Tonga`s Public Financial Management Reform

Transcription

GOVERNMENT OF THE KINGDOM OF TONGA
TONGA’S PUBLIC FINANCIAL
MANAGEMENT REFORM ROADMAP,
2014/2015– 2018/2019
Prepared by the Ministry of Finance and National Planning
Kingdom of Tonga
Tonga PFM Reform Roadmap 2014-2019
Table of Contents
Executive Summary ............................................................................................................... 1-5
1
Introduction. ................................................................................................................... 1-9
2
Commitment to the PFM Reform Roadmap. ................................................................. 2-9
3
The current PFM setting. ............................................................................................. 3-11
3.1
Legal and regulatory framework. ......................................................................... 3-11
3.2
Institutional framework. ....................................................................................... 3-12
3.3
Recap of previous reforms ................................................................................... 3-13
4
Tonga PFM System Diagnostics and Self-Assessment. .............................................. 4-15
4.1
PFM System Improvements to Date .................................................................... 4-16
4.2
Need for a sound PFM Reform roadmap ............................................................. 4-17
5
The PFM reform roadmap – Challenges and Proposed actions. .................................. 5-18
5.1
Critical Institutional and Structural Issues. .......................................................... 5-18
5.1.1 Reliable Government Integrated Financial Management Information System
(IFMIS). ....................................................................................................................... 5-18
5.1.2 Adequate Human Capital (Staff Capacity). ..................................................... 5-20
5.1.3 Improve The Existing Legislative and Regulatory Framework. ...................... 5-22
5.2
Policy Formulation, Planning, and Budget Formulation. .................................... 5-23
5.2.1 Improve Planning Processes ............................................................................ 5-23
5.3
Enhance policy formulation ................................................................................. 5-25
5.4
Increase Credibility of the Budget ....................................................................... 5-26
5.4.1 Composition of expenditure out-turn at MDAs level. ..................................... 5-26
5.5
Improve Budget Comprehensiveness and Transparency. .................................... 5-28
5.5.1 Budget Classification. ...................................................................................... 5-28
5.5.2 Transparency of inter & non- governmental fiscal relationships..................... 5-29
5.5.3 Oversight of aggregate fiscal risk from other public sector entities. ............... 5-30
5.5.4 Public Access to Key Fiscal Information......................................................... 5-32
5.6
Enhance Policy based Budgeting ......................................................................... 5-33
5.6.1 Multi-year perspective in fiscal planning, expenditure policy and budgeting. 5-33
5.7
Budget Execution ................................................................................................. 5-35
5.7.1 Predictability and Control in Budget Execution .............................................. 5-35
5.7.2 Effectiveness in collection of tax payments..................................................... 5-36
5.7.3 Predictability in the availability of funds for commitment of expenditure ...... 5-38
5.7.4 Management of Debt........................................................................................ 5-39
5.7.5 Competition, value for money and controls in Procurement. .......................... 5-40
5.7.6 Improve Asset Management. ........................................................................... 5-41
5.7.7 Effectiveness of Internal Audit ........................................................................ 5-42
5.7.8 Devolvement of Government PFM system...................................................... 5-45
5.8
Accounting and Financial Reporting ................................................................... 5-46
5.8.1 Accounting, Recording and Reporting ............................................................ 5-46
5.8.2 Availability of information on resources received by service delivery units. . 5-46
5.8.3 Quality and timeliness of In-year reporting ..................................................... 5-47
5.8.4 Quality and timeliness of Annual Reporting. .................................................. 5-48
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5.9
External Oversight ............................................................................................... 5-49
5.9.1 External Scrutiny and Audit............................................................................. 5-49
5.9.2 Scope, Nature and Follow-up of External Audit ............................................. 5-49
5.9.3 Legislative Scrutiny of the Annual Budget Law.............................................. 5-51
5.9.4 Legislative Scrutiny of External Audit Reports. .............................................. 5-52
5.10 Other Critical Issues. ............................................................................................ 5-53
5.10.1 Development Partner Management Practices .............................................. 5-53
5.10.2 Sustainable Capacity Building ..................................................................... 5-55
6
Sequencing the PFM Reform Roadmap ...................................................................... 6-56
6.1
Monitoring and Evaluation. ................................................................................. 6-57
6.1.1 PFM Reform Coordinating Unit (PFM-RRU) ................................................. 6-57
6.1.2 PFM Reform Roadmap Steering Committee (PFM-RSC) .............................. 6-58
7
Communicating the PFM Reform Roadmap ............................................................... 7-59
8
Change Management Process. ..................................................................................... 8-60
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List of Tables and Annex
Table 1 Outcome of the 2014 PFM Review
Table 2 PEFA Assessment on the Credibility of the Budget
Table 3 Key Budget credibility goals, challenges and proposed actions
Table 4 PEFA Assessment on Comprehensiveness and Transparency
Table 5 Classification of the Budget, challenges and proposed actions
Table 6 Transparency on inter-governmental fiscal challenges and planned actions
Table 7 Key challenges and planned actions on Oversight of aggregate fiscal risk
Table 8 Key Budget information goals, challenges and proposed actions
Table 9 PEFA Assessment on Budget Cycle – Policy based Budgeting
Table 10 Key multi-year planning and budgeting goals, challenges and proposed
actions
Table 11 PEFA Assessment on the Budget Cycle – Predictability and Control in
Budget Execution
Table 12 Key challenges to the effectiveness of tax collection and planned actions
Table 13 Key challenges on other budget control and execution and planned actions
Table 14 Key challenges in procurement and planned actions
Table 15 Key internal audit challenges and planned actions
Table 16 PEFA Assessment on– Accounting, Recording and Reporting
Table 17 Key challenges on other budget control and execution and planned actions
Table 18 Key challenges on in-year and annual reporting and planned actions
Table 19 PEFA Assessment of the– External Scrutiny and Audit
Table 20 Key external audit challenges and planned actions
Table 21 Key challenges related to Legislative Review of the Annual Budget Law and
planned actions
Table 22 Key challenges relating to legislative scrutiny of external audit reports and
planned actions
Table 23 Key development partner management challenges and planned actions
ANNEX 1 Tonga PFM Reform Roadmap 2014-2019 Results Matrix
15
26
27
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29
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31
32
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61
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LIST OF ABBREVIATIONS
AO
CEO
CF
CMS
CP
DPs
IFMIS
FY
GoT
ICT
IPSAS
LA
MDAs
MDGs
MoET
MoFNP
MoH
MoPEs
MoRC
MTB
MTBF
NRBT
ODA
PAC
PDMRP
PEs
PEFA
PFM
PFM-RRU
PFM-RSC
PFTAC
PI
PICs
PRS
PSC
RMS
SP
TSDF
Audit Office
Chief Executive Officer
Contingency Fund
Customs Management System
Corporate Plan
Development Partners
Integrated Financial management information system
Fiscal Year
Government of Tonga
Information & Communication Technology
International Public Sector Accounting Standards
Legislative Assembly
Ministries, departments and agencies
Millennium development goals
Ministry of Education and Training
Ministry of Finance and National Planning
Ministry of Health
Ministry of Public Enterprises
Ministry of Revenue and Customs
Medium-term budgeting
Mid-term budget framework
National Reserve Bank of Tonga
Overseas development assistance
Public Accounts Committee
Public Debt Management Reform Plan
Public Enterprises
Public Expenditure and Financial Accountability
Public Financial Management
Public Financial Management-Reform Roadmap Unit
Public Financial Management-Roadmap Steering
Committee
Pacific Financial Technical Assistance Centre
Performance Indicator
Pacific Island Countries
Procurement Reform Strategy (Action Plan)
Public Service Commission
Revenue management system
Sector Plan
Tonga Strategic Development Framework
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EXECUTIVE SUMMARY
With the Government of Tonga’s narrow revenue base, there is every need for disciplined
allocation and efficient utilization of public funds. A sound public financial management
(PFM) system should ensure that:





Government revenue is collected and administered properly;
public spending is carried out effectively as planned and efficiently as budgeted;
practical signals are sent out when deviations occur;
oversight mechanisms are effective in monitoring and evaluation of public spending;
economic transactions are timely recorded and accurately reported.
Past decades have witnessed Government’s continual efforts to improve its PFM system. The
Tonga PFM Reform Roadmap (the ‘Roadmap’) covers the five (5) year period from July
2014 to June 2019.
‘Effective and efficient governance with transparent and disciplined PFM system that
serves the interests of the Government of Tonga (GoT) and its people’ is the vision of this
PFM Reform Roadmap 2014-2019.
As part of Tonga’s major program of restructuring and PFM reform, GoT continues to press
ahead with efforts to improve the quality of its PFM in a coherent and coordinated manner.
Improving the efficacy of public service delivery would:
i.
ii.
iii.
iv.
v.
achieve macroeconomic stability;
create an environment conducive for private sector growth;
ensure the optimal use of Tonga’s productive resources;
enhance accountability and good governance; and
directly contribute to improving standard of living of Tongans.
Conversely, poor PFM imposes a growth penalty, which increases vulnerability to
macroeconomic and fiscal shocks; encourages fraudulent acts and corrupt behavior; and can
have adverse impacts on wider socio-economic stability.
Government has been pursuing a variety of reform programs for at least the last two decades.
These have met with a variety of results, from effective change, to limited change, to no longterm desirable effect.
Evidence that Tonga has taken PFM reforms can be found in the facts that:
 it has made significant progress in achieving most of its MDGs;
 it was the highest ranked among Pacific Island Countries (PICs) on the World Bank’s
2014 Doing Business Report;
 its ratings on the World Bank’s Public Expenditure and Financial Accountability
(PEFA)1 assessments have steadily improved since 2007;
1PEFA
is a multi-agency partnership program sponsored by: the World Bank, the International Monetary Fund, the European Commission,
the United Kingdom’s Department for International Development, the French Ministry of Foreign Affairs, the Royal Norwegian Ministry
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 among the ten Pacific Island Countries that have completed PFM system reviews
using the PEFA assessments, Tonga had high ratings of (A or B) compared to the
region--receiving 16 A’s or B’s out of the 31 PFM dimensions assessed; and
 a recent Australian Assessment of National Systems found that most aspects of the
Tongan PFM system are developed well enough that they could manage direct
budget support in a transparent and accountable manner.
However, there were also some weaknesses identified which include:
 lack of political commitment to see the process through to sustained implementation;
 lack of adequate phasing of the reform process and clear communication between all
stakeholders;
 high turnover of staff and changes in management resulting in loss of key staff before
adequately handing over the new process to new staff;
 lack of adequate resources due to tight budget constraint and the occurrence of
unforeseen significant events that require diversion of resources to remedy and deal
with as a matter of urgency and priority;
 lack of real buy in to the reform process, with the result that some changes in “form”
were put in place without real change in “content”;
 lack of appreciation of how long it takes to embed reforms; and/or
 lack of ongoing development partner support, resulting in important support being
withdrawn before the reforms are fully embedded.
The results of the 2014 PEFA self-assessment displays the strengths and improvements to
date since the 2010 assessment. Government recognizes and appreciates the ongoing support
of development partners in supporting these PFM reforms, and calls on them to show a strong
ongoing commitment so as to ensure that these reforms are effectively embedded. The aim is
to continue building on these achievements. The Roadmap for the next 5 years covers both
structural and process reforms and includes the followings:
A. Critical need – crossing cutting issues;
The priority of the Roadmap is to enhance the reliability of the Government Integrated
Financial Management Information System (IFMIS), and to ensure adequate staff is in place
in all the PFM units. This is done through a proposal to upgrade the existing IFMIS, and
strengthen the staff capacity of MoFNP and relevant MDAs either through recruitment or
build capacity of existing staff. Furthermore, the PFM Act 2002 and related regulations and
policy need to be revised to provide a robust legal framework for PFM functions to operate.
B. Policy Formulation, Planning, and Budget Formulation;
The Roadmap is part of the Government development reform agenda, as shown in the Tonga
Strategic Development Framework (TSDF) and in various international and regional charters
that Tonga had endorsed. An improved planning process to link the budget to the national
plan and related sector, district and corporate plans, is needed and supported, and for
preparation of a longer term National Development Plan beyond 2014.
The policy formulation needs to be enhanced to provide the appropriate macro framework to
inform planning and budgeting. This would require collaboration with the Bureau of
of Foreign Affairs, the Swiss State Secretariat for Economic Affairs, and the Strategic Partnership with Africa.
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Statistics. On Budget formulation, there is greater need for improved budget credibility, more
comprehensive and transparency, and policy-based budgeting.
C. Budget Execution:
Predictable and controlled budget execution is necessary to enable effective management of
policy and programme implementation. The Roadmap supports the control of the budget to
ensure that funds are available to meet commitments. The Roadmap also envisions
devolvement of more financial management responsibilities to MDAs in order to allow them
greater flexibility in allocating resources to more efficiently and effectively meet national
objectives – provided they operate with complete transparency using the government’s
central IFMIS and their business processes for procurement, commitment control, and other
financial transactions comply with PFM law, regulations, and MOFNP operating policies.
The need for effective revenue management will be enhanced by the proposal to upgrade the
Revenue Management System (RMS). The Roadmap supports the approved Procurement
Reform Strategy and its implementation plan as this will ensure value for money on
Government spending and improved accountability and transparency. The internal oversight
role is also critical as a management tool to ensure proper internal controls are in place to
ensure compliance.
D. Accounting and Financial Reporting;
The ongoing demand on Government to be more transparent and accountable increases the
importance of improved financial reporting. MoFNP will continue to work towards a ‘Whole
of Government’ Financial Report that includes the financial statements of Public Enterprises.
MoFNP will continue to insert improvements in an effort to comply with International Public
Sector Accounting Standards (IPSAS).
E. External Oversight;
The oversight role of the Legislative Assembly and the Audit Office is vital for the
effectiveness of PFM functions. The Roadmap supports strengthening the capacity of the
Audit Office to perform more performance audits in addition to the current financial and
compliance audit mandates. The establishment of the Parliament Public Accounts Committee
(PAC) adds credibility to the oversight role. However, it still needs an appropriate
framework in place to effectively carry out such critical functions and some training of PAC
members to fully absorb the significant roles and functions of the PAC.
F. Other Cross cutting issues – Capacity Building;
It is very critical to build the capacity and develop skills of PFM staff not only to effectively
carry out their respective functions but also to sustain the high level of PFM standards and
practice in the future. The Roadmap considered it crucial to establish a PFM Training Unit in
the MoFNP Policy and Reform Division to identify the training needs, and assess the
knowledge and skill gaps of PFM units then co-ordinate, organize, and facilitate relevant
PFM training courses for them.
To achieve the goals of the Roadmap, a PFM Reform Roadmap Committee (PFM-RRC) will
be set up to oversee the implementation of the PFM Reform Roadmap. The Policy and
Reform Unit will provide the secretariat function to the PFM Reform Roadmap Steering
Committee (PFM-RSC), which will be chaired by the Minister for Finance and National
Planning. Communicating the Roadmap effectively and getting the support of the
stakeholders are fundamental to the success of the roadmap. To ensure effective
implementation of the Roadmap, a Risk Management Framework is suggested to provide
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strategies to identify and manage risks. Moreover, a Change Management Plan is needed to
strategize the implementation of the Roadmap and identify the effect of the changes so that it
can be implemented effectively.
We look forward to the commitment of Government to allow the effective implementation of
the PFM Reform Roadmap and also the continued partnership with development partners to
achieve the goals and aspirations of the people of Tonga in a fiscally responsible manner.
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1
INTRODUCTION.
Public Finance Management (PFM) is an essential part of the development process in any
country, and Tonga is no exception. PFM concerns the effective management of the
collection and expenditure of public funds. It encompasses all phases of the budget cycle,
including the preparation of the budget, internal control and audit, procurement, monitoring
and reporting arrangements, and external audit. Efficient PFM is central to creating a
relationship of mutual trust and shared consensus between Government and its citizens. It
ensures accountability and efficiency in the management of public resources, which are
critical to the achievement of public policy objectives, even at a global front such as the
Millennium Development Goals (MDGs).
The increasing demand from the people of Tonga for Government to provide public services,
underpin the needs for better resource allocation and transparent governance. However, such
societal needs will always be greater than the resources available for Government to satisfy
those needs. Financial resources are scarce and access is uneven. With the Government of
Tonga’s (GoT) limited resources and narrow revenue base; there is every need for disciplined
allocation and efficient utilization of public resources. A good PFM system ensures that:





Government revenue is collected and administered properly;
public spending is carried out effectively as planned and efficiently as budgeted;
practical signals are sent out when deviations occur;
economic transactions are recorded and reported accurately, completely, and timely;
and
oversight mechanisms are effective in monitoring and evaluation of public spending.
Past decades have witnessed GoT’s continual efforts to improve its PFM system.
This document presents the Tonga Public Financial Management (PFM) Reform Roadmap
(the ‘Roadmap’) for the next five (5) year period, 2014/2015 – 2018/2019 (i.e. July 2014 –
June 2019).The Roadmap is part of the government led overall reform strategy which
includes interactive engagement with relevant stakeholders. It provides a general guidance
and pathway for the proposed PFM reforms, taking into account the existing PFM systems
and processes. The Roadmap is in 8 sections. The background information on the current
Tonga PFM systems and setting is in Sections 2 and 3. Section 4 presents the Tonga PFM
system diagnostic and assessment, and the need for reform. The core of the Roadmap is
section 5 which analyzes related PFM issues and proposed actions to address those issues.
The last three sections (sections 6 – 8) cover critical areas and issues to ensure the effective
implementation of the PFM Reform Roadmap.
2
Commitment to the PFM Reform Roadmap.
The GoT is committed to the PFM Reform. The Roadmap is part of the Government’s overall
public sector reform and development strategy. The Tonga Strategic Development
Framework (TSDF) 2011-2014, included as one of its nine outcome objectives, the need for
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“Better governance, by adopting the qualities of good governance, accountability,
transparency, anti-corruption and rule of law”.
The TSDF has four (4) enabling themes to deliver these outcome objectives which are all
related PFM activities. These include:
i.
ii.
iii.
iv.
continuing progress to a more efficient and effective Government;
improving the macro-economic environment and fiscal management;
ensuring Public Enterprises are sustainable and accountable; and
ensuring a more coordinated whole of Government approach in Tonga’s partnership
with development partners.
In addition, Tonga has endorsed the Pacific Plan, the Forum Principles of Good Leadership
and Accountability, the Forum Economic Ministers Economic Plan, and also the Paris
Declaration and Accra Agenda. These international and regional reform plans/agenda
highlighted and recognised the importance of good governance with emphasis on the need for
PFM reforms and a Reform Roadmap. Tonga is fully committed to these principles and
actions.
The vision of the Tonga PFM Reform Roadmap 2014-2019 is:
‘Effective and efficient governance with transparent and disciplined PFM system
that serves the interests of the Government of Tonga (GoT) and its people’.
Tonga’s PFM reform roadmap broad objective is to improve the efficacy of public service
delivery in a manner that would:





maintain macroeconomic stability;
create an environment conducive for private sector growth;
maximize the optimal use of productive resources;
enhance accountability and good governance; and
improve the standard of living of Tongans.
The Ministry of Finance and National Planning (MoFNP) will lead and co-ordinate the
Roadmap with relevant key institutions set out in section 3.2 below, and with development
partners. The intention is to move ahead with the planned improvements to the current PFM
system in a monitored and consistent strategy, taking into account the interests of all PFM
stakeholders.
The commitment of the GoT to carry out the PFM system reform is fundamental for the
effective implementation of this Roadmap. The willingness of development partners to
provide budgetary support and technical assistance to GoT hinges on a sound PFM system in
place.
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3
3.1
THE CURRENT PFM SETTING.
Legal and regulatory framework.
The initial architecture of Tonga’s PFM system is traced back to its 1875 Constitution. This
architecture is supplemented by relevant legislation, regulations, policies, procedure manuals,
and financial instructions that have been installed and updated from time to time to meet the
test of time. The Constitution of Tonga obligates the people of Tonga, and its residents, to
contribute, through taxation, to financing the Government. It also instructs that the
Legislative Assembly shall determine the overall estimates (ceilings) for public service
expenditure prior to the beginning of the new fiscal year. It further demands that no public
funds could be spent without a prior vote by the Legislative Assembly.
Key legislation necessary to facilitate the sound management of public finance, is in
place including:
o
o
o
o
o
o
o
o
o
o
o
o
Government Act 1903 and its amendments.
Public Finance Management Act 2002 and its amendments of 2010.
Revenue Administration Act 2000 and its amendments of 2002 and 2013.
Revenue Services Administration Act 2002 and its amendments of 2003, 2007,
2008, 2010 and 2013.
Consumptions Tax Act 2003 and its amendments of 2005, 2010 and 2013.
Income Tax Act 2007 and its amendments of 2010.
Customs Act 2007 and its amendments of 2010 and 2012.
Customs and Excise Management Act 2007 and its amendments of 2010, 2012,
and 2013.
Excise Tax Act 2007 and its 2013 amendment.
Public Audit Act 2007 and its amendments of 2012.
Public Enterprises Act 2002 and its amendments of 2012.
Public Service Act 2002 and its amendments of 2010 and 2012.
These PFM related laws are being operationalised by key regulations such as the:
o
o
o
o
o
o
o
o
Public Finance Administration Regulations 1984.
Public Revenue Regulations 1988
Public Procurement Regulations 2010.
Revenue Services Administration Regulations 2003 and its amendments of 2006
and 2013.
Consumption Tax Regulations 2005.
Income Tax Regulations 2008.
Customs and Excise Management Regulations 2013.
Public Service Regulations 2003 and its amendments of 2010.
The Tonga Strategic Development Framework (TSDF), the Districts and Sector
Plans, MDAs’ Corporate Plans (CPs), Budget Estimates, Budget Strategies, Budget
Statements, and Treasury Instructions, are part of the Cabinet orders that are in place
to facilitate the PFM process.
The PFM Manual, Corporate Planning Manual, Budget Manual, Procurement
Manual, Internal Audit Manual, Public Service Policy Manual, and other relevant
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manuals are either in place or are in advanced draft form. These manuals will
continue to be updated and consolidated as much as possible on a regular basis during
the Roadmap period.
3.2
Institutional framework.
PFM reforms need robust institutions to support the process and maintain its integrity in a
sustainable way. Tonga has already established these robust institutional arrangements
framework through legislations and/or past reforms. In the case that any of these institutional
arrangements need to be enhanced and strengthened, the Roadmap provides for such
requirement. The current institutional arrangements in Tonga includes key MDAs as follows:
INSTITUTIONS
The Legislature


The Executive
Cabinet
Ministry of Finance 
& National Planning
(MoFNP)
Ministry of Revenue

ACTIVITIES
Approves the appropriation of public funds for Government
operation through the annual budget. Government financial
statements are required to submit to Parliament on an annual
basis.
In 2011, the Public Accounts Committee (PAC) of the House
was established. The PAC’s establishment was a major
achievement as a good governance tool with greater
expectations for improved transparency and accountability.
Formulates public policies including PFM, and administer
Government operations to provide services to the public.
Manages public finance which is operationalised through
various PFM activities as follows:
 National Planning–coordinate the national planning,
district and sector planning, and corporate planning.
 Policy formulation and advice- provide macro-economic
forecasting and also the provision of advisory role on, and
formulation of, economic and development policies.
 Budget formulation and monitoring –prepare the budget
strategy, Government budget estimates, the budget
statements, and co-ordinates with relevant MDAs and
within MoFNP during the budget formulation process.
Monitor the budget execution in collaboration with the
MoFNP – Treasury division.
 Project and aid management –co-ordinate overseas
development assistance (ODA), and also collaborate with
some MDAs on aid and project management.
 Procurement–administer the procurement regulation.
 Cash, debt, and asset management –daily managing of
cash, expenditure debt, and asset of Government.
 Internal oversight –carry out the internal audit of MoFNP
operations.
 Accounting, recording and Reporting –operate the
centralised Government accounting system, and prepares
the GoT financial reports.
Revenue collection and administration –of about 80% of total
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and Customs
(MoRC)
Audit Office
Public Accounts
Committee (PAC).
Public Service
Commission (PSC)
Ministries,
Departments, and
Agencies (MDAs)
Bureau of Statistics
National Reserve
Bank of Tonga
(NRBT)
Ministry of Public
Enterprises (MPEs)
and Public
Enterprises (PEs)
Government revenue. The remaining 20% is by other MDAs.
 Internal and external oversight functions of Government.
 Legislative oversight and scrutiny role on behalf of the
Legislative Assembly (LA).
 Overall administration of the civil service.
 As of July 2014, GoT has15 Ministries2 and 8 Agencies3. MDAs
are responsible for carrying out PFM activities.
 Collect and analyse data which enhance PFM functions.
 Independent and guide monetary policy and act as disciplining
force on fiscal policy.
 As of July 2014, there are 15 PEs4. MPE is tasked with the
oversight role over the PEs.
The above key institutions have worked collaboratively to promote fiscal responsibility
and good governance, through transparent and accountable financial transactions. Such
collaboration is greatly needed for the implementation of the Roadmap to be successful
and sustainable.
3.3
Recap of previous reforms
Over the past two decades, GoT has conducted a range of restructuring and reform
programs to improve the operations of the public services including:


public service reform, staff performance systems, improved management;
restructuring of Government MDAs to put in place a more efficient, effective and
affordable public service;
Ministry of Foreign Affairs and Trade, Prime Minister’s Office, Ministry of Finance and National Planning,
Ministry of Revenue and Customs, Ministry of Public Enterprises, Ministry of Commerce, Tourism, and
Labour, Ministry of Justice, Ministry of Police, Prisons and Fire Services, Ministry of Health, Ministry of
Education and Training, Ministry of Internal Affairs, Ministry of Agriculture, Food, Forestry and Fisheries,
Ministry of Infrastructure, Ministry of Lands and Natural Resources, Ministry of Environment Energy Climate
Change Disaster Management Meteorology Information and Communication.
2
3
Palace Office, Legislative Assembly, Audit Office, Commissioner of Public Relations, Tonga Defence
Services, Attorney General’s Office, Public Service Commission, and Bureau of Statistics.
4
Tonga Broadcasting Commission, Tonga Water Board, Tonga Forest Products Ltd, Ports Authority Tonga,
Tonga Airports Ltd, Tongatapu Market Ltd, Tonga Power Ltd, Tonga Communications Corporation, Tonga
Development Bank, Tonga Post Ltd, Waste Authority Ltd, Tonga Export Quality Management Ltd, Tonga
Assets managers & Associates Ltd, Friendly Island Shipping Agency Ltd, Tonga Cable Ltd.
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



planning and financial sector reform;
economic and social development;
fiscal and tax reform; and
private sector reform.
These reforms have met with a variety of results. In some cases, reforms have been
embedded and have continued. In other cases, reforms never really got off the ground,
and in yet other cases, reforms have been followed for a while but have fallen away over
time.
Evidence that Tonga has taken PFM reforms can be found in the following facts:


it has made significant progress in achieving most of its MDGs;
it was the highest ranked among PICs on the World Bank’s 2014 Doing Business
Report;
 its ratings on the World Bank’s Public Expenditure and Financial Accountability
(PEFA) assessments have steadily improved since 2007;
 Tonga ranks better than any other PICs in the UNDP Human Resource Index
2012;
 among the Pacific Island Countries that have completed public financial
management system reviews using the PEFA assessments Tonga had high
numbers of high (A or B) ratings in the region receiving 16 A’s or B’s out of the
31 PFM dimensions assessed; a recent Australian Assessment of National Systems
found that most aspects of the Tongan PFM system are well enough developed
that they could manage direct budget support in a transparent and accountable
manner; and
 Country Performance Assessment (CPA) and Country Performance Indicator
Assessment (CPIA)
However, a number of factors have contributed to the reforms’ mixed performance
including:







lack of political commitment to see the process through to sustained
implementation;
lack of adequate phasing of the reform process and clear communication between
all stakeholders;
high turnover of staff and changes in management resulting in loss of key staff
before adequately handing over the new process to new staff;
lack of adequate resources due to tight budget constraint and occurrence of
unforeseen significant events that need diversion of resources to remedy and deal
with as a matter of urgency and priority;
lack of real buy in to the reform process, with the result that some changes in
“form” were put in place without real change in “content”;
lack of appreciation of how long it takes to embed reforms; and/or
lack of ongoing development partner support, resulting in important support being
withdrawn before the reforms are fully embedded.
While much has been achieved in the past decades, more still remains to be done.
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4
Tonga PFM System Diagnostics and Self-Assessment.
The 2014 PEFA self-assessment is the latest assessment to date. The 2014 self-assessment
acknowledges certain strengths in Tonga’s PFM system and identifies key areas that need
improvements when compared to the PEFA ratings of 2007 and 2010. GoT acknowledges
these weaknesses and is fully committed to addressing the weaknesses and areas where
improvements are needed.
A summary of the state of the Tonga PFM systems from the 2014 PEFA review is in Table 1
below. The 2014 PEFA self-assessment is one of the bases used by the Roadmap. The
Roadmap focuses on improving the PFM areas that is performing below the acceptable
levels, while still maintaining the areas that performed well. The assessment is followed by
proposed actions to improve critical PFM areas to ensure a complete and effective PFM
system in the next five (5) year period.
Table 1: Outcome of the 2014 PEFA PFM Self-Assessment Review
The indicators that presented a very satisfactory level of PFM performance (score A) are:
 PI-1 Aggregate expenditure out-turn compared to original approved budget;
 PI-3 Aggregate revenue out-turn compared to original approved budget;
 PI-5 Classification of the budget;
 PI-6 Comprehensiveness of information included in budget documentation;
 PI-7 Extent of unreported government operations;
 PI-9 Oversight of aggregate fiscal risk from other public sector entities;
 PI-11 Orderliness and participation in the annual budget process;
 PI-13 Transparency of taxpayer obligations and liabilities; and
 PI-17 Recording and management of cash balances, debt and guarantees.
The indicators that presented an acceptable level of PFM performance (score B, B+) are:
 PI-2 Composition of expenditure out-turn compared to original approved budget;
 PI-4 Stock and monitoring of expenditure payment arrears;
 PI-14 Effectiveness of measures for taxpayer registration and tax assessment;
 PI-20 Effectiveness of internal controls for non-salary expenditure;
 PI-22 Timeliness and regularity of accounts reconciliations;
 PI-24 Quality and timeliness of in-year budget reports; and
 PI-25 Quality and timeliness of annual financial statements.
The indicators that presented weak levels of PFM performance (score C, C+) are:
 PI-10 Public access to key fiscal information;
 PI-12 Multi-year perspective in fiscal planning, expenditure policy and budgeting;
 PI-16 Predictability in the availability of funds for commitment of expenditures;
 PI-18 Effectiveness of payroll controls;
 PI-21 Effectiveness of internal audit;
 PI-26 Scope, nature and follow-up of external audit;
 D-2 Financial information provided by development partners for budgeting and reporting
on project and program aid; and
 D-3 Proportion of aid that is managed by use of national procedures.
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The indicators that presented very weak levels of PFM performance (score D, D+) are:
 PI-15 Effectiveness in collection of tax payments;
 PI-19 Competition, value for money and controls in procurement ;
 PI-23 Availability of information on resources received by service delivery units.
 PI-27 Legislative scrutiny of the annual budget law;
 PI-28 Legislative scrutiny of the external audit reports; and
 D-1 Predictability of Direct Budget Support.
The indicators Not Rated (N/R) and Not Applicable (N/A) included:
 PI-8 Transparency of Intergovernmental Fiscal Relations; and
4.1
PFM System Improvements to Date
The improved indicators achieved under the 2014 PEFA self-assessment are an outcome of a
number of actions and projects that have been negotiated with the support of development
partners. These include the following:
i. Production of the TSDF -Outlines the vision, outcome objectives, and strategic
development direction that the government wishes to take.
ii. Corporate planning improvements - A revised process for three-year revolving
corporate planning – Enhanced Corporate Planning - has been implemented. The goal
is an integrated approach which will provide a three year corporate plan more focused
on:
 the outcomes for public services as the basis for improved management at
the MDAs level,
 the information required for three year rolling Medium-term budget
framework (MTBF), and
 improved monitoring of progress and staff performance.
iii. Medium-term budgeting framework (MTBF) - Forward estimates for expenditures
are published in budget documents at the Ministry level. A process for a three-year
rolling MTBF has been designed and implemented and is integrated with the
corporate planning process to ensure that MDAs corporate plans and budgets are
internally consistent, providing a clear balance between the MDAs outputs and
available resources. It is envisioned that future budget documents and tracking
systems will clearly identify at the program/sub-program level the future costs of past
decisions, and include more information on the future costs of other high priority
objectives identified in the National Development Strategy.
iv. Streamlining the level of budgetary delegation to MDAs.
v. Revenue collection and management systems - A Review of Tax and Customs
Administration was undertaken in 2011, with support from PFTAC. As a result, the
Revenue Committee has been established to endorse proposals to implement (and
submit to Cabinet for approval if needed) and to track implementation.
vi. The chart-of-accounts has been updated to include the UN supported Classification
of Functions of Government (COFOG) classification to provide greater detail and for
ease of international comparison.
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vii. The Contingency Fund approved at the beginning of each financial year continues to
adequately cover the unbudgeted demands that arise during the Financial Year.
viii. A clear policy of no further Government borrowing until debt returns to
sustainable levels has been established, and an evaluation of Government’s debt
management system has identified aspects that need additional attention.
ix. Project and aid management systems strategies have been formulated, and project
management database established.
x. Development partner coordination is becoming more systematic. Government has
taken the initiative to improve development partner coordination through holding
Government - Development Partner meetings 1-2 times a year to:
 provide updates and discuss development partner plans;
 establish a joint-development partner monitoring system for the provision of
budget support; and
 establish an effective reform matrix for budget support. This ensures that all
providers of budget support are using the same set of reform criteria to streamline
compliance and predictability of budget support.
xi. The Government procurement system has been regularized with the Procurement
regulations now adopted.
xii. Annual and in-year financial reporting have been provided to Cabinet, Parliament
and to the public.
xiii. Internal Audit Division in MoFNP had been established, and currently operating.
xiv. Audit Office legal framework strengthened to enhance independence of audit
functions.
xv. Establishment of a senior level Working Group for Government Structural Reform
to lead the restructuring of the Government Ministries to bring them into line with the
new Cabinet structure, and guide a longer-term reform program including PFM
reform; and
xvi. Re-activation of work on an improved staff performance management system.
GoT recognizes and appreciates the ongoing support of development partners for these
reforms, and calls on them to continue with a strong ongoing commitment to ensure that these
reforms are effectively embedded.
4.2
Need for a sound PFM Reform roadmap
The GoT recognised that a PFM reform is critical to secure long-term economic success, to
maximise the efficient use of limited public resources, to create the highest level of
transparency and accountability in Government finances, and most importantly, to channel
more and better services for the citizens of Tonga.
The global economic crisis compounded by some unfortunate domestic events in the recent
past years had negatively impacted government fiscal performance and threatened financial
stability with declining Government revenue, increasing unbudgeted commitments, and a
substantial increase in indebtedness. .
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Despite the commitments of national and development partner resources in the past years to
implementing PFM reforms in Tonga some weaknesses remain which will continue to
undermine budget credibility, and threaten fiscal stability over the medium-term. These
include:
i. The lack of an overall plan for implementing the PFM and related reforms, resulting
in some weaknesses in overall supervision and integration of the various initiatives.
ii. The lack of an effective coordination and monitoring mechanism at the management
level within MoFNP and with key MDAs to help ensure that various parts of the
reform process move smoothly together.
iii. The lack of both adequate human and physical capital to carry out the proposed
reform in a sustainable manner both within MoFNP and in MDAs.
iv. The lack of co-ordination of various development partners’ support to the reform
process has resulted in some overlaps that had to be addressed by staff.
GoT then supports the need for a PFM reform. It reaffirmed its intention and commitment to improve
revenue collection, prudently manage public spending, contain debt to a sustainable level, enhance
financial controls and reporting, and continue to make improvements in many areas
The Roadmap brings together various initiatives currently underway and combines them with
some further initiatives to address remaining gaps and so ensure that GoT has a
comprehensive and integrated process of reform underway.
5
The PFM reform roadmap – Challenges and Proposed actions.
This is the core part of the PFM Reform Roadmap and is designed to address the challenges
on the current PFM systems as implied in the Tonga PFM diagnostics and assessments. The
Roadmap proposes reforms on structural issues, the financial management cycle, and core
institutional strengthening issues. It takes into account the existing local PFM systems and
settings and the resource constraints, and focuses on creating an enabling environment for
efficient and effective PFM and public service delivery. It covers the following major areas:
A.
B.
C.
D.
E.
F.
5.1
Critical Institutional and Structural Issues.
Policy formulation, Planning and Budget formulation.
Budget Execution.
Accounting and Financial Reporting
External Oversight.
Other Critical Cross-Cutting issues
Critical Institutional and Structural Issues.
5.1.1 Reliable Government Integrated Financial Management Information System
(IFMIS).
A functional PFM system, properly integrated into an IFMIS, provides reliable information
that supports proper planning and budgeting, efficient management of public resources,
timely reporting, and effective enforcement of accountability rules and procedures.The
Roadmap’s top priority is the proposal to upgrade and improve the Government Integrated
Financial Management Information System (IFMIS). This is very critical for the efficient and
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effective implementation of all phases of the PFM cycle and the Roadmap. The following
provides reasonable justifications:

The need for accurate, complete, and reliable data that is timely available for planning
and policy formulation, for budgeting, procurement, recording, reporting, and oversight
roles. Efficiency gains are expected from ensuing improvements in resource allocations.

The potential for significant improvements in staff competencies and morale, and also
their occupational health, as the work processes will be more efficient and effective.
Staff time will be utilized more productively on more economic and financial analysis.

The effective utilization of recent technology developments that Tonga has achieved or
will achieve, such as the new broadband and faster internet connection.

The practical application of the skills and knowledge that has been developed by staff
through technical assistance, especially to MoFNP, on particular PFM areas in all
divisions of the ministry.
The commitment from GoT and Development Partners (DPs) to fund this top-priority
proposal is crucial. If this priority area cannot be implemented it will hinder all other aspects
of this Roadmap and slow down the progress of the proposed reform. It will thus make it
difficult to expect improvements on a timely basis in key PFM functions.
In analysing the existing IFMIS the following problems were identified:
i. Government IFMIS is far lagging in maintenance.
The GoT IFMIS is far lagging in adequate maintenance and timely upgrading to
match and adapt to the evolvement of subsequent reforms and economic challenges
since its establishment more than 15 years ago. The existing FMIS has not been
integrated to provide the real time information that it was developed for. It resulted in
inefficient processes, idle system functions, and ineffective allocation of resources.
ii. Government PFM capacity is inadequate
There is lack of adequate PFM capacity, both human and physical, in both the
MoFNP and MDAs. Such deficiency is a major barrier to implement an effective and
efficient PFM and this Roadmap. It is a priority to provide the appropriate capacity to
MoFNP and MDAs to facilitate the Roadmap implementation.
iii. Government IFMIS has not completely rolled out into all ministries
The GoT IFMIS has not yet completely rolled out into all MDAs. As of October 2013,
the accounting SunSystem has been rolled out to only 11 MDAs besides the MoFNP.
The volume and complexity of Government financial transactions have been increased
tremendously in the past decade, and therefore has increased the demand for more real
time information by stakeholders. The roll out of the IFMIS was considered as a
mechanism to meet such demand.
iv. Government integrated communication network system is limited.
There is limitation in a Government integrated communication network to support
MoFNP and MDAs, and that has caused ineffective communications and inefficient
actions. An upgraded integrated communication network system with adequate
capacity for current and future expansion will allow efficient, timely and effective
communication within MoFNP and with MDAs.
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In view of the above limitations the following proposed actions are to be taken to improve
the Government’s IFMIS capabilities and to ensure successful implementation of the
Roadmap.
Proposed Actions
Responsible Target Date
1. Upgrade the GoT Integrated Financial Management MoFNP
30 June, 2015.
Information System (FMIS), which: (i) is compatible with
Government need and stakeholders; (ii) has automated
features for an effective and efficient PFM operations; and
(iii) has the ability to be deployed to MDAs and
consolidated by MoFNP.
2. Upgrade the computer equipment and install compatible
computers that will interface with GoT IFIMS in MoFNP
and Accounts divisions of MDAs with specific standard
specifications to cater for integration of the PFM
functions.
MoFNP
31 December,
2015.
3. Complete the roll-out of Government IFMIS to MDAs.
MoFNP,
MDAs
MoFNP,
MDAs
30 June, 2016.
4. Review and upgrade the Government Integrated
Communication Network that will support the
communications of PFM activities within MoFNP, and
also with MDAs, and stakeholders.
30 June, 2017.
5.1.2 Adequate Human Capital (Staff Capacity).
The existing human capital in all the key PFM ministries and MDAs is inadequate to
facilitate the effective, efficient, and sustainable implementation of the PFM functions. As
with the top priority for IFMIS proposed above, the need for adequate human capital is also
significant and must also consider a priority. The lack of adequate staff to implement the
Roadmap will be a catalyst for failure. Therefore it is needed to strengthen the human capital
in MoFNP, MoRC, AO, MoPE, and MDAs, for PFM to function well.
The proposals for improvements in staff capacity for key PFM MDAs are provided below:
Ministry of Finance and National Planning (MoFNP);
The MoFNP is currently not adequately staffed to carry out its mandatory PFM functions.
Therefore, MoFNP needs appropriate staff with appropriate qualifications and experiences in
all divisions to carry out their expected roles in the Roadmap.
Given its critical role to lead and co-ordinate the implementation of the Roadmap, MoFNP’s
structure should be able to support the Roadmap’s successful implementation. Therefore a
review of the existing MoFNP structure should be considered and to also ensure improved
and better co-ordination of divisions within MoFNP. Further improvement is also needed on
the integration of MoFNP outreach and support to MDAs at all PFM areas and divisions.
MoFNP will determine and establish the most appropriate structure arrangement to ensure
further strengthening of the integration between PFM unit’s related areas of work within
MoFNP and with MDAs.
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Proposed Actions
Responsible
Target Date
1. Review MoFNP’s structure to achieve greater integration
and improved co-ordination of key PFM Units within
MoFNP and with MDAs and stakeholders conducive to
the achievement of PFM goals and accommodate
sustainable effective PFM reforms.
MoFNP
31 December,
2014.
2. Strengthen the human capital (staff) capacity of key PFM
Units of MoFNP through recruitment/upgrading to
reinforce the existing staff capacity to carry out its
mandatory PFM functions and to lead the implementation
of the PFM reforms.
MoFNP
31 December,
2015.
Ministry of Revenue and Customs (MoRC)
The Roadmap supports the proposal to improve staff capacity in MoRC as provided below.
MoRC needs to be properly resourced and motivated to ensure efficient collection of tax
revenue and proper administration of the tax functions.
Ministry of Public Enterprises (MoPE).
The need to improve the oversight of aggregate fiscal risk for Public Enterprises (PEs) and
other public entities and for improved accountability and transparency by PEs raise the
demand for adequate staff capacity.
Proposed Action
Responsible
1. Improve the staff capacity of MoPE by recruiting new
and/or strengthen existing staff to enhance the mandatory
oversight function over PEs, and also the analysis and
reporting of PEs performance as per PFM reforms.
MoFNP,
PSC, MoPE
Target Date
31 December,
2015.
Audit Office (AO).
It is also critical to strengthen the staff capacity of the Audit Office to ensure that they carry
out their mandatory oversight roles effectively and independently. The Roadmap proposed
that in the medium term the internal audit functions of MDAs should be gradually transferred
to the Internal Audit Division (IAD) of MoFNP. The AO will then concentrate on the
external audits of MDAs’ and PEs’ financial statements. Moreover, the AO will continue to
perform more performance audits. The staff capacity need of the AO is always provided in
their CPs and Annual Management Plan which is submitted on an annual basis to Parliament
for endorsement.
Ministries, Departments, and Agencies (MDAs).
All MDAs are currently not adequately resourced to carry out PFM functions effectively and
efficiently. MDAs need to be equipped with appropriate staff capacity with at least
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Accountants and Assistant Accountants. Further, the Roadmap needs improved staff capacity
of MDAs to:
 assist in preparation of corporate plans (CPs) and link to medium term budgeting
(MTB) with appropriate costing;
 assist in ensuring accuracy and completeness of aid projects records and reports;
 implement the devolvement of some financial management to respective MDAs as
long as they conform to uniform business process standards laid out by the MOFNP;
 ensure compliance of MDAs with procurement rules and regulations;
 prepare MDAs for the internal and external audits; and
 ensure more effective co-ordination of MDAs with MoFNP on all PFM matters.
As a minimum requirement, each MDA should ensure that they have at least access to these
skills or have these posts which may vary depending on existing capacity, and size and
volume of financial transactions of each MDAs. These minimum posts include:
a. One (1) Financial Manager at the Deputy/Principal Accountant level.
b. At least One (1) Senior Accountant/Accountant.
c. At least Two (2) Assistant Accountants
d. At least One (1) ICT Staff/Assistant.
Proposed Action
Responsible
1. Co-ordinate with MDAs to review and assess their PFM
MoFNP,
staff capacity then strengthen/recruit adequate staff to PSC, MDAs
MDAs’ Accounts Divisions to carry out their respective
PFM functions.
Target Date
>50% by 30
June, 2015.
100% by 30
June 2016.
5.1.3 Improve The Existing Legislative and Regulatory Framework.
The Public Finance Management Act (PFMA) 2002, which governs the management of
public funds and mandated the PFM activities, needs to be reviewed and improved to provide
the enabling and updated legislative and regulatory framework for the effective operation of
PFM functions. It came into effect in June 2003, and has not been reviewed since then
despite the subsequent changes and various reforms that have effects and impacts on the
government PFM functions.
In 2010, draft PFM regulations were prepared, but the subsequent changes in the political and
economic landscape impacted the PFM functions and these draft regulations were put on
hold. It was considered that these draft PFM regulations need further review together with a
review of the principal Act. Currently, the subordinate regulations of the repealed Public
Finance Administration Act (Cap 65) and Public Revenue Act (Cap 64) are still used in
accordance with section 48(2) of the PFMA.
It is therefore imperative that the PFM Act 2002 and subordinate regulations are to be revised
to:
 ensure transparency and greater accountability in managing public resources;
 strengthen and improve PFM in Government by ensuring the safe custody of assets
and enhance quality reporting of Government economic transactions;
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


provide clarity on the application of the PFMA to PFM activities, assign
responsibilities for PFM activities, and determine the scope and standards of PFM to
be applied in Tonga;
respond and cater for the changes in PFM standards and practices due to rapid change
brought by technology which automated business processes with more electronic and
paper-less transactions, thus called for efficient and effective PFM functions; and
accommodate the subsequent development, and proposal for improved, PFM
activities such as the establishment of the MoFNP Internal Audit function, and the
proposals for devolvement of PFM to MDAs.
In addition, there is the need to review and better integrate other regulatory and policy
frameworks5 to ensure alignment and consistency with the revised legislations. These should
be prepared during and/or after the legislative and regulatory review.
The following action is being proposed to improve the legislative framework.
Proposed Actions
Responsible
1. Review the Public Finance Management (PFMA) Act
2002 and PFM regulations, and other PFM related
regulatory and policy frameworks.
MoFNP,
Crown Law
Office, AO,
LA.
5.2
Target Date
31 December,
2015.
Policy Formulation, Planning, and Budget Formulation.
5.2.1 Improve Planning Processes
The PFM reform must be implemented as part of the Government overall strategy and
country led. Effective planning and allocation of resources is key and government should
develop and institutionalise planning processes at all levels of Government. It is therefore
critical to build consensus through inclusive consultations to develop plans at various layers
from national level, to district, sector, and corporate planning level.
Currently, several documents are prepared as part of the planning process:
i.
the ‘Tonga Strategic Development Framework’;
ii. District Plans;
iii. Sector Plans;
iv.
MDAs Corporate Plans; and
v. MDAs Annual Action Plans.
5
These other frameworks may include the National Planning Framework, Economic and Development Policy
Advice Framework, Budget Framework, Budget Manual, Treasury Instructions, Treasury Manual, Cash, Debt,
and Asset Management Frameworks, Risk Management Framework, Procurement policy and Procedure
Manual, Internal Audit Charter and Manual, Audit Manual, Financial Reporting Standards, and other related
PFM regulatory frameworks.
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The content of many of these plans reflects the significant amount of work by many actors in
Government, private sectors, and civil society organisations (CSOs). However, most of these
contents are disconnected from the medium-term budget and annual budgets. For instance,
MDAs have thought about their missions, visions, objectives, goals, outputs, and outcomes
but strategies do not translate well to activities and are often not costed. The lack of
connection between planning and the budget has caused significant concerns from PFM
perspective as it often resulted in unfavourable and negative fiscal implication due to
diversion of resources to unplanned and unbudgeted activities. This has also prompted some
MDAs to question the value of corporate planning process.
It is crucial for PFM functions to improve the planning process and strengthen planning at
these levels. Further, to show the clear link between these plans to budget documents and the
budget process as strong tools for strategic management, and quality PFM functions.
MDAs will be asked to provide a clear gap analysis between the current state of their outputs
and the desired state. This will include the additional resources (local and aid) required over
the next few years to deliver these improvements, and explaining how outputs will be
improved and how they will contribute to improvements in outcomes. This is important to
build accountability in MDAs. Overall, budget circumstances or Government priorities may
not permit requests of MDAs and other parties to all be met when they want them met, but
allowing them to clearly state their arguments in a document that will be the basis for setting
priorities will contribute to an improved system.
The following actions are being proposed to improve the planning process.
Proposed Actions
Responsible
1. Complete the implementation of three-year rolling
MoFNP,
PSC,
MDAs.
30 June,
2015.
MoFNP.
31 December,
2015.
corporate plans with more medium-term policy and
strategy content. This is (i) guided by the TSDF, and also
with the Sector and the District Plans and (ii) fully
consistent with the MTBF, so that corporate plan outputs,
and available resources, can be put in balance.
2. Review the TSDF and develop a long-term National
Strategic Development Plan covering at least 10 years
and to include a clear Monitoring and Evaluation
Framework.
3. Review status of District Plans and Sector Plans and
develop medium-term strategies, including mechanisms
for periodic review. The review to be done on district and
sector level and prioritized based on the TSDF/Long-term
National Strategic Development Plan, and link to relevant
CPs and budget process.
MoFNP,
MIA, NGC,
SGC
Target Date
30 June,
2016.
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5.3
Enhance policy formulation
PFM reform starts with sound policy formation at a macroeconomic level. Countries are
increasingly involved in global integration with varying dynamics. Success and failure in
effective PFM depends on the country’s capacity to make informed decisions on where it
should intervene in the economy and with which instruments. A clear macroeconomic
framework that determines the overall fiscal envelope over a multi-year period provides
operational certainty to Government and enables both the public and private sector to adopt a
longer-term horizon.
The capacity of MoFNP to provide a macro-economic framework through macro-economic
modeling and forecast of the national economy is weak and limited. Moreover, the quality
and availability of statistics (especially demographic forecasts of age cohorts using the most
public services) required for evidence-based policy decision making and results monitoring
are also inadequate.
It is critical therefore to develop and strengthen the capacity in MoFNP to perform such
forecasts not only to ensure appropriate policy formulation but also to inform the planning
and budget processes. Further improvements are also needed to key baseline statistics in
terms of availability, coverage and quality, hence increase accountability and transparency.
This also requires strengthening the statistical capacity6 to track development outcomes.
The collaborations between the relevant divisions within MoFNP, and also with key MDAs
such as the National Reserve Bank of Tonga (NRBT) and the Bureau of Statistics are so
crucial. NRBT guides monetary policy and acts as a disciplining force on fiscal policy. This
can be done through establishing a high level and/or working group to meet regularly and
discuss and share relevant issues and improvements to be made. It will ensure that the
required information is included and obtained in the collection of data and survey with proper
analysis to maintain the integrity and credibility of the forecast.
Proposed Actions
Responsible
Target Date
1. Strengthen MoFNP capacity to develop medium term MoFNP
macro-economic-framework
with
proper
macroeconomic forecast and adequate analysis. This to inform
the planning and budget processes, and also enhance
policy formulation.
30 December,
2015.
2. Support the capacity development in the Bureau of MoFNP,
Statistics and encourage its involvement in the Bureau of
implementation of the “Ten Year Pacific Statistics Statistics
Strategy 2011-2020”.
Ongoing.
3. MoFNP to develop mechanism to enhance close co- MoFNP,
30 June,
6
PFTAC has provided assistance to Statistics and also SPC has a 10 year project to improve data on National
Statistics, so this will greatly assist to improve quality of data.
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ordination and ensure mutual working relationships with MDAs,
key institutions such as the National Reserve Bank of NRBT,
Tonga and the Bureau of Statistics.
Bureau of
Statistics.
5.4
2015.
Increase Credibility of the Budget
In order for the budget to be a tool for policy implementation, it is important that it is realistic
and implemented as approved. Lack of credibility increases the likelihood of deficit
overshooting or building up of arrears.
On the 2014 PEFA Self-Assessment, Tonga scored high (at least B+) in two (2) out of the
four (4) PEFA performance indicators (PIs) on the Credibility of the Budget, such as follows:
Table 2 – PEFA Assessment on the Credibility of the Budget
PI.1
PI.2
PI.3
PI.4
Aggregate expenditure out-turn compared to
original approved budget
Composition of expenditure out-turn compared to
original approved budget
Aggregate revenue out-turn compared to original
approved budget
Stock and monitoring of expenditure payment
arrears
2007
2010
2014
PEFA
PEFA
PEFA selfassessment assessment assessment
B
A
A
C
C
B+
A
A
A
B+
B+
B+
5.4.1 Composition of expenditure out-turn at MDAs level.
When the composition of the expenditure varies considerably from the original budget, the
budget will not be a useful statement of policy intent. While the management of aggregate
revenue and expenditure in the GoT’s budget is satisfactory, problems were identified at the
MDA/program level. The credibility of the disaggregated budget items has been undermined
by significant variances in the composition of out-turns at the MDA level. These in-year
budget adjustments have in the past contributed to considerable variation in the composition
of the expenditure from the original budget. These were due to factors such as the followings:
 budget preparation was not properly carried out with adequate costing thus resulting
in significant transfers between votes during the financial year;
 occurrence of unforeseen events that required funding but was not budgeted for;
 linkages between the planning and budgeting were not clear;
 consultations with MDAs, and within Cabinet, during the budget preparation phase
was not adequate;
 the criteria on the access and utilization of Contingency Fund (CF) was not clearly
defined;
 the amount of time for Cabinet to consider budget and financial matters is too brief to
allow all Cabinet members to develop a good understanding of issues, and to jointly
discuss and reach consensus on the most appropriate approach;
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
the process of Cabinet papers from some MDAs with fiscal implications often bypassed MoFNP, even though the Cabinet Manual requires that they first be considered
by MoFNP.
The above limiting factors can be addressed by developing a mechanism similar to the
existing Financial Management Model and re-directing the efforts of budget analysts to
analyze proposals/submissions from MDAs or other bodies, and provide appropriate policy
advice. It will ensure that any budget proposals approved is based on proper economic and
fiscal analysis with clear budget implications.
The improved and better understanding of the budget strategies and intent by parties at all
levels will assist to address those concerning factors above. These parties may include
Parliament, Cabinet, MoFNP, MDAs, and other relevant stakeholders. The timing of the
budget process and related consultations is therefore important to ensure the budget is well
prepared, adequately consulted, constructively discussed and understood, before being
approved. A proper consultation strategy should be in place to ensure the budget strategies
and processes are understood by all stakeholders. The Budget Preparation calendar needs to
be very strategic to support the consulting and understanding of the budget. It will also
provide space for staff especially at MOFNP to work through the process and liaise with
relevant stakeholders; therefore avoid any over-stress by the time constraint.
The following table presents a summary of the key budget credibility challenges, and the
proposed actions that GoT will implement to address the challenges:
Table 3 – Key Budget credibility goals, challenges and proposed actions
PI.2 - Composition of expenditure out-turn compared to original approved budget
PI.2(i) Extent of the variance in expenditure composition during the last three years,
excluding contingency items;
PI.2(ii) Average amount of expenditure actually charged to the Contingency Fund Vote
over the last three years
2014 PEFA rating:
Goal:
Challenges
PI.2 (i) was B and PI.2 (ii) A; the overall rating was B+.
To improve the rating for PI.2(i) and PI.2(ii) to A.
 Variance between budgeted and actual expenditures;
 Weak integration of planning and budgeting; and
 Distortion of overall fiscal position through use of the Contingency Fund to
supplement unbudgeted spending.
Proposed Actions
Responsible
Target Date
1. Review the existing Financial Management Model (or MoFNP.
develop a new mechanism) for analysis and determining
economic and fiscal implications of any budget proposal
from MDAs or other bodies.
31 December,
2015.
2. Review the timeframe of the annual Budget Preparation MoFNP
Calendar and develop a proper budget consultation
strategy. This is to allow ample time for the budget
process to be prepared, consulted, discussed and
understood and approved by responsible parties.
31December,
2014
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5.5
Improve Budget Comprehensiveness and Transparency.
Comprehensiveness of the budget is necessary to ensure that all Government activities and
operations are taking place within the Government fiscal policy framework and are subject to
adequate budget management and reporting arrangements. Similarly, transparency enables
the external scrutiny of Government policies and programs and their implementation.
On the PEFA assessment for Comprehensiveness and Transparency, Tonga scored well in
four (4) out of the six (6) PEFA performance indicators such as follows.
Table 4 – PEFA Assessment on Comprehensiveness and Transparency
PI.5
PI.6
PI.7
PI.8
PI.9
PI.10
Classification of the Budget
Comprehensiveness of information included in
budget documentation
Extent of unreported government operations
Transparency on inter-governmental fiscal relations
Oversight of aggregate fiscal risk from other
public sector entities
Public access to key fiscal information
n.a.
2007
2010
2014
PEFA
PEFA
PEFA selfassessment assessment assessment
C
C
A
A
A
A
D+
n.a.
C
A
n.a.
C
A
n.a
A
C
C
C
Not assessed
5.5.1 Budget Classification.
Robust budgets allow spending to be tracked and arranged according to three (3)
classifications: administrative, economic and functional. The 2010 PEFA found that the
recurrent budget, both in terms of its formulation and its execution (e.g. in-year reports,
audited annual financial statements) was presented and recorded using economic and
administrative classifications, but not functional classifications7. Although, the 2011/2012
and subsequent financial year budgets included the functional classification of
expenditure, it still needs to be improved and in line with related established international
standard such as the UN-supported Classification of Functions of Government (COFOG).
Furthermore, no data was provided at the program level so it was not possible to construct
any meaningful sub-functional or functional data through aggregation. The development
budget was presented and recorded at the budget formulation and execution points on an
administrative basis only, by MDAs.
It is important that the classification of the budget is able to identify and link any
An administrative classification shows spending organized by a government’s ministries or departments. An economic
classification system breaks expenditures down by categories like staff compensation, supplies and materials, or equipment.
A functional classification organizes spending by major programs or activities within a ministry or department. In many
cases, it may be appropriate to use divisions or units within a Ministry as a starting point for a program structure. There is
not an internationally accepted, universal definition of what a “program” is. The definition chosen must make sense in the
local context.
7
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proposed strategy that form a core element in the Government’s policy framework such
as community assistance strategy, poverty reduction strategy, etc. Moreover, it should
also capture any information on Government operations that currently are unreported. The
classification of accounts established and operated by a separate legislation, such as
Emergency Fund, and also trust monies, which are all maintained at MoFNP or MDAs
should be considered on its proper purpose and context.
The GoT budget presentation format should reflect the most important classifications of
administrative combined with economic and programmatic (or functional) classifications.
The classifications should be embedded in the chart of accounts to ensure that all
transactions can be reported in accordance with any of the classifications used. Therefore
it is imperative that all classifications need to be reviewed and improved to ensure
consistency and proper budget presentation and accountability. This is to be done by
reviewing the existing classification to ensure that budget formulation and execution is
based on those classifications (administrative, economic, and programmatic) by 30 June,
2015. The chart of accounts will need to be revised to ensure that these classifications are
being embedded.
The following table presents a summary of the current status of budget classification and
the proposed actions to meet the challenges.
Table 5 – Classification of the Budget, challenges and proposed actions
PI.5 - Classification of the budget
PI.5(i) Classification system used for formulation, execution and reporting of government budget
2014 PEFA rating:
Goal:
PI.5 is an A
Maintain rating for PI.5 at A.
Challenges:
 Budget formulation and execution based on administrative and economic
classifications and not including functional classification.
Proposed Actions
Responsible
1. Review and improve the existing budget classification to MoFNP.
Target Date
30 June 2016.
ensure that all government fiscal transactions are captured
and appropriately classified into economic, administrative,
and programmatic (or functional) classifications for
budget presentation, execution, and reporting, using
appropriate acceptable standards. These classifications to
be embedded in the Chart of Account.
5.5.2 Transparency of inter & non- governmental fiscal relationships.
Availability of information regarding the performance of the Government in maintaining
fiscal discipline and managing risks promote allocative transparency and enhance budget
comprehensiveness. Sub-national Governments with fiscal authorities or responsibilities do
not exist yet in Tonga.
However, Government has approved policies to transfer grants to various non-government
organisations including community groups, sporting bodies, non-government schools, civil
society organisations, private sector businesses, and individuals. These grants include funds
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for agriculture marketing, tourism and commerce, elderly scheme, women and youth safe
houses, various sports’ events, and other national activities. Members of Parliament are also
allocated with constituency grants to cover for any requests for community activities or
projects from their respective constituencies. These grants need to be managed within the
Government fiscal framework and subject to adequate budget management and reporting
arrangements.
There is no clear criteria for assessment, distribution, usage, and accountability of these grant
funds. It is therefore prudent to develop a Government Grant Policy Framework that should
set out clear criteria for assessment, distribution, usage, and accountability of Government
grant (or similar arrangements) to/from recipients.
Table 6 – Transparency on inter-governmental fiscal relations, challenges and planned
actions.
PI.8 - Transparency on inter-governmental fiscal relations
2014 PEFA rating:
Goal:
Challenges:
PI.8 is Not Available
No clear framework on usage of, and accountable for, Government grant
transfers.
Proposed Actions
1. Develop a Government Grant Policy Framework and
Responsible
MoFNP
Target Date
30 June, 2015.
submit to Cabinet for approval.
5.5.3 Oversight of aggregate fiscal risk from other public sector entities.
Government usually has a formal oversight role in relation to other public sector entities and
it should monitor and manage fiscal risks arising from these public entities. Major
autonomous Government agencies (AGAs) and PEs submit financial reports to the
Government at least annually as required by the respective legislations, but a consolidated
complete overview has not been prepared.
The 2010 and 2014 PEFA observes that there is no legislative or regulatory requirement for
Government to monitor fiscal risk of AGAs and PEs on a regular basis. However, MoPE do
conduct ongoing monitoring of fiscal risk issues, as well as monitoring of profitability, in
order to achieve its core objectives which are:
 improving the profitability of PEs;
 improving returns on Government equity; and
 improving dividend payouts from PEs.
The information disclosed in the financial statements is insufficient to monitor the fiscal risks
posed by PEs or their financial health. For example, there was no information on PEs balance
sheet items (assets and liabilities), and even the net profit/loss figures was bottom-line only
and did not include any separate information on the PE’s revenue or expenses. MoPE has
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ascribed the difficulties in obtaining the reports from some PEs to a combination of factors,
including:
 that the PEs are generally lacking the resources and capacity needed for this type of
reporting;
 that other shareholders are refusing to sign reports in a timely fashion;
 that the auditors are asking to see information that the PEs does not have on file and is
therefore unable to provide; and
 that the auditors often take a long time to finalize their audit report.
GoT will require AGAs and PEs to submit, during the annual budget process, the narrative
discussions of their financial condition as well as medium-term forecasts of their condition
for at least three (3) years. These will be analyzed by the MoPE and MoFNP and a report
will be prepared to accompany each annual budget describing the aggregate fiscal risk of the
AGAs and PEs.
The following table presents a summary of the key challenges on fiscal risk oversight that
may be posed by PEs, as well as a list of planned actions that will be implemented to address
the challenges.
Table 7 –Key challenges and planned actions on Oversight of aggregate fiscal risk
PI.9 - Oversight of aggregate fiscal risk from other public sector entities
PI.9(i) Extent of Government monitoring autonomous government agencies (AGA) and public
enterprises (PEs);
PI.9(ii) Extent of Government monitoring sub-national government’s fiscal position.
2014 PEFA rating:
Goal:
PI.9(i) was C; PI.9(ii) was not applicable; Overall rating was A.
Improve rating for PI.9(i) to B.
Challenges:
 Managing fiscal risk from public sector entities
 Timely preparation of accurate and complete financial statements by public
sector entities.
Proposed Actions
Responsible
Target Date
1. Review and update the status of all AGAs/PEs’ statutory
MoPE,
MoFNP,
AO.
31 March,
2015.
MoPE,
MoFNP.
31 March,
2015.
MoPE,
MoFNP.
30 April, 2015
and
onwards.
financial reporting, and assess issues that caused any
delay/late reporting and devise plan of actions to clear and
avoid any further backlogs.
2. MoFNP and MoPE to require and receive from AGAs and
PEs the followings:
a. during the annual budget process, the narrative
discussions of their respective financial conditions as
well as medium-term forecasts of their condition for at
least three next three (3) years.
b. include a Statement of Risks in their respective
financial reports (if not yet done) - describing
assessment of risks and mitigating factors regarding
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those risks, and to commence on the report for the
financial year ended 30 June, 2015.
c. produce and submit a quarterly financial statements and MoPE,
audited annual financial statement within the set or MoFNP,
statutory deadline.
PEs
3. MoFNP and MoPE to produce 6-month consolidated MoFNP,
financial updates for all AGAs/PEs including narrative MoPE.
that highlights problems and assesses risks.
30 June, 2016.
31 August,
2016.
5.5.4 Public Access to Key Fiscal Information.
Transparency will depend on whether information on fiscal affairs, positions and
performance of the Government is easily accessible to the public or at least the relevant
interest groups. The 2010 PEFA found that only year-end financial statements were available
to the public within a reasonable time. Since then the MoFNP has started making monthly
budget execution reports available to the public within the recommended time, and has
started in the fiscal year 2012-2013 budget also releasing to the public the annual budget
documentation when it is submitted to Parliament. The approved Procurement Reform Plan
includes the plan to put the awarded contracts on a specific procurement website. There are
also media releases on key events and achievements being issued by MoFNP from time to
time. Information on resources available to primary service units are publicized and duly
available upon request, from the respective MDAs such as on primary schools (MoET) and
on primary health clinics (MoH).
The following table presents a summary of the key public information challenges, as well as a
proposed action to address those challenges that remain to be actioned.
Table 8 – Key Budget information goals, challenges and proposed actions
PI.10 - Public access to key fiscal information
PI.10(i) Number of the listed elements of public access to information that is fulfilled (in order to count
in the assessment, the full specification of the information benchmark must be met)
2014 PEFA rating:
Goal:
PI.10(i) was C.
Improve rating for PI.10 to A.
Challenges:
Commence and maintain timely public access to the following information
through appropriate means:
 Annual budget documentation;
 In-year budget execution reports;
 Year-end financial statements;
 External audit reports;
 Contract awards;
 Resources available to primary service units.
Proposed Actions
Responsible
1. The MoFNP in liaison with relevant MDAs to devise a MoFNP,
‘public relation schedule’, to timely disseminate budget MDAs.
and fiscal information to the public. This information
Target Date
30 June, 2015
and
onwards.
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may include annual budget documentations, in-year
budget financial reports, annual financial reports and
related audit reports. MoFNP also monitor that these
information are duly posted on the MoFNP website and
other relevant websites/medium on timely basis, and
make available to the public.
5.6
Enhance Policy based Budgeting
A policy-based budgeting process enables Government to plan the use of resources in line
with its fiscal policy and national strategy. A weak planning process may lead to a budget
that does not respect the fiscal and macroeconomic framework defined by Government. On
the PEFA assessment for the Budget Cycle – Policy-based Budgeting, Tonga scored well in
one out of the two PEFA performance indicators such as follows.
Table 9– PEFA Assessment on the Budget Cycle – Policy based Budgeting
PI.11
PI.12
Orderliness and participation in the
annual budget process
Multi-year perspective in fiscal
planning, expenditure policy and
budgeting
2007 PEFA
assessment
B
2010 PEFA
assessment
A
2014 PEFA
self-assessment
A
D+
C
C
5.6.1 Multi-year perspective in fiscal planning, expenditure policy and budgeting.
Expenditure policy decisions have multi-year implications and it must be aligned with the
availability of resources in the medium-term perspective. It is also important to note that
multi-year fiscal forecasts of revenue, expenditure and deficit financing must be the
foundation for policy changes. Tonga has commenced medium-term budgeting and is
committed to its continuing improvement. Tonga scored well in the 2010 PEFA on the debt
sustainability aspect of medium-term planning and, beginning with the 2011-12 budget,
tables were included in the budget document showing medium-term planning estimates at the
sub-program level within each MDAs. Technical Assistance was provided since 2010 to
improve Tonga’s medium-term planning and budgeting capabilities and the following
exercises are ongoing:
 Redesigning of corporate planning and budget documents to add more planning and
strategy content at the sub-program level, covering both recurrent and investment
expenditure (locally and aid sourced);
 Modifying the budget development calendar to allow more time for the Cabinet to
discuss medium-term planning issues and to set priorities;
 Demonstrating links between multi-year estimates and subsequent setting of annual
budget ceilings, or explain differences, in publicly available budget framework
papers; and
 Show in budget documents the recurring costs (including all operating costs and
estimated future repair/replacement costs based on deprivation factors) of all new
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investment projects, as well as estimated repair/replacement costs of existing capital
assets.
As mentioned earlier, MDAs shall show alignment of respective CPs with Government
priorities and sector strategies and show clear linkages between multi-years estimates and
subsequent setting of annual budget ceilings. They should also ensure to fully cost any policy
decision in order to determine whether current and new policies are affordable within
aggregate fiscal targets. Any proposed investments should have clear strategy-linked
selection criteria, and to be integrated into the annual budget formulation process with its
relevant recurring costs. Such information will also be highlighted for setting relevant
policies including development projects especially at project appraisal stage.
MoFNP will continue to prepare relevant instructions to MDAs on how to describe and cost
priority service improvements that may have been identified in their Plans.
The following table presents a summary of the key multi-year planning and budgeting
challenges, as well as proposed actions to address the challenges.
Table 10– Key multi-year planning and budgeting goals, challenges and proposed
actions
PI.12 - Multi-year perspective in fiscal planning, expenditure policy and budgeting
PI.12(i) Multi-year fiscal forecasts and functional allocations;
PI.12(ii) Scope and frequency of debt sustainability analysis;
PI.12(iii) Existence of costed sector strategies;
PI.12(iv) Linkages between investment budgets and forward expenditure strategies.
2014 PEFA rating:
Goal:
Challenges:
PI.12(i) was C; PI.12(ii) was A; PI.12(iii) was D; and PI.12(iv) was D.
Improve ratings for PI.12(i), PI.12(iii) and PI.12(iv) to A.
 Demonstrating links between multi-year estimates and subsequent setting
of annual budget ceilings, or clearly explaining differences;
 Developing fully costed strategies for significant sectors and districts
including recurrent and capital expenditures. A costed sector
strategy/district plans should come from the related Sector/District Plans
and incorporate into the relevant part of the corporate plan and budget
about future intended direction and a best estimate at the time of costs to
achieve;
 Improving the planning and budgeting for recurring costs of investment
projects and repair/replacement costs of existing capital assets.
Proposed Actions
Responsible
1. Review corporate plan and budget documents to add more MoFNP,
planning and strategy content in Major Ministries in 2015- MDAs
2016 and all ministries in 2016-17, with outputs,
outcomes, programs aligned with those specified in
ministry corporate plans.
2. Continue the integration of the corporate plans and
budget:
MoFNP,
 For 2014/2015: enhanced three-year rolling PSC,
Target Date
Major MDAs
– 1 July,
2015.
All MDAs – 1
July,
2016
1 July, 2015.
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
corporate plans providing clear links to three-year MDAs
rolling budgets;
For 2015/2016: three-year corporate plan and
budget integrated into one document for each
MDAs.
3. Demonstrate links between multi-year estimates and
subsequent setting of annual budget ceilings and explain MoFNP,
MDAs
differences to Cabinet and to CEOs and MDAs.
4. Show in budget documents the estimate recurring costs
(including all operating costs and estimated future MoFNP,
repair/replacement costs based on depreciation factors) of MDAs.
all new investment projects (including development
projects), as well as estimated repair/replacement costs of
existing capital assets for sectors.
5.7
1 July, 2016.
30 June, 2015.
30 June, 2015.
Budget Execution
5.7.1 Predictability and Control in Budget Execution
Predictable and controlled budget execution is necessary to enable effective management of
policy and programme implementation. Moreover, a functional PFM system, properly
integrated into an IFMIS, will also improve performance on many budget execution,
accounting, recording and reporting tasks.
On the PEFA assessment for the Budget Cycle – Predictability and Control in Budget
Execution, Tonga scored well in four out of the nine PEFA performance indicators such as
follows.
Table 11 – PEFA Assessment on the Budget Cycle – Predictability and Control in
Budget Execution
PEFA Performance Indicators for the Credibility of
the Budget
PI.13
PI.14
PI.15
PI.16
PI.17
PI.18
PI.19
PI.20
PI.21
Transparency of taxpayer obligations and
liabilities
Effectiveness of measures for taxpayer
registration and tax assessment
Effectiveness in collection of tax payments
Predictability in the availability of funds for
commitment of expenditures
Recording and management of cash balances,
debt and guarantees
Effectiveness of payroll controls
Competition, value for money and controls
of procurement
Effectiveness of internal controls for nonsalary expenditure
Effectiveness of internal audit
2007
PEFA
assessment
D+
2010
PEFA
assessment
A
2014
PEFA selfassessment
A
C+
B
B
D+
C+
D+
C+
D+
C+
B
A
A
D+
B
B+
C
C+
D
C+
B+
B+
D
D+
C+
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5.7.2 Effectiveness in collection of tax payments.
Accumulation of tax arrears can be a critical factor undermining high budget out-turns, while
the ability to collect tax debt efficiently lends credibility to the tax assessment process, and
reflects equal treatment of all taxpayers. Collection transparency and effectiveness
arrangements have improved markedly since the first PEFA assessment in terms of publicly
available information on policy and tax rulings. Since the 2010 PEFA, a tax appeals
mechanism has been introduced and the management of arrears has improved noticeably
from earlier years, reflecting substantive administrative reforms.
In addition to several planned administrative reforms, the government has considered and
carried out other reforms to introduce a small business tax, and to develop a new natural
resource tax regime.
The following table presents a summary of the key challenges to the effectiveness of tax
collection, as well as a list of policy actions that Tonga will implement to further improve tax
and customs administration.
Table 12– Key challenges to the effectiveness of tax collection and proposed actions
PI.15 - Effectiveness in collection of tax payments
PI.15 (i) Collection ratio for gross tax arrears, being the percentage of tax arrears at beginning
of the fiscal year which was collected during that fiscal year (average of the last two fiscal years)
PI.15 (ii) Effectiveness of transfer of tax collections to the Treasury by the revenue
administration.
PI.15(iii) Frequency of complete accounts reconciliation between tax assessments, collections,
arrears records and receipts by the Treasury
2014 PEFA rating:
Goal:
PI.15 (i) was D; PI.15 (ii) was A; PI.15 (iii) was A; Overall rating was D+.
Improve rating for PI.15(i) to A
Challenges
 Reduce tax arrears;
 Improve taxpayer knowledge of their tax liabilities and responsibilities for
payment;
 Improve efficiency of the collection system; and
 Improve relation with tax payers and avoid damaging business viability.
Proposed Actions
Responsible
Effectiveness of tax administration;
1. Upgrade the Revenue Management System (RMS) and MoRC
utilize relevant functions such as analysis, filing, risk
management, audit and investigations, assessment of
entries:
 Updated RMS version
 Medium-term need for further RMS modules
.
2. Develop a communication strategy for community
outreach to achieve the desired aim of “Revenue from the
Target Date
31 July, 2015.
31 July, 2016.
31 December,
2015.
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Community, For the Community, and devise related
training program for staff on the outreach.
3. Review human resources capacity at MoRC for effective
revenue administration function.
Ongoing
4. MoRC transition to functional structure with review of its
structure in the next 2 year.
31 July, 2016.
Interest and Penalty regime;
5. Implement a Corporate Income Tax installment for larger
taxpayers.
Inland Revenue Administration;
6. Establish a taxpayer services function
7. Review the process for approving, monitoring, and
reporting exemptions to:
a. determine if they are still relevant and cost effective;
b. maintain in tax legislations all laws granting tax
exemptions and concessions;
c. introduce a process for approving exemptions; and
d. introduce a tax expenditure statement detailing the
estimated cost of all exemptions.
Filing & Payments;
8. Analyze late filing and late payment data to determine the
best interventions, set targets and allocate resources to
improve on-payments for large and small businesses.
31 July, 2016
31 July, 2015.
31 December,
2015.
30 June, 2015
9. Move to Electronic filing of returns for large businesses
to free up processing resources.
31 July, 2016.
10. Introduce a risk management/case selection module into
RMS to further free up processing resources.
31 July, 2015.
11. Maintain data-matching activities until the risk
management module is purchased but review the current
process and adopt a more strategic approach to data
matching activities.
31 July, 2015
Audit and Investigations;
12. Introduce and shift to computerized risk modeling.
13. Continue to develop the compliance program for more
analytical assessments to build in a greater degree of
specificity across each taxpayer segment, sectoral issues,
resource
allocation,
compliance
improvement
measurement, and identification of implications for flowon effects.
31 July, 2016.
31 July, 2015.
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Collection Enforcement;
14. Devise a system to analyze arrears on a systematic basis
to better understand the breakdown of arrears,
particularly collectible and uncollectible debt and identify
sectors presenting the greatest likelihood of non-payment.
Post Clearance Audit;
15. Institute procedures for mounting combined tax and
Customs audits where an identified benefit is likely to
accrue.
Assessment of entries;
16. Use TIN data to check information declared on Customs
entries.
31 July, 2015.
31 July, 2015.
31 July, 2016.
5.7.3 Predictability in the availability of funds for commitment of expenditure
Effective execution of the budget, in accordance with work plans, requires that the spending
MDAs receive reliable information on availability of funds. The budget needs to be executed
in an orderly and predictable manner to enable effective management of policy and program
implementation. This would need making arrangements for the exercise of control and
stewardship in the use of public funds. Although MoFNP’s procedures for forecasting and
monitoring cash flows are reasonable and has been able to provide reliable information to
MDAs on commitment ceilings, at least quarterly, in advance, it still needs to be strengthened
to ensure its timely monitoring. Weaknesses also exist in other areas of budget control and
execution especially the frequent in-year budget adjustments. This has resulted in disorderly
execution of the budget and led to unplanned allocations to other areas, which then
undermine fiscal management.
It is therefore very important to predict not only the availability of funds but also the size and
timing of commitments to be paid. This is sometimes challenging especially when the cash
inflow is low while commitments are high. MoFNP are sometimes unaware of some major
payments that need to be made until advised by MDAs on the urgency of such payment. For
instance, payment for medical supplies, transfer payment for scholarships, remittance to
overseas missions, transfer to outer-island operations, etc.
There is a need to review and update the existing framework and guidelines in operation that
will have a direct impact on the predictability of availability of funds for commitment. Cash
Management Guidelines should be reviewed for use by the MoFNP and MDAs to assist in
planning and monitoring the cash flow level. The Guideline should also include guidance on
accounting and reporting of commitments and arrears. It is also considered important to
review the existing Cash flow committee to broaden their term of reference and establish a
Group to oversee cash management and also to include debt and asset management. The
composition of the Group should be determined by MoFNP by reviewing the existing
composition of the Cash flow committee, but should at least include CEOs from MoFNP,
MoRC, PMO, PSC, and other relevant MDAs and relevant divisions from within MoFNP.
This proposal should be considered together with related recommendations in the ‘Public
Debt Management Reform Plan’ report. In addition, the financial instructions for overseas
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missions and outer-islands operations should also be reviewed to ensure proper management
of budget allocations and more accurate predictions of commitments.
Table 13 below presents a summary of the challenges on other budget control and execution,
as well as proposed actions to address the challenges.
Table 13 – Key challenges on other budget control and execution and planned actions
PI.16 - Predictability in the availability of funds for commitment of expenditures
PI.16(i) - Extent to which cash flows are forecast and monitored;
PI.16(ii) - Reliability and horizon of periodic in-year information to ministries, departments,
and agencies (MDAs) on ceilings for expenditure commitment;
PI.16(iii) - Frequency and transparency of adjustments to budget allocations, which are
decided above the level of management of ministries, departments, and agencies.
2014 PEFA rating:
Goal:
PI.16(i) was A; PI.16(ii) was B; PI.16(iii) was C; and Overall rating was C+.
Improve ratings for PI.16(ii) and PI.16(iii) to A.
Challenges

Frequent in-year budget adjustments.
Proposed Actions
Responsible
1. Review the current composition of the Cashflow MoFNP
committee members to establish a stronger group with
broader term of reference to regularly monitor the
management of cashflows and also to include debt and
asset management. The composition of the group to be
determined by MoFNP.
Target Date
.
31 January,
2015
2. Review and Update the Cash Management Guidelines and MoFNP.
submit for endorsement of the established group and seek
approval for mandatory use and full compliance by all
MDAs.
31 December,
2015.
MoFNP,
3. Review and develop a new Diplomatic Mission Financial MoFAT
Framework and Guidelines and ensure consistency with
relevant established regulatory framework.
MoFNP,
4. Review and develop an appropriate PFM systems and PSC
procedures for the centralization of Government financial
operations in the outer islands and ensure consistency with
relevant established regulatory frameworks. Strengthen
Sub-Treasuries’ capacities to carry out PFM functions.
31 December,
2015.
31 December,
2015.
5.7.4 Management of Debt
Debt management, in terms of contracting, servicing and repayment, and the provision of
Government guarantees are often major elements of overall fiscal management. Poor
management of debt and guarantees can create unnecessary high debt service costs and can
create significant fiscal risks. Tonga scored relatively well on the 2014 PEFA in the area of
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debt management. The MoFNP ensures that Government will be able to anticipate and
manage any potential shocks to Tonga’s debt stock given the significant shift in the structure
of the debt portfolio. To assist in improving its debt management, the MoFNP requested a
debt management review in mid-2011 and in late 2012. The 2012 review produced the
‘Public Debt Management Reform Plan’ (PDMRP) that was released in May 2013. The
review built on the findings of previous technical assistance on Strengthening Debt
Management Capacity, and Scoping Mission on Debt and Cash Management. The PDMRP
recommended specific actions and include:
 Developing Debt Management Strategy – to revise the draft Medium Term Debt
Management Strategy (MTDS), and devise a formal adoption and dissemination plan,
including periodic evaluations.
 Strengthening Risk Management Framework – to develop procedures manual for
external borrowing, finalize the “Policy Framework for Government Guarantees”,
and a related review of the PFM Act 2002.
 Improving Coordination with Macroeconomic Policies – to enhance coordination with
fiscal policy on improved sensitivity and scenario analysis, improve coordination with
NRBT on monetary policy, and looking at domestic debt market development.
The PDMRP also suggested the lead agency and possible timeframes for implementation of
each recommendation. The Roadmap supports the PDMRP and its proposed implementation
plan, which complement the related recommendations of this Roadmap.
Proposed Action
Responsible
1. Support the adoption of the ‘Public Debt Management MoFNP
Reform Plan’ (PDMRP) and its related recommendations
and consult with relevant stakeholders to ensure effective
implementation.
Target Date
As per
timeframe
proposed
in
PDMRP.
5.7.5 Competition, value for money and controls in Procurement.
Significant public spending takes place through the procurement system. A well-functioning
procurement system ensures that money is used effectively for achieving efficiency in
acquiring inputs for, and value for money in, the delivery of programmes and services by the
government. Since 2010 several changes in the procurement system have gotten underway,
including:
 the procurement regulations that were in draft form in 2010 have been approved and
are available on the MoFNP website;
 work has started with the MoFNP ICT section to put templates on the web;
 a procurement plan template has been developed and is being used this year;
 a plan has been developed to put all annual procurement plans of the MDAs and
awarded contracts on the procurement website;
 a procurement capability assessment tool has been developed to evaluate procurement
staff and staffing levels in line ministries, and identify training needs.
 an Action Plan (Procurement Reform Strategy) has been approved by Cabinet in
August 2013 to implement the recommendations from the procurement review
undertaken in March 2013. The Reform Strategy commenced in the 4th quarter 2013.
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Major challenges that remain include:

improving skills and staff levels in the MoFNP’s Procurement Division and the
Procurement Unit in the MDAs;

working with regional institutions to develop training and certification opportunities
for current or prospective procurement officers, and

implementing a procurement complaints mechanism.
AusAID has completed a Procurement Review for Tonga and the final report on
Procurement Reform Strategy (Action Plan) was approved by Cabinet in August 2013. A
number of additional challenges were raised by the report which is being addressed in the
approved Procurement Reform Strategy (PRS). The Roadmap supports the Procurement
Reform Strategy and its implementation plan to strengthen the government procurement
system especially on: regulatory framework review; staff capacity improvements; public
access to procurement information; appropriate complaints system; and ensure transparency
and accountability. The recommendations of the PRS complement any related
recommendations in this Roadmap.
The following table presents a summary of the key challenges in procurement, as well as the
proposed action to address the challenges.
Table 14 – Key challenges in Procurement and planned actions
PI.19 - Competition, value for money and controls of procurement.
PI.19(i) Use of open competition for award of contracts that exceed the nationally established monetary
threshold for small purchases;
PI.19(ii) Justification for use of less competitive methods;
PI.19(iii) Existence and operation of a procurement complaints mechanism
2014 PEFA rating:
Goal:
Challenges:
PI.19(i) was C; PI.19(ii) was D; PI.19(iii) was D; and overall rating was D.
Improve rating for PI.19 (i), PI.19(ii) and PI.19(iii) to A.
 absence of a proper Strategic Action Plan to facilitate greater centralization
of procurement.
 reducing the award of contracts through methods other than open
competition that cannot be justified in accordance with legal requirements;
 improving the procurement legal and regulatory framework;
 making more procurement information available to the public; and
 implementing an independent administrative procurement complaints
system.
Proposed Actions
Responsible
1. Support the implementation of the approved Procurement MoFNP
Reform Strategy (Action Plan) and its recommendations.
Target Date
As per PRS
action
plan.
5.7.6 Improve Asset Management.
Asset management is crucial to ensure that Government maintains effective internal controls
to manage its Physical Assets and to maintain proper records regarding the use and
disposition of those assets and to properly account for those assets in the Government
financial statements. It is necessary therefore for the Government to safeguard and maintain
its Physical Assets in order to receive the maximum benefit from those assets.
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The Government financial statements have been issued with unqualified audit opinion in the
past years due to the inability of the current system to determine the value of Government
assets at balance date. For several years the MoFNP has been requesting MDAs to prepare
and submit Asset Registers. Some MDAs have done a commendable job on this task.
Unfortunately, this critical information has not been accurately and completely prepared by
MDAs, therefore the value of the Government assets has not yet been determined. As a result,
the estimated amounts that should be budgeted for asset replacement or repair cannot be
adequately determined. At present, MDAs have seen little value in preparing their respective
Asset Registers and they do not feel obligated to record and maintain those assets, hence the
proposal for a new strategy for asset management.
This Roadmap has proposed the devolvement of PFM functions to MDAs and a clear strategy
for all MDAs to be responsible for the accurate recording, appropriate maintenance plans,
and timely reporting of assets under their care. The MoFNP will continue working with key
MDAs in July 2014 to develop/update this information for high priority services such as
health, education, water supply, sanitation, and other key infrastructure. The aim is to have a
more detailed Asset Management framework in place by December 2015, and continue
training and working with MDAs on the new approach strategy in January 2016 or earlier.
The framework should set out the Government policy on management of assets, and ensure
that all assets procured are accurately and completely recorded, managed, accounted for, and
reported on a regular basis. Development of the asset management framework should take
into account similar work already done on developing the Tonga National Infrastructure
Investment Plan (NIIP).
The following action is proposed to address the challenges above.
Proposed Action
Responsible
1. Develop an Asset Management Framework submit for
Cabinet approval. The work on the proposed framework
should take into account similar work done on NIIP.
MoFNP,
MDAs.
Target Date
31 December,
2015.
5.7.7 Effectiveness of Internal Audit
Regular and adequate feedback to management is required on the performance of the internal
control systems, through an internal audit function. Such a function should meet the
international standards for internal auditing. The Audit Office (AO) is responsible for all
internal audit activities in Government and also acted as the Government’s (external)
Supreme Audit Institution. The Internal Audit Division (IAD) in MoFNP was established in
mid-2010, and currently focuses on internal audit of MoFNP operation.
The AO carried out financial audits, compliance audits and special investigations audits on a
routine basis. However, the 2010 and 2014 PEFA review estimates that systemic issues
accounted for less than 20 per cent of audit activities. It noted that the AO conducted some
special investigation audits, where the effectiveness of procedures and controls applied were
investigated and systems strengthening recommendations made.
Internal audit reports were issued to MDAs in the form of management letters, but none of
these documents were ever published in full. Reports were usually provided to MoFNP. The
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AO Annual Report was the only publicly available information on audits and it only
summarised the key audit findings for the year for each MDAs. The Annual Report did not
contain much detail about the transgressions, systemic problems or the responsive actions of
MDAs against audit recommendations.
Since 2010, the MoFNP Internal Audit Division has:
o prepared:
an internal audit policy and charter(completed and in place);

job descriptions(completed and in place);

an internal audit strategy 2010– 2013(completed and in place);

annual audit plans(completed and in place);

an audit manual(still in draft form and this should be ready by June
2014 because of staffing constraints);and

an assignment practice guide.
o completed various audits within MoFNP functions; and
o updated and implemented management practices.
The management of risk is an integral part of good management practice. Effective risk
management is the cornerstone of good corporate governance and can lead to improved
performance – resulting in better service delivery, more efficient use of resources, and better
project management as well as helping to minimize waste, fraud and poor value-for-money
decision making. Risk management is most effective when it becomes integrated into normal
operating procedures, processes and systems and is demonstrably driven by top management.
It is required to be aligned to all corporate governance issues and to be a feature of planning,
implementation of systems and processes and reporting. To achieve this strong focus and
leadership is needed.
It is therefore critical that a Risk Management Framework and Strategy be developed as an
integral part of this Roadmap. The aim is to establish a framework and procedures under
which risks can be identified and managed. This may include setting up appropriate Risk
Committee or Group to provide the risk oversight role. The framework will need to be
reviewed and updated regularly, as well as review the risks themselves and the various
management strategies in place. Understanding of the risk exposures facing Government and
PFM units will facilitate effective planning and resource allocation and encourages a
proactive management culture. MoFNP shall ensure that risk management features in all
assessments, plans, reports and analysis.
The following table presents a summary of the key internal audit challenges, as well as a list
of policy actions that Tonga will implement to address the challenges.
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Table 15– Key Internal Audit challenges and planned actions
PI.21 - Effectiveness of internal audit
PI.21(i) Coverage and quality of the internal audit function;
PI.21(ii) Frequency and distribution of reports;
PI.21(iii) Extent of management response to internal audit findings
2014 PEFA
rating:
PI.21(i) was A; PI.21(ii) was B; PI.21(iii) was C, and overall rating was C+
Improve rating for PI.21(ii) and PI.21(iii)
MoFNP and MDAs
Challenges:




inadequate internal audit coverage of ministries;
adequacy of Professional Standards;
Inadequate Internal Audit focus on systemic issues;
Inadequate Report issuance and distribution; and
 Inadequate response and action on internal audit findings.
Proposed Actions
Responsible
1. MoFNP to work with AO on the mandate for internal MoFNP,
audit to gradually expanding MoFNP IAD internal audit AO
coverage to all MDAs as follows:



four (4) MDAs
ten (10) MDAs
All MDAs
Target Date
31 July, 2016
.
31 July, 2017.
31 July, 2018.
2. The MoFNP to coordinate with the AO to strengthen MoFNP,
Professional Internal Audit standards with the aim of AO
applying those standards to all internal audit operations
for MDAs and PEs. They will also be reviewed for
consistency with international standards and practices.
31 December,
2016
3. MoFNP to work with the AO to develop annual targets MoFNP,
for increased focus on systemic issues. The combined AO.
efforts of both offices on systemic issues will reach at
least 50% of total audit effort.
31 December,
2018.
4. Response and Action on Internal Audit findings: - A MoFNP,
quarterly report will be submitted to the Audit Committee AO.
on ‘Status of Audit Recommendations, Responses, and
Actions’ by MDAs. A six-monthly report will be
submitted to Cabinet. Items will be kept on the report
until a satisfactory action accepted by the Audit
Committee is reported.
5. Develop a Risk Management Framework and strategy to
provide adequate assessment of risks in all phases of
PFM activities and the implementation of the PFM
Roadmap so that appropriate mitigating measures are put
in place.
31 December,
2015.
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5.7.8 Devolvement of Government PFM system.
Government has been operating a centralized accounting system since inception. MDAs have
been only partially fully responsible for the control, manage, and account of their budget
allocation. Overall, internal controls for salary and non-salary expenditures are operating
effectively. However, as mentioned earlier, there are still some weaknesses in the recording
and reporting of arrears, commitments, liabilities and assets.
All MDAs need to improve its financial management functions and be able to manage the
resources bestowed upon them and to also account for them. MoFNP had been liaising with
MDAs through dialogue, trainings, and issuing of Treasury Circulars and Instructions to
improve accountability. However, there was not much progress. MDAs focuses mostly on
collecting revenue and spending their budget allocation, with lack of due regards to full
accountability of resources under their stewardship.
Budgeting and resource allocation should therefore be devolved to MDAs as it will ensure
better and improved efficiency, effectiveness and accountability from MDA CEOs. Success
of any devolvement is based on building staff capacity and the development of appropriate
skills in PFM activities. The proposed devolvement will provide opportunity to:




utilise staff more productively in MDAs by improving their knowledge and skills on
technical areas especially to facilitate the proposals for more technical PFM work;
apply and put into good practice, the skills and knowledge developed by staff through
technical assistance, especially to MoFNP, on particular PFM areas in all divisions of
the ministry;
attract and provide opportunities for those graduates with degree and/or diploma in
PFM areas to work in government and enhance their careers in a particular field; and
promote to establish a PFM community of practice as a network to share experiences
and enhance skills of staff in all MDAs thus ensure sustainability of good PFM
standards and practice in government and in the public sector.
This Roadmap therefore continues to support efforts to devolve financial allocative
management to MDAs. To ensure successful implementation of the proposed devolvement,
key preparatory works are needed to be done during the financial years 2014-2015 and 20152016. These will include:




Conduct a review of the current government accounting system to determine areas
that need to be strengthen and/or streamlined for improved efficiencies.
Implement the update of the IFMIS and also strengthening of MoFNP and MDAs
capacities (both physical and human capitals).
Review and design the appropriate and relevant PFM system, policies and procedures
for MoFNP, and for MDAs to cater for the proposed devolvement.
Carry out relevant PFM trainings for key staff in MoFNP and MDAs.
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Proposed Action
1. Conduct a full review of the current government
Responsible
Target Date
MoFNP.
31 December, 2015.
MoFNP,
MDAs
30 April, 2016.
accounting system.
2. Review and design the PFM system including
applicable policies and procedures for MoFNP,
and for MDAs.
MoFNP,
MDAs.
30 June, 2016.
4. Devolve the PFM budgetary functions to all MoFNP,
≥30% by 1 July, 2016;
≥60% by 1 July, 2017;
100% by 1 July 2018.
3. Conduct regular PFM trainings on the proposed
PFM system with MoFNP and all MDAs.
MDAs.
5.8
MDAs
Accounting and Financial Reporting
5.8.1 Accounting, Recording and Reporting
Timely, relevant and reliable financial information is required to support all fiscal and budget
management and decision making processes. On the PEFA assessment for the Budget Cycle
– Accounting, Recording and Reporting, Tonga did not score well, such as follows.
Table 16 – PEFA Assessment on– Accounting, Recording and Reporting
PEFA Performance Indicators for the Credibility of the Budget
PI.22
PI.23
PI.24
PI.25
Timeliness and regularity of account reconciliation
Availability of information on resources received by
service delivery units
Quality and timeliness of in-year budget reports
Quality and timeliness of annual financial statements
2007
PEFA
assessment
D
D
2010
PEFA
assessment
B
D
2014
PEFA Selfassessment
B+
D
C+
D+
C+
D+
B+
B+
5.8.2 Availability of information on resources received by service delivery units.
The 2014 PEFA reported that while the MoET and MoH did keep, for their own internal
purposes, records of the cash transfers received through their budget allocations by schools
and by health centers, they used this only for internal reporting purposes, and the information
was not published anywhere in the budgets or other documents. Their reports did not
necessarily include all in-kind resources received. For example, the education data included
the grants provided by NZAID (since these go through Government systems) but probably
did not include other development partner assistance.
The following table presents a summary of the challenges on other budget control and
execution, as well as the proposed actions to address the challenges.
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Table 17 – Key challenges on other budget control and execution and planned actions
PI.22 - Timeliness and regularity of accounts reconciliation
PI.22(i) Regularity of bank reconciliation:
PI.22(ii) Regularity of reconciliation and clearance of suspense accounts and advances
2014 PEFA rating: PI.22(i) was A, PI.22(ii) was B, and overall rating was B+.
Improve PEFA rating for PI.22(ii).
Goal:
Challenges
 Weak processes for timely reconciliation and clearance of suspense
accounts faster;
PI.23 - Availability of information on resources received byservice delivery units
PI.23(i) Collection and processing of information to demonstrate the resources that were actually
recceived (in cash and in kind) by most common frontline service delivery units (focus on primary
schools and primary health care clinics) in relation to the overall resources made available to the
sectors, irrespective of which level of government is responsible for the operation and funding of those
units
2014 PEFA rating:
Goal:
Challenges
PI.23 was D
Improve PEFA rating for PI.23 to A.
 Inadequate reporting on resources received by education and health
service units.
Proposed Actions
Responsible
1. MoFNP to work with relevant MDAs to identify primary MoFNP,
service delivery units and classify related transactions in MDAs.
the accounting system. This is to capture all related
transactions and then report on both cash and in-kind
resources on a regular basis. The related financial reports
will be included as part of the respective MDAs’ Annual
Reports.
Target Date
31 December,
2015.
.
5.8.3 Quality and timeliness of In-year reporting
The ability to bring in the budget requires timely and regular information on the actual budget
performance to be available for Cabinet to monitor performance. Quarterly reports and
monthly financial reports continue to be produced and made available on the MoFNP
website.
The content of the reports in 2010 was found to be weak presenting only actual cash revenue
and expenditure for the quarter. They did not compare the actual expenditures with approved
budgets or discuss variances, and there was no information or accrual-based data on
expenditure commitments. The current content and format has addressed most of these
weaknesses showing variances from estimated monthly budget outlays and explaining why
actuals deviated from plans. The only remaining weakness is lack of complete coverage of
commitments.
Reports will be produced more quickly and accurately with the expansion of the IFMIS into
all MDAs and perhaps the PEs too. The proposal to devolve the PFM allocative functions to
MDAs will require all MDAs to report all commitments which will improve the accuracy of
the reports.
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5.8.4 Quality and timeliness of Annual Reporting.
Consolidated year-end financial statements are critical for transparency in the PFM system.
The ability to prepare year-end financial statements in a timely fashion is a key indicator of
how well the accounting system is operating, and the quality of records maintained.
Weaknesses in annual financial reporting identified by the 2014 PEFA included:
 Balance sheet, receivables and payables were not disclosed and the amount disclosed
for physical assets was an estimated value only.
 Timeliness of the reports.
 Lack of full compliance with accounting standards.
MoFNP will continue the current practice of advising MDAs to record and report on their
respective receivables, payables, and assets on a regular basis. In addition, AGAs and PEs
financial statements will be consolidated into the GoT Public Accounts to present a complete
accountability of ‘Whole of Government’ financial reporting. The consolidation will be led
by the MoFNP and co-ordinate with MoPE and Financial Managers of respective AGAs and
PEs during each fiscal year
Table 18 below presents a summary of the challenges on in-year and annual reporting, as well
as proposed actions to be implemented by Government, PEs, and other Government entities.
Table 18 – Key challenges on in-year and annual reporting and planned actions
PI.24 - Quality and timeliness of in-year budget reports
PI.24(i) Scope of reports in terms of coverage and compatibility with budget estimates;
PI.24(ii) Timeliness of the issue of reports;
PI.24(iii) Quality of information
2014 PEFA rating: PI.24(i) was B; PI.24(ii) and PI.24(iii) were A, and overall rating was B+.
Improve rating for PI.24(i) to A.
Goal:
Update detail comparison of budget estimate to revised and actuals based on
sun system data
PI.25 - Quality and timeliness of annual financial statements
PI.25(i) Completeness of the financial statements;
PI.25(ii) Timeliness of submission of the financial statements;
PI.25(iii) Accounting standards used
2014 PEFA rating: PI.25(i) was A; PI.25(ii) was A; PI.25(iii) was B; and overall rating was B+.
Improve PEFA ratings for PI.25(iii) to A.
Goal:
Challenges
 Capturing all commitments as well as payments in the monthly financial
reports.
 Timely preparation of annual statements.
 Completeness of information disclosed in the annual statements.
 Full compliance with accounting standards.
Challenges
Proposed Actions
Responsible
1. Establish a Financial Managers Forum of Government and MoFNP,
Public Enterprises and other Government entities to MoPE, PEs
discuss relevant PFM issues including reporting. This is to
Target Date
1 July, 2017.
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set up the platform for the consolidation of AGAs/PEs
financial statements with Government to form the Whole
of Government Consolidated Financial Reports.
2. Prepare Consolidated Financial Reports for Whole of MoFNP,
Government (including the PEs and other Government MoPE, PEs,
entities) in accoordance with applicable IPSAS and submit AO
to AO.
MoFNP,
AO, MPEs
3. Full compliance with IPSAS-Cash.
5.9
31 December,
2018
28 February,
2019.
External Oversight
5.9.1 External Scrutiny and Audit
Effective scrutiny by legislature and through external audits is an enabling factor in the
Government being held to account for its fiscal and expenditure policies and their
implementation. On the PEFA assessment for the External Scrutiny and Audit, Tonga again
did not score well, such as follows.
Table 19 – PEFA Assessment on the – External Scrutiny and Audit
PI.26
PI.27
PI.28
Scope, nature and follow-up of external audits
Legislative scrutiny of the annual budget law
Legislative scrutiny of external audit reports
2007
PEFA
assessment
D+
C+
D
2010
PEFA
assessment
D+
D+
D
2014
PEFA Selfassessment
C+
D+
D+
The 2014 PEFA self-assessment noted that there have been improvements in the tabling and
approval of annual reports to the Legislative Assembly. However, there is still limited
scrutiny by the Legislative Assembly attributed to limited timeframes and ability of the
Public Accounts Committee to scrutinize the Budget and external audit reports.
As with Cabinet, bi-lateral development partners with first-hand experience in working with
Parliaments may wish to consider supporting workshops for members of the Legislative
Assembly about how they can improve their operations to support better PFM in Tonga.
PAC scrutiny authority should be strengthened and set out in Law clearly, especially its
relationship with the MoFNP, MDAs, AO, and Parliament.
5.9.2 Scope, Nature and Follow-up of External Audit
A high quality external audit is an essential requirement for creating transparency in the use
of public funds. Weaknesses in external audit identified by the 2010 and 2014 PEFA include:
1. Audit frequency. The Audit Office typically manages to cover all MDAs within the
space of two (2) years.
2. Inadequate focus on systemic PFM issues
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3. Timeliness.
4. Poor response and follow-up to audit recommendations. (The audit recommendations
presented to auditees are rarely addressed by management. Although auditees
generally do send a formal and timely response to the audit findings, this response is
usually not thorough and there is little evidence of any effective follow-up).
The AO Annual Plan considered frequency of audit visits depending on their audit
assessments and approach. The external audit services should be in accordance with the
mandatory financial reporting of the auditee. As with other PFM units, staffing of the AO is
also an issue.
The issue on the timeliness of the audit reports attribute to both the auditor and auditee. A
‘Schedule of Audit Reports submission to Parliament’ to include in the AO Annual Plan audit
programme should contribute to timely submission of information. Audit reports (including
Special Audit Reports, Annual Report, etc but may not include Management Letters) shall
then be submitted to Parliament within the mandatory/specified timeframe for such report.
Once the AO’s audit reports including annual report are submitted to Parliament, they should
become available to the public.
The AO and MoFNP-IAD, may need to report on status of audit recommendations and
related management responses and actions by MDAs, on a regular basis. In the case of Public
Enterprises, respective Board of Directors should be provided with a similar report. Those
management report items should be kept on the report until a satisfactory action accepted by
the PAC and/or Audit Committee is reported. The report should then be submitted to Cabinet
on a 6 monthly basis. This status report will be posted on LA, AO, and MoFNP websites.
The following table presents a summary of the external audit challenges, as well as a list of
policy actions that Tonga will implement to address the challenges.
Table 20 – Key External Audit challenges and planned actions
PI.26 - Scope, nature and follow-up of external audits
PI.26(i) Scope/nature of audit performed (incl. adherence to auditing standards);
PI.26(ii) Timeliness of submission of audit reports to legislature;
PI.26(iii) Evidence of follow up on audit recommendations
PI.26(i) was B; PI.26(ii) was C; PI.26(iii) was C; and overall rating was C+.
2014 PEFA rating:
Improve ratings for PI.26(i), PI.26(ii) and PI.26(iii) to B.
Goal:
Challenges
 Audit frequency.
 Inadequate focus on systemic issues.
 Timeliness.
 Poor response and follow-up to audit recommendations.
Proposed Actions
Responsible
Target Date
1. The AO co-ordinates with MoFNP IAD in devising an AO,
agreed audit visit schedule with regards to internal audits MoFNP.
of MDAs. This to be included in both the AO and
MoFNP IAD respective Annual Audit Plans
1 July 2016
onwards
2. Support the AO to continue carrying out performance AO,
audits to enhance governance and quality audit functions. MoFNP.
30 June,
2016.
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3. The AO Annual Plan audit programme to include a AO, LA.
schedule of Audit Reports submission to Parliament. All
audit reports(including Special Audit Reports, Annual
Report, etc but may not include management letters) shall
be
submitted
to
Parliament
within
the
mandatory/specified timeframe for such report.
4. Approved Audit reports to be posted within reasonable AO,
timeframe to relevant website. Approval may be granted MoFNP,
by Parliament or authoritative body, and posted to MoPE, LA.
websites of Parliament, AO, and MoFNP, and also MoPE
in regard to PEs audits, so that they can be freely
accessed by the public.
5. The AO and MoFNP-IAD, to prepare a ‘Report on Status AO,
of Audit Recommendations and Management Responses MoFNP,
and Actions by MDAs and PEs’ on a quarterly basis, and LA.
submit to the PAC and the Audit Committee for
information and subsequent follow-up. The report will be
submitted to Cabinet on a 6 monthly basis for
information and monitoring, and will be posted on LA,
AO, MoFNP websites.
31 March,
2015.
30 June,
2016.
30 June,
2016.
5.9.3 Legislative Scrutiny of the Annual Budget Law.
The power to give the Government authority to spend rests with the Parliament and is
exercised through the passing of the annual budget. If the Parliament does not rigorously
examine and debate the budget, that power is not being effectively exercised and will
undermine the accountability of the Government to the electorate. Weaknesses in legislative
scrutiny of the annual budget law identified by the 2010 and 2014 PEFA include:
 inadequate time for scrutiny and debate. The budget documents are typically
presented to the Legislative Assembly by early June for scrutiny. This allows for less
than one month of scrutiny and debate. In turn, Cabinet would not have sufficient time
to meaningfully revise the detailed proposals for legislative approval before the start
of the financial year. This is being addressed above in section with the proposal to
revise the budget process calendar; and
 no documented procedures for legislative review of the budgetary documentation.
The following table presents a summary of the challenges related to Legislative Review of
the Annual Budget Law (Appropriation Act), as well as a list of policy actions that Tonga
will implement to address the challenges.
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Table 21 – Key challenges related to Legislative Review of the Annual Budget Law and
planned actions
PI.27 - Legislative scrutiny of the annual budget law
PI.27(i) Scope of the legislature’s scrutiny;
PI.27(ii) Extent to which the legislature’s procedures are well-established and respected;
PI.27(iii) Adequacy of time for the legislature to provide a response to budget proposals both
the detailed estimates and, where applicable, for proposals on macro-fiscal aggregates
earlier in the budget preparation cycle (time allowed in practice for all stages combined);
PI.27(iv) Rules for in-year amendments to the budget without ex-ante approval by the
legislature
2014 PEFA rating:
Goal:
Challenges:
PI.27 (i) was C; PI.27 (ii) was B; PI.27 (iii) was D; PI.27 (iv) was C; and
overall rating was D+.
Improve ratings for PI.27(i) and PI.27(ii) PI.27(iii) and PI.27(iv) to A.
 Providing adequate time for scrutiny and debate.
 No documented procedures for legislative review of the budgetary
documentation.
Proposed Actions
Responsible
1. MoFNP to devise a clear guideline and rule on in-year MoFNP
budget amendments for use by all MDAs. This would
include setting limits on extent and nature of amendments
and are consistently observed and respected.
2. MoFNP to liaise with Parliament in devising written
parliamentary procedures to be adopted by the Legislative MoFNP, LA
Assembly for budget review including:
 internal organizational arrangements - such as
specialized review committees (may be PAC), and
negotiation procedures;
 scope of review - such as the recording of
conclusions on corporate planning , fiscal policies,
medium-term fiscal framework, medium-term
priorities, MDAs corporate plans with key
performance indicators, and the details of annual
expenditure and revenue; and
 any other budgetary issues that need explanations
and clarifications
Target Date
31 May,
2016.
31 May,
2016.
5.9.4 Legislative Scrutiny of External Audit Reports.
Parliament has a key role in exercising scrutiny over the execution of the budget. Weaknesses
in legislative scrutiny of external audit reports identified by the 2010 and 2014 PEFA
included:
 Timeliness of legislative reviews;
 Inadequate reviews; and
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
Infrequent recommendations and consequent lack of executive implementation.
Since the 2010 PEFA a Public Accounts Committee (PAC) was created in the Legislature in
2011, and the Committee has started receiving related training. The 2014 PEFA selfassessment recognizes the improvements to date with further recommendations to strengthen
and ensure that the PAC is well-functioning and effective.
The following table presents a summary of the challenges relating to legislative scrutiny of
external audit reports, as well as a list of policy actions that Tonga will implement to address
the challenges.
Table 22– Key challenges relating to legislative scrutiny of external audit reports and
planned actions
PI.28 - Legislative scrutiny of external audit reports
PI.28(i) Timeliness of examination of audit reports by the legislature (for reports received
within the last three years).;
PI.28(ii) Extent of hearings on key findings undertaken by the legislature;
PI.28(iii) Issuance of recommended actions by the legislature and implementation by the
executive.
2014 PEFA rating: PI.28(i) was B, PI.28(ii) D and PI.28(iii) B.
Improve rating for all PI.28.
Goal:
Challenges
 Timeliness of legislative reviews.
 Inadequate reviews.
 Infrequent recommendations and consequent lack of executive
implementation.
Proposed Actions
Responsible
1. LA Public Accounts Committee (PAC) to have a AO, LA
documented framework and/or procedures for review and
scrutiny of external audit reports. This to include conduct
hearings on key findings, and the issuance and monitoring
of recommended actions, including the related
communication strategy to the public.
Target Date
31 October,
2015.
5.10 Other Critical Issues.
5.10.1 Development Partner Management Practices
Direct budget support constitutes an important source of revenue to Government and poor
predictability of budget support affects fiscal management. The 2010 and 2014 PEFA
assessment identified the following weaknesses in development partner management
practices:
 Inadequate information on in-kind assistance provided. (MoFNP estimates that
overall, around 40% of development partner assistance is provided as cash and 60%
provided in-kind.)
 Inadequate information for budgeting. (Most development partners do not respond to
requests for this information and many do not provide estimates in time to be
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

incorporated into the budget. Some development partners provide assistance to
regional programs but do not advise GoT of the proportion that will benefit Tonga.)
Inadequate quarterly expenditure reports. (MoFNP would like to receive quarterly
expenditure reports and most development partners do not provide these.)
Inadequate information to determine the proportion of development partner funds
using Government systems.
The Government recognizes the importance of donor assistance and has become more active
in coordinating with development partners to improve the completeness of the budget papers
and financial statements.
The following table presents a summary of the development partner management challenges,
as well as proposed actions to address the challenges. The GOT looks forward to working
with development partners to improve the flow of information needed between them.
Table 23 – Key Development Partner Management challenges and planned actions
D.1 - Predictability of direct budget support
D.1(i) Annual deviation of actual budget support from the forecast provided by the
development partner agencies at least six weeks prior to the Government submitting its
budget proposals to the legislature (or equivalent approving body);
D.1(ii) In-year timeliness of development partner disbursements (compliance with aggregate
quarterly estimates).
D.2 - Financial information provided by donors for budgeting and reporting on project and
programme aid
D.2(i) Completeness and timeliness of budget estimates by development partners for project
support;
D.2(ii) Frequency and coverage of reporting by development partners on actual development
partner flows for project support.
D.3 - Overall proportion of aid that is managed by use of national procedures
D.1(i) was C and D.1(ii) D
2014 PEFA
D.2(i) and D.2(ii) were C
rating:
D.3 was C
Improve rating for all of D.1, D.2 and D.3 to A.
Goal:
Challenges:
 Inadequate information on in-kind assistance provided
 Inadequate information for budgeting
 Inadequate quarterly expenditure reports
 Inadequate information to determine the proportion of development partner
funds using Government systems.
 Inadequate information to identify allocation of resources across sectors,
regions, and priorities in the TSDF
Proposed Actions
1. Establish a Government Development Partners Forum
(GDPF) to meet on monthly basis and discuss
development assistance issues. These issues to include
aid flows projections, use of Government system,
projects’ implementation status and issues, project
status/completion reporting etc. The representatives
Responsible
MoFNP,
MoFAT,
PMO,
DPs
Target Date
31 December,
2014.
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from Government may include MoFNP, MoFAT, PMO,
and any other relevant MDAs.
2. MoFNP to submit quarterly reports to Cabinet on MoFNP
31 March, 2015.
Projects Implementation Status and major issues raised
from the GDPF. The report is to be published in the
MoFNP website once approved by Cabinet.
3. MoFNP to develop an Aid/Project Budgeting and MoFNP,
DPs
Reporting Framework and agreed with Development
Partners (DPs) for adoption. The framework to include
requirements for DPs to provide:
a. Budget estimates for disbursement of project aid at
stages consistent with the Government’s budget
calendar and with a breakdown consistent with the
government’s budget classification.
b. Quarterly reports within one month of end of quarter
on all disbursements made of the externally financed
project estimates in the budget, with a break down
consistent
with
the
Government
budget
classification.
c. Schedule of Acquittal report submissions for
MoFNP to co-ordinate and implement for all
projects.
4. The proportion of aid that is managed through MoFNP,
Government system and procedures for PFM areas of DPs
procurement, payment/accounting, audit and reporting to
be improved to at least 90% on average.
31 December,
2015.
>50 % by 30June,
2016
>75% by30 June,
2018
>90% by 30 June,
2019.
5.10.2 Sustainable Capacity Building
It is critical to develop a more sustainable system to build capacity and develop skills on PFM
functions for all those who are and/or would likely to involve in PFM activities in MDAs,
AGAs, PEs, and other relevant agencies. The goal is to:
 reach more PFM professionals both in the MoFNP as well as other MDAs;
 make better use of existing in-country resources; and
 bring together in one Tongan focal-point institution the knowledge and mentoring
experiences supported by development partners.
Tonga is already accruing benefits from training programs currently run through local
training institutions such as Government Training Programs, USP’s branch campus at
Nuku’alofa for teacher training and business administration, etc. Tonga encourages
development partners to join forces and supplement the generous contribution made by the
Government of Australia to support sustainable long-term USP training programs aimed at
improving the quality of public management.
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Development partner-funded training of PFM professionals in Tonga, as in most other PICs,
has been on formal and informal in-country mentoring and coaching through TA provided by
relatively long/short-term advisors; grant/scholarship support for nationals to study abroad/incountry; and formal short out-of-country workshops. Each has its own unique set of
advantages and disadvantages.
The Roadmap proposes that a PFM secretariat within the Policy and Reform Division in the
Ministry of Finance & National Planning develop a PFM Capacity Building Framework,
identify the PFM training needs of PFM staff, including any knowledge gaps in PFM. Also
the training can be done within Government or with other established training institution such
as USP or other regional organisations. It may also include secondment or work attachment
to overseas Ministry of Finance or similar jurisdiction on specific PFM areas. The
establishment of the PFM Capacity Building Framework will also ensure harnessing the skills
and sustain the high level standards of PFM staff, and thus contribute to develop the PFM
Community of Practice.
Proposed Actions
Responsible
1. A PFM Capacity Building Framework is established within MoFNP.
MoFNP. The proposed Capacity Building Framework is to
identify training needs and knowledge/skill gaps of PFM
staff. The Policy Coordination and Reform Unit, acting as
the Secretariat for the Committee, would and then
develop, coordinate, organize, and/or facilitate relevant
PFM training materials and courses for all PFM staff in
MDAs and relevant agencies to enhance their knowledge,
develop their skills, and sustain their standards in PFM
activities, and thus create the PFM Community of
Practice.
6
Target Date
31
December
, 2015.
Sequencing the PFM Reform Roadmap
Successful PFM reforms have carefully sequenced work over time to match Government
interest, need for a PFM improvement, and capacity to implement. Lack of reform progress in
some cases is attributable to reform overload, trying to do too much too quickly. The Tonga
PFM Reform Roadmap is being sequenced into three main Phases, with prioritization of
proposed actions to be determined by PFM – RSC.
Phase I - Year 1 to mid-Year 2 (November 2014 – December, 2015).
This phase establishes the critical platform for the Roadmap. It tries to bridge a critical
capacity gaps in both physical and human capital which are so fundamental for the
effective implementation of the whole Roadmap. It also looks at some key structural
reform to complete, and the establishment of crucial frameworks to guide the
implementation of PFM functions, strengthening the work with development partners,
and other gaps that need to fill in as being critical for the effective implementation of the
PFM Reform Roadmap. Also capacity building is proposed to be strengthened by
establishing a PFM Training Committee within MoFNP.
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Phase II –Mid Year 2 – Year 3(January 2016 – June 2017).
Phase II will continue the activities in Phase I and will focus on strengthening particular
PFM areas. This includes budget credibility by including the gradual devolvement of
PFM functions to MDAs improving the quality of financial reporting, and strengthening
of the oversight roles of both the Audit Office and Parliament. .
Phase III - Year 4 – Year 5 (July 2017– June 2019).
The effective implementations of recommendations in Phase I and Phase II will lead, to
introducing the accrual basis of accounting in Phase III to improve quality of financial
reporting. The full consolidation of MDAs and PEs financial reporting will also be done,
thus ensure full compliance with the International Public Sector Accounting Standards
(IPSAS).
6.1
Monitoring and Evaluation.
To facilitate, amongst other things, the pace of the PFM Roadmap Reform, and in some part
avoid duplication, there is a great need to review the operation of existing PFM institutions
such as MoFNP and key MDAs. Annex I provides the key milestone that the implementation
of the Roadmap should be monitored against.
To determine if the PFM Roadmap is achieving its goals, it is important that the planned
actions are incorporated into the Corporate Plans of the implementing MDAs and that the
progress on the planned actions and set targets are monitored, evaluated and updated, at least
on a rolling quarterly basis. In order to improve monitoring and reflect implementation
progress, the Roadmap will be updated on a regular basis, at a minimum every two (2) years
with annual reviews of progress involving development partners and stakeholders. In
addition, GoT will continue to use the PEFA Framework and other similar mechanisms to
monitor implementation progress. The intention is to keep the Roadmap flexible and as a
living document in order to take-stock performances and frontload new PFM challenges that
need to be addressed.
6.1.1 PFM Reform Coordinating Unit (PFM-RRU)
The Policy and Reform Division is set up as the PFM Reform Roadmap Coordination Unit
(PFM-RRU) in the MoFNP to play the management unit roles of the Roadmap, and be
responsible for the follow up of progresses and monitor the implementation of the Roadmap. All
communications relating to the Roadmap will be received and transmitted from PFM-RRU,
which will report directly to the CEO of the MoFNP. In performing its monitoring role, the
Unit may also co-ordinate contact points in other key PFM MDAs.
This PFM-RRU will perform these tasks:
 formulation and evaluation of the actions required for implementation of the
Roadmap;
 adequacy and access to resources;
 discuss the proposed work plans and schedules;
 evaluate the work of consultants;
 organize training workshops, as required;
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




disseminate information to all stakeholders on the Roadmap;
monitor progress by implementing agencies and advise on action to overcome
problems;
handle any complaint from the stakeholders and general public on the implementation
of the Roadmap;
collect data to monitor performance of the reform plan; and
ensure cohesion and consistency between the various initiatives and the effective use
of external support to the Reform process.
Individual implementing agencies could also conduct their annual internal reviews to assess
and evaluate the progresses in their planned actions. They should report and provide
recommendations through the PFM-RRU. This should increase the effectiveness of the
planned actions.
6.1.2 PFM Reform Roadmap Steering Committee (PFM-RSC)
A PFM Reform Roadmap Steering Committee will be formed to oversee the progress of the
Roadmap. The PFM-RSC will be chaired by the Minister for MoFNP and will include the
following representation: CEO of MoFNP, Auditor General and CEO of MoRC
There will also be a technical committee comprising of the Chief Secretary & Secretary to
Cabinet (Deputy Chair), CEO of MoFNP, CEO of MoRC, Auditor General, CEO of the PSC,
CEO of MoPE, CEO of the MoET, CEO of MoH, and Clerk of the Legislative Assembly.
The secretariat will be provided by the PFM-RRU.
The PFM-RSC will meet quarterly and will:
 Review progress reports from the PFM-RRU;
 Advise on policy issues, problems and constraints raised by the PFM-RRU;
 Review recommendations from external consultants;
 Commission independent reviews such as the PEFA assessment;
 Approve amendments and future phases of the PFM Reform Road-map;
 Provide guidance and support to the Task Force to achieve the reform objectives;
 Assist in identifying additional resources for implementation as required; and
 Ensure the reform work is clearly integrated into and supportive of the restructuring
and reform program of government.
Furthermore, MoFNP plans to continue to carry out annual reviews of the PFM reform
process using PFTAC’s PEFA Self-Assessment Workbook and other relevant assessment
tools in collaboration with interested development partners. In addition, it is proposed that an
independent analysis of progress using the international Public Expenditure and Financial
Accountability (PEFA) matrix be supplemented by the OECD/DAC Procurement
Assessment, or a similar tool for small nation procurement. A Procurement Review has just
been completed by the AusAID and that should be adequate to supplement the PEFA
Review.
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Proposed Actions
Responsible
1. A PFM Reform Roadmap Unit (PFM-RRU) is established MoFNP.
in the MoFNP. This Unit is to play the management unit
roles of the PFM Reform Roadmap, and be responsible for
the following up of the progresses and monitoring the
implementation of the PFM Reform Roadmap.
2. A PFM Reform Roadmap Steering Committee is formed
to oversee the progress of the PFM Reform Roadmap.
MoFNP
7
Target Date
31 January,
2015.
31 January,
2015.
Communicating the PFM Reform Roadmap
For the Roadmap to succeed, the participation and support of wide number of personnel
across all levels of public and private is required. It is therefore essential to have the
Roadmap presented to the main divisions of the MoFNP, MoRC, MoPE, PSC, AO, and LAPAC so that they understand their roles and responsibilities in the PFM reform process. The
PFM-RRU is the designated specific contact point at the MoFNP to receive communications
regarding the PFM Roadmap. The Unit will communicate the Roadmap under the
instructions of the PFM-RSC.
The following steps will form the main elements of communicating the PFM Reform
Roadmap to the stakeholders and the public:
 The PFM Reform Roadmap will be presented to all the relevant staff in the main
implementing divisions within the MoFNP, MoRC, MoPE, PSC, AO, and LA-PAC. This
is to stimulate and encourage discussions and feedbacks on their respective roles in the
roadmap and for them to understand the respective priorities in the reform process. This
should be carried out as soon as the Roadmap is finalized and approved by Cabinet.
 The PFM Roadmap will be presented to the MDAs, and PEs in periodic meetings, to
ensure that they are aware of the roadmap and the importance of their support for the
success of PFM reform process. The meetings will be used to maintain a regular flow of
information and dialogue on progress, activities, problems and constraints.
 Circulars sent out by the CEO of MoFNP will be used to inform CEOs and MDAs, and
these will be copied to all Ministers, to inform them of the PFM Reform Roadmap and
the need for their support for the change process. Circulars will be used to provide a
regular flow of information to MDAs on the progress and activities of the Roadmap with
details of the roles and responsibilities for the reform agenda.
 A briefing session will be arranged with development partners to initiate a dialogue on the
content of the PFM Reform Plan, the priorities, the coordination of capacity building
support and the monitoring arrangements including future dialogue with partners.
 Consideration will also be given to establishing a newsletter, targeting key stakeholders
with information on the progress of implementation, challenges and success stories along
with information on selected capacity building actions from different perspectives.
However, this will be dependent on the identification of the human resources to undertake
this work.
 The PFM Reform Roadmap and annual progress reports will be made available to all
stakeholders and other interested parties online through the MoFNP Website.
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
The PFM Roadmap will continue to be linked to other established body on Government wide
reform to ensure the links being developed with other relevant MDAs are maintained and
developed.
Proposed Actions
Responsible
PFM-RRU,
communication strategy and submit to PFM-RSC for PFM-RSC.
approval.
1. The PFM-RRU to develop the PFM Reform Roadmap
8
Target Date
30 June,
2015.
Change Management Process.
The PFM Roadmap Reform proposes many changes to the existing regulatory and
institutional frameworks, systems and processes, human and physical capitals, and
technology and to MDAs. It is therefore critical that such changes are managed well to ensure
effective implementation of the PFM Roadmap Reform. There will be a Change Management
Plan put in place to manage the people-side of change. This includes challenges and
opportunities the roadmap may face during the change process. Communication, training and
coaching of staff is important especially relevant key people for the change.
Proposed Actions
Responsible Target Date
1. Develop a Change Management Plan to set out strategies MoFNP.
to manage the changes proposed by the PFM Roadmap
and ensure success of the Roadmap and for future
improvements
31 December,
2015.
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Annex I : Tonga PFM Reform Roadmap 2014-2019 Results Matrix
PFM
Areas
Actions
Lead entity
A. CRITICAL INSTITUTIONAL AND STRUCTURAL ISSUES
5.1 Reliable Government Integrated Financial Management Information System (IFMIS).
1. Upgrade the GoT Integrated Financial Management Information System
MoFNP
(IFMIS)
2. Upgrade the computer equipment and install compatible computers that will
MoFNP
interface with GoT IFMIS in MoFNP and Accounts divisions of MDAs .
3. Complete the roll-out of Government IFMIS to MDAs .
Target Date
Milestone
30 June, 2015.
Upgraded GoT IFMIS and
operating
100% upgraded and installed
31 December,
2015.
MoFNP, MDAs
30 June, 2016.
4. Review and upgrade the Government Integrated Communication Network MoFNP, MDAs
that will support the communications of PFM activities.
30 June, 2017.
5.2 Adequate Human Capital (Staff Capacity).
1. Review MoFNP‟s structure to achieve greater integration and improved coordination of key PFM Units within MoFNP and with MDAs and
stakeholders conducive to the achievement of PFM goals and accommodate
sustainable effective PFM reforms
2. Strengthen the human capital (staff) capacity of key PFM Units of
MoFNP
31 December,
2014.
MoFNP
31 December, at least 50% by 30 June, 2015; and
2015.
100% by 31 December, 2015.
MoFNP, PSC,
MoPE
31 December, at least 50% by 30 June, 2015; and
2015.
100% by 31 December, 2015.
MoFNP, PSC,
MDAs
30 June, 2015. at least 50% by 30 June, 2015; and
100% by 30 June, 2016.
MoFNP through recruitment/upgrading to reinforce the existing staff
capacity to carry out its mandatory PFM functions and to lead the
implementation of the PFM reforms.
3. Improve the staff capacity of MoPE by recruiting new and/or strengthen
existing staff to enhance the mandatory oversight function over PEs, and also
the analysis and reporting of PEs performance as per PFM reforms staff
and/or strengthen existing staff .
4. Co-ordinate with MDAs to assess their PFM staff capacity then
strengthen/recruit adequate staff to MDAs‟ Accounts Divisions to carry out
their respective PFM functions.
5.3 Improve The Existing Legislative and Regulatory Framework
1. Review the Public Finance Management (PFMA) Act 2002 and PFM MoFNP, Crown
Law Office, AO,
Regulations, and other PFM related regulatory and policy frameworks.
LA.
Page 61
100% roll out completed and
connected
Government integrated
communication system in place
31 December,
2015.
Revised MoFNP structure and
operation.
Public Finance Management Act
2002 with Amendments approved
by Parliament, and assented by the
King.
PFM
Areas
Actions
Lead entity
Target Date
Milestone
B. POLICY FORMULATION, PLANNING, AND BUDGET FORMULATION.
5.4 Improve Planning Processes
1. Complete the design and full implementation of three-year rolling corporate
plans with more medium-term policy and strategy content.
MoFNP, PSC,
MDAs.
2. Review the TSDF and develop a long-term National Strategic Development MoFNP, MDAs,
Plan covering at least 10 years, and to include a clear Monitoring and
Other
Evaluation Framework.
stakeholders
3. Review status of District Plans and Sector Plans and assist to develop MoFNP, MIA,
medium-term strategies including mechanisms for periodic review.
NGC, SGC
5.5 Enhance policy formulation
1. Strengthen MoFNP capacity to develop medium term macro-economicframework with proper macro-economic forecast and adequate analysis.
2. Support the capacity development in the Bureau of Statistics and encourage
its involvement in the implementation of the “Ten Year Pacific Statistics
Strategy 2011-2020”.
3. MoFNP to develop mechanism to enhance close co-ordination and ensure
mutual working relationships with key institutions such as the National
Reserve Bank of Tonga and the Bureau of Statistics
5.6 Increase Credibility of the Budget
1. Review the existing Financial Management Model (or develop a new
mechanism) for analysis and determining economic and fiscal implications
of any budget proposal from MDAs or other bodies
2. Review the timeframe of the annual Budget Preparation Calendar and
develop a proper budget consultation strategy.
Page 62
30 June, 2015. Corporate Plan framework in place
and in use.
31 December,
2015.
National Development Plan
approved and used.
30 June, 2016.
District/Sector plans linked to
National Plan
MoFNP
31 December,
2015.
MoFNP, Bureau
of Statistics
Ongoing
Appropriate staff in place and a
macro economic forecast model
developed and used.
Progress as scheduled.
MoFNP, MDAs, 30 June, 2015.
Regular co-ordination contact
Bureau of
between MoFNP/MDAs/Bureau of
Statistics, NRBT.
Statistics/NRBT. Improved data
quality and more accurate and
complete forecasts and analysis
MoFNP.
31 December,
2015.
MoFNP.
31 December,
2014.
Upgraded Financial Management
Model (or similar model) and in
use
Revised Budget Preparation
Calendar and schedule.
PFM
Actions
Areas
5.7 Improve Budget Comprehensiveness and Transparency
5.7.1
Budget Classification.
1. Review and Improve the existing budget classification to ensure that all
government fiscal transactions are captured and appropriately classified into
economic, administrative, and functional classifications for budget
presentation, execution, and reporting, using appropriate acceptable
standards. These classifications to be embedded in the Chart of Account.
Lead entity
Target Date
Milestone
MoFNP.
30 June, 2016.
Accurate and complete revised
classification of all government
financial transactions
5.7.2
Transparency of inter-governmental fiscal relationships.
1. Develop a Government Grant Policy Framework and submit to Cabinet for
MoFNP.
30 June, 2015.
approval.
5.7.3
Oversight of aggregate fiscal risk from other public sector entities.
1. Review and update the status of all AGAs/PEs‟ statutory financial reporting, MoPE , MoFNP, 31 March, 2015.
and assess issues that caused any delay/late reporting and devise plan of Audit Office.
actions to clear and avoid any further backlogs.
2. MoFNP and MoPE to require and receive from AGAs and PEs the
followings:
a. during the annual budget process, the narrative discussions of their MoPE, MoFNP. 31 March, 2015.
respective financial conditions as well as medium-term forecasts of
their condition for at least the next three (3) years.
b. include a Statement of Risks in their respective financial reports (if MoFNP, MoPE. 30 April, 2015
and onwards.
not yet done), describing assessment of risks and mitigating factors
regarding those risks, and to commence on the report for the financial
year ended 30 June, 2015.
c. produce and submit a quarterly financial statements and audited MoFNP, MoPE, 30 June, 2016.
PEs
annual financial statement within the set or statutory deadline.
3. MoFNP and MoPE to produce 6-month consolidated financial updates for
MoFNP, MoPE.
all AGAs/PEs including narrative that highlights problems and assesses
risks.
5.7.4
Public Access to Key Fiscal Information.
1. The MoFNP in liaison with relevant MDAs to devise a „public relation MoFNP, MDAs.
schedule‟, to timely disseminate budget and fiscal information to the public.
Page 63
Approved Government Grant
Policy Framework, and in used.
Updated financial reporting by
Public Enterprises and other
government entities.
Complete budget related
information is submitted on time
and credible.
Statement of Risks approved to be
part of the statements in the
Annual Financial Statement, and
included.
31 August,
2016.
All Quarterly and Annual
Financial Reports approved and
within set deadline.
Consolidated 6 months report
approved and used.
30 June, 2015
and onwards.
100% posted in the website and
within the set time.
PFM
Actions
Lead entity
Target Date
Milestone
Areas
5.8 Enhance Policy-based Budgeting
5.8.1
Multi-year perspective in fiscal planning, expenditure policy and budgeting.
1. Review corporate plan and budget documents to add more planning and MoFNP, MDAs Major MDAs – Improved budget and better budget
strategy content by standardizing the definition and content of sub-programs
1 July, 2015.
control at sub-program level.
in Major Ministries in 2015-2016 and all ministries in 2016-17, with outputs,
All MDAs – 1
outcomes, programs aligned with those specified in ministry corporate plans.
July, 2016
2. Continue the integration of the corporate plans and budget:
MoFNP, PSC,
MDAs
a) For 2014/2015: enhanced three-year rolling corporate plans providing
clear links to three-year rolling budgets;
b) For 2015/2016: three-year corporate plan and budget integrated into one
document for each MDAs.
3. Demonstrate links between multi-year estimates and subsequent setting of MoFNP, MDAs
annual budget ceilings and explain differences to Cabinet and to CEOs and
MDAs.
4. Show in budget documents the estimate recurring costs (including all MoFNP, MDAs
operating costs and estimated future repair/replacement costs based on
depreciation factors) of all new investment projects (including development
projects), as well as estimated repair/replacement costs of existing capital
assets for sectors.
Approved Planning and Budget
documents
1 July, 2015.
1 July, 2016.
30 June, 2015.
Budget documents and
consultations
30 June, 2015.
Budget documents approved
incorporating these estimated
recurring costs.
C. BUDGET EXECUTION
5.9 Predictability and Control in Budget Execution
5.9.1
Effectiveness in Tax payments.
1. Upgrade the Revenue Management System (RMS) and utilize relevant
functions such as analysis, filing, risk management, audit and investigations,
assessment of entries:
a)
Updated RMS version
b)
Medium-term need for further RMS modules
2. Develop a communication strategy for community outreach to achieve the
desired aim of “Revenue from the Community, For the Community" , and
devise related training program for staff on the outreach.
MoRC
3. Review human resources capacity at MoRC for effective revenue
administration function.
MoRC
Page 64
MoRC
Updated RMS system and
operating with additional modules
added.
31 July, 2015.
31 July, 2016.
31 December,
2015.
Ongoing
Positive Feedback from
community and improved
awareness.
100%
PFM
Areas
Actions
Lead entity
Target Date
Milestone
4. MoRC transition to functional structure with review of its structure in the
next 2 year.
5. Implement a Corporate Income Tax instalment for larger taxpayers.
6. Establish a taxpayer services function
7. Review the process for approving, monitoring, and reporting exemptions to:
a. determine if they are still relevant and cost effective; b. maintain in tax
legislations all laws granting tax exemptions and concessions;
c. introduce a process for approving exemptions; and
d. introduce a tax expenditure statement detailing the estimated cost of all
exemptions.
MoRC
31 July, 2016.
MoRC
MoRC
MoRC
31 July, 2016
31 July, 2016.
31 December,
2015.
Approved ministry structure and
functioning
100%
100%
Approved policy exemptions in
place and implemented.
8. Analyse late filing and late payment data to determine the best interventions,
set targets and allocate resources to improve on-payments for large and small
businesses.
9. Move to Electronic filing of returns for large businesses to free up
processing resources.
10. Introduce a risk management/case selection module into RMS to further free
up processing resources.
11. Maintain data-matching activities until the risk management module is
purchased but review the current process and adopt a more strategic
approach to data matching activities.
12. Introduce and shift to computerized risk modelling.
13. Continue to develop the compliance program for more analytical assessments
to build in a greater degree of specificity across each taxpayer segment,
sectorial issues, resource allocation, compliance improvement measurement,
and identification of implications for flow-on effects.
MoRC
30 June, 2015
Improved collection of arrears.
MoRC
31 July, 2016.
MoRC
31 July, 2015.
Improved number of returns
submitted
Module incorporated and working
MoRC
31 July, 2015.
100%
MoRC
MoRC
31 July, 2016.
31 July, 2015.
operating risk model
Improved compliance and reduced
non-compliance
14. Devise system to analyse arrears on a systematic basis to better understand
the breakdown of arrears, particularly collectible and uncollectible debt and
identify sectors presenting the greatest likelihood of non-payment.
MoRC
31 July, 2015.
Reduce the arrears level by 50%
15. Institute procedures for mounting combined tax and Customs audits where
an identified benefit is likely to accrue.
16. Use TIN data to check information declared on Customs entries.
MoRC
31 July, 2015.
100%
MoRC
31 July, 2016.
100%
Page 65
PFM
Areas
Actions
5.9.2 Predictability in the availability of funds for commitment of expenditure.
1. Review the current composition of the Cashflow committee members to
establish a stronger group with broader term of reference to regularly
monitor the management of cashflows and also to include debt and asset
management. The composition of the group to be determined by MoFNP.
2. Review and Update the Cash Management Guidelines and submit for
endorsement of the established group and seek approval for mandatory use
and full compliance by all MDAs.
3. Review and develop a new Diplomatic Mission Financial Framework and
Guidelines and ensure consistency with relevant established regulatory
framework.
4. Review and develop an appropriate PFM systems and procedures for the
centralization of government financial operations in the outer islands and
ensure consistency with relevant established regulatory frameworks.
Strengthen Sub-Treasuries‟ capacities to carry out PFM functions.
5.9.3 Management of Debt
1. Support the adoption of the ‘Public Debt Management Reform Plan’
Lead entity
Target Date
Milestone
MoFNP
31 January,
2015.
100%
MoFNP
31 December,
2015.
Cash Management Guidelines
approved and in use.
MoFNP,
MoFAT.
31 December,
2015.
MoFNP, PSC.
MoFNP
As per
timeframe
proposed in
PDMRP
At least 80% of PDMR
recommendations implemented
MoFNP
As per PRS
action plan
At least 50% by 31 December
2015, and 100% by December
2016.
MoFNP, AO
31 December,
2015.
Asset Management Framework
approved and used.
(PDMRP) and its related recommendations and consult with relevant
stakeholders to ensure effective implementation
5.9.4 Competition, value for money and controls in Procurement.
1. Support the implementation of the approved Procurement Reform Strategy
(PRS) (Action Plan) and its recommendations
5.9.5 Asset Management
1. Develop an Asset Management Framework submit for Cabinet approval. The
work on the proposed framework should take into account similar work done
on NIIP.
5.9.6 Effectiveness of Internal Audit.
1. MoFNP will work with AO on the mandate for internal audit to gradually
expanding MoFNP IAD internal audit coverage to all MDAs as follows:
a)
b)
four (4) MDAs
ten (10) MDAs
Diplomatic Mission Financial
Framework and Guidelines
31 December, Improved PFM functions in Outer2015.
islands.
MoFNP, AO
Agreed Internal Audit Mandate
and implemented as planned.
31 July, 2016.
31 July, 2017.
Page 66
c)
PFM
Areas
All MDAs
Actions
Lead entity
2. The MoFNP to coordinate with the AO to strengthen Professional Internal
Audit standards with the aim of applying those standards to all internal audit
operations for MDAs and PEs.
3. MoFNP to work with the AO to develop annual targets for increased focus
on systemic issues.
4. A quarterly report will be submitted to the Audit Committee on „Status of
Audit Recommendations, Responses, and Actions‟ by MDAs.
5.9.7 Devolvement of Government PFM System.
1. Conduct a full review of the current government accounting system.
31 July, 2018.
Target Date
MoFNP, AO
31 December,
2016.
MoFNP, AO.
31 December,
2018.
31 December,
2015.
MoFNP, AO.
Milestone
100% Compliance with the
Professional Internal Audit
Standards.
100%
Report endorsed by the Audit
Committee and noted by Cabinet.
At least 90% of recommendations
being actioned.
31 December,
Report of the review agreed and
2015.
approved.
2. Review and design the PFM system including applicable policies and MoFNP, MDAs. 30 April, 2016. PFM financial system for MDAs,
procedures for MoFNP, and for MDAs.
and MoFNP.
3. Conduct regular PFM trainings on the proposed PFM system with MoFNP MoFNP, MDAs. 30 June, 2016.
Improved capacity of staff
and all MDAs.
4. Devolve the PFM functions to all MDAs.
MoFNP, MDAs.
MoFNP, MDAs. >30% by 1 July,
Carried out as scheduled.
2016;
Improved PFM operation in MDAs
>60% by 1
and MoFNP.
July, 2017;
100% by 1 July
2018.
D. ACCOUNTING AND FINANCIAL REPORTING
5.10 Accounting, Recording and Reporting
5.10.1 Availability of information on resources received by service delivery
units.
1. MoFNP to work with relevant MDAs to identify primary service delivery MoFNP, MDAs
units and classify related transactions in the accounting system.
PFM
Areas
Actions
Lead entity
Page 67
31 December,
2015.
Monthly statements approved.
Target Date
Milestone
1 Establish a Financial Managers Forum of Government and Public MoFNP, MoPE,
Enterprises and other Government entities to discuss relevant PFM issues
PEs
including reporting.
2 Prepare a Consolidated Financial Reports for Whole of Government MoFNP, MoPE,
(including the PEs and other Government entities) in accordance with
PEs
applicable IPSAS.
3 Full compliance with IPSAS
MoFNP, MPEs
1 July, 2017.
Improved co-ordination and
reporting.
31 December,
2018
Unqualified Audit Report
28 February,
2019.
Unqualified Audit Report
AO, MoFNP.
1 July 2016
onwards
Agreed Internal Audit visit
schedule
2. Support the AO to continue carrying out performance audits to enhance
governance and quality audit functions.
3. The AO Annual Plan audit programme to include a schedule of Audit
Reports submission to Parliament.
4. Approved Audit reports to be posted within reasonable timeframe to relevant
website.
5. The AO and MoFNP-IAD, to prepare a „Report on Status of Audit
Recommendations and Management Responses and Actions by MDAs and
PEs‟ on a quarterly basis, and submit to the PAC and the Audit Committee
for information and subsequent follow-up.
AO, MoFNP.
30 June, 2016.
No. of compliance performed
AO, LA.
31 March, 2015.
AO, MoFNP,
MoPE, LA.
AO, MoFNP,
LA.
30 June, 2016.
Approved Annual Reports with
updated Financial Reports.
100% within the set timeframe
30 June, 2016.
Report endorsed by the Audit
Committee and noted by Cabinet.
At least 90% of recommendations
being actioned.
PFM
Actions
Areas
5.11.2 Legislative Scrutiny of the Annual Budget Law.
1. MoFNP to devise a clear guideline and rule on in-year budget amendments
for use by all MDAs.
2. MoFNP to liaise with Parliament in devising a written parliamentary
procedures to be adopted by the Legislative Assembly for budget review
including:
 internal organizational arrangements;
 scope of review ; and
 any other budgetary issues that need explanations and clarifications
Lead entity
Target Date
Milestone
MoFNP.
31 May, 2016.
MoFNP, LA
31 May, 2016.
Budget review procedures
Approved documented
parliamentary procedures and in
use.
E. EXTERNAL OVERSIGHT
5.11 External Scrutiny and Audit
5.11.1 Scope, Nature and Follow-up of External Audit.
1. The AO to co-ordinates with MoFNP IAD in devising an agreed audit visit
schedule with regards to internal audits of MDAs.
Page 68
5.11.3 Legislative Scrutiny of External Audit Reports.
1. LA Public Accounts Committee (PAC) to have a documented framework
and/or procedures for review and scrutiny of external audit reports.
5.12
AO, LA
Development Partner Management Practices
1. Establish a Government Development Partners Forum (GDPF) to meet on
MoFNP,
monthly basis and discuss development assistance issues.
MoFAT, PMO,
DPs
31 October,
2015.
Approved documented Framework
and in use.
31 December,
2014.
Improved coordination,
accountability, and transparency
with Development Partners
2. MoFNP to submit quarterly reports to Cabinet on Projects Implementation
Status and major issues raised from the GDPF.
MoFNP
3. MoFNP to develop an Aid/Project Budgeting and Reporting Framework and
agreed with Development Partners (DPs) for adoption.
MoFNP, DPs
4. The proportion of aid that is managed through government system and
procedures for PFM areas of procurement, payment/accounting, audit and
reporting to be improved to at least 90% on average.
MoFNP, DPs.
>50 % by 30
June, 2016
>75% by 30
June, 2018
>90% by 30
June, 2019.
Improved used of country system.
Lead entity
Target Date
Milestone
MoFNP.
31 December,
2015.
PFM Capacity Building (Training)
Unit established and operating.
PFM Capacity Building
Framework approved and used.
Improved PFM trainings and
improved capacity of PFM staff.
PFM
Actions
Areas
5.13 Sustainable Capacity Building
1. A PFM Capacity Building (Training) Unit to establish within MoFNP.
6.0 SEQUENCING THE PFM REFORM ROADMAP
Page 69
31 March, 2015.
Report noted by Cabinet and at
least 90% of recommendations
being actioned.
31 December,
Approved and Agreed Aid
2015.
Framework. Improved Budget
information. DPs Quarterly reports
endorsed ad reconciled. Acquittals
updated and prepare on time.
1. A PFM Reform Roadmap Unit (PFM-RRU) be established in the MoFNP.
MoFNP.
31 January,
2015.
31 January,
2015.
Established and functioning.
31 December,
2015.
Approved Change Management
Plan and implemented.
2. A PFM Reform Roadmap Steering Committee (PFM-RSC) be formed to
MoFNP
oversee the progress of the PFM Reform Roadmap.
7.0 COMMUNICATING THE PFM REFORM ROADMAP
1. The PFM-RRU to develop the PFM Reform Roadmap communication PFM-RRU, PFM- 30 June, 2015. Approved communication strategy.
strategy and submit to PFM-RSC for approval.
RSC.
Increased awareness and improved
understanding of PFM functions.
Positive feedback.
8.0 CHANGE MANAGEMENT PROCESS
1. Develop a Change Management Plan to set out strategies to manage
the changes proposed by the PFM Roadmap and ensure success of the
Roadmap and for future improvements
Page 70
MoFNP.
PFM Reform Roadmap - Implementation Timeline Phases
TONGA PFM REFORM ROADMAP - Implementation Timeline Phases.
PHASE I
PFM Objectives
Year 1
(July 2014 - June
2015)
5.1. Reliable Government IFMIS.
(Proposed Actions 5.1 : 1 - 4)
5.2. Adequate Human Capital
5.3. Improve the Legal and Regulatory Framework
(Proposed Actions 5.3 : 1)
5.4. Improving Planning Processes
5.5. Enhance Policy Formulation
5.6. Increase Credibility of the Budget
5.7. Improve Budget Comprehensiveness and Transparency
5.7.1 Budget Classification
(Proposed Actions 5.7.1 : 1)
5.9.2 Transparency of Inter-governmental fiscal relationships
(Proposed Action 5.7.2 : 1)
5.7.3 Oversight of aggregate fiscal risk from other public sector entities
(Proposed Actions 5.7.3 : 1 - 3)
5.7.4 Public Access to Key Fiscal Information.
5.8. Enhance Policy Based Budgeting
5.8.1 Multi-year perspective in fiscal planning, pexpenditure policy and budgeting
5.9. Predictability and control in Budget Execution
5.9.1 Effectiveness in Tax payments
(Proposed Actions 5.9.1 : 1 - 16.)
PHASE II
Year 2
(July 2015 - June
2016)
Year 3
(July 2016 - June
2017)
PHASE III
Year 4
(July 2017 - June 2018)
Year 5
(July 2018 - June
2019)
PHASE I
PFM Objectives
Year 1
(July 2014 - June
2015)
5.9.2 Predictability in the availability of funds for commitment of expenditure
(Proposed Action 5.9.2 : 1 - 4)
5.9.3 Management of Debt.
5.9.4 Competition, value for money amd controls in procurement
5.9.5 Asset Management
(Proposed Actions 5.9.5.: 1)
5.9.6 Effectiveness of Internal Audit
5.9.7 Devolvement of Government PFM System
5.10. Accounting, Recording, and Reporting.
5.10.1 Availability of information on resources received by service delivery units
5.10.3 Quality and timeliness of Annual Reporting
5.11. External Scrutiny and Audit.
5.11.1 Scope, nature, and follow-up of external audit
5.11.2 Legislative scrutiny of the Annual Budget
5.11.3 Legislative scrutiny of the External Audit Reports
5.12. Development Partner Management Practices
(Proposed Actions 5.12: 1 - 4)
5.13. Sustainable Capacity Building.
PHASE II
Year 2
(July 2015 - June
2016)
Year 3
(July 2016 - June
2017)
PHASE III
Year 4
(July 2017 - June 2018)
Year 5
(July 2018 - June
2019)
PHASE I
PFM Objectives
6. Monitoring and Evaluation
(Proposed Actions 6:1 -2)
7. Communicating the PFM Reform Roadmap
(Proposed Actions 7:1)
8. Change Management Process
(Proposed Action 8 : 1)
Year 1
(July 2014 - June
2015)
PHASE II
Year 2
(July 2015 - June
2016)
Year 3
(July 2016 - June
2017)
PHASE III
Year 4
(July 2017 - June 2018)
Year 5
(July 2018 - June
2019)

Tonga`s Public Financial Management Reform

Transcription

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