mineral Resources and Energy (MIREME), the Supreme Audit Institution (TA) and the National Association of Municipalities (ANAMM), as well as selected municipalities in the provinces of Inhambane and Sofala in developing and strengthening efficient and transparent processes in public administration. 

The project is working on four fields of activity simultaneously: 

• Strengthening decentralisation

Strategies for strengthening and implementing the decentralisation reform are being developed and the project supports their countrywide implementation at municipal level in cooperation with the Ministry of State Administration and Public Service, the Ministry of Finance and the National Association of Municipalities.

• Improving financial governance in selected municipalities

The project supports the municipalities on matters relating to income, budgeting, internal control, human resources strategy, communication with citizens and supervision by local assembly.

• Strengthening external financial control

The project advises the Supreme Audit Institution on auditing strategic areas such as extractive industries and in complex public construction projects.

• Increasing the transparency of financial flows in the extractive sector

The project assists with monitoring financial transfers from resource revenue in the extractive regions, thereby helping to harness the development potential of the extractive sector.
The advisory consortium, consisting of NIRAS – IP Consult, Ambero and WINS Global Consult, provides support on the project implementation.
Conceptually, the project builds on the experiences and successes of completed projects such as Good Financial Governance in Local Government (2015 to 2019) and Support to the Mozambique Supreme Audit Institution (2016 to 2019).
 

Results

Together with selected municipalities and districts in Manica, Sofala and Inhambane provinces, strategies to increase the authorities’ own revenues and internal control have already been developed and implemented during prior projects. In comparison to 2016, these revenues have risen by an average of 28 per cent in the 24 districts in 2018. In the six pilot municipalities, revenues have increased by an average of eight per cent in 2018 when compared with 2017. 
In the same period, some 1,500 participants from the local public sector received training from national partner institutions in workshops and seminars. The proportion of women attending these courses was approximately 30 per cent. This is more than the proportion of female employees in the institutions, which is almost at 20 per cent. Since then, around 800,000 citizens from eleven partner municipalities potentially have better access to services when to construction permits, company registrations as well as tax and fee collection. 

The annual report of the Mozambican Supreme Audit Institution contributes to increase accountability in the extractive sector. Since 2017, this the report has included a chapter on the extractive industry, which shows the origin and amount of tax revenues within the sector. In future, the Supreme Audit Institution will also check contracts in the extractive sector and public construction projects such as roads and airports and verify, if they are in accordance with new procedures.