THE HEALTH SECTOR-WIDE APPROACH
AND
HEALTH SECTOR BASKET FUND
GRAHAM HOBBS
ECONOMIC AND SOCIAL RESEARCH FOUNDATION
Final Report
February 2001
Contents
Acronyms
4
Executive Summary
5
1. Introduction
9
2. HSBF: How it Works and its Establishment
11
2.1 The Move to a Health Sector-Wide Approach
11
2.2 Establishing the Health Sector Basket Fund
11
2.3 How the HSBF works: The Joint Disbursement System at Central Level
14
2.4 How the HSBF works: The Joint Disbursement System for Council Health Basket Funds 18
3. Factors Relevant to the Decision to Use the Joint Funding Mechanism
26
3.1 Regulations Prevent Pooling per se
26
3.2 Tied Aid
30
3.3 The Flexibility of DAC Members’ Rules and Procedures
30
3.4 Attribution and “Visibility”
31
3.5 Mismatches Between Joint Funding and the Actual and Appropriate Aid Relationship
31
4. The HSBF: The Decision to Join, and it Operation and Development
34
4.1 Using Government Systems and Building Capacity
34
4.2 Procurement
37
4.3 Health Sector Policy, Provision and Decentralisation
38
4.4 Control, Ownership and Exclusion
39
4.5 World Bank Credit
41
4.6 Projects
41
5. The Local Government Reform Basket Fund
43
5.1 The Local Government Reform Programme and Local Government Reform Team
43
5.2 The Local Government Reform Basket Fund: How it Works
44
5.3 Learning Lessons from the Local Government Reform Basket Fund
49
2
6. Summary and Future Aid Co-ordination Issues
52
6.1 What Factors Determine a DAC member’s Decision to Use or not use the HSBF?
52
6.2 Future Aid Co-ordination Issues
54
Annexes
A. Terms of Reference
58
B. Joint Funding Mechanisms (Basket Funds) in Tanzania
60
C. List of Interviews
61
3
Acronyms
ACP – African, Caribbean and Pacific States
BFC – Basket Financing Committee
DAC – Development Assistance Committee
EU – European Union
FY – Fiscal Year
GoT – Government of Tanzania
HSBF – Health Sector Basket Fund
LGRBF – Local Government Reform Basket Fund
MoF – Ministry of Finance
MoH – Ministry of Health
MRALG – Ministry of Regional Administration and Local Government
NGO – Non-Government Organisation
PS – Principal Secretary
SWAp – Sector-wide Approach
USD – United States Dollars
4
Executive Summary
I.
II.
In June 1998, the Ministry of Health and donors agreed to pursue a sector-wide
approach to health reform. The sector-wide approach aims to increase co-ordination,
with donors and government supporting one health sector programme. More
ambitiously, it aims to make systemic improvements, increasing government
ownership and supporting rather than fragmenting government systems.
Eight donors (DANIDA, DFID, GTZ/KfW, Irish Aid, Netherlands, NORAD, SDC and
the World Bank) subsequently chose to use a joint funding mechanism (the Health
Sector Basket Fund, HSBF) to deliver part of their aid to the health sector.
How the Health Sector Basket Fund works
III.
HSBF funding to the central Ministry of Health finances an annual Plan of Action.
Donors deposit funds into a USD Holding Account at the Bank of Tanzania. The
Basket Financing Committee – comprising the Ministry of Health, Ministry of Regional
Administration and Local Government, Ministry of Finance and HSBF-donors – is
responsible for overseeing operation of the HSBF. It reviews and approves annual
plans and budgets; confirms donors’ annual contributions; and reviews and approves
quarterly reports, and the release of funds from the USD Holding Account.
IV.
The Basket Financing Committee’s decision to release funds is based on an
approved cash flow forecast (for the forthcoming quarter) and satisfactory financial
and technical performance reports (from the previous quarter) prepared by the
Ministry of Health; and clear evidence of monthly releases of government funds for
the Plan of Action.
V.
Funds are transferred from the USD Holding Account via the government’s
Development Revenue Account to the Exchequer Account. HSBF funds follow
government financial rules and procedures (described in the HSBF accounting
manual). Funds are processed using the government’s Integrated Financial
Management System. All Warrants of funds and payments are processed using the
system. Cheques are generated through the Central Payment System at Treasury.
Reports for donors and government are printed from the system. Funds are
accounted for as part of the Ministry of Health’s voted expenditure.
VI.
The Ministry of Health must submit to the Basket Financing Committee an Annual
Expenditure Report showing budgeted against actual expenditure for the activities in
the Plan of Action. The Basket Financing Committee appoints external auditors to
conduct an annual audit.
VII. HSBF funding to councils is currently restricted to recurrent expenditure excluding
personnel emoluments. Furthermore in FY2000, the HSBF Planning Guide states the
exact allocation of HSBF funds (50 UScents per capita in FY2000) between six cost
centre categories.
VIII. Councils prepare an annual Council Health Plan, which includes all recurrent and
development expenditure, identifies the source of funding (including HSBF funds),
and is integrated into the council’s budget. Councils also prepare quarterly reports
comparing actual to budgeted expenditure. The Council Health Plans and quarterly
reports are sent to the Regional Secretariat for checking and conformity to HSBF
eligibility criteria. The Regional Secretariat collates and summarises these and
submits them to the Ministry of Regional Administration and Local Government.
5
IX.
X.
The Basket Financing Committee annually approves funding for each council,
based on consolidated Council Health Plans and recommendations made by the
Ministry of Regional Administration and Local Government and Ministry of Health. The
Committee approves quarterly releases of funds, based on consolidated quarterly
reports, and recommendations from both Ministries. Funds are transferred from the
USD Holding Account to the government’s Exchequer Account and follow
government financial rules and procedures (described in the HSBF procedures
manual).
Councils are required by law to maintain accounts as provided in the Local
Authorities Accounting Manual. The Office of the Controller and Auditor General, with
support from external auditors, undertakes an annual audit. The Basket Financing
Committee may recommend an extraordinary audit of HSBF funds for any council. In
addition, the Ministry of Regional Administration and Local Government submits to
the Basket Financing Committee an Annual Expenditure Report comprising a
Recurrent Accounting Return with receipts and payments for the year, and budgeted
against actual recurrent expenditure. The Annual Report and Accounting Return is
subject to an annual audit by the Office of the Controller and Auditor General.
Factors that determine a DAC Member’s decision to Use or not use the HSBF
XI.
Most DAC members described a policy decision to participate or not in the HSBF,
rather than listing internal rules and regulations that prevented their participation.
Furthermore, rules and regulations can change if a policy decision is made to join
the HSBF. The German Minister’s decision to join the HSBF provides an obvious
example.
XII. Internal rules and regulations explicitly prevent Belgium, Italy and the WHO from
pooling funds with other donors and governments. The EU can jointly fund with
some EU funds and should, according to the Lome Convention, be able to jointly
fund all funds. USAID can, with difficulty, pool some funds.
XIII. Joint funding mechanisms normally prevent tying. This could be a constraining
factor for CIDA and USAID who have restrictions about tied aid.
XIV. Agreeing common procedures requires sufficient flexibility in donors’ internal rules
and procedures. Flexibility varies across DAC members. The World Bank has
internal guidelines that must be met by governments receiving development credits.
XV. For many DAC members a desire for attribution and/or visibility was either a
barrier they overcame before basket funding, or is a constraint to their future
participation. Some basket-donors prefer to earmark within the HSBF. One nonbasket-donor said earmarking their individual funds was a pre-condition to using
basket funds.
XVI. A few DAC members described a mismatch between joint funding as an aid
modality and the actual and/or appropriate aid relationship between themselves and
Tanzania. Aid in some EU countries is decentralised to local governments. Some
EU bilateral donors argued their bilateral co-operation should be considered
together with the aid they provide via the EU. One donor said their priority for
development co-operation is to build partnerships between their own and Tanzanian
civil society, and argued that basket funding is not suited to this role. A few UN
organisations argued that their long-term role is not to finance development, and
basket funds are a mechanism for donors and creditors to finance development.
6
XVII. HSBF funds are managed as part of government resources and follow
government financial procedures. All DAC members are concerned about the
accountability and transparency of HSBF funds, and more generally, about
government management capacity. This stops some DAC members from using the
HSBF and affects operational and development issues within the HSBF.
XVIII. Several DAC members are concerned about health sector policy, in particular,
inadequate attention to reproductive health and community health care, and that the
Ministry of Health and the sector-wide approach/HSBF are centre-led processes
with negative consequences for district health provision. A couple of UN
organisations felt they might not meet their specific mandates within the HSBF.
The Local Government Reform Basket Fund
XIX. In March 1997, a government-donors meeting decided to establish a joint funding
mechanism (the Local Government Reform Basket Fund, LGRBF) to finance the
Local Government Reform Programme and Action Plan and Budget. DANIDA,
DFID, EU, FINNIDA, Irish Aid, the Netherlands, NORAD and UNDP-UN Capital
Development Fund currently support the Local Government Reform Programme
and use the LGRBF.
XX. In 1998, the government established the Ministry of Regional Administration and
Local Government. The Local Government Reform Team – leading the reform
process – became a technical arm of the Ministry, with managerial and financial
autonomy within it.
XXI. There are operational similarities between the LGRBF and HSBF. A committee,
comprising government and basket-donors, oversees operation of each basket
fund, for example, authorising budgets and the release of donor funds from a
Holding Account at the Bank of Tanzania to government accounts. Both
mechanisms (broadly) follow government financial rules and procedures, and use
the government’s Integrated Financial Management System. Funds are accounted
for as a part of Ministries’ voted expenditure and are subject to external audit.
XXII. The health sector-wide approach and HSBF (and possible future sector-wide
approaches) are more complex than the Local Government Reform Programme
and LGRBF, limiting the transferability of LGRBF experience. There are two main
reasons: 1) the content of local government reform is simpler, with greater
government-donor consensus, than health sector reform; and 2) the Local
Government Reform Programme/LGRBF is more like a donor-funded pooled
project than a sector programme, with limited government funding and the Local
Government Reform Team resembling a parallel project unit. Important lessons
remain:
XXIII. LGRBF financing and the programme budget have consistently exceeded
programme expenditure and although donors would like to cut the budget, no donor
individually wants to cut their contribution. As a consequence, the Local
Government Reform Team chooses which parts of its budget (an “over-sized
menu”) to implement and has less incentive to cost effectively use funds.
XXIV. Donors have found it difficult to exhaustively monitor the programme/LGRBF and
have significantly reduced their monitoring intensity.
XXV. There is flexibility in the operation of the LGRBF, for example, allowing EU
funding to be conditional on a teacher rationalisation study, which may be
beneficial.
XXVI. LGRBF success is based on donor trust in the Local Government Reform Team,
and regular communication (and information provision) between the government
and Local Government Reform Team, and donors.
7
Future Aid Co-ordination Issues
XXVII.DAC members unanimously express concerns about using government systems
in joint funding arrangements. Yet there is no clear vision on how to build
government capacity and there is evidence that the health sector-wide
approach/HSBF has neglected this. For example, there is a need to address the
role (if any) of external technical assistance within the health sector-wide approach.
XXVIII. A second concern for many DAC members is monitoring HSBF outcomes.
Along with the development of performance indicators, and monitoring and
evaluation processes, there is a need to address the role of (individual) HSBFdonors within the monitoring and evaluating process.
XXIX. There are choices to be made, between alternative sets of rules and procedures,
in developing the HSBF, which could affect future donor participation in the HSBF.
For example, if earmarking can increase donor participation in basket funds by
overcoming donors concerns about loss of attribution or visibility (albeit fungibility),
or side-stepping internal rules on joint funding, should earmarking be allowed?
XXX. Many things can be done outside of the HSBF to improve aid co-ordination. An
effective set of health sector structures (e.g., committees) would help in this
endeavour. It would be a significant improvement to ensure that all donor support
forms part of a coherent health sector programme and is recorded on the budget
(both ex-ante and ex-post) – neither occurs at present. If there were a common
sector programme, partially financed by the HSBF, there could also be common
monitoring and evaluation process.
8
1. Introduction
The government and donors in Tanzania agree that the aid modality matters. In
recognition of this, in June 1998, the Ministry of Health and donors agreed to pursue a
“sector-wide approach (SWAp)” to health reform. Cassels (1997)1 states that:
“At the heart of a sector-wide approach is a medium-term collaborative programme of
work concerned with the development of sectoral policies and strategies; projections of
resource availability and expenditure plans; the establishment of management systems
by governments and donors, to facilitate the phased introduction of common
management arrangements; and institutional reform and capacity building, in line with
agreed policies. In addition, structures and processes need to be established for
negotiating strategic management issues, and reviewing sectoral performance against
jointly agreed milestones and targets.”
At a minimum, the SWAp aims to increase co-ordination with donors and the
Government of Tanzania (GoT) supporting one health sector programme. More
ambitiously, the SWAp aims to make systemic improvements in the health sector,
increasing GoT ownership and supporting rather than fragmenting GoT systems.
In the context of the SWAp, eight donors subsequently chose to use a joint funding
mechanism (the “Health Sector Basket Fund”, hereafter HSBF) to deliver part of their
aid to the health sector.
This study has two main objectives:
i.
To describe how the HSBF works and implementation experience to date;
ii.
To describe those factors that determine a donor’s choice of aid modality (or
modalities), in particular their decision to use or not use the HSBF.
1
Cassels (1997). “A Guide to Sector-wide Approaches for Health Development.”
9
In addition, the study aims:
iii.
To compare and contrast the HSBF with the local government reform basket fund;
iv. To identify future aid co-ordination issues in the health sector.
The terms of reference are attached as annex A.
Section 2 describes how the HSBF works and implementation experience to date.
Section 3 looks at factors that determine donors’ choice of aid modalities, in particular
their decision to use joint-funding mechanisms in general. Section 4 looks more
specifically at the HSBF. It describes characteristics of the HSBF, which influence
donors’ decisions to join or not, and current HSBF operational and development issues.
Section 5 compares and contrasts the HSBF with the local government reform basket
fund. Finally, section 6 provides a summary and looks at future aid co-ordination issues
in the health sector.
A definition of a “joint funding mechanism” or “basket fund”, and a list of joint funding
mechanisms in Tanzania is given in Annex B. Annex C contains a list of all interviews
conducted for this study.
10
2. HSBF: How it Works and its Establishment
2.1 The Move to a Health Sector-Wide Approach (SWAp)
In January 1998 a Health Sector Reform Review Meeting set the groundwork for
broader involvement of donors in the process of health sector planning. A consensus
emerged among donors that a new way of working was needed to ensure GoT
leadership and to restrict fragmentation of the sector. In March 1998 a “SWAp
Workshop” was held to conceptualise this new way of working. In June 1998 the
Ministry of Health (MoH) and donors signed a “Joint Statement of Intent” to adopt a
SWAp to health reform.
In June 1999 the MoH and donors agreed a 3-year Plan of Work for 1999-2002.2 This
restates longer-term policies, priorities and objectives, and sets objectives and targets
for 1999-2002 in order to “guide the preparation of 1-year plans and budgets by all the
various units of the health sector.” A Plan of Action for FY1999/2000 extracted activities
from the Plan of Work 1999-2002 to be implemented by the MoH (and the Ministry of
Regional Administration and Local Government, MRALG) in the first fiscal year.
2.2 Establishing the Health Sector Basket Fund (HSBF)
In April 1999 a “Joint Donor and GoT Side Agreement” was signed by GoT and six
donors (DANIDA, DFID, Irish Aid, NORAD, SDC and the World Bank) confirming their
commitment to establish a joint funding mechanism and identifying steps that needed to
be taken to facilitate this.3
A set of priority activities from the Plan of Action was identified (mostly) by the MoH to
be supported by the HSBF in FY1999/2000 – the Prioritised Plan of Action. The MoH
and “basket-donors” approved this at the end of July 1999.
2
Covering the period FY1999/2000 to FY20001/2002.
11
The Ministry of Finance (MoF) must enter HSBF-funded/Prioritised Plan of Action
activities into Platinum (the GoT’s Integrated Financial Management System software)
before the MoH and MRALG can access funds.4 The MoH and basket-donors
contracted PriceWaterhouseCoopers and Softech to enter Prioritised Plan of Action
activities into Excel (so they could be entered into Platinum). This was completed in
September 1999.
The Basket Financing Committee (BFC), comprising representatives of the MoH,
MRALG, MoF and basket-donors, is responsible for overseeing operation of the joint
funding mechanism. The BFC met for the first time in October 1999 and approved the
Excel plans (of Prioritised Plan of Action activities to be entered into Platinum) and an
accounting manual describing the joint disbursement system for funds to the central
MoH.5
Basket-donors deposit funds into a USD Holding Account at the Bank of Tanzania. After
a delay of two months the USD Holding Account was opened in December 1999. DFID,
Irish Aid, NORAD and SDC deposited funds into the USD Holding Account in the same
month.
HSBF funds are managed by GoT systems, accounted for as part of MoH’s voted
expenditure and processed using the GoT’s Integrated Financial Management System.
The HSBF accounting manual follows GoT financial procedures. Nevertheless, MoF and
MoH staff had difficulties following the HSBF procedures.6 Training was provided in
March 1999.7
In May 2000 the first HSBF funds were used for the Prioritised Plan of Action 1999/2000
activities. A Quarter 1 and a revised plan were implemented in the last two months of
FY1999/2000. In the absence of agreed HSBF procurement procedures, procurement
3
The Health Sector Basket Fund (HSBF) is the name given to this joint funding mechanism.
More generally, this is true for all GoT budget items.
5 MoH (November 1999). “Joint Disbursement System for the Health Sector at Central Level –
Accounting Manual,” URT. Hereafter, the HSBF accounting manual.
6 Note that the Platinum system was first introduced in the MoH in July 1999.
7 Implementation delays also arose because HSBF funds were recorded on the GoT development
instead of the recurrent budget.
4
12
was done by basket-donors. Neither the Netherlands, who joined the HSBF near the
end of fiscal year, nor the World Bank, disbursed via the HSBF in FY1999/2000.
In FY2000/1, the HSBF plans to provide a 50c (US cents) per capita health basket grant
to Phase I districts8, in addition to funding the central MoH. In February 2000 the BFC
approved a procedures manual describing the joint disbursement system for funds to
councils and planning guidelines (conditions) for use of the health basket grant. 9 To
ensure district officers could follow HSBF procedures and guidelines (learning from the
experience at central level), PriceWaterhouseCoopers with MRALG and MoH provided
training to district officers. This was completed in May 2000.
HSBF funds were disbursed to thirty-three out of thirty-seven Phase I districts in July
2000.10 The disbursement was delayed by confusion over the authority of the MRALG to
request transfers from the USD Holding Account. The MRALG (correctly) requested the
MoF to transfer funds from the USD Holding Account to districts. The MoF thought that
only the MoH had this authority. As a result, the MRALG passed it request via the MoH.
The MoF warranted the funds to the MoH who then issued a cheque to the MRALG who
transferred the funds to districts.
The HSBF planning guide is designed to allow comprehensive district planning, i.e.
districts should produce one plan for activities from different funding sources. However,
separate plans and budgets were made for GoT and HSBF funds in FY2000.11 Why?
Because Council Health Plans and budgets for HSBF funds could not be prepared until
after the HSBF procedures manual and planning guide were approved, and training of
district officers complete, i.e. after May 2000. In contrast, districts’ budgets for GoT
funds were complete in November 1999 ready for the start of FY2000.12
8
I.e. districts in Phase I of the Local Government Reform Programme.
MRALG (February 2000). “Procedures Manual for the Joint Disbursement System for Council
Health Basket Funds,” URT (2000). Hereafter, HSBF procedures manual. MRALG (February
2000). “Planning Guide for Local Authorities Regarding Utilisation of of Health Basket Grant for
Year 2000,” URT. Hereafter, HSBF planning guide.
10 In the first round, 33/37 district health plans were approved. Subsequently, three more have
been approved, leaving just one now outstanding.
11 The central GoT’s fiscal year runs July-June, whereas district council’s fiscal year runs JanuaryDecember.
12 There is a disagreement on the course of events here. One HSBF-donor said that integrated
district plans were produced based on the draft HSBF procedures manual and approved by the
BFC in February 2000.
9
13
The BFC approved the Plan of Action 2000/1 on 20 July 2000.13 HSBF disbursements to
the central MoH should begin at the start of September 2000 after Plan of Action
activities have been entered into Platinum.
2.3 How the HSBF Works: The Joint Disbursement System at Central Level
HSBF funds are used to finance the Plan of Action. HSBF funds are to be managed as
part of GoT’s resources and accounted for as part of MoH’s voted expenditure. The
HSBF accounting manual, describing the joint disbursement system for funds to the
central MoH, follows Government financial procedures.14
The HSBF will be processed using the Integrated Financial Management System. This
system will enable MoH to track HSBF funds. All payments and Warrants of funds will
be processed using the system. Cheques will be generated through the Central
Payment System at Treasury. Reports for basket-donors and the GoT will be printed off
the system by the accounts unit at the MoH.
2.3.1
Responsibilities
The Basket Financing Committee (BFC) is responsible for overseeing operation of the
joint disbursement system. It is co-chaired by the Principal Secretary (PS)-MoH and PSMRALG and comprises representatives from MoH, MoF, MRALG and basket-donors.
More specifically the BFC is responsible for:

Reviewing and approving annual plans and budgets;

Agreeing levels of funding and confirming donors’ annual contributions;

Reviewing and approving the allocation and reallocation of resources on quarterly
basis; and
13
Technical plans were ready by end June 2000 but financial budgets were delayed as a result of
confusion emanating from the implementation of a Q1 and revised plan at the end of
FY1999/2000.
14 The HSBF accounting manual complies with Financial Orders (1983). The financial orders and
Treasury circular minutes issued should be observed. The HSBF accounting manual should be
read in conjunction with Financial Orders (Part 1) and the training guide for the Integrated
Financial Management System.
14

Reviewing and approving quarterly reports, both financial and technical, and the
release of funds from the USD Holding Account.
The Accountant General is responsible for operation of the USD Holding Account. The
Accounting Officers (PS-MoH and PS-MRALG) are responsible for notifying the
Accountant General on decisions to transfer funds from the USD holding account, for
the allocation of funds to Warrant Holders and for issuing broad guidelines for the
preparation of budgets.
The Chief Accountant (MoH) is responsible for day to day operation of the accounting
system. This includes maintenance of proper records in respect of payments, custody of
payment documents, and ensuring the integrity of financial transactions entered in the
Integrated Financial Management System. More specifically it includes authorising and
distributing Warrants of Funds, approving and posting payments on Integrated Financial
Management System, and preparing and distributing financial reports.
Warrant Holders (Heads of Department) are responsible for preparing and submitting
department
budgets,
authorising
payments,
preparing
technical
reports
on
implementation of the Plan of Action, and explaining variances in budget versus actual
expenditure under their control.
2.3.2
Procedures and Accounting15
Basket-donors deposit funds into the USD Holding Account at the Bank of Tanzania.
Every quarter the Accounting Officer in collaboration with Strategy Co-ordinators
prepares a quarterly plan setting out the activities and outputs with financing
requirements, according to the Plan of Action budget. The Chief Accountant in
consultation with Strategy Co-ordinations and Warrant Holders prepares a quarterly
cash flow forecast, with funding requirements by source (GoT, HSBF and other donors).
15
The chart of accounts is used in the accounting system for collecting, recording, summarising
and classifying financial information. The coding system has been designed to classify
expenditure and budgetary information by: i) division with MoH, ii) strategy, activity and output
according to the Plan of Action budget, iii) region, district and cost centre, and iv) source of
funding (GoT, pooled donors, or other donor). It has been developed as part of the wider
Government Accounts Development Project (soon to be introduced within government).
15
The Accounting Officer submits the quarterly plan and cash flow forecast to the BFC for
review and approval.
The BFC’s recommendation to transfer funds from the USD holding account is based on
1) an approved cash flow forecast (for the forthcoming quarter) and satisfactory financial
and technical performance reports (from the previous quarter);16 and 2) clear evidence
of monthly releases of government funds for the Plan of Action.17
Following the BFC’s recommendation, the Accounting Officer of the MoH (cochairperson of the BFC) notifies the Accountant General in writing to instruct the Bank of
Tanzania to transfer funds from the USD Holding Account to the (GoT’s) Development
Revenue Account and then the Exchequer Account and then the Paymaster General
Account. The Accountant General then issues Exchequer Issue Notifications, reflecting
the source of funds, to notify relevant parties (MoH and Exchequer Section) that funds
are available.
On receipt of the Exchequer Issue Notification, the Exchequer Section (MoF) credits the
MoH’s Paymaster General cash book on the Central Payment System with the amount
transferred from the Exchequer Account. The Accounting Officer (MoH), on receipt of
the Exchequer Issue Notification, informs the relevant Warrant Holders that resources
are available via a Warrant of Funds Notification Report. This report authorises each
Warrant Holder to spend the funds allocated for activities shown on the warrant.
Separate warrants of funds are issued for GoT funds and HSBF funds.18
16
I.e. at the end of Q2, the BFC will recommend a transfer of funds for Q3 on the basis of a Q3
cash flow forecast and financial and technical performance reports for Q1.
17 The contribution from the GoT will be made prior to transfer of funds from the USD Holding
Account. In case the GoT delays making its contribution, MoF shall issue a guarantee that GoT’s
contribution has been reserved. Failure of MoF to issue such a guarantee, on grounds of external
shocks influencing overall revenue collection of GoT will be reported to BFC for further decision
concerning basket-donors’ contribution. GoT’s share of funding is allocated and disbursed by
Treasury in the normal way.
18 For central expenditure in the Regions a Payments Voucher will be sent to Treasury, instructing
a transfer to the Payment Bank Account in the Sub-Treasury.
16
The Warrant Holder authorises payments based on approved claims for payment up to
the amount available and for the purpose stated on the Warrant of Funds Notification
Report. It is each Warrant Holder’s responsibility to ensure that standard government
procedures in respect of purchases are observed.
A Payments Voucher will be raised in favour of the supplier and processed through the
Integrated Financial Management System. All Payments Vouchers must contain a
commitment reference (generated by the Integrated Financial Management System), be
authorised by the Warrant Holder and countersigned by the Chief Accountant, and be
passed by the Pre-audit section. Payments Vouchers will only be processed if sufficient
uncommitted funds are available to the Accounting Officer.
The Chief Accountant will review and approve requests for payment on the system. As
the system is online and networked, the Central Payment Office will be able to access
authorised payment requests and print cheques. The Central Payment Office will
despatch cheques with the cheque list to the Accounts Unit at the MoH where suppliers
will be required to collect and sign for cheques in the cheque list.
At the end of the fiscal year, unspent funds are returned to Treasury, and the element
relating to the HSBF funds is credited to the USD Holding Account.
2.3.3
Management Information Reports
The Chief Accountant (MoH) has the responsibility to prepare and distribute monthly,
quarterly and annual reports. Wherever necessary, a report should be accompanied by
a written commentary drawing attention to its most significant features and action
required. In particular, there must be commentary on performance accomplishments
indicating outputs achieved against targets, with variances explained.
Seven reports must be distributed quarterly to Warrant Holders and the BFC within ten
working days of quarter-end:

Quarterly Performance Report, comparing actual and cumulative expenditure
against budgets and Warrants of Funds issued, analysed by strategy and activities;

Cash Flow Forecast;
17

USD Holding Account Receipts and Payments;

Sources and Uses of Funds;

Output Monitoring Report, providing information on outputs achieved in relation to
expenditure incurred;

Expenditure Report, summarising information on actual expenditure against budget
and analysis of variance (less detailed than the Quarterly Performance Report); and

Bank Reconciliation Statement for the USD Holding Account.
The Chief Accountant must prepare standard annual reports required by GoT financial
regulations. In addition, she must prepare and submit to the BFC an Annual Expenditure
Report showing budgeted against actual expenditure for the activities (and strategies) in
the Plan of Action. Strategy Co-ordinators in collaboration with Warrant Holders must
prepare annual progress reports detailing progress in implementation of various
strategies and output achieved.
The BFC appoints external auditors to conduct an annual audit. The Chief Accountant
must send a proposed timetable for audit to the office of the external auditors. In
addition to preparing annual accounts, the accounts staff must ensure the final general
ledger listing and other schedules required by Financial Orders are made available to
the auditors.
2.4 How the HSBF works: The Joint Disbursement System for Council Health Basket
Funds
HSBF funds to councils are currently restricted to recurrent Other Charges, i.e.,
recurrent expenditure excluding personnel emoluments. There are further restrictions for
FY2000:
i.
Funds may not be used for the purchase of medical supplies;
ii.
Funds may not be used for capacity building initiatives;
iii.
Allowances should not exceed 20% of total expenditure funded from HSBF funds;
iv. The HSBF Planning Guide states the exact allocation of HSBF funds (50c per
capita in FY2000) between six cost centre categories.19
19
In particular, Council Health Department (10%), Council hospital (35%), urban health centres
(10%), rural health centres (15%), dispensaries (15%), and community initiatives (5%) – with 5%
18
The HSBF procedures manual, describing the joint disbursement system for funds to
councils, follows, with some additions, existing budgeting, accounting and reporting
procedures for local authorities.20
2.4.1
Responsibilities
The BFC is responsible for overseeing the operation of the joint disbursement system.
The MRALG is responsible for the overall supervision of councils including:
i.
Preparation of national consolidated reports of Council Health Plans and quarterly
reports for the BFC;
ii.
Scrutinising Council Health Plans and quarterly reports for failure to meet National
Minimum Standards and performance indicators;
iii.
Liaison with the MoH on technical matters; and
iv. Make recommendations to the BFC on the qualification of councils for HSBF funds.
The MoH is responsible for technical guidance and the evaluation of councils’ (technical)
performance. This includes the development and monitoring of national guidelines,
standards and performance indicators; advising the MRALG on councils’ technical
performance; and support to the Regional Secretariat on technical issues.
The Regional Secretariat is responsible for:
i.
Assisting councils in the preparation of Council Health Plans and quarterly reports;
ii.
Evaluating Council Health Plans and quarterly reports for their compliance with
National Minimum Standards, national guidelines, and HSBF guidelines;
iii.
Collating and summarising Council Health Plans and quarterly reports for the
region; and
iv.
Making recommendations to the MRALG on the qualification of councils for HSBF
funds.
unallocated. If there are voluntary agency hospitals in the councils, then the unallocated 5% must
be allocated to hospitals for “priority health interventions” (defined in the HSBF Planning Guide).
20 The HSBF procedures manual (for councils) complies with the Local Authorities Accounting
Manual, Financial Regulations, Local Government Financial Management Trainers Guide and the
MoH Planning Guide for Local Authorities Utilisation of the Basket Grant for the Year 2000.
19
The Council is responsible for:
i.
Preparation of Council Health Plans;
ii.
Control and application of funds;
iii.
Management of service delivery; and
iv.
Preparation and agreement of quarterly reports with the Regional Secretariat.
2.4.2
Disbursement Procedures
Councils prepare an annual Council Health Plan, which includes all recurrent and
development expenditure, identifies the source of funding (including HSBF funds), and
is integrated into the council’s budget. Prior to approval by the council, the Council
Health Plan is passed to the Regional Secretariat to check its conformity to national
guidelines and eligibility for HSBF funds. After council approval, the Regional Secretariat
collates and summarises the Council Health Plans for its region and passes them to
MRALG, copied to MoH, with recommendations (whether or not each Council Health
Plan is eligible for HSBF funds) and comments. The MRALG collates the regional
Council Health Plan summary reports and submits them to BFC for approval of funding.
The MoH and MRALG meets to agree recommendations prior to the BFC meeting and
to ensure that recommendations meet both financial and technical performance
requirements.
Councils also prepare quarterly reports for activities funded by the council health
account comparing actual expenditure to the budget (Council Health Plan). Quarterly
reports are submitted to the Regional Secretariat for checking. On satisfying themselves
that the report is correct and the funds have been appropriately used, the Regional
Secretariat collates the reports for the region and submits them to the MRALG (copied
to MoH) with their recommendations and comments, including a recommendation as to
the release of the next quarter’s funding. The MRALG brings together all reports
received and make recommendations to the BFC, in consultation with the MoH on
technical performance issues, on the release of funds.
20
The BFC annually approves (potential) HSBF funding for each council, based on
consolidated Council Health Plans and recommendations made by the MRALG and
MoH. The BFC approves quarterly releases of HSBF funds to councils, based on
consolidated council quarterly reports, recommendations made by the MRALG and
MoH, and once per year, the Annual Expenditure Report. Councils which fail to report in
the prescribed format in a timely manner will not receive quarterly HSBF funds until their
reports are approved.
Following the BFC’s approval, the MRALG requests the Accountant General to release
funds equal to the approved amount from the USD Holding Account into the Exchequer
Account. The Accountant General releases the funds in the form of an Exchequer Issue
into the vote of the MRALG. The MRALG produces a Payment Voucher in favour of
each council approved to receive HSBF funds and sends it to the Central Payments
Office for Telegraphic Transfer preparation. The Telegraphic Transfer is prepared in
favour of the council’s health (number 6) account.
All income and expenditure for council health services must be channelled through the
health account. The council’s own resources must be transferred from the council’s
General Account to the health account for disbursement. All Payment Vouchers drawn
on this account must be signed by the District Medical Officer/Medical Officer of Health 21
or their deputies. The Council Treasurer will manage the bank account and all
accounting through normal council procedures.
The District Medical Officer/Medical Officer of Health manages and monitors the
financial and operational performance of service outlets on a day-to-day basis with
financial information and support (including monthly expenditure reports) from the
Council Treasurer. The service outlets provide regular performance reports and a
financial report of funds collected and spent at the service outlet to both. The Head of
the Health Deptartment of the Council and Council Treasurer inform the Council Health
Committee of financial and operational performance. The Council Health Board, where it
exists, provides performance guidance.
21
The District Medical Officer in rural councils and Medical Officer of Health in urban councils.
21
The preparation of the Council Health Plans and quarterly reports, and scrutiny and
consolidation at Regional Secretariats and the MRALG are now described in detail.
2.4.3
Council Health Plan and Budget
The Council Health Plan is based on normal council budgeting procedures and MoH
planning guidelines22, and is prepared as part of the council’s budget preparation cycle.
The GoT agrees with councils, through the usual negotiation process, National Minimum
Standards. The MRALG calculates the block grant for each council. The BFC indicates
the provisional level of HSBF funds available for the year. These funding levels plus
amounts received from other sources provide the basis for Council Health Plans and
budgets.
The Council Health Plan should comprise three parts:
i.
Technical Plan;
ii.
Funding Matrix; and
iii.
Overview of the Council Health Plan outlining major objectives and strategies.
The Technical Plan is derived from the council’s strategic plan and MoH guidelines and
includes:
-
Objectives of the council in the health sector;
-
Strategies and activities to be undertaken to meet these objectives;
-
Implementers of activities;
-
Performance indicators; and
-
The likely source of funding of activities and the overall cost.
22
Including the Planning Guide for Local Authorities Regarding Utilisation of the Health Basket
Grant for the Year 2000. Hereafter, HSBF Planning Guide.
22
The Council Health Plan Funding Matrix is a summary of the council’s health recurrent
and development budget. The Funding Matrix analyses the recurrent budget by cost
centre and headings, giving the total annual cost of each item and its source of funding
(including HSBF funds).23
Council Health Plans will be sent to the Regional Secretariat by the first week of
November. The Regional Secretariat scrutinises each Council Health Plan checking
their conformity with national guidelines, seeking clarification where necessary, and
making
comments
and
recommendations
on
the
each
plan
to
MRALG.
Recommendations should include whether or not the Council Health Plan meets HSBF
eligibility criteria, highlighting shortfalls where this is the case. The Regional Secretariat
follows up with councils that have not submitted Council Health Plans. The Regional
Secretariat collates the Council Health Plans into a regional financial matrix and sends
this to the MRALG by the third week of November. Councils submitting Council Health
Plans late should not hold this up. Late Council Health Plans will be submitted to the
next quarter’s meeting of the BFC.
The MRALG prepares a Consolidated Matrix of Council Planned Expenditure and
Funding and reviews comments and recommendations made by the Regional
Secretariats. The MRALG should consult the MoH on technical inputs, objectives and
performance indicators, where the Regional Secretariat has made comments. The
MRALG and MoH consult on final recommendations to ensure that a consistent view is
presented to the BFC. The MRALG provides recommendations to the BFC in a report
on councils to be funded and give reasons for councils not recommended for funding. It
should also note councils that failed to submit their Council Health Plan on time. The
report, along with the Consolidated Matrix, must be submitted to the BFC by the second
week of December.
23
The Accounts Structure in the Council Health Department should reflect the activity areas in
which it is operating and the activities undertaken. It must include six cost centres: 1) Council
23
The BFC will meet in the second week of January. It’s approval decision (which councils
to be funded and the amounts) is based on the:
i.
Consolidated Matrix of Council Planned Expenditure and Funding
ii.
MRALG recommendations report
iii.
Regional Financial Matrices
2.4.4
Quarterly Reports
The District Medical Officer/Medical Officer of Health should report quarterly on the
technical and financial performance of the council in its provision of health services
against the Council Health Plan. The proposed format of the quarterly report is as
follows:
i.
Overview
ii.
Technical Report
iii.
Financial Report
The Overview summarises major quarterly successes of failures and issues arising
therefrom, and provides reasons for significant variances from the Council Health Plan
budget. The Technical Report includes the quarterly performance monitoring reports
defined by the MoH in the HSBF Planning Guide. The Financial Report includes the
Health sector Recurrent Accounting Return, and a Bank Reconciliation Report and Bank
Statement (for the number 6 account).24
The council should submit the quarterly report to the Regional Secretariat within one
month of quarter-end. The Regional Secretariat checks the reports and collates them
into a Quarterly Regional Report.25 This includes a financial report, derived directly from
councils’ Recurrent Accounting Returns, showing each council’s budgeted and actual
receipts and payments, and budgeted and actual Personnel Emoluments, Allowances
and Other Charges. It should also include, for each council, an assessment of technical
Health Department, 2) Council Hospital, 3) Urban Health Centres, 4) Rural Health Centres, 5)
Dispensaries, and 6) Community Initiatives.
24 The Health sector Recurrent Accounting Return is based on all transactions on council health
(number 6) account and is in line with the Local Government Reform Programme Accounting
Returns for conditional grants for all sectors.
25 Unsatisfactory quarterly reports should be reported to the council in writing. Wherever possible,
a regional representative should visit the council to assist in rectifying the problem.
24
performance (in a format required by the MoH), an assessment of whether councils
have complied with financial guidelines, reasons for variances from the Council Health
Plan budget, and a recommendation to the MRALG with respect to the next quarter’s
HSBF funding. The Quarterly Regional Report must be submitted to the MRALG and
MoH within six weeks of quarter-end.
The MRALG scrutinises and consolidates the Quarterly Regional Reports. The MRALG
prepares a consolidated report including a summary of each councils’ Recurrent
Accounting Returns and technical achievements, derived directly from the Quarterly
Regional Reports, and a recommendation on next quarter’s HSBF funding for each
council. The MRALG report should be submitted to the BFC within ten weeks of quarterend. The BFC will meet eleven weeks after quarter-end.
2.4.5
Annual Reports and Audit
Councils are required by law to maintain books of accounts as provided in the Local
Authorities Accounting Manual. These accounts shall be closed at the end of the fiscal
year and a final financial statement prepared and submitted for audit as stipulated by the
Local Government Finances Act. The Office of the Controller and Auditor General, with
support from a sub-contracted firm of auditors, undertakes an annual audit. Councils
with the support of the Regional Secretariat should answer audit queries. The Regional
Secretariat will monitor the responses of councils to audit queries. Audit reports are
presented to the BFC. The BFC may recommend an extraordinary audit of HSBF funds
for any council.
The MRALG prepares standard annual reports required by financial regulations. In
addition, it prepares and submits to the BFC an Annual Expenditure Report comprising a
Recurrent Accounting Return with receipts and payments for the year, and budgeted
against actual recurrent expenditure. The Annual Report and Accounting Return will be
subject to an annual audit by the Office of the Controller and Auditor General. In
FY2000, a sub-contracted firm, supported by the internal auditor, will undertake an
interim audit after the first two quarters of HSBF disbursements and spending.
25
3. Factors Relevant to the Decision to Use Joint Funding Mechanisms
This section looks at factors that determine donors’ choices of aid modalities, in
particular their decision to use joint-funding mechanisms in general.
Section 3.1 documents all DAC member rules or regulations that prevent pooling per se.
Joint funding arrangements normally prevent tying, including, but to a lesser extent, for
technical assistance. Section 3.2 documents DAC bilateral donors’ rules and regulations
with respect to tying aid. More generally, the flexibility or otherwise of donor rules and
procedures will influence their ability to use a particular set of common procedures.
Section 3.3 provides a brief discussion of the main points and documents those rules
and regulations discussed in the interviews.
Joint funding arrangements imply a loss of attribution and “visibility”, or the ability to “flag
wave”. Section 3.4 documents the importance of attribution and visibility for both basketand non-basket-donors.
Several DAC members argue there is a, sometimes fundamental, mismatch between
joint funding as an aid modality and the actual and/or appropriate aid relationship
between themselves and Tanzania. These arguments are described in section 3.5.
3.1 Regulations Prevent Pooling per se26
For some DAC members, regulations state explicitly that they may not pool, some or all,
funds with other donors and foreign governments. Table 3.1, columns 2 and 3, shows
which DAC members are currently using the HSBF and the Local Government Reform
Basket Fund (LGRBF). Column 3 states whether or not internal rules and regulations
prevent DAC members from pooling some or all of their funds.27
26
All information in this section is based on interviews conducted for this study (see Annex C).
Clearly, participation in either the HSBF or LGRBF demonstrates an ability to pool some or all
funds.
27
26
Table 3.1
DAC members Uses HSBF Uses LGRBF Could pool some
or all funds
Belgium
N
N
N
Canada
N
N
Y
Denmark
Y
Y
Y
EU
N
Y
Y
Finland
N
Y
Y
France
N
N
Y
Germany
Y
N
Y
Ireland
Y
Y
Y
Italy
N
N
N
Japan
N
N
Y
Netherlands
Y
Y
Y
Norway
Y
Y
Y
Spain
N
N
N/A
Sweden
N
N
Y
Switzerland
Y
N
Y
UK
Y
Y
Y
UNAIDS
N
N
N/A
UNDP
N
Y
Y
UNFPA
N
N
Y
UNICEF
N
N
Y
USA
N
N
Y
WHO
N
N
N
World Bank
Y
N
Y
Y= Yes, N = No, N/A = “Not Applicable” (see below)
Further explanations for some DAC members are provided below.
Country CIDA offices have the discretion to enter pooling arrangements.
The EU has three types of funds: 1) European Development Fund, 2) Non-Program
funds, and 3) Counterpart funds (local currency generated from import support). Both
Non-Program and Counterpart funds can be used for joint funding.
Current EU financial regulations and daily EU practice suggest that European
Development Fund funds can not be used for joint funding.
However, the Lome
Convention (Article 251) implies that joint and parallel financing is possible.28 In practice,
28
The Lome Convention cannot be overturned by executive agency (e.g., EU) regulations.
27
there will need to be a “legal” challenge to EU financial regulations if the EU Tanzania
office wants to use European Development Fund funds for joint financing.
More generally, the Lome Convention could be used to challenge other EU rules,
regulations and procedures that prevent joint funding. Article 251 part 4 states that
“measures shall be taken to co-ordinate and harmonize operations of the [EU] and those
of other co-financing bodies, in order to minimize the number of procedures to be
undertaken by the ACP States and to render those procedures more flexible…”
GTZ and KfW are expected to use the HSBF in FY2001/02.
Act 2 of the Nuova Disciplina Della Cooperazione Dell’Italia Con I Paesi in Via di
Sviluppo (1987) describes those aid activities that can be financed within the framework
of the Italian law. The activities include project financing, support to international
organisations and Italian NGOs. However, funding foreign governments, and therefore
joint funding, is not possible.29
The Embassy of Japan stated that no particular procedures needed changing if Japan
entered a basket fund. However, there would need to be a special agreement between
the GoT and Japan on the modality of the basket fund.
There are four types of Spanish aid to Tanzania: 1) Funds distributed by the Agencia
Espanola de Cooperacion International in Madrid direct to Spanish NGOs, 2) Aid
distributed by Spanish local governments, 3) A very small Embassy of Spain budget in
Tanzania,30 and 4) Concessional loans. The Embassy of Spain argued that none of
these were suitable for basket funding.
29
Changes to this law have been discussed for the last 5-6 years and may be changed before the
end of 2001. The main changes aim to make aid expenditure more flexible. However, several
Italian Government policy papers also suggest changing the law to allow aid to fund foreign
governments, thereby allowing basket funding.
30 Approximately US$30,000 per annum.
28
The UNAIDS is a technical secretariat to improve UN system co-ordination, improve
their technical contribution and their role as advocates, and helps facilitate resource
mobilisation for National AIDS Control Program. It does not implement projects. 31
The UNDP will soon use UN Capital Development Fund funds to enter the LGRBF. This
will be the first time UNDP, anywhere, has participated in a joint funding mechanism.
The UNFPA is able to participate, on a case-by-case basis, in common-basket funding
arrangements in sector-wide approaches where the UNFPA is satisfied that adequate
monitoring, reporting and accounting mechanisms are in place. Initially, a limited amount
of resources would be committed until the basket fund is tested and found to be
reasonably functional.
Most USAID funds cannot be co-mingled with either other donor or government funds.
Co-mingling means pooling funds and losing attribution. Co-financing with donors and
governments is possible provided attribution is possible.
Co-mingling (joint funding) is possible with Non-Project Assistance funds. USAID has
used Non-Project Assistance funds in a basket arrangement in Ghana and in the
Zambian health sector. However, using Non-Project Assistance funds for basket funding
is very difficult and requires the approval on a case-by-case basis of the US Congress.
Congress does not like Non-Project Assistance especially in the health sector.32
The World Bank and GoT have signed a loan agreement that could provide funds to the
HSBF. ODI (1999, p47)33 states that World Bank procurement and disbursement
regulations for investment loans (SIPs) prevent World Bank joint funding with donor and
government funds. However, it argues that adjustment loans allow more flexibility in
procedures.
UNAIDS Tanzania receives “Program Acceleration Funds” from Geneva of approximately
700,000 per annum. The UN Theme Group on HIV/AIDS manages these funds and the UNDP is
the executing agency.
32 USAID support to the Zambian health sector basket has stopped.
33 ODI (1997). “The Status of Sector-wide Approaches,” Overseas Development Institute, London,
UK.
31
29
3.2 Tied Aid
Joint funding arrangements normally prevent tying, including, but to a lesser extent, for
technical assistance. Bilateral donors were asked in the interview whether their aid,
including technical assistance, is tied. Their answers are given below:
Belgium, Finland, Ireland, Italy, the Netherlands, Norway, Sweden and Switzerland
stated that all aid, including technical assistance, is untied. Several basket-donors from
these countries said they actively push for the complete untying of aid within the HSBF.
The UK (DFID) and Germany (GTZ and KfW) stated that all aid, including technical
assistance, is untied in joint funding arrangements (including the HSBF). Except in
special cases, EU aid must be tied to EU or ACP countries. However, Article 251,4,v of
the Lome Convention suggests joint financing is a special case. It states that in cases of
joint financing, EU rules on “eligibility and competition” (i.e. those pertaining to
procurement), among others, can be changed, implying the EU can untie in joint funding
arrangements. Although 25% of Danish aid worldwide must be tied, DANIDA aid is
untied with joint funding arrangements.
Canada (CIDA) does tie aid, although the percentage of tied aid is falling. USAID aid is
mostly tied. Most purchases need to have US origin, USAID must buy US
pharmaceuticals. USAID must go via US organisations to acquire technical assistance
and commission studies although these US entities will often work jointly with African
organisations. USAID can procure technical professional services locally and support
local NGOs.
3.3 The Flexibility of DAC Members’ Rules and Procedures
The flexibility or otherwise of DAC members’ rules and procedures (e.g., accounting and
procurement procedures) will influence their ability to use a particular set of common
procedures.34
34
It was impossible for this study to document all internal DAC member rules and procedures and
to contrast these with the HSBF procedures as they are evolving.
30
DAC members vary greatly in their degree of flexibility. Four examples are illustrative:

Irish Aid has no fixed financial regulations for disbursing aid. Their regulations are
“relatively strict”, but flexible and designed on a case-by-case basis.

SIDA stated they were a “very flexible organisation” so internal rules and procedures
could easily be changed when necessary.

Article 251,4,v of the Lome Convention states that in cases of joint financing, EU
rules and regulations can be changed.

The World Bank has a set of internal guidelines on financial management (including
procurement) that must be met by recipient governments receiving development
credits. Local World Bank offices cannot change these guidelines. HSBF procedures
must meet these guidelines before the World Bank credit can be used in the HSBF.
The World Bank has “approved” HSBF procedures for disbursement to the central
MOH but has not approved the procedures for disbursements to councils.
Procurement rules and procedures have arisen as an important issue in the HSBF.
Basket- and non-basket-donor rules and regulations on procurement are discussed in
some detail in section 4.
3.4 Attribution and “Visibility”
Some DAC members stated that attribution and “visibility” (the ability to “flag wave”) are
not important. However, for many DAC members attribution and/or visibility was a
barrier they overcame before joining the HSBF or LGRBF, or is a barrier to their future
participation. A desire for attribution by some basket-donors is illustrated by their desire
for earmarking within the HSBF. One non-basket-donor said earmarking their funds was
a minimum requirement for their participation in a joint funding arrangement. Some DAC
member regulations that explicitly prevent joint funding (section 3.1) probably arise from
a desire to ensure attribution.
3.5 Mismatches Between Joint Funding and the Actual and Appropriate Aid Relationship
Several DAC members argue there is a, sometimes fundamental, mismatch between
joint funding as an aid modality and the actual and/or appropriate aid relationship
between themselves and Tanzania. These arguments are described below.
31
Aid in some EU countries is decentralised to local governments (e.g., France and
Spain). This portion of national development co-operation does not suit the type of
basket funding arrangements discussed in this study. A significant share of Spanish aid
to Tanzania is currently distributed by the Agencia Espanola de Cooperacion
International in Madrid direct to Spanish NGOs.
One bilateral donor, paraphrasing a national co-operation document, said they
supported a greater emphasis on recipient country ownership and responsibility for the
control of aid; on the necessity for better aid co-ordination between donors; on a sectorwide approach if sector priorities are defined by the recipient country; and on the
necessity to use local expertise and reduced external technical assistance. In other
countries, the donor uses a mix of budget support, basket funding, institutional capacity
building and project support. However, in Tanzania their current priority for development
co-operation is to build partnerships and networks between their own civil society and
Tanzanian civil society. Basket funding, the donor argued, tends to obliterate these
aspects of bilateral co-operation. Citizens in the donor’s country expect strong links
between civil societies, before (sector) budget support is provided.
Some EU bilateral donors argued that their bilateral co-operation should be considered
together with the aid they provide via the EU. One EU bilateral donor argued they
provided some jointly funded aid via EU-European Development Fund funds. Another
EU bilateral donor felt there was a division of labour between the EU and bilateral EU
donors, highlighting possible future EU support to the Poverty Reduction Budget
Support.35
Several arguments were made by UN organisations supporting the health sector.36
Perhaps the most fundamental argument expressed by several UN organisations was
that their long-term role is not to finance development, and basket funds are a
mechanism for donors and creditors to finance development. Instead, their long-term
role includes promoting an agenda in the country (an “influence” role), providing
35
36
The Multilateral Debt Fund replacement.
Not all the arguments described below were advanced by all the organisations.
32
technical expertise, delivering services where government coverage is inadequate and
piloting innovative projects.
UN organisations need to meet specific mandates. Each UN organisation must ask
whether their mandate is best achieved by using joint funding arrangements. The
answer will depend in part on the activities funded by pooled funds and health sector
policy. Concerns about health sector policy are described in section 4.3 below.
Monitoring must be able to demonstrate the impact of pooled funds on certain objectives
(e.g., reproductive health and children). Concerns exist that monitoring is insufficient for
this purpose.
UN organisations often receive resources from bilateral donors for specific purposes. A
couple of arguments were advanced. First, if donors think placing funds in a basket best
supports these activities, then donors could put these funds directly in a basket rather
than directing them via a UN organisation.37 Second, it was argued that attribution
(“these funds supported these activities”) is necessary when resources are for specific
purposes and attribution is lost in a basket.
Two UN organisations argued it is difficult to finance (health) emergencies using the
HSBF. One UN organisation argued UN technical expertise is required in the execution
of certain health interventions. This links again to the role of UN technical expertise in a
joint funding arrangement. Finally, another UN organisation argued that their funding,
based on international donations, is very unpredictable and therefore ill suited to joint
funding arrangements with one-year and longer planning horizons.
37
This argument is strongest when the activity requires only planning and financing rather than
any technical expertise (e.g., vaccinations). If not, the argument rests on whether or not there are
gains from combining the provider of technical expertise and finance.
33
4. The HSBF: The Decision to Join, and its Operation and Development
4.1 Using Government Systems and Building Capacity
All DAC members expressed concerns about using GoT systems in the context of joint
funding arrangements and the HSBF. The greatest concern for all donors is
accountability and transparency. Some concerns exist, however, for almost every aspect
of GoT and MoH management including planning, health sector policy, procurement,
district health provision and monitoring.38
These concerns are crucial. They are the reason some DAC members have chosen not
to use the HSBF. They lead other DAC members, not involved in the health sector but
considering using joint funding arrangements in other sectors (e.g., education), to set
certain pre-conditions for using basket funds. Finally, they shaped development of the
HSBF, and shape alternative HSBF-donors views on its operation and future
development. All these issues are discussed below.
One non-basket-donor that supported a sector-wide approach in the health sector
agreed with a long-term aim of moving to budget support. However, they argued that
GoT/MoH “core functions” should reach an acceptable level before donors establish a
basket fund, and GoT systems were not currently acceptable.39 Donor support to
establish the Medical Stores Division and to improve the GoT financial management
system (the Platinum system) provide successful examples of building GoT/MoH
capacity without moving to joint funding arrangements. However, the donor felt that
neither the HSBF nor the SWAp is addressing the need to improve MoH capacity (we
return to this issue later).
38
Concerns about health sector policy and provision are described in section 4.3 below.
The donor would only basket fund if the government was, in their opinion, transparent and noncorrupt.
39
34
Another non-basket-donor said they would use the HSBF if and only if it funded those
activities the donor wanted to fund. While in principle this is possible (the donor could
support the HSBF if the activities were in the Prioritised Plan of Action), the donor
argued that in practice donors were “blindly” committing resources to the HSBF without
information on the activities funded and their impact.
Two DAC members, involved in the education sector (and not in the health sector),
described pre-conditions for using an education basket fund. One of these said spot
checks and audits, and progress on performance indicators, monitoring and evaluation
procedures (financial flows and outcomes), procurement especially at district level, and
auditing are pre-conditions. The second DAC member said acceptable standards of
financial management (e.g., accounting, procurement and auditing), and output/resultsbased monitoring and evaluation are a pre-condition for use of a basket. Another DAC
member, using the LGRBF, said independent audits immediately after books-close are a
pre-condition for their participation in any basket.
There are a variety of views among basket-donors on the efficacy of GoT/MoH systems
and how best to build capacity. These alternative views lead to different opinions on the
present operation and future development of the HSBF.
A few basket-donors would prefer to rely (almost entirely) on GoT/MoH systems without
imposing extra procedures and controls, and use an independent audit to monitor
performance. The majority of HSBF-donors, in contrast, prefer to insist that acceptable
procedures to donors, documented in HSBF procedures and accounting manuals, be
followed strictly with donor disbursements conditional on the strict application of these
procedures. These donors prefer to move slower, take smaller risks and to increase
funding incrementally. They argue the other approach would lead to lots of problems
(e.g., mismanagement and fraud), highlighted by an independent audit, and result in
donor disillusionment with the HSBF.40
40
In reality, there are a greater variety of views than the simple dichotomy above suggests.
35
These different views have practical implications for the daily operation of the HSBF. For
example, the Memorandum of Understanding states that the MoH should announce
Basket Financing Committee meetings two weeks before the date of the meeting.
Sometimes the MoH announces these meetings late. Some HSBF-donors argue this is
a small issue and the meeting should take place as announced. Others donors argue
that they should strictly and consistently follow the Memorandum of Understanding. A
second example is alternative basket-donor views on their response to mismanagement
or corruption.
Arguably a consequence, at the start of the HSBF’s life, of MoH staff learning and
applying procedures strictly is the slow disbursement and implementation we have
observed. Some donors argue this is an inevitable result of the right approach. Others
argue it is a negative consequence of imposing extra procedures and insisting on their
strict application, and it should be addressed. Another explanation for slow HSBF
spending is the narrowness of expenditure budget codes coupled with the difficulty of
virementation. A similar disagreement applies here too: some donors argue that this is a
problem, others argue narrow codes are necessary to ensure accountability.
A second issue is how to build GoT/MoH capacity within the SWAp/HSBF process.
While the HSBF itself aims to make systemic improvements by supporting rather than
fragmenting GoT systems, Cassels (op cit.) argues that “weak institutional capacity is
one of the main constraints affecting the implementation of sector-wide approaches”
and addressing this should be part of the programme of work.
Several DAC members argue that the need to build MoH capacity is not being
addressed. There is some evidence supporting this view. GoT staff training was only a
belated component of the process of setting up the HSBF. Central MoH and MoF staff
received training after it became clear they found it difficult to follow procedures in the
HSBF manual. District staff training was only planned after problems at the central level
emerged.
Several basket-donors argue that external technical assistance is required for capacity
building but this is not a unanimous view. While one donor argued there is a “desperate
need” for good (recognising there is bad) technical co-operation in Tanzania, another
36
donor argued for “almost zero” long-term technical assistance, preferring short-term
local technical assistance, with demand locally (GoT) driven and managed. Helleiner
(2000)41 proposes technical assistance as a (negative) indicator of donor performance.
In reality, technical assistance is probably the most difficult part of aid to rationalise and
no progress has been made on this issue since the Agreed Notes in 1997. More
broadly, there appears to be no clear vision of the way forward within the SWAp and
HSBF.
4.2 Procurement
The discussion of HSBF procurement procedures and the interim remedy to a lack of
agreement provides a good example of HSBF-donors’ concerns about using GoT/MoH
procedures and divergent views about the appropriate way forward.
In FY1999/2000, HSBF-donors were unwilling to use MoH procurement procedures for
HSBF funds. Instead, the MoH produced a list of procurement items and HSBF-donors
procured items from this list (reducing their cash transfer to the HSBF accordingly). In
FY2000/01, DFID is managing procurement (using an agent) until a procurement plan is
agreed between GoT and HSBF-donors. In short, most HSBF-donors did not trust MoH
procurement procedures and wanted a parallel system. One HSBF-donor disagreed with
this approach, arguing “the general rule is not to substitute GoT structures for parallel
systems”.
The MoH made it clear that long-term they did not want an external procurement agent.
Three HSBF-donors needed to confirm with their headquarters that this was acceptable.
In August 2000, the MoH submitted a 225-page procurement manual to HSBF-donors
detailing procurement rules and procedures. HSBF-donors will require procurement to
be well monitored. Even if donors accept the manual it will not be sufficient. HSBFdonors (at least some of them) argue there is a need to strengthen MoH procurement
capacity. One HSBF-donor stated the need for external technical assistance, arguing
that capacity could only be built on-the-job rather than in training workshops.
Helleiner (2000). “Tanzania Assistance Strategy: Critical Issues,” presented at the (Tanzania)
Consultative Group, May 22-26 2000.
41
37
4.3 Health Sector Policy, Provision and Decentralisation
Many DAC members argued that there has been too much emphasis in the
development of the HSBF on financial rules and procedures, while health sector policies
and their implementation (the effective use of HSBF resources) have been largely
ignored. Health sector activities funded by the HSBF and health sector policy, are
important factors for DAC members deciding whether or not to use the HSBF.42 A
particular concern is that the SWAp and HSBF are a centralising force during a
decentralisation process and that district health interventions will be neglected.
DAC members articulated several policy concerns. In particular, that reproductive health
care and community-based health care, and health workers, receive too little emphasis
in health policy.43 One DAC member felt that advocacy and health awareness
(education) issues were also neglected. Several DAC members are concerned that the
Tanzanian health SWAp, in contrast to other health SWAps, is dominated by policy
issues at the central level, even though these are relatively straight forward, at the
expense of implementation issues, especially at district-level. There are concerns that
district health provision is neglected and under-funded relative to central and regional
provision.
It is a widely held view among DAC members that there is a need to critically address
the relationship between the SWAp/HSBF and decentralised health provision. Moreover,
several DAC members maintain there is an inherent conflict between the SWAp/HSBF,
which they argue is a centre-led (top-down) process, and decentralised health provision.
Is the HSBF a centralising force in conflict with decentralisation? Two pieces of evidence
suggest centralising instincts. First, one DAC member said, “you cannot guarantee
district health plans match central MoH and donor priorities.” Second, districts only
receive HSBF funds in FY2000/01 if they are allocated between six cost centres
categories (and not for personal emoluments, medical supplies or capacity building
initiatives) as follows: Council Health Department (10%), Council hospital (35%), urban
42
In the education sector, one donor said (fundamental) policy differences between themselves
and GoT were currently sufficient to prevent their participation in an education basket fund.
43 One donor argued that reproductive health is not part of the health sector programme.
38
health centres (10%), rural health centres (15%), dispensaries (15%), and community
initiatives (5%) – with 5% unallocated.44,45
On the relationship between donors, the SWAp/HSBF and decentralised health
provision, one HSBF-donor prefers two health sector basket funds, one funding the
central MoH, another funding districts. This is meant to prevent the central MoH and
districts fighting for HSBF funds. Another HSBF-donor argues that donors should work
directly with individual districts. There is a danger, however, that donor funds will
dominate district health plans, and that donor dependency will emerge at district-level.
Finally, a few donors are concerned that, as a result of the SWAp/HSBF, they will lose
touch with the realities of community health care; that donor experience in community
health care will be lost; and that there will be less innovation in approaches if projects
are phased out. ODI (op cit.) argue the latter suggests a role for pilot projects integrated
in SWAps, which may be more owned, better known and therefore more influential.
4.4 Control, Ownership and Exclusion
A particular concern of many DAC members is the impact of the HSBF on the
relationships between “HSBF-donors”, “non-basket-donors” and GoT. HSBF-donors
often hold informal meetings before official donor-GoT meetings (e.g., Basket Financing
Committee meetings) to seek a common position to approach GoT. HSBF-donors it is
argued are “ganging-up” on GoT.46 Furthermore, by deepening the dialogue, increasing
the range of issues donors feel they can legitimately discuss with GoT, and by donors
asking for informal meetings with GoT, it is claimed that HSBF-donors are trying to
“micro-manage” the health sector. This leaves some DAC members to question whether
the HSBF has increased or decreased GoT ownership.
44
Furthermore, if there are voluntary agency hospitals in the councils, then the unallocated 5%
must be allocated to hospitals for “priority health interventions” as defined in the HSBF Planning
Guide.
45 Medical supplies are funded by the HSBF at central level.
46 In contrast, a LGRBF-donor argued, in the context of an over-sized local government reform
budget, that donors find it hard to agree a common position and donors are more like competitors
than collaborators.
39
During the process of setting up the HSBF, basket-donors held extra discussions with
the MoH. These meetings were necessary to agree HSBF modalities. However,
important areas of future MoH strategy were also discussed. Non-HSBF-donors felt they
were being excluded from parts of the health sector programme relevant to all donors.47
Many non-HSBF-donors argue that HSBF-donors, played out in the Basket Financing
Committee, continue to dominate the health sector policy process, excluding other
donors. While the SWAp is meant to increase consultation and co-ordination around a
common sector programme, the HSBF, it is argued, has reduced consultation. The
HSBF debate has become dogmatic and politicised, with accusations of first and second
class donors. It has created rifts and animosity among donors possibly reducing the
prospects of future consultation and co-ordination.
In this context, health sector structures (e.g., committees) and the relationships between
them become important. The initial concerns of non-HSBF-donors were addressed by
establishing a SWAp Committee and a Basket Financing Committee (BFC). The former,
comprising GoT and all health sector donors, was meant to deal with all health sector
reform questions and guide the health SWAp. The latter, comprising GoT and HSBFdonors, was meant to focus on basket fund issues. In practice, real power is assumed to
reside with HSBF-donors in the BFC. A third structure, the Health and Population Sector
Group, representing all DAC members, has little power as HSBF-donors, once active
members, now rarely attend.
The Health and Population Sector Group established a working group and “proposed [a]
structure for strengthening consultation and co-ordination in the health sector”. The BFC
is a sub-committee of the (apex) SWAp Committee in their proposed structure. While at
least some non-HSBF-donors prefer the proposed structure, at least some HSBFdonors find it unacceptable. One DAC member felt the proposed structure would
increase consultation and was therefore good. Another agreed all health reform issues
should be discussed in the SWAP Committee but felt HSBF-donors had a right to direct
communication with GoT due to the large size of HSBF funds. A few DAC members
47
Other DAC members argue the health SWAp should include far more stakeholders not just
GoT and donors.
40
argued that current structures (meetings) were too large to achieve meaningful,
constructive consultation and agreement.
4.5 World Bank Credit
The World Bank would like to support the HSBF via a credit. Several HSBF-donors
argue the credit should only be disbursed if there are insufficient donor grants to finance
the Plan of Action, i.e., the World Bank should operate as a “creditor-of-last-resort”. This
is not the case at present - bilateral HSBF-donors would like to disburse more via the
HSBF than is currently possible. In the long-term, the World Bank is happy playing this
role of “creditor-of-last-resort”. In the short-run, however, the World Bank would like to
disburse the credit via the HSBF, to “learn” and be “comfortable” using it, and be
involved in its design.
4.6 Projects
In the short-term, HSBF-donors continue to support projects.48 There are transitional
reasons for this. Donors started some projects before the HSBF and will not stop
funding them half way through. Donors will “transfer” some projects into the HSBF when
it is disbursing funds more effectively. However, aside from these transitional reasons,
most HSBF-donors (perhaps not all) will continue to support some projects in the longerterm.
HSBF-donors offered a number of reasons for continuing to use a project approach. At
a general level they argued that sometimes a project approach is better than sector or
budget support. NGOs and the private sector, for example, are sometimes a better
vehicle than government. If there are good projects they should be supported.
48
In FY2000/01, total donor funds to the health sector (MoH, NGOs, private sector etc) is
estimated to be TShs106,585million. 16.6% of these funds (TShs17,655million) use the HSBF.
Estimates supplied by Dr. S. Nyaywa at the MoH. SPA (199x) in a study of 16 SWAps, estimate
that 80% of disbursements use donor project procedures and only 17% use direct budget support.
The study, however, notes that these are early days as the first commitments were only made in
1996/97. Moreover, 40% of donors used direct budget support for part of their sector programme.
41
One donor expressed a preference for using “multiple point of entry” to support
development. Supporting districts, for example, guarantees that some funds get closer
to intended beneficiaries. Some HSBF-donors said projects were necessary where GoT
and donor priorities differed or where donors felt certain activities received too little
attention in the health sector programme. One HSBF-donor set up a project to establish
the impact on Phase I districts of receiving HSBF funds, presumably due to concerns
about inadequate monitoring. Finally, one HSBF-donor said there are benefits from their
staff managing a project as opposed to GoT staff.
42
5. The Local Government Reform Basket Fund
5.1 The Local Government Reform Programme and Local Government Reform Team
Local government reform began in 1994 as a component of the Civil Service Reform
Programme. In October 1996, the GoT’s vision, objectives and strategies for local
government reform were set out in the Local Government Reform Agenda. In March
1997, a joint GoT-donors meeting convened to discuss the Local Government Reform
Agenda. Local government reform was institutionally separated from the Civil Service
Reform Programme and the Local Government Reform Team was formed under the
Prime Minister’s Office to lead the reform process.
In 1998, the Policy Paper on Local Government Reform was adopted and the GoT
established the Ministry of Regional Administration and Local Government (MRALG).
The Local Government Reform Team became a technical arm of the MRALG, with
managerial and financial autonomy within it. The Local Government Reform Agenda
was developed into a comprehensive operational programme – the Local Government
Reform Programme with an Action Plan and Budget.
The Local Government Reform Programme has four major elements:

A decentralisation strategy to devolve political, administrative and financial decisionmaking to local government;

An increase in local government resources via a transfer of funds from central
government to district governments in the form of conditional, supplementary
unconditional and equalisation grants, and procedures for increased revenue
collection at district level;

A strategy to improve local government service delivery, to set affordable national
minimum standards for service delivery and to integrate (decentralised) sector
reforms within the local government reform process; and

Capacity building at the central government (MRALG) and local government levels.
43
The Local Government Reform Programme is guided at the top by the Inter-Ministerial
Co-ordination Committee (of permanent secretaries), the Common Basket Fund
Steering Committee (comprising GoT and basket-donors) and the Government and
Donors Local Government Reform Consultative Forum. Implementation is managed by
the Local Government Reform Team within the MRALG.49 Council Reform Teams are
established in each (reforming) district to support the district council in the design and
implementation of reform. Zonal Reform Teams were established in Arusha, Dar es
Salaam, Dodoma, Mbeya and Mwanza, comprising three technical specialists (in
financial
management,
restructuring
and
personnel
management,
and
local
government), to guide, train and support Council Reform Teams. Regional Reform Coordinating Committees were established within Regional Secretariats to co-ordinate and
supervise reform with their regions.
The local government reform process is not implemented in all districts at the same
time, but in three phases with 37 councils in the first phase, and 35 councils in the
second and third phases. Phase I districts started implementation in January 2000,
Phase II districts start in January 2001 and Phase III districts in January 2002. The
Local Government Reform Programme is due to be completed by December 2004. The
MRALG will remain responsible for support to regional and local government after
reform.
5.2 The Local Government Reform Basket Fund: How it works50
5.2.1
Introduction
The GoT-donors meeting in March 1997 decided to establish a joint funding mechanism
(hereafter, Local Government Reform Basket Fund, LGRBF) to finance the Local
Government Reform Programme and Action Plan and Budget. DANIDA, DFID, EU,
49
The Local Government Reform Team includes a programme manager, programme accountant,
five component managers each responsible for the major Local Government Reform Programme
components, a monitoring and evaluation expert, a training advisor and a chief technical adviser.
50 The section draws heavily on URT (1997). “Prime Minister’s Office, Local Government Reform
Programme – Financial Management Manual,” URT.
44
FINNIDA, Irish Aid, the Netherlands, NORAD and UNDP-UN Capital Development Fund
currently support the Local Government Reform Programme and use the LGRBF.51,52
A combination of LGRBF funding and direct donor funding financed the first Action Plan
and Budget (July-December 1998 and revised October-December 1998). The LGRBF
currently finances almost all of the Local Government Reform Programme. The current
Action Plan and Budget (July 1999-December 2004) amounts to a total of TShs39billion
over FY1999/2000 to FY2004/5, with TShs8.1 billion in FY1999/2000. Donors fund the
majority of the Action Plan and Budget; GoT’s contribution to the LGRBF in
FY1999/2000 was TShs44 million.53
Operation of the LGRBF follows procedures laid down in the “Local Government Reform
Programme – Financial Management Manual”. LGRBF funds are accounted for as part
of MRALG’s voted expenditure. The Common Basket Fund Steering Committee,
comprising the MRALG, MoF and basket-donors, is responsible for overseeing
operation of the LGRBF.
5.2.2
Planning and Budgeting Process
The Local Government Reform Team must abide by all GoT financial planning
regulations as outlined in the Government Financial Regulations. Preparation of the
annual plan/budget by the Local Government Reform Team must be finalised by 31
March each year and submitted to the MRALG Budget Committee. The annual
plan/budget is part of the MRALG’s development budget, which must be forwarded to
the MoF by 15 April. The Government and Donors Local Government Reform
Consultative Forum must submit comments on the annual plan/budget to the Local
Government Reform Team by 30 April. The Common Basket Fund Steering Committee
should approve the annual plan/budget in last week of May.
51
Some donors participating in the LGRBF signed a Memorandum of Understanding with the
GoT.
52 Some donors continue to support districts directly (via district development programmes) as
well as supporting the Local Government Reform Programme.
53 The GoT also contributes to the Local Government Reform Programme by supporting the
MRALG, other ministries, and through regional and local government.
45
5.2.3
Disbursement and Management of Funds
Donor (LGRBF) funds and GoT counterpart funds are deposited into the Satellite A/C at
the Bank of Tanzania. Transfers are made 6-monthly54 from the Satellite A/C into the
Common Basket A/C on approval of the Common Basket Fund Steering Committee.
Their decision to release funds from the Satellite A/C is based on the following reports:

Monthly reports of income and expenditure;

Monthly bank reconciliation statements;

A forecasted financial cash flow statement for the next 6 months55 reflecting all
sources and uses of funds, as per approved annual plan/budget;

Annual financial accounts (within three months of financial year end);

6-monthly56 audit reports; and

Additional reports as requested.
With the exception of audit reports, these reports must be prepared by the Local
Government Reform Team.
Following the Common Basket Fund Steering Committee recommendation, the PSMRALG (chairman of the Committee) notifies the Accountant General in writing to
instruct the Bank of Tanzania to transfer funds from the Satellite A/C into the Common
Basket A/C. The Accountant General then issues Exchequer Issues Notifications, to
notify the relevant parties (Accounting Officers and Exchequer Section) that funds are
available.
The LGRBF funds the Local Government Reform Team, Zonal Reform Teams and
provides
small
district
reform
grants
to
Council
Reform
Teams.
PriceWaterhouseCoopers manage Zonal Reform Teams and Zonal Reform Teams
allocate district reform grants to Council Reform Teams. LGRBF funds to Zonal Reform
Teams and Council Reform Teams are therefore disbursed and accounted for via
PriceWaterhouseCoopers. Zonal Reform Team financial specialists act as an informal
auditor/monitor of LGRBF district reform grants.
54
This used to be quarterly.
This used to be quarterly.
56 This used to be quarterly.
55
46
The release of funds from the Common Basket A/C credits the six vote books
corresponding to the six Local Government Reform Programme components.57 The
Local Government Reform Team Programme Manager is the Accounting officer for
Local Government Reform Team funds. The Programme Manager, on receipt of the
Exchequer Notification Issue, informs the relevant warrant holders (Local Government
Reform Team Component Managers) that resources are available. Approval of
expenditure or commitments is done against balances in vote books. An item shall be
passed for payment only if it has a credit balance in the relevant vote book. Component
Managers are responsible for expenditure under their component.
5.2.4
Expenditure Procedures
Local Government Reform Team payments shall be effected in accordance with GoT
financial regulations. Any officer signing a payment voucher thereby certifies the
accuracy of every detail therein and will be held responsible for the legitimacy of the
payment. No payment voucher shall be passed for payment unless it bares authority by
the Component Manager, Programme Accountant and Programme Manager. A cheque
shall be considered passed for payment when signed by two official signatories, at least
one of whom should be either the Programme Manager or Programme Accountant.
Imprest management and allowance claims shall follow existing GoT financial
regulations. Overtime rates for Local Government Reform Team staff shall be
determined by the Common Basket Fund Steering Committee. The Local Government
Reform Team shall engage consultants according to MRALG tender and contractual
procedures. Recruitment procedures and criteria of selection shall be made available to
the Common Basket Fund Steering Committee if need arises. The Financial
Management Manual (p33-35) describes procurement procedures. The purchase of
high value items requires approval of the PS-MRALG. Major contract works should be
based on tenders and a tender board appointed by the PS-MRALG. The tender award
should be based on the broad principles stipulated in the GoT Financial Order Part III.
57
The Local Government Reform Programme has six major components: 1) Governance; 2)
Restructuring of Local Government; 3) Finance; 4) Human Resource Development and
47
5.2.5
Account Keeping and Financial Reporting
Records or documents should support all Local Government Reform Programme
transactions. Documents will mainly be receipts, payment vouchers, or ordering
documents. Payment vouchers will be used to support and process all types of
payments.
The Local Government Reform Team must submit the financial reports listed above to
the Common Basket Fund Steering Committee. Before financial reports are prepared, a
mechanism of checking the accuracy of financial information should be applied
including: i) preparation of monthly trial balance, ii) reconciliation of imprests, iii) bank
reconciliation, iv) physical cash count, and v) physical stock taking.
5.2.6
Platinum System
The Platinum system was installed in July 2000 connecting the Local Government
Reform Team to the GoT’s financial management system and computerising many of
the above procedures. Most reports and accounts are now produced by Platinum and by
December 2000 it should be possible to print cheques using Platinum.
5.2.7
Auditing and Reviews
Internal and external audits are performed regularly. Existing GoT auditing regulations
shall be followed. MRALG Internal Auditor will conduct internal audits. An external
private auditor (currently KPMG) audits the LGRBF 6-monthly.58 In addition, the
Common Basket Fund Steering Committee or individual donors may commission
external auditors to conduct a performance audit (to assess if funds are used
economically, efficiently and effectively in achieving intended goals). It is the duty of the
Local Government Reform Team to reply to all audit procedures relating to the Local
Government Reform Programme. The GoT, through PS-MRALG, will instigate
disciplinary and/or legal actions against offending parties if evidence of fraud or
Management; 5) Institutional and Legal Framework; 6) Programme Management/Implementation
Strategy.
58 This used to be quarterly.
48
embezzlement of LGRBF funds is unearthed. The Local Government Reform Team will
take corrective action in the event of less serious audit queries.
External reviews of the Local Government Reform Programme are conducted annually.
There will be a comprehensive appraisal in January-April 2001.
5.3 Learning Lessons from the Local Government Reform Basket Fund
Valuable lessons can be learnt from the LGRBF experience for joint-funding
arrangements (basket funds) in other sectors and these are detailed below. However,
most DAC members who use both the LGRBF and HSBF argue that the health SWAp
and HSBF (and possible future SWAps) are more complex than the Local Government
Reform Programme and LGRBF; limiting the transferability of the LGRBF experience. I
discuss this argument first.
Several arguments are used to justify the claim that the Local Government Reform
Programme and LGRBF are different from the health SWAp and HSBF. Some DAC
donors argue that the content of local government reform is simpler, with greater GoTdonor consensus, than health sector reform.59 Others argue that the Local Government
Reform Programme/LGRBF is more like (an extra) donor-funded pooled project than a
sector programme, with limited GoT funding and the Local Government Reform Team
resembling a parallel project unit. Some donors continue to support districts directly as
well as supporting the Local Government Reform Programme.60 One DAC donor argued
that “equality” between donors (in the sense that each donor contributes a similar
amount to the LGRBF) leads to a more productive relationship in the LGRBF. The group
of donors supporting the Local Government Reform Programme is smaller than the
number involved in the health SWAp.
59
One DAC donor disagreed arguing that local government reform was similarly complex.
Furthermore, donors working directly with district councils are involved in the Local Government
Reform Programme at this level via Council Reform Teams.
60
49
5.3.1
LGRBF Experiences
One LGRBF-donor said donor contributions to the LGRBF have consistently exceeded
Local Government Reform Programme expenditure.61 The donor argued that while all or
most donors would like to cut the Local Government Reform Programme annual budget
to a more realistic figure, no donor individually wants to cut their contribution. Donors
want to meet disbursement targets and to not look like “late-payers” in the context of
basket funding. As a consequence, the Local Government Reform Team has less
incentive to (cost) efficiently use funds.62 Furthermore, the donor argued, the Local
Government Reform Programme budget looks like an “over-sized menu” and the Local
Government Reform Team can implement whichever parts it wants.
There are several examples of flexibility within the Local Government Reform
Programme/LGRBF.63 The next tranche of EU funding to the LGRBF is conditional on a
teacher rationalisation study. Second, donors continue to finance parts of the Local
Government Reform Programme outside of the LGRBF, including some technical
assistance and the introduction of the Platinum system in some districts. Third, NORAD
aid cannot be used to pay rent. However, NORAD (and other LGRBF-donors) accepted
funding rent for the Local Government Reform Team building via the LGRBF by arguing
that GoT’s LGRBF contribution was funding the rent.
The division of powers between the Common Basket Fund Steering Committee and the
Government and Donors Local Government Reform Consultative Forum mirrors that
between the Basket Financing Committee and the SWAp Committee in the health
sector. While decision-making power is meant to reside in the Consultative Forum, in
practice this power resides in the Common Basket Fund Steering Committee. In short,
money is power.
One LGRBF-donor argued that initial Local Government Reform Programme monitoring
was largely input, rather than objective, based (e.g., x number of workshops were held
and donors paid y in per diems). He argued that there is a tendency in joint funding
61
For example, in FY1999/2000, the Local Government Reform Programme budget was TShs8.8
billion and actual expenditure was less than TShs4 billion.
62 The donor referred to this situation as “people swimming in money”.
50
mechanisms for monitoring criteria to gravitate to the lowest common denominator
(amongst donors) or national government criteria. Another LGRBF-donor argued that
Local Government Reform Programme monitoring and evaluation remains incomplete.
One LGRBF-donor argued that LGRBF-donors started basket-funding looking at every
single line of programme documents, but this was hard work and they subsequently
significantly reduce their monitoring intensity.
One LGRBF-donor argued that external auditors could face perverse incentives.
Auditors are required to assess the acceptability of GoT accounts during an audit.
However, auditors in Tanzania rely heavily on the GoT for business and may be
concerned that their future business is risked if they fail to pass GoT accounts.
Finally, the Local Government Reform Team Programme Manager argued that the
success of the LGRBF is based on donor’s trust in the Local Government Reform
Team’s ability to manage donor funds, and the regular communication and information
provided by the GoT and Local Government Reform Team to donors. LGRBF-donors
supported both these arguments.
63
And this flexibility has advantages.
51
6. Summary and Future Aid Co-ordination Issues
6.1 What Factors Determine a DAC Member’s Decision to Use or not use the HSBF?
This study was conceived in part on an assumption that donor’s rules and regulations
rather than policy were the major constraint to their participation in the HSBF. The
interviews suggested otherwise. Most DAC members described a policy decision to
participate or not in the HSBF, rather than listing internal rules and regulations that
prevented their participation. Furthermore, rules and regulations can change if a policy
decision is made to join the HSBF. The German Minister’s decision to join the HSBF
provides an obvious example.
A few DAC members described a mismatch between joint funding as an aid modality
and the actual and/or appropriate aid relationship between themselves and Tanzania.
Aid in some EU countries is decentralised to local governments. Some EU bilateral
donors argued their bilateral co-operation should be considered together with the aid
they provide via the EU. One donor said their priority for development co-operation is to
build partnerships between their own and Tanzanian civil society, and argued that
basket funding is not suited to this role. A few UN organisations argued that their longterm role is not to finance development, and basket funds are a mechanism for donors
and creditors to finance development.
Internal rules and regulations explicitly prevent Belgium, Italy and the WHO from pooling
funds with other donors and governments. The EU can jointly fund with some EU funds
and should, according to the Lome Convention, be able to jointly fund all funds. USAID
can, with difficulty, pool some funds. Joint funding arrangements normally prevent tying.
This could be a constraining factor for CIDA and USAID who have restrictions about tied
aid. More generally, agreeing common procedures requires sufficient flexibility in
donors’ internal rules and procedures. Flexibility varies between DAC members. The
World Bank has a set of internal guidelines that must be met by governments receiving
development credits.
52
For many DAC members a desire for attribution and/or visibility was either a barrier they
overcame before basket funding, or is a constraint to their future participation. Some
basket-donors prefer to earmark within the HSBF. One non-basket-donor said
earmarking their individual funds was a pre-condition to using basket funds.
HSBF funds are managed as part of GoT resources and follow GoT financial
procedures. All DAC members are concerned about the accountability and transparency
of HSBF funds, and more generally, about GoT management capacity. There are
concerns about health sector policy, in particular, inadequate attention to reproductive
health and community health care, and that the MoH and SWAp/HSBF are centre-led
processes with negative consequences for district health provision. A couple of UN
organisations felt they might not meet their specific mandates within the HSBF. These
concerns affect the decision to join or not join the HSBF, and operational and
development issues within the HSBF.
Surveys of SWAps, by Cassels (op cit.) and ODI (op cit.), highlight similar factors. ODI
(op cit., P46) argues that a move to common procedures faces several constraints:
“some donors are prohibited from merging funds; recipients lack financial management
capacity; entrenched corruption in some countries; donors are risk averse; and the link
from budgets to outputs are poor, making it hard to show the benefits from budget
support.”
Cassels (op cit., Pxiv and Pxvii) lists:
“concerns about accountability and the political risks of being associated with corrupt or
unproductive spending; the restricted technical scope of existing sector assistance
policies…[and] the issue of attribution – the need for donors to be associated with
specific inputs or outcomes” as constraints to the adoption of sector-wide approaches
and basket funding.
53
6.2 Future Aid Co-ordination Issues
The MoF’s aim is to make the HSBF work well to encourage increased donor
participation. Several non-basket-donors said if the HSBF operates well they would
consider basket-funding themselves. The Embassy of Germany sees the HSBF as a
“test case”. If it were successful they would be willing to join baskets in other sectors.
This final sub-section considers four issues:

How can we make the HSBF work better?

Accepting new HSBF members

Improving health sector aid co-ordination (the HSBF is not the only way)

Lessons for aid co-ordination and other basket funds
6.2.1
Making the HSBF Work Better
DAC members unanimously express concerns about using GoT systems in joint funding
arrangements. Yet there is no clear vision on how to build GoT/MoH capacity and there
is evidence that the health SWAp/HSBF has neglected this.
Cassels (op cit., Pxvi) argues:
“[k]ey components of this part of the programme of work will include: (i) building
government capacity to lead the process of sectoral development, particularly in relation
to strategic planning and policy, budgetary and financial analysis, [and] (ii) the
development of structures, systems and incentives, in both the public and private sector,
to manage health services in line with national policies…”
There is a need to understand and address the fundamental causes of limited GoT
capacity. The link between civil service and health sector reform is important. Some
DAC members argue external technical assistance is required for capacity building. In
contrast, Helleiner (op. cit.) proposes technical assistance as a negative indicator of the
aid relationship and the MoH, and other donors, have been openly sceptical of the role
of technical assistance. There is a need to address the role (if any) of external technical
assistance within the health SWAp.
54
A second concern for many DAC members is monitoring HSBF outcomes. The
development of performance indicators, and monitoring and evaluation processes, are
still being developed by the HSBF. There is a need to address the role of HSBF-donors
within the monitoring and evaluating process. One LGRBF-donor argued basket-donors
start by looking at every single line of LGRBF documents but significantly reduced their
monitoring intensity over time. It is very difficult for individual basket-donors to monitor
all aspects of a basket fund. DFID argue there should be a division of labour to allow
more effective donor monitoring of the HSBF. In particular, DFID suggested that GoT
could choose individual donors to collaborate with MoH departments in evaluating
different parts of health sector reform.64
6.2.2
Accepting New HSBF Members
There are choices to be made, between alternative sets of rules and procedures, when
developing the HSBF. Non-basket-donors will make HSBF participation decisions in part
on these HSBF rules and procedures. Thus choices made in designing HSBF rules and
procedures could affect future HSBF participation. Trade-offs may exist between
increasing donor participation in the HSBF and other factors affecting the choice of
HSBF rules and procedures.65
A few examples highlight possible choices. In the LGRBF in FY2000/01, EU funding is
conditional on a teacher rationalisation study. One non-basket-donor argued that if
certain donors have rules on tied aid, then the basket fund should be flexible and allow
tying in the basket fund. Several DAC members have a preference for earmarking within
basket funds. One non-basket-donor said earmarking was a minimum condition for their
participation in basket funds. If earmarking can increase donor participation in basket
funds by overcoming donors concerns about loss of attribution or visibility, or sidestepping internal rules on joint funding, should earmarking be allowed?66
64
All health sector donors (those using and not using the HSBF).
One DAC donor argued that the SWAp process is about “finding a middle way in which all
stakeholders are happy and levelling the ambitions of different stakeholders for the SWAp.”
66 Some donors argue that earmarking is futile because funds are fungible. However, if
psychologically it persuades certain donors to use joint funding mechanisms, then earmarking
may play an important role. The Ugandan Poverty Alleviation Fund allows earmarking and attracts
donors who might not otherwise participate in joint funding arrangements.
65
55
6.2.3
Improving Health Sector Aid Co-ordination (the HSBF is not the Only Way)
ODI (op cit., P26) argue that “the ability to provide sector support within a coherent
overall budget is the strongest potential benefit of a SWAp.” Although all health sector
donors signed the Joint Statement of Intent to adopt a SWAp to health reform, it would
be difficult to argue the current set of donor health sector interventions constitutes a
coherent sector programme. The Minister of Finance has argued the importance of
recording all aid on the GoT budget.67 It would be a significant improvement to ensure
that all donor support forms part of a coherent health sector programme and is recorded
on the budget (both ex-ante and ex-post). If there were a common sector programme,
partially financed by the HSBF, there could also be common monitoring and evaluation
process.
The Minister of Finance argued that it is as important for donors to harmonise
procedures as it is for donors to use common GoT procedures in a basket fund. A UN
organisation argued that the UN system should be able to harmonise their reporting
systems. One DAC donor designed an interface to transform accounting outputs from
the GoT financial systems into a format acceptable to themselves and their
headquarters. In summary, many things can be done outside of the HSBF to improve
aid co-ordination. An effective set of health sector structures (e.g., committees) would
help in this endeavour.
6.2.4
Lessons for Aid Co-ordination and Other Basket Funds
During the interviews, DAC members and GoT staff suggested a number of factors
conducive to a successful SWAp and basket fund. Donors and GoT need to agree a
sector policy and plan of action.68 Several DAC members argued that a successful
SWAp requires donors to make decisions in country and long-term commitments,
otherwise the process of agreeing a common policy and procedures become difficult.
One DAC member argued, however, that email communication made decentralised
donor decision-making less imperative.
67
Speech at the Consultative Group meetings in 2000.
In the education sector, one donor said (fundamental) policy differences between themselves
and GoT were currently sufficient to prevent their participation in an education basket fund.
68
56
Personalities matter. A successful basket fund requires trust between donors and GoT.
The head of the Local Government Reform Team argued that the GoT/Ministry must
share information and communicate regularly with donors to increase trust. One DAC
donor argued that trust and successful co-operation may be better achieved at subsector level.
Finally, the Netherlands Embassy argues that DAC members should agree a set of
common procedures for joint funding arrangements. This would help formalise and
speed-up the stumbling, “reinventing-the-wheel” process which accompanies each new
basket fund. They also argue that DAC members should first agree a set of common
principles (e.g., transparency, accountability, equity etc.) and common procedures
should be derived from these. Following the logic of ownership, these should be
government procedures acceptable to donors. Ideally, for example, the new GoT
procurement policy would be acceptable to donors.
57
Annex A – Terms of Reference for Consultancy to Assist DAC Members to
Understand the Problems Facing Potential ‘Basket Funders’ in the Health Sector.
1. Background
As part of the ‘best practices’ to be pursued under TAS, there is need to reach consensus
between GoT and donors on a set of disbursement and reporting procedures for donor
financed activities, which are efficient and transparent.
As much as possible, these
procedures should be fully integrated into the GoT procedures.
The establishment of such procedures is expected to reduce time and cost of disbursing
funds, as well as enabling the integration of donor funding into the government budget.
As a first step, and as a follow-up to the discussions with the Utstein Ministers, a clear
understanding of what is currently happening in the Basket Fund, and the reasons for
some donors’ non-participation in this fund, would help to provide a basis for discussion of
these issues.
2. Objective of this assignment
Achieve a clear understanding of the problems that non-basket donors face, or anticipate
to face, in participating in the Health Sector Basket Fund.
This will constitute a
contribution towards starting a process aimed at achieving a clear set of common
procedures, agreeable to GoT and donors, primarily applicable in joint financing through
basket arrangements.
3. Tasks
a) Review arrangements for management of Health Basked Fund with MOH and
Accountant General staff, to gain an understanding of the fund and any problems
experienced. Provide a clear description of these procedures, including a detailed
description of how the Platinum system is used to account for donor funds.
b) Interview all the Health Sector donors individually, (both bilateral and multilateral), and
explore with them (in a non-judgemental way), the reasons, both of policy and legal
nature, that they are not able to participate in the Health Basket Fund, or, any
impediment they may have found in joining the fund.
58
c) Collect documentation on any rules and regulations that may be part of these reasons.
Hold follow-up meetings as necessary in order to get full details of the issues (e.g. full
understanding of the accounting rules and procedures that are not met by a Basket
Fund. List all accounting rules and procedures used in accounting for donor funds.
d) Document the reasons and issues identified, so that they can be clearly understood,
as a basis for discussion by DAC members.
e) Review the Local Government Basket Fund procedures, (including interviewing LGBF
members), to see if any of the problems facing the Health Basket Fund have been
resolved, and identify key differences between the two funds, to facilitate GoT/DAC
discussion of the two experiences.
4. Duration
Up to eight weeks, with provision for extension if required.
5. Remuneration
(Equivalent of ESRF)
6. At the request of the Ministry of Finance, the consultancy will be funded by DFID, and
managed by the UNDP Office. In performing the tasks, the consultant should be
prepared to collaborate with other consultants, to be determined by UNDP in
consultation with representatives of MoF, the Utstein group and other DAC members.
59
Annex B – Joint Funding Mechanisms (Basket Funds) in Tanzania
A joint funding mechanism (or basket fund) refers to a mechanism, shared by two or more
parties, for the disbursement, management and accounting of funds. In the context of a
sector-wide approach, a joint funding mechanism, shared by donors, would typically
follow, to a significant extent at least, (recipient) government financial rules and
procedures. Alternatively, a joint funding mechanism may occur between two or more
donors in the context of a project.
There are several joint funding arrangements in Tanzania including:

Health Sector Basket Fund (HSBF)

Local Government Reform Basket Fund (LGRBF)

Multilateral Debt Fund to be replaced by the Poverty Reduction Budget Support

Primary School Books

TB/Leprosy

Election 2000
60
Annex C – List of Interviews
DFID (UK): Sandra Baldwin – 29 June 2000
Netherlands Embassy: Theo van Banning – 13 July 2000
Norwegian Embassy: Gunnar Foreland (Minister Counsellor) – 2 August 2000
Embassy of Finland: Martii Eirola – 2 August 2000
Embassy of Italy: Marcello Cavalcaselle (First Secretary) – 2 August 2000
Royal Danish Embassy: Winnie Petersen (Counsellor, Development) – 3 August 2000
Spanish Embassy: Mrs Mercedes Sanchez-Pedrosa – 3 August 2000
SIDA: Christine McNab – 7 August 2000
UNAIDS: Evaristo Marowa – 8 August 2000
SDC: Arnold Buluba – 8 August 2000
European Commission: Klaus Schmidt – 8 August 2000
Embassy of the Federal Republic of Germany: Dr Rolf Drescher (First Secretary) – 9
August 2000
Embassy of Belgium: Philip Heuts (Attaché for International Co-operation) –10 August
2000
USAID: Robert Cunnane and Patricia Roder – 11 August 2000
Embassy of Ireland: Earnan O Cleirigh (Programme Officer) –15 August 2000
UNICEF: Valerie Leech –15 August 2000
World Bank: Emmanuel Malangalila –16 August 2000
WHO: Dr Mohamed Amri – 17 August 2000
CIDA: Brian Prosconiate – 17 August 2000
GTZ: Dr. Goergen (Health and Population Sector Co-ordinator) –17 August 2000
KfW: Mr. Maltzan –17 August 2000
Netherlands Embassy: Theo van Banning – 17 August 2000
Local Government Reform Team: Mr Kabagire (Programme Manager) – 18 August
2000
UNFPA: Teferi Seyoum (UNFPA Representative) – 18 August 2000
DFID (UK): Paul Smithson (Health and Population Adviser) and Piet van Heesewijk
(Senior Governance Advisor) – 18 August 2000
61
UNICEF: Dr Bjorn Ljungqvist (Representative) – 22 August 2000
Ministry of Finance: Mr. Lyimo (Deputy Permanent Secretary) – 22 August 2000
Embassy of Japan: Ambassador and Mr. Kono (First Secretary) – 24 August 2000
Ministry of Health: Dr. Sam Nyaywa – 25 August 2000
Office of the Accountant General: Mr Mwanza (Assistant Accountant General) – 28
August 2000
Embassy of France: Councillor – 1 September 2000
WHO: Eileen Petit-Mshana – 6 September 2000
European Commission: Frans Ronholt – 7 September 2000
UNDP: Sally Fegan-Wyles (UN Resident Representative)
UNDP: Mia Baek
62