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Hashemite Kingdom of Jordan
Institutional Financial Management Capacity Assessment (IFMCA):
Education and Social Development Sectors
June 28, 2006
Document of the World Bank
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CURRENCY
Currency Unit = Jordanian Dinar (JD)
US$ 1 = JD 0.7089 (as of June 2006)
ACRONYMS AND SPECIAL TERMS
ATM Automated Teller Machine
CFAA Country Financial Accountability
Assessment
CPAR Country Procurement Assessment
Report
Diwan Headquarters
EDDS Education management software
Eduwave Education management Software
EFT Electronic Funds Transfer
EGRP Enterprise Government
Resource Planning
ERfKE Education Reform for Knowledge
Economy
FMIS Financial Management
Information System
FMS Financial Management System
GBD General Budget Directorate
GFMIS Government Financial
Management Information System
GFS-2001 Government Financial Statistics,
version 2001
GL General Ledger
HR Human Resources
IFMCA Institutional Financial Capacity
Assessment
IIA Institute of Internal Auditors
IMF International Monetary Fund
INTOSAI International Organization of
Supreme Audit Organizations
IT Information Technology
JD Jordanian Dinar
LAN Local Area Network
MAD Ministry of Administrative
Development Madressa School
MOE Ministry of Education
MOF Ministry of Finance
MOHE Ministry of Higher Education
MOPIC Ministry of Planning (and
International Cooperation)
MOSD Ministry of Social Development
MTEF Medium Term Expenditure
Framework
MTTF Medium term Fiscal
Framework
Muderiyya Province
NAF National Aid Fund PER Public Expenditure Review
PFM Public Financial Management
PSRP Public Sector Reform Program
RFP Request for Proposal
SAI Supreme Audit Institution
TSA Treasury Single Account
VFM Value for Money
WAN Wide Area Network
WB World Bank
Regional Vice-President:
Country Director
Director:
Manager, Financial Management:
Task Mission Leader
Christiaan Poortman
Joseph Saba
Hasan Tuluy
Samia Msadek
Pierre Messali
iii
Table of Contents
Table of Contents ......................................................................................................................... iii
List of Tables and Figures................................................................................................................v
Executive Summary ....................................................................................................................... vi
I Government - Wide Factors ..........................................................................................................1
1. Background .............................................................................................................................1
The National Agenda .............................................................................................................. 1
The Public Sector Reform Program ........................................................................................ 2
2. Institutional Structures ............................................................................................................2
Ministry of Finance ................................................................................................................. 2
Ministry of Planning and International Cooperation ............................................................. 4
Ministry of Administrative Development ................................................................................ 4
Civil Service Bureau ............................................................................................................... 4
Human Resources Policy Environment .................................................................................. 5
3. Financial Management ............................................................................................................5
Budget Planning...................................................................................................................... 5
Budget Execution .................................................................................................................... 6
Accounting & Reporting ......................................................................................................... 7
GFMIS..................................................................................................................................... 7
Internal Controls ..................................................................................................................... 8
Electronic Transactions ........................................................................................................ 10
Internal Audit ........................................................................................................................ 10
External Auditing .................................................................................................................. 12
4. Capacity Building ..................................................................................................................13
5. Recommendations for Government – Wide factors..............................................................15
II The Education Sector Capacity Assessment ..............................................................................17
1. Background ...........................................................................................................................17
MOE’s Ten year Strategy for Education .............................................................................. 18
National Agenda ................................................................................................................... 18
2. Institutional Structures ..........................................................................................................19
Ministry of Education ........................................................................................................... 19
3. Financial Management ..........................................................................................................21
MOE Financial Organization ............................................................................................... 21
Budget Formulation .............................................................................................................. 23
Budget Execution .................................................................................................................. 27
Accounting & Reporting .......................................................................................................27
Reporting............................................................................................................................... 29
Internal Controls ................................................................................................................... 29
Internal Audit ........................................................................................................................30
4. Capacity Building ..................................................................................................................32
5. Performance Indicators ..........................................................................................................34
6. Recommendations for the Ministry of Education ..................................................................35
iv
III. A The Social Development Sector Capacity Assessment .....................................................36
1. Background ...........................................................................................................................36
The Multi-Year Strategy ........................................................................................................ 36
2. Institutional Structures ...........................................................................................................37
Ministry of Social Development ............................................................................................ 37
3. Financial Management ..........................................................................................................40
Budget Formulation and Execution ...................................................................................... 40
Accounting & Reporting ....................................................................................................... 43
Internal Controls ................................................................................................................... 44
Internal and External Audit .................................................................................................. 45
4. Performance Indicators ..........................................................................................................46
5. Capacity Building ..................................................................................................................46
6. Recommendations for the Ministry of Social development .................................................47
III. B National Aid Fund.............................................................................................................49
1. Background ...........................................................................................................................49
2. Institutional Structure............................................................................................................49
3. Financial Management ..........................................................................................................51
NAF Program........................................................................................................................ 51
Budget Formulation and Execution ...................................................................................... 51
Accounting & Reporting ....................................................................................................... 53
Internal Controls ................................................................................................................... 55
Internal and External Audit .................................................................................................. 56
4. Capacity Building .................................................................................................................56
5. Recommendations for the National Aid Fund ......................................................................57
v
List of Tables and Figures Table 1. Selected Fiscal Parameters 2003-2010 (million JD) Table 2 Status of IMF/WB Reform Recommendations Affecting IFMCA Analysis Table 3 The Expenditure Control Process Table 4 Summary of MOF Financial Training Activities in 2005 Table 5 Key Data on Public Education in 2003/2004 Academic Year Table 6 Potential Sample Performance Measures and Indicators Table 7 Education Budget Performance 2003-2005 (JD Million) Table 8 Proposed New Program Structure Table 9 Ministry of Education: PEFA Performance Indicators Table 10 Social Development Budget Performance (JD Million) Table 11 Ministry of Social development: PEFA Performance Indicators Table 12 NAF 2006 Budget Request vs. Approved Figure 1 Ministry of Education Organization Figure 2 MOE Directorate of Financial Affairs Figure 3 MOE Audit, Inspection and Quality Assurance Figure 4 Organization of the Ministry for Social Development Figure 5 MOSD Financial Directorate Organization Figure 6. NAF Organization Structure
Box A Procurement control procedures Box B Steps to Implement Modern Internal Audit Box C Education Highlights Box D MOE Objectives to Support its Ten-Year Strategy Box E Social Security Fund Box F Housing Fund Box G Potential Financial Courses
Jordan IFMCA Executive Summary
vi
Executive Summary
The Government of Jordan has been actively engaged in improving its fiscal and public financial
management framework for over a decade. It has been assisted in this work by both the World
Bank and the IMF. The 1999 Public Sector Reform initiative had four components, two of which
directly affected financial management.1 The financial management reforms were aimed at, inter
alia, moving to a medium term expenditure framework, adopting a GFS-2001-compliant chart of
accounts for budgeting, accounting and reporting, adopting a Treasury Single Account,
eliminating the external auditor from the ex ante control process and implementing a
Government Financial Management Information System (GFMIS). Implementation remains a
challenge and the 2004 action plan issued by a joint WB-IMF team2 did not move as planned as
the readiness of the line ministries to move with the modernization reforms as well as their
capacity to introduce and manage the change are different.
The current Institutional Financial Management Capacity Assessment (IFMCA) selected two
sectors the Education and Social Development3 which are of importance to the Government of
Jordan. Both sectors feature prominently in the government’s recent National Agenda and the
Country Assistance Strategy (CAS). Both are being supported through a number of World Bank-
supported projects and Economic Sector Works (ESWs).
The IFMCA examined the ability of the MOE and MOSD4 to implement maintain and operate an
effective financial management system. The review gave special attention to the sector’s
financial staff, its processes of financial control and its supporting information as well as the
sector’s ability to successfully deliver its strategy and annual work programs. The review
identified gaps in the financial management system at the central and sector levels and assessed
the associated risks on the use of public funds and planned modernization reforms.
At the central level the report explains in Chapter I that, while the planned changes are laudable,
the government needs to put greater emphasis on their implementation. The Ministry of Finance
needs to be more proactive in its dealings with the ministries with respect to accelerating and
coordinating the implementation of such initiatives as: the new chart of accounts; the
introduction of performance budgeting; and the government-wide GFMIS. For these initiatives,
there are no identifiable, senior MOF managers who are driving the implementation process to
completion. Financial management capacity is low for financial officers and the budget
managers. This is even more important as the financial management reforms are progressively
implemented. Finally, there is a need for a modern internal audit function across the government.
The Ministry of Education is a leader in financial management reforms at the line ministry level.
It is pursuing automation of the education information and performance measurement systems at
the district and school level, assisted by donors. As well, it is a pilot ministry for the
government’s performance budgeting reform initiative. The ministry is well ahead of the
1 These were The Financial Management reform and the e-Government initiatives.
2 IMF/World Bank, Jordan: Consolidating Budget Management Reforms, July 2004
3 The mission did not analyze those NGOs operating in the Social sectors, and focused only on their financial
relations with the Ministry of Social Development or the National Aid Fund. 4 The IFMCA team examined the degree of coordination within the ministries and between the ministries and the
Ministries of Finance and Planning in their financial management processes, as well as their effectiveness
Jordan IFMCA Executive Summary
vii
complementary reforms that must take place within the General Budget Directorate for the
effective implementation of performance budgeting to begin. There are serious problems in
coordination of the design and the implementation of the ministry’s FMIS. There is no ministry
owner for the FMIS project, and the acquisition process does not appear to be following the
government’s own procurement rules.
A number of significant problems in financial management systems of the Ministry of Social
Development and the National Aid Fund5 were found which eroded accountability for
performance and sound internal control. The MOSD and NAF share regional offices, with some
ministry staff working full time on NAF administration. All regional directors are ministry staff,
whose costs are not apportioned to the NAF budget. This understates NAF field operating costs.
Regional management do not receive an approved budget, and must submit all requests for
commitment or payment directly to their respective headquarters financial units. This removes
any sense of their personal accountability for effective budget management. Financial processes
are weak; there are no initiatives to implement the GFS-2001-compliant charts of account; no
work is being done on preparing for a new FMIS; performance budgeting is non-existent; a
modern internal audit function is not in place and, as a result, major weaknesses in the
distribution of the NAF cash payments to eligible recipients have been undetected. The NAF
operations should be made more transparent to Parliament and the public by the publication of its
approved budget and its final budget report at year-end.
Recognizing the challenges that the different institutions are facing to move with the
implementation of the planned modernization reforms, the recommendations proposed in the
report, took into account the Government overall priorities and distinguished the reforms that can
be implemented in the short team and those that will take more time. The team however would
like to stress the importance of the following two recommendations:
1. The top three Government PFM reforms: (i) the budget management (results-oriented budget,
MTEF), (ii) the accounting-reporting system (new chart of accounts, reporting of commitments),
and (iii) the Government integrated financial management system (GFMIS); need a stronger
leadership of the Ministry of Finance and a greater collaboration with the MOPIC and the line-
ministries. It also requires a strategic approach to capacity strengthening of the financial staff in
the line-ministries or audit bodies with special attention to middle management team.
2. The government should approve a program of implementation of modern internal audit across
the government. The program would follow a multistage process. The Government should assign
formal responsibility to MOF for the functional direction, including professional training, of all
financial staff in government entities.
To respond to the skills upgrade needs the MOF’s should increase significantly its training
capacity, either in-house or through contracting out a portion of the program.
5 The operations of the Pension Fund were out of scope
Jordan IFMCA Government-Wide Factors
1
I Government - Wide Factors
1. Background
During the past decade, the Government of Jordan implemented a full-fledged adjustment
program with continuous support from the IMF and the World Bank. Economic growth during
the last few years of the 1990s was over 4 percent, despite adverse external political factors.
GDP growth reached almost 5 percent in 2002, and was around 7 percent in 2004. Jordan
graduated from the IMF program of support in July 2004. A World Bank report6 described
Jordan as a star performer among emerging countries in terms of its structural reform
achievements.
The National Agenda
In 2005, the Government issued a ten-year strategic plan, the National Agenda, which aimed to
“... improve the quality of life of Jordanians through the creation of income-generating
opportunities, the improvement of standards of living, and the guarantee of social welfare.” The
plan set ambitious macroeconomic performance targets, to be achieved during the coming
decade and clearly articulated performance measures to be used to monitor progress towards
their achievement. Table 1 displays the targets in the context of the country’s recent economic
performance.7
Table1. Selected Fiscal Parameters 2003-2010 (million JD)
Actual Est. Target
2003 2004 2005 2010
GDP 7,204 8,164 9,118 14,498
Total Revenue and Grants 2,613 2,959 3,062 3,929
Current Revenue 1,632 2,088 2,522 3,793
Tax Revenue 1,083 1,429 1,766 2,590
Non-tax revenue 548 659 756 1,203
Capital Revenue 44 60 40 0
Total Expenditure and Net Lending 2,710 3,113 3,479 4,235
Total Expenditure 2,710 3,113 3,479 4,235
Current Expenditure 2,064 2,310 2,848 3,065
Capital Expenditure 646 803 631 1,170
Lending minus Repayments 0 0 0 0
Primary surplus 73 7 -210 -82
Deficit / Surplus (excluding Grants) -1,035 -965 -917 -442
Debt 6,891 7,193 7,136 8,371
National Savings Rate (percent) 32% 24% 6% 19%
Unemployment Rate (percent) 14.5% 12.6% 14.7% n.a
Source: National Agenda,
6 World Bank, PAD for a Public Sector Reform Building Project, February 24,2005, page 1 7 Government of Jordan, National Agenda 2006-2015, p7.
Jordan IFMCA Government-Wide Factors
2
The first and third dimensions of the National Agenda are of greatest relevance to the Education
and Social Development Sectors. Specific measures directly supporting the two sectors identified
in these dimensions include8: increased and higher quality vocational training; employment
support; significant improvement in the quality of the education provided by the sector; higher
student participation rates; the establishment of a steady and predictable source of financing;
rationalization and simplification in administrative development; improvement in the
accountability of government; and increased transparency in government operations.9
The Public Sector Reform Program
Jordan launched a Public Sector Reform Initiative in 1999, with support from the World Bank
and bilateral donors. Phases I and II of the program had four tracks: public sector administrative
reform; an e-government initiative; judicial reform; and financial management reform. The
financial management and budget reforms involve restructuring the expenditure budget, moving
to a medium-term budgetary framework and modernizing financial management. The Bank-
financed Public Sector Reform Capacity Building Project continued prior donor support for the
reform by ensuring strategic staffing within administrative agencies and by providing them with
training and other capacity building support to implement the reform process. The project also
financed goods, equipment and technical assistance for central government agencies executing
the program
2. Institutional Structures
The IFMCA focuses on the ministries of Finance, Planning & International Cooperation, and
Administrative Development as well as the Civil Service Bureau.
Ministry of Finance
The Ministry of Finance is the main player in the budget reform process. A 2004 joint
IMF/World Bank report noted that the MOF faced institutional fragmentation and capacity
limitations in the budget management process.10
The MOF shares responsibility for the budget
process with a semi-autonomous General Budget Directorate (GBD) that is outside the MOF
organization but that reports directly to the Minister of Finance. In addition, the Ministry of
Planning and International Cooperation manages the donor-financed investment budgets in a
parallel process. The IMF/WB report made a number of recommendations that affect the
IFMCA; this report is the main assessment of the Jordan Public Financial management and the
IFMCA builds on its conclusions. Its recommendations are presented in Table 2.
8 Government of Jordan, op cit, p 4.
9 Ibid.
10 IMF/World Bank, Jordan: Consolidating Budget Management Reforms, July 2004, pp 10-21.
Jordan IFMCA Government-Wide Factors
3
Table 2: Status of IMF/WB Reform Recommendations Affecting IFMCA Analysis Recommendation Implementation
Timeframe Status as of Q1/2006
Establish 3-year, rolling MTTF and MTEF
2005
There are six task forces working on the completion planned for the 2007 budget. Risk of delay
MOF/ General Budget Directorate to adopt a Performance Framework for budget management monitoring
Q3/2005
No progress; no plans in General Budget Directorate to implement
Pilots to establish performance information expanded by GBD to new sectors
2005
Ministry of Education selected as a pilot is now developing a framework
General Budget Directorate to streamline and redefine budget programs to ensure clear and measurable links between program inputs, activities, outputs and outcomes
Continuous
No obvious progress
2005 Budget based on an updated functional and economic classification consistent with international practice
Q3/2004
GFS2001-compliant chart of accounts to be completed by June 2006 for implementation in the 2007 budget. Includes functional and geographic coding
Implement a Treasury Single Account
2005
The reform is almost completed. Most of Ministries accounts are in the TSA. At present, the treasury is centralized within a system of zero-balance accounts. The final stage will be the extension of the method to all other public entities holding public funds.
Explore feasibility - simplified General Ledger
Q3/2004
There is no treasury system to capture transactions for GL. It can only be compiled manually from monthly ministry reports; awaiting the GFMIS for the system
Introduce Simplified Commitment Controls
2005
A manual commitment report is prepared monthly by all budget entities and sent to MOF, which compiles a monthly report manually. Its reliability is uncertain.
Complete GFMIS conceptual design and functional specifications
2006
Consultants’ RFP for GFMIS completed in August 2005. Project stalled over short list of consultants; agreement recently reached and Cabinet RFP decision imminent. Target date will slip by 1-2 years
Phase out Audit Bureau’s ex ante control role
2005
Audit Bureau agrees with recommendation. Implementation to be phased in as internal audit capacity is established in MOF
Establish new regulations for Internal Audit
2006
Cabinet has approved the creation of a centralized internal audit group in MOF; necessary regulations in preparation.
Source: MOF Interviews
Accountability for the implementation of this package of reforms is diffuse and unclear. There
are multiple areas of responsibility, with no overall direction from the most senior levels of the
ministry.
MOF has a major role in the implementation of these financial reforms. Changes required
include the use of functional and program classifications that permit the linking of costs (inputs)
Jordan IFMCA Government-Wide Factors
4
with program outputs (performance information) and ultimately, measures of outcomes (the
achievement of the program objectives). This will require revisions to the expenditure
classification system and, over time, a move towards accrual accounting. It will also require the
implementation of a fully functioning GFMIS within MOF and ultimately in all ministries.
Finally, it will require major changes in the resource allocation processes to utilize program-
specific performance information as the basis for decision-making.
Ministry of Planning and International Cooperation
The government of Jordan has a unified budget insofar as the budget funding of current and
capital budgets is concerned. Both budgets are managed by the MOF. However, the Ministry of
Planning and International Cooperation manages a separate foreign-financed investment budget
and the government’s matching contributions to each project in accordance with the respective
project agreements.
The Bank-financed Education Reform for Knowledge Economy (ERfKE) project is a key project
of relevance to this analysis that is not managed by the MOPIC but has been delegated to the
Ministry of Education (MOE)11
.
Ministry of Administrative Development
The Ministry of Administrative Development administers the Cabinet-approved public sector
reform policy. This includes civil service reforms and financial reforms, among others. The
IFMCA mission was advised that the bulk of the reforms relating to financial administration
were the responsibility of MOF. Of particular importance are the steps necessary to implement a
results-based system of budgeting, with agreed indicators for specified outputs and outcomes.
The ministry has been allocated funds to start establishing reform units to support the public
sector reform agenda and act as agents of change in the larger ministries.12
Civil Service Bureau
The Civil Service Bureau is responsible for monitoring the implementation of the Civil Service
law and related regulations in government entities; establishing competitions for job vacancies in
close cooperation with entities requiring staff; managing the pool of surplus staff and making
recommendations to the Public Service Development Committee on transfers. It does not play a
role in the development of capacity of existing civil servants, although new requirements may be
reflected in job profiles for recruitment.
11
The MOPIC has delegated his signing authority to the MOE for the payment of the government’s matching
contributions from the MOP’s budget account for that purpose. This simplifies the previous process, in which the
payment and supporting documents were processed by MOE and then sent to the MOP, where they were again
submitted to the same review and approval process as MOE’s. A check then was issued payable to the Minister of
Education for an amount equal to the matching contribution, which was deposited with the central bank in the
appropriate account for the project. 12
Smaller ministries would follow; the team was also advised that there are no plans at present, for such reform
units in Governorates.
Jordan IFMCA Government-Wide Factors
5
Human Resources Policy Environment
The strategic Human Resources policy function does not have a single locus within the
government of Jordan. New policies can be proposed from a variety of sources for review and
approval by the newly created Public Service Development Committee, chaired by the deputy
Prime Minster. The mission was advised that, to date, no changes have been proposed for the
committee’s consideration. The mission considers that a single, accountable policy centre should
be established to provide a focal point for the considerable work necessary in developing future
HR policies and related processes and procedures.
The present HR policy environment makes it difficult to discharge employees for poor
performance. Additionally, there appear to be no formal policies or provisions for workforce
adjustments that could facilitate the reorganization of administrative entities. The mission
encountered regular comments by senior management about their inability to control levels of
employment and the resulting salary costs as part of the overall cost of the policies implemented.
This adversely affects the effectiveness of financial management of the current operating
budgets. However, of equal importance is the future impact of this policy on the implementation
of government-wide and ministry financial management information systems and the resulting
simplification of the associated work processes.
The mission believes that the government should consider establishing a policy group to develop
new policies for the government workforce of the future as described in its National Agenda.
Specifically, and within the terms of the mission’s mandate, the mission believes that the impact
of technology has the potential to significantly affect the existing processes for financial
management, including budgeting, accounting, asset management, auditing and reporting as well
as human resource and payroll management. As the government moves to implement its GFMIS,
major efficiency gains will become possible through the redesign of the financial and other
processes to take advantage of the more efficient GFMIS processes. Major training will be
necessary to ensure that staff can perform well in their new duties. As well, the training plan
should be complemented by a fair and transparent workforce adjustment policy for those unable
to retrain or whose positions are no longer required in the revised work processes.
3. Financial Management
Budget Planning
The National Agenda is taking advantage of the budget reforms already underway within MOF.
Amendments to the Financial management law have been recently adopted (2005). There is a
newly installed macro-fiscal unit within MOF that is entitled to produce its first multi-year fiscal
framework for the 2007-2009 budget periods, in time for the 2007 budget cycle. This will also
include a multi-year expenditure framework (for investment budgets only) for the same period.
The IMF/World Bank had recommended that the budget cycle be advanced by two months to
permit more time for budget preparation13
. This was not implemented in 2005, due to political
changes. If it were to be done for the 2007 budget, it would assist ministries to reflect their new
National Agenda-related initiatives in their 2007 budget submission. To support the National
13
IMF/World Bank, Jordan: Consolidating Budget Management Reforms, July 2004, p36
Jordan IFMCA Government-Wide Factors
6
Agenda, all proposed new initiatives are being required to be fully costed over a three-year
period and to be part of the Budget submission from each ministry. The General Budget Director
stated that his directorate will be examining the 2007 budget submissions to ensure that they
respond to the priorities established for their sector by the government’s National Agenda.
Results-oriented budgeting is a future objective of the government14
. The incorporation of
output-oriented budget planning would increase resource allocation efficiency and improve
targeting of budget resources. The Ministry of Education is a pilot ministry that is initiating
results-oriented (performance) budgeting in its 2007 submission (details are presented in Chapter
II). While this is a major undertaking within the ministry, the mission saw little evidence that the
General Budget Directorate was prepared to handle a pilot budget submission prepared on a
performance-based approach. Nor was there evidence of sustained communication between the
two budgeting organizations that one would expect during the early stages of pilot
implementation. It did not appear to the mission that the General Budget Division Director
considered himself to be the owner of this important budget reform.
In the first year of piloting of performance budgeting, the MOE’s plan is to use performance
information to prepare the budget, but to submit its budget to the General Budget Directorate in
the standard format. This will represent good progress in the pilot ministries. But if the General
Budget Directorate is not trained or prepared to assess the pilot budget performance
justifications, they will not be acquiring the knowledge to operate in a performance-based
budgeting environment when the pilot phase is over. The government cannot expect results when
a performance-based budgeting system is developed in the ministries and not in the General
Budget Directorate.
Budget Execution
Budget execution in the government reflects the weak macroeconomic framework15
and the
resulting uncertain budget ceiling for expenditures.
Discussions with line ministries confirmed the weak budgeting situation. Ministries noted that
MOF practices cash rationing16
, generally beginning in late November and continuing until the
new budget has been approved in late February or early March. For the current budgets, only the
non-salary component is frozen, a minor percentage of the total. However for the investment
budgets, a three-month suspension in project spending represents a major loss in efficiency in the
management of the project. Consistent cash rationing is symptomatic of poor fiscal forecasting of
revenues and expenditures. If the government wishes to improve resource allocation efficiency
and effectiveness, cash rationing should be discontinued as far as possible. This can be achieved
by improved accuracy in the fiscal framework, with better forecasts of next year revenues and
the budget expenditure ceilings. This should contribute to the elimination of cash rationing as a
result of unexpected fiscal “surprises” near year end.
14
IMF/World Bank, Jordan: Consolidating Budget Management Reforms, July 2004, pp 34-35, parag.C 15
IMF/World Bank, Jordan: Consolidating Budget Management Reforms, July 2004, pp 21-26 16
IMF/World Bank, Jordan: Consolidating Budget Management Reforms, July 2004, pp 44-45
Jordan IFMCA Government-Wide Factors
7
Central controls exist at a highly disaggregated level. Ministry programs are appropriated in
three main groups of line items – salaries (16 line items), operating and maintenance (14 line
items), and transfers (8 items). There is also a special category, Social and Economic
Transformation for financing specific government priorities. Transfers between salaries and
other groups are only permissible by Parliamentary approval. Transfers between line items
within a category are allowed, subject to the approval of the General Budget Directorate. There
is little flexibility afforded to line management to adjust their budgets to respond to changes in
budget execution circumstances.
Accounting & Reporting
Accounting
The government practices cash-based accounting and reporting for its budget operations. With
the implementation of a new chart of accounts, the capacity to progressively migrate towards
accrual accounting will be possible. The mission was informed that the GFMIS will be
completed in 2006, with full implementation across government to follow in time for the 2007
budget. The mission is of the view that this deadline cannot be met, and that a more realistic
target date for completion of implementation in the MOF would be in 2007, in time for the 2008
budget17
. The mission was advised that the MOF and MOE have met to agree the necessary
functional codes for education in the MOF chart of accounts; these serve as the basis for the
MOE’s development of the more detailed functional levels for use within the ministry.
GFMIS
The IMF-WB report has thoroughly analyzed the project of GFMIS in 2004 and assessed its high
related risk18
.
The MOF has recently established its requirements for a full-function Government Financial
Management Information System and is awaiting Cabinet approval before proceeding. The
intention is for this system, once installed in MOF, to be replicated in all 24 ministries and 60 –
70 major other entities. The mission was advised that, three years ago, the Minister of Finance
sent a letter to all ministries advising them that they must seek approval from the MOF before
initiating any work on an FMIS for their ministry.19
This was reinforced by a subsequent MOF
letter to all their Financial Controllers advising them not to approve any commitments for new
FMIS systems in their entities.
Despite this, the MOE and other ministries are in various stages of implementation of their own
FMIS. The mission was advised that one firm, ITG20
, has already installed its own Enterprise
Government Resource Planning (EGRP) system in at least two entities (Ministry of Tourism,
Ministry of Communications and Information Technology) and is currently working in the
17
IMF/World Bank, Jordan: Consolidating Budget Management Reforms, July 2004, pp 51-55 18
IMF/World Bank, Jordan: Consolidating Budget Management Reforms, July 2004, pp 50-55 19
This instruction was issued pursuant to Articles 46 and 48 of the Financial By-Law No 3,1994, as
amended 1995 and 2005. 20
Information Technology Group (Jordanian IT firm)
Jordan IFMCA Government-Wide Factors
8
Ministry of Education21
. The MOF staff is aware of this work, and is participating in assessments
of the Ministry of Tourism’s system. Discussions with one of these entities that have already
implemented the system indicated that serious shortcomings exist and are, to date, unresolved.
The mission is concerned about the lack of close and ongoing coordination on this important part
of the reform agenda22
. There has been a serious lack of communication among MOF, the
ministries that have already installed the ITG system, the MOE and other potential ministries
considering “going it alone” with their own financial management information systems. The lack
of knowledge on the part of MOF on the status of the EGRP system that is in place and being
marketed as meeting MOF requirements is not consistent with their role related to common
FMIS standards across the government. The mission did not assess how compatible these
different systems were but only noticed that no initiative to ensure such a crucial compliance was
ever taken. The present situation should be addressed rapidly.
Internal Controls
Budget execution controls are exercised by 74 MOF controllers present in all budget entities.
They follow a conventional pattern of rigid, centralized controls, with overlapping
responsibilities23
discharged by multiple agencies (Table 3 refers). Automation of the
expenditure control process is an excellent opportunity to change the budget control system.
Internal and external audit units should be phased out of this control process and assigned to
more sophisticated tasks of audit, each of them focused on the real objective of its type of
audit24
.
21
ITG has promised to install the network for free. 22
The cost of an IFMIS system is generally high and could reach several million of dollars depending on the
system’s architecture. 23
IMF/World Bank, Jordan: Consolidating Budget Management Reforms, July 2004, pp 55-61 24
IMF/World Bank, Jordan: Consolidating Budget Management Reforms, July 2004, pp 57-61
Jordan IFMCA Government-Wide Factors
9
Table 3 The Expenditure Control Process
No. Control Description Form used Performed By
Comment
1
The Finance manager forwards the directorate’s request to spend on a certain item to the disbursement controller who checks that sufficient budget is available and commits the amount.
Commitment sheet (from MOF)
Disbursement controller
Relevant
2
Once the item/service is received/delivered, the Supplies directorate checks the item/service against the offer and prepares delivery forms.
Delivery Forms
Supplies Directorate
Relevant
3
The invoice and all supporting documents are forwarded to the Finance directorate which checks the commitment against the expenditure, ensures the adequacy and completeness of the delivery forms, prepares and signs the payment voucher (signature according to defined authority limits)
Payment voucher
Finance Directorate (payment section)
Relevant
4
The payment voucher is forwarded to the Disbursement controller who checks it against the commitment made and signs the voucher.
Signed payment voucher
Disbursement Controller
Same that step 3
5
The internal auditor in the Finance Directorate performs an ex-ante compliance check regarding the availability of budget and the compliance with the financial by laws and the budget law. Then the auditor gives the voucher a number, posts it in the system, signs it and forwards it to the Internal Audit Unit.
Signed payment voucher
Internal auditor in Finance Directorate
Should be performed by the MOF controller (step 7).
6
The Internal Audit Unit performs an ex-ante compliance check regarding the availability of budget and the compliance with the financial by laws and the budget law. The Internal Audit unit stamps and signs the payment voucher and forwards it to the MOF controller.
Signed payment voucher
Internal Audit Unit at the ministry
Should be performed by the MOF controller (step 7). The internal auditor should be assigned to real tasks of internal audit.
7
The MOF controller
25 checks the accuracy of the payment
voucher against the Financial By laws, signs and stamps the payment voucher.
Signed payment voucher
MOF controller
Relevant
8
If necessary, the Audit Bureau also performs an ex-ante compliance check and stamps the payment voucher.
Signed payment voucher
Audit Bureau
Not necessary. Already done at step 7 by the MOF controller. The AB should be phased out of these tasks.
9
The signed and stamped payment voucher is sent to the Disbursement section in the Financial Directorate which prepares a check, records its number on the payment voucher and posts the checks in the system.
Signed payment voucher
Disbursement Section
Relevant
10
Another employee in the disbursement section reviews the daily print out of all the posted checks
Daily print out of checks
Disbursement Section
Could be merged with step 9
Source: Ministry of Education
As one component of the implementation of the new GFMIS, the existing financial control
system should be simplified on a high priority basis by the Ministry of Finance. Several
redundancies can be identified, at least five in the above table 3. The new processes should be
25
The MOF controller is currently a MOF’s agent. In the long run, he could become a Ministry’s agent and entitled
to play a more important internal control role.
Jordan IFMCA Government-Wide Factors
10
designed in cooperation with pilot and other ministries and the Audit Bureau26
. Because this
simplification may require changes to laws, regulations, practices and procedures, it should be
initiated at an early stage of the GFMIS process, before implementation begins in pilot
ministries. The changes should cover a full spending cycle including procurement controls.
Failure to do so could result in legal impediments to changes and a loss of the resulting
significant efficiencies that normally accompany the implementation of a fully computerized
financial management information system.
Box A Procurement control procedures
Much of ministries procurement is conducted on their behalf by centralized procurement authorities. For general
supplies valued at less than 20,000 JD, the General Department of Supply in MOF acquires the necessary supplies
from its inventory of supplies or through external procurement. For goods in excess of 20,000 JD, the MOF uses a
special procurement committee to oversee a tender on behalf of the government. Order fulfillment is well-structured.
Large quantities are sent directly from the supplier to ministry directorates according to a distribution list provided
by the ministry. A committee in each directorate examines the received goods and certifies the quantity and quality
of the order. After the individual entities have received the orders that were distributed from the directorate
facilities, then the ministry financial directorate makes the appropriate payment.
Procurement of equipment and works is also done by tender, again centralized by the Ministry of Public Works on
behalf of the ministry. Public tenders for purchase more than 20,000 JD are managed by this ministry. For
procurements below the threshold, the process is managed by the individual ministry concerned. Regular audits are
conducted by the ministry, by the MOF and the auditors of the Audit Bureau.
Electronic Transactions
The government currently permits the use of electronic funds transfer (EFT) and credit card
payments. However, these procedures are not integrated into the overall revenue collection
process. For example, the EFT procedures require the accountant to prepare a transaction receipt
for each electronic deposit advice form.27
The e-Government initiative is the responsibility of a
unit in the Ministry of Administrative reform. However, work is at the initial study and legal
drafting stages and little direct output is expected over the next two years. The Public Sector
Reform Administration unit responsible for e-government should nevertheless consult with MOF
as they develop their legal framework to ensure that MOF can assess its impact on simplification
of its internal control systems.
Internal Audit
Internal inspection units exist in all government entities. Generally, they exercise the ex ante
controls over the expenditure process with a lot of redundancies with the MOF controllers. In
limited instances, they have begun to extend their recommendations to cover the performance of
internal controls, a function performed by internal auditors.
26
The Audit bureau is in the process of phasing out these tasks related to internal audit (see below) 27
MOF, Application Instructions for Financial Affairs for Collection of Revenues by Means of Electronic Funds
Transfer No. 10 for the Year 2003, as Amended, article 5.
Jordan IFMCA Government-Wide Factors
11
There are no modern internal audit functions in the government of Jordan28
. As part of the
process of establishing the reallocation of audit functions between the Audit Bureau and the
government, the MOF should consider establishing a more formal internal audit process that
complies fully with international standards. The Institute of Internal Auditors, an independent
international organization, provides a full range of audit standards and processes.
Previous studies29
have identified an overlap in the functions performed by the external auditor
(Audit Bureau) and those of the government. In particular, the Audit Bureau has been sitting on
procurement committees for purchases of supplies, public works and engineering services.
Performing executive tasks is an inappropriate role for an external auditor as it violates the
principle of independence of any Supreme Audit institution. The government has agreed to
remedy the situation by implementing a new segregation of duties for the Audit Bureau. The
Bureau’s current internal audit function and the auditors will be gradually shifted to the MOF
and the remaining auditors will discharge external audit functions. Implementation will take
place over a number of years. When completed, the Audit Bureau will meet the INTOSAI
requirements relating to not performing functions belonging to the government30
.
A modern and effective internal audit function is a prerequisite for an effective functioning of a
public financial management system. It requires an underlying legislative base; clear
responsibilities vested in the Minister of Finance for the establishment of the policies, guidelines,
regulations and procedures governing internal audit; the use of international audit standards; and
the establishment of an internal audit function in all major budget entities. The need for such a
function will become urgent as the government implements its computerized budgeting and
financial control systems, as line budget managers will have to be advised of their compliance
with significantly revised financial processes that accompany the new financial system.
Introducing the function is a lengthy process, requiring technical assistance from experienced
internal auditing consultants to train auditors, to advise senior management on issues relating to
internal audit, and to assist in internal audit implementation in MOF and across all ministries.
The redeployment of Audit Bureau staff will be an opportunity to create a modern internal audit
function, first in MOF and ultimately in all budget entities. The Institute of Internal Auditors has
established internal audit standards for aspects such as planning audit assignments, audit
techniques, audit reporting, qualifications of internal auditors, and code of conduct for internal
auditors, etc. Their standards should be endorsed by the government and used in the
implementation of modern internal audit function across the government.
A suggested plan of implementation of internal audit is presented in Box B below. It is a multi-
year, progressive implementation plan for internal audit across all significant government
entities.
28
IMF/World Bank, Jordan: Consolidating Budget Management Reforms, July 2004, pp 56-57. 29
Ibid. , pp 57-59. 30
See INTOSAI standards. Convention of Lima. www.intosai.org
Jordan IFMCA Government-Wide Factors
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Box B Steps to Implement Modern Internal Audit
Amend financial law to assign responsibility for internal audit to the Minister of Finance and that
requires internal audit units to be established in all first line budget entities as specified by MOF in a phased implementation process.
The law would also empower the Minister of Finance to issue internal audit standards, guidelines, and manuals that conform to international standards for auditing to govern the planning, conduct, training, and reporting of all Government internal auditors and their professional development.
MOF would be given responsibility for developing auditor qualification and certification standards for providing training to international standards to be made available to all new and existing staff.
MOF would establish an internal audit quality assurance process and report to Cabinet annually on the implementation progress of internal audit and on overall conclusions of internal audits conducted across the system.
Engage a technical assistance mission for a period of at least 18 months to assist the MOF in the drafting of the legislative amendments to the financial law and to assist in the setting up and training of an internal audit unit within MOF with an audit operations and an audit policy mandate.
Use the TA to help in the preparation of internal audit courses and train the new MOF internal audit staff on internal audit standards, practices and procedures.
Progressively develop and issue internal audit guidelines, standards and auditing manuals for use by internal auditors from international standards and best practices
Undertake internal audits within the MOF to gain experience in internal auditing work. This activity should be overseen by an experienced internal auditor consultant who could provide on-the-job advice and assistance to the new auditors.
Develop a multi-year plan to implement internal audit units in all major budget entities, according to an implementation plan that considers the financial risk in each ministry, the degree of maturity of its existing inspector unit and the degree of management support for modern internal audit.
External Auditing
The Audit Bureau is the external auditor for all government entities. It is a mature Supreme
Audit Institution (SAI), established in 1928 and operating under the Law on Accounts Auditing
(1931) as amended in 1952. Its audit universe includes all budget entities, municipalities and
public enterprises. The Audit Bureau has audit offices in all ministries and major entities to
conduct ongoing audits of their operations. The audits conducted are compliance audits for the
financial regulations and attestation audits on the financial reports of the respective entities.
While there are some elements of performance auditing in these audits, performance audits are
not yet part of the mainstream activities of the Bureau31
.
The near term priorities of the Audit Bureau include: aligning the audit processes to support the
expression of a formal audit opinion on the government’s financial statements; enhanced training
and exposure to best practices through twinning arrangements with the UK National Audit
Organization and the German Court of Accounts32
; and auditing of the government’s
implementation of the National Agenda and the Public Sector Reform Program (PSRP). There
31
IMF/World Bank, Jordan: Consolidating Budget Management Reforms, July 2004, pp 57-61 32
The program of twinning has been implemented in 2006, financed by the EU.
Jordan IFMCA Government-Wide Factors
13
are also previously identified issues of independence (involvement in the internal processes of
government) which are being resolved.
The Audit Bureau identified a number of recurring problems in financial management
encountered during their audits of government entities. They include the following:
Budget development and execution: there is a lack of priorities in budget development,
the general budget is incomplete, the budget is unrelated to results, and contain no
detailed information on capital budgets;
Human Resource management: there is a shortage of qualified personnel due to
difficulties in attracting highly qualified staff and a lack of sound training of existing
staff; the human resource management framework is rigid;
Information technology: there is limited exchange of information across vertical,
stovepipe systems, and a lack of integrated financial management information systems;
and
Transparency: published government data is not in compliance with international
standards (such as the IMF Special Data Dissemination Standards).
4. Capacity Building
The government does not have a formal training program designed to establish and maintain the
professional competence of its existing employees. This was identified by the Audit Bureau as
well as the Civil Service Bureau. There are notable exceptions; MOE provided external training
for 852 of its teachers in 2004, 87 percent of the total external training provided across
government.33
But the situation as regard to financial staffs of the technical ministries is different. Financial
training is very limited. The MOF advised the mission that they have training capacity available
to train ministry financial staff in specialized financial management subjects. They regularly run
training courses for their staff and for a limited number of ministry financial staff, at no cost to
the ministries. They are outfitting part of a building for use as a financial training facility, with
French government assistance. Table 4 provides details of recent training activities by MOF;
note the limited participation of the two sector ministries under study by the IFMCA team. In
2005, the training was mainly (93 percent) used by MOF staff.
33
Civil Service Bureau, 2004 Annual Report, P 55.
Jordan IFMCA Government-Wide Factors
14
Table 4 Summary of MOF Financial Training Activities in 2005
Source: MOF
There is an urgent need for a major training initiative for the financial officers in ministries and
agencies. With the number of significant changes currently being implemented (Chart of
Accounts, TSA, MTEF, GFMIS, performance budgeting), all aspects of the work of the financial
officers across government will be significantly changed in the long run. Notably:
budget preparation will be affected by the new budget preparation module in the FMIS,
as well as the use of performance information in cost justification for new budget
initiatives;
budget execution processes will be radically simplified, eliminating the multiple,
duplicative ex ante approval processes, eliminating the flow of documentation and
permitting electronic authorizations.
the closing of the final accounts will be automated and management reports will be
available at any time in any desired format.
internal auditors will require significant training in order to adopt the modern,
international auditing standards of internal audit in their audit activities.
management will have to accept responsibility for their organization’s financial and
program performance and learn to manage in a results-based environment of increased
transparency and accountability.
The Ministry of Finance is normally entitled to establish and administer a formal training
program for all financial officers in government. It should include: the inventorying of the
existing qualifications of all financial officers in government; the establishment of the future
requirements of each financial job in the light of current and planned reforms; the identification
of the courses required to provide the necessary expertise to meet the requirements of the new
financial jobs; the scheduling of training courses; and the ongoing administration and the
delivery of the training. The Ministry of planning should also consider facilitating the process in
improving the coordination between the MOF and the line-ministries, in particular the ministries,
pilots of the reforms in the area of capital expenditures.
34
NAF staffs are trained through other training institutions than MOF (see chapter 3).
Number of Training Classes
Number of Students Sessions
MOF staff training Sessions
MOE staff Training Sessions
MOSD & NAF Staff Training Sessions
Other Training Sessions
87
1121
1040
0
034
81
Jordan IFMCA Government-Wide Factors
15
5. Recommendations for Government – Wide factors
Short-term
1. The MOF should designate a senior executive within the ministry with responsibility for ensuring the
implementation of the agreed IMF/WB reforms, and grant this person the necessary authority to
discharge his responsibilities
2. The Minister of Finance should revise the budget process to start two months earlier.
3. MOF should designate a senior executive within the Ministry with responsibility and accountability
for resolving the current situation regarding FMIS and for ensuring a common set of standards to
govern the implementation of these key components of the financial management system.
4. The MOF should decide whether or not it wishes to enforce its previous ban on all ministry-level
FMIS development.
If so, it should re-issue the Minister’s previous prohibition on all new FMIS development and
closely monitor to ensure compliance.
If it decides not to enforce its earlier position, then it should actively engage other ministries that
are proceeding with their own FMIS development to ensure that these systems meet MOF
architectural and functional requirements. In particular, it should closely examine the ITG system
already in place in two ministries and ensure that it meets the MOF functional requirements.
If these architectural and functional requirements have not been prepared, the MOF should compile
them and issue them on a high priority basis.
5. The MOF should ensure that meetings are held with all ministries that are implementing changes to
the charts of account to ensure their compatibility with the central chart of accounts as they develop
detailed functional sub categories.
Medium term 6. A single, accountable policy centre should be established to provide a focal point for the considerable
work necessary in developing the government’s human resource policies, processes and procedures
and in ensuring with their implementation across the government.
7. The government should establish now a general policy on workforce adjustment that would enable
realization of the future benefits of automation while protecting the interests of its workforce.
8. The General Budget Director should be clearly designated by the Minister of Finance as the “owner”
of the performance-based budgeting reform initiative and should be held accountable for its
successful piloting and subsequent implementation across all budget entities.
9. The General Budget Directorate should make greater efforts to prepare itself for receiving and
analyzing the pilot performance-based budgets by ensuring that its relevant staff are trained in the
principles of performance budgets and by initiating and maintaining a continuous dialogue with the
pilot ministries on their progress. The creation of a sectoral team of experts at the GBD, in order to
improve the pilot-performance based budget should be established to complement the work underway
in MOE.
Jordan IFMCA Government-Wide Factors
16
10. The MOF should eliminate as far as possible the practice of year end cash rationing through
improvements to the revenue and expenditure forecasting in its 2007 – 2009 fiscal and expenditure
frameworks.
11. The Ministry of Finance should begin to simplifying the budget control processes by identifying
and changing the legal basis for these controls to take advantage of the efficiency gains possible from
implementation of the GFMIS government-wide.
12. The Government should prepare and implement a plan to create modern internal audit units, based
on international standards, across all ministries and other major entities in the government.
13. The Ministry of Finance should finance, establish and administer a formal, comprehensive training
program for all financial officers in government as computerization of financial management
processes continues. The Ministry of Planning should support the MOF in training relating to the
preparation and the management of the capital budget.
Long-term
14. The Ministry of Administrative Development should consult quarterly with MOF as it develops its e-
government legal framework, in order that MOF may anticipate future simplification of its control
processes for greater control efficiency.
Jordan IFMCA Education Sector
17
II. The Education Sector Capacity Assessment
1. Background
The responsibilities of the Minister of Education and Higher education and Scientific research
include public education, universities and scientific research and development, but these two
latter sectors are actually under the responsibility of a dedicated Ministry35
. All play important
roles in supporting the government’s objective of transforming Jordan into a knowledge-based
economy. This report is about the Ministry of Education and refers exclusively to the primary
and secondary public education system; it excludes universities, given the specificities of this
sector36
, and private and donor funded primary and secondary educational facilities, that follow a
different financial management system.
The education system in Jordan is a
major component of government
activity. Table 5 provides a summary
of the students and schools in the
Jordanian education system. The
MOE and the Government realized
that a longer term strategy would be
necessary to ensure that the system
was as efficient and effective as
possible. This resulted in the ten-
year strategy for education.
Source: MOE
Table 5 Key Data on Public Education in 2004/2005 Academic Year
Level Students
Teachers Full time
Schools
Pre-school (based on 2004/2005 data)
1,347,919 62,711 4,119
Secondary (all, grades 10-11-12) (based on 2004/2005 data)
183,412 15,587 1,229
Source: MOF Budget Law; and other data from MOE
35
Ministry of Higher education and Scientific research. 36
The drafting of a Bank’s report on this sector is on-going in 2006.
Box C Education Highlights
by 2012, the school-age population will increase from
1.5 million to nearly 2.0 million;
approximately 91 percent of the population over age 15
is able to read and write;
12 years of basic and high school education are free; the
10-year basic cycle is mandatory;
MOE basic cycle schools serve 74 percent of students;
private sector covers 15 percent and the balance is
managed by UNRWA or others;
85 percent of secondary schools are MOE provided;
MOE’s budget accounted for 13.5 percent of total
government expenditures in 2003.
Jordan IFMCA Education Sector
18
MOE’s Ten year Strategy for Education
The MOE has developed a 10-year strategy for education.37
It recognizes that improvement in
the quality of education must be financially sustainable. New investments are also required in
schools, classrooms and equipment. This will require improved efficiency in resource allocations
and greater effectiveness of these expenditures. This means, inter alia, the minimization of
administrative overhead to ensure maximum funds for classroom instruction. Reforms will occur
through internal improvements and potential partnerships with NGOs, communities and the
private sector and school restructuring. Box C illustrates how the MOE will achieve these
objectives.
Source: MOE
For the purposes of the IFMCA, the objectives for the reduction of current expenditures,
increasing the efficiency of spending and the use of performance information to improve
effectiveness are the most relevant areas.
National Agenda
These activities link well with the education components of the National Agenda. It recognized
that decentralization of administration and curriculum reforms were important to the system.
Increased enrollment in selected areas, improvements in teaching quality and more attention to
vocational education are also addressed. For the purposes of the IFMCA, the relevant
components are the decentralization of decision-making authority, improved sector monitoring
and evaluation and enhancing expenditure efficiency. Taken together, the strategic plan and the
National agenda set the road ahead for MOE and its reform plans.
37
PriceWaterhouseCoopers, Strategic Outcomes and Impact , Final Draft Report, March 2005
Box D MOE Objectives to Support its Ten-Year Strategy
Focus on reducing current expenditures.
Set priorities for expenditures that contribute most to achieving the reform goals and objectives.
Compute total costs of operation* of all existing and proposed reforms and apply them to
decisions on selection of projects.
Use agreed performance indicators to formally track and review project progress and use in future
resource allocation decisions.
Focus on educational delivery, support, and management systems that are high quality, cost
efficient, sustainable, and effective, using technology where it provides these gains
Explore sharing educational system costs with other beneficiaries.
_____________________________________________________ * Total Cost of Operations includes purchase, maintenance, depreciation, operating and support costs
Jordan IFMCA Education Sector
19
2. Institutional Structures
Ministry of Education
The MOE organization chart is shown in Figure 1. The operational directorates reporting to the
Secretary General for Educational and Technical Affairs represent all of the headquarters policy
and procedural functions associated in particular with the development of the education
curriculum, teacher certification, research and development, examinations, education and student
affairs, and IT. The administrative and financial directorates reporting to the Secretary General
of Administrative & Finance Affairs represent all of the support functions for the ministry. The
36 district directorates and their schools deliver education services to the students.
For financial management aspects, the directorates of greatest interest include: Planning,
Finance affairs, Information technology, Buildings & international projects, and Audit,
inspection & quality assurance.
The Directorate of education planning is responsible for the process of preparation of the annual
budget of the MOE and the preparation of the current and the budget-financed components of the
investment budget. It is also responsible for the major budget reforms in the area of performance
measurement and performance-based budgeting that are being implemented by the ministry in its
role as a pilot ministry for these reforms.
The Directorate of financial affairs is composed of three units. The accounts department is
responsible for all payments made by the ministry and manages the ministry’s budget execution
through a manual control process. The Housing Fund department manages an optional fund for
housing assistance to teachers after retirement; and the Social Security Fund department
administers a mandatory contributory pension fund for all teaching staff.
The Directorate of information technology is responsible for the rapid computerization of the
schools and the curriculum through a dedicated software named Eduwave, the provision of
timely and accurate education management information through the Education Management
Information System (now Education Decision Support System, EDDS) and the automation of the
financial, human and other resources through an integrated resource management system.
The Directorate of building and international projects is responsible for the management and
administration of all donor-financed ERfKE project in the educational sector. It is a ring-fenced
operation, which extends to the independent processing and approval of all invoices related to
these projects.
The Directorate of Audit, Inspection and Quality Assurance performs two major functions –
internal audit and quality assurance. Audits of financial transactions, supplies, administrative
compliance, engineering works and audit of complaints are part of the audit responsibilities. The
quality assurance activities look at the quality of items procured or constructed for compliance
with the original suppliers’ specifications in headquarters and the districts and formulates
remedial action plans where deficiencies are detected.
Jordan IFMCA Education Sector
20
Figure 1 Ministry of Education Organization
Minister
Planning
Committee
Education
Council
Office of the
Minister
National Education Science & Culture
Secretariat
Audit, Inspection And Quality
Assurance
SG Education & Technical Affairs SG Administration & Finance
Directorate of education
activities
Directorate of general
education & student affairs
Directorate of Vocational
Education & Production
Directorate of research and
development
Directorate of curriculum
Directorate of information
technology
Directorate of training and
education supervision
Examinations directorate
Secretary General
Office
Directorate of employee affairs
Directorate of supplies
Directorate of education planning
Directorate of financial affairs
Directorate of legal affairs
Directorate of building and
international projects
Directorate of education
and international relations
Head of general
division
Secretary General Office
Head of media and
public relations
36 District
Directorates
Jordan IFMCA Education Sector
21
3. Financial Management
Jordan faces several financial-related challenges in improving the learning environment: the
scarcity of available sites and high cost of land in urban areas; the large budget cuts over the past
several years in civil works for general education; the need to use a greater share of the capital
budget for equipment; past decisions regarding school construction that have resulted in close to
70 percent of MOE small schools enrolling only 400 students (or less); and an ad hoc and under-
funded school maintenance program. Financial planning for the future facilities will also have to
take into account the natural population growth, which will cause an increase of approximately
30 percent in the number of students by 2012. 38
MOE Financial Organization
MOE’s financial responsibilities are shared by a number of directorates, mainly three of them.
The Directorate of education planning is responsible for the budget preparation function, as well
as the reforms currently underway to pilot a performance-based budgeting process. The
Directorate of building and International Projects includes financial affairs unit that performs the
accounting and payment authorization functions for the ERfKE project. Finally, the Directorate
of financial affairs, which includes 44 persons, performs all budget accounting functions,
including payment authorization within the Accounts department. This Directorate also has two
other departments responsible for the Housing Fund and the Social Security Fund for teachers.
Figure 2 refers.
Figure 2 MOE Directorate of Financial Affairs
38
Source: National Education Strategy, op cit, p. 11.
Jordan IFMCA Education Sector
22
There are two teacher funds that are administered separately from ministry operations. These
include the Teachers’ Social Security Fund and the Teachers’ Housing fund. Both administer
contributions from teachers and keep the contribution in commercial bank accounts, outside of
the TSA. The Social Security Fund also administers MOE contributions. Boxes D and E describe
the principal characteristics of each of these funds.
Accounts
department
Housing fund
department
Social security fund
department
Disbursements division
Internal audit Division
Vouchers & fund division
Prepayment & deposits division
Loans & subscriptions
sivision
Engineering Division
Compensation & subscriptions
division
Investment division
Disbursement control division
Directorate of
Financial affairs
Jordan IFMCA Education Sector
23
Source: MOE Source: MOE
In the 36 districts a 5-6 person financial unit in the education muderiyya provides a range of
financial services to the schools and the district. There is approximately 200 staff in all these
financial units in the 36 districts. The district receives a financial advance that is drawn down for
small expenditures. An accountant prepares all documents and comes to MOE headquarters to a
designated authorizing officer where all transactions are entered into the system and payment
vouchers are signed.
Budget Formulation
Traditional Budget Process
The budget preparation cycle as promulgated by the MOF has not changed. MOF continues to
send out the budget circular in late June, without priorities. It sets annual global ceilings for the
ministry’s current and investment budgets. The Directorate of education planning at the MOE
forwards the budget circular to all directorates and the 36 districts, without target ceilings or
ministry priorities. Salaries, wages and benefits account for the vast majority (90 percent) of the
current budget total and are managed centrally by the HR department. Individual directorates
and districts prepare their (primarily investment) budget proposals, which are then referred to the
appropriate technical directorate for review and challenge. The resulting budgets are
Box E
Social Security Fund Contributions: Mandatory
51/2 % from all staff;
11 % from MOE budget
Eligibility
Staff working before 1995 covered by MOF budgetary payment;
Since 1995, all staff covered by Social Security
Payment
lump sum, tax free
1 month of salary for 1-15 years +150 JD / additional year
Governance
Board of Directors 7 members – no independent board members
External audited financial statements Sent to Director General and Minister
Statements not sent to members
Box F
Housing Fund
Contributions: Voluntary
18% participation rate
5% monthly contribution
Eligibility
Contributors wait about 25 years to get housing loan, based on:
- # years of contribution (60%) - # years in MOE (40%) Payment
Loans up to 20K JD, 18 years interest free
Contributions + interest returned; teachers can borrow the difference between the 20,000 JD and contributions
Governance
Board of Directors 7 members – no independent board members; Board approves each payment
External audited financial statements Sent to Director General and Minister
Statements not sent to members
Jordan IFMCA Education Sector
24
consolidated and reviewed by a high-level budget committee consisting of the Secretaries-
General and the Minister before the budgets are sent to MOF. Both budgets are negotiated with
MOF and MOE staff to obtain an agreed final budget proposal. There is little discretion at the
district of Governorate level for the current budgets.
The Performance-based Budget Pilot
The MOE is a pilot ministry for the implementation of results-based budgeting. Good progress is
being made in the design of this process and in implementation. The Directorate of education
planning, assisted by consultants, has:
revised the ministry program structure to focus on the outputs of the budget.
displayed both governorates and districts in the program activity structure. This supports
decentralization when the government decides to proceed with the education sector.
revised its chart of accounts to include the functional and geographic classifications for the
operations of the ministry and its districts and schools.39
MOE has confirmed with MOF the
level of functional classification for education that will be in the revised GFS 2001-compliant
chart of accounts.
The ministry is in the process of developing a set of strategic program objectives and specific
objectives, coupled with quantified performance indicators for all directorates. The intention is to
use the information internally to analyze next year’s budget requirements and prepare the budget
within the ministry on this program results basis. Table 6 refers. The intent is to track these key
performance indicators and set annual or multi-year targets for each (e.g. reduce repetition rates
from X% to Y% in 2007)
39
The consultants, Pricewaterhousecoopers, noted that there was a reasonable alignment between the programs and
the functions, although the programs did not always have budget responsibility for all spending in the function.
Proper alignment is required.
Jordan IFMCA Education Sector
25
Table 6 Potential Sample Performance Measures and Indicators Measure Description of Key Performance Indicator Education Effectiveness
Measurable increases in learning outcomes for students Reductions in repetition rates Higher proportion of students going on to higher education Reduced adult illiteracy
Equity in Education
Limited variations in achievement between genders, ethnic, social groups and districts
Program Efficiency
Outcomes achieved and increased efficiency in sustainable future operations
Management Efficiency
MOE to keep educations share of public spending at just under 14 %. Increasing the proportion of education funds being spent on direct education School management decisions are to be delegated to the lowest possible level, including hiring of staff and reallocations of budgetary funds
Source: MOE
To accompany this results-based budget structure, an enhanced process has been
recommended.40
The recommendation consists of a multi-year budget planning process,
beginning with an examination of the existing strategic priorities and the preparation of a
strategic outlook paper. The paper would contain the proposed budget priorities, levels of
expenditures and relevant targets for all programs for the upcoming budget year (FY07) and the
two out-years. The MOE would finalize the priorities when the MOF annual budget circular has
been received with the budget targets. MOE would then send their budget circular that would
contain details of expenditure ceilings and performance indicator targets for the upcoming
budget year to all budget entities. This recommendation is being reviewed by senior
management. This program is supported by the Bank since 2005 as part of the PER follow-up.
This represents a major cultural change for all MOE staff. It will require a significant amount of
training in all aspects of the new budget process and its performance-based foundations. The
transition will take several years to be completed, initially in MOE and subsequently in MOF,
although this is the opposite of what one would expect from a central agency that is supporting
budgetary reform. Ironically, unless the present level of commitment by the GBD to support
results-based budgeting is significantly increased, the MOE will have no one with whom to
negotiate its new performance-based budgets and the entire initiative may not be sustainable in
the future unless the GBD gets more involved in this new procedure. In such a case, the ministry
40
Pricewaterhousecoopers, Budget and Planning Systems, July 2004
Jordan IFMCA Education Sector
26
of Planning may consider playing a more active role in facilitating the dialogue between the
GBD and the MOE.
Budget Preparation Performance
One measure of budget preparation system effectiveness is the ability of ministries to obtain the
funds requested for their current and investment budgets. Because MOP separately manages the
donor-financed component of the investment budget, this measure is less comprehensive.
However, it still is indicative of how well the process functions. Table 7 refers.
Table 7 Education Budget Performance 2003-2005 (JD Million)
Source: Ministry of Education
*Social and Economic Transformation Project
The ministry has a good track record in preparation of budgets that are acceptable by the General
Budget Directorate. Current budget variance has been less than 5 percent in the period 2003-
2005. However, this high rate of approval of the current budget also reflects the invariance of the
salaries and benefits component, which accounts for approximately 90 percent of the current
total. The capital budget success rate was less important and highly variable, ranging from 55 to
29 percent variance. These capital expenditures are the budget-financed component; the ERfKE
donor program provides substantial financing in addition to this budget allocation. The capital
amounts provided by MOF are consistent with other capital approvals and do not appear to be
unreasonable. The temporary budgets relate to financing under the Social and Economic
Transformation Project, whose variance was the widest ranging of all categories. The mission
concluded that the SETP budget decision-making was made centrally, with little influence from
the executing ministry.
Current Capital SETP* Total
2003
Budget requested (R) 287.7 26.8 24.5 339.0
Budget Approved (A) 273.4 12.2 20.2 305.8
Budget Utilized (U) 270.4 8.9 18.3 297.6
Variance (R-A)/ R 4.9 % 54.4 % 17.5 % 9.7 %
Variance (A-U)/ A 1.0 % 27.0 % 9.4 % 2.6 %
2004
Budget requested (R) 300.2 21.5 13.3 335.0
Budget Approved (A) 290.1 14.0 28.5 332.6
Budget Utilized (U) 284.0 12.8 17.3 314.1
Variance (R-A)/ R 3.3 % 34.8 % -114.2% 0.7 %
Variance (A-U)/ A 2.1 % 8.5 % 39.2 % 5.5 %
2005
Budget requested (R) 312.0 18.0 8.0 338.0
Budget Approved (A) 307.0 12.8 22.4 342.2
Budget Utilized (U) 317.5 12.1 17.1 346.7
Variance (R-A)/ R 1.6 % 28.8 % -180.0 % - 1.2 %
Variance (A-U)/ A - 3.4 % 5.4 % 23.6 % - 1.3 %
Jordan IFMCA Education Sector
27
As regard to the budget utilized variance, the track record also is acceptable, in particular for the
capital expenditures which ranges from 5 to 27 percent variance.
Budget Execution
The budget execution process follows the same process as described in the government-wide
factors chapter (Table 3). The mission noted the duplicative nature of the process, with at least
five overlaps between sequential steps in the process. Two comments can be made: the presence
of multiple, repetitive steps tends to relieve each individual of his responsibility and
accountability for successfully discharging his task; the large number of steps generates delays in
the payment processing process, which could affect the suppliers prices for provision of goods
and services to the government41
Accounting & Reporting
Accounting
All accounts are now in the TSA except the Social Pension Fund and the Teachers Housing
Fund. The ministry is undertaking major changes to its program structures and its chart of
accounts. Table 8 provides the details of the proposed program structure currently under
development within the ministry. It is a pure, output-based structure that replaces a previous
output and input program configuration. This will be reflected in the accounting system when
full implementation is approved. Until that time, the Directorate of education planning will
prepare the 2006 budget internally on this revised structure and cross-walk the final budget
proposal to the old structure for submission to MOF.
Table 8 Proposed New Program Structure
New structure Existing Structure Administration and Supportive Services Administration Kindergarten Education General Education Basic Education Vocational Secondary Education Adult Literacy Vocational Education Sports Activities Special Education Rehabilitation/training Adult Education and Removal of Illiteracy Examinations Educational Activities organized by MOE Media and Textbooks Special Education
Source: MOE and Pricewaterhousecoopers, Project A Report, page 2.
The MOE advised the IFMCA mission that their revisions to its chart of accounts to include the
functional and geographical classifications will be compatible with the MOF changes to its chart
to bring it into conformance with the GFS 2001 requirements. MOF confirmed this to be the
case.
The existing cash-based accounting policy will remain in effect. The mission observed that, as
the use of performance information is further developed to include financial costing and the
related performance financial ratios, the ministry should plan for a future, multi-year phased
41
That should be confirmed on a sampling analysis.
Jordan IFMCA Education Sector
28
migration to accrual-based accounting. This would ensure that the costs used would reflect the
full costs, including the costs of physical assets. It is a long-term reform.
Financial Management Information Systems
The MOE’s information technology is a confusion of 32 multiple, ageing legacy stovepipe
systems, combined with manual reporting processes. The financial and resource management
systems are partially automated (budget preparation, payroll) and manual (budget execution
controls, audit). The ministry is proactively moving to automate all of its core functions,
including education planning, delivery and management processes, and to implement a
complementary initiative for an integrated resource management system. This latter system was
the principal focus of the mission.
There is considerable confusion surrounding the IFMIS. The process appears to be out of
sequence. Deadlines are being discussed, in the absence of an implementation plan or an
approved supplier. The ministry has not prepared its statement of requirements for such a system,
and there does not appear to be a senior management “owner” of the reform. Staff within the
ministry considers the IT directorate as the owner of this and other automated systems. The
IFMCA team is concerned, as the success of any large computer-based project such as a financial
management information system is heavily dependent on user ownership of the project and its
implementation.
Additionally, there has been little consultation between the ministry and the MOF on the
development of its FMIS. In fact, the Minister of Finance had written two years ago to all of his
cabinet colleagues prohibiting the development of any ministry FMIS without his approval;
MOF advised the mission that MOE did not seek the Minister of Finance’s approval and no such
approval was given. The mission believes that the MOE should resolve this situation before
proceeding further with its FMIS project.
If approval to proceed is obtained, the MOE project manager should closely engage the MOF
personnel at two levels - managerial and technical. The managerial consultation is necessary to
ensure that the functionality of the MOE system is compatible with the one of the MOF system.
Technically, the MOE and MOF should ensure that the maximum commonality between the
architectures, data designs and hardware/software is achieved to minimize the capital and
operating costs of implementing FMIS in all major government entities. This consultation should
be formal and regular, with decisions taken communicated to all parties in both ministries.
The IFMCA mission also noted that a supplier was interviewing various ministry directorates in
order to acquire their user needs and to develop a statement of requirements.42
This supplier is
ITG, the same company that is responsible for the design and implementation of the ministry’s
Eduwave and EDDS43
softwares. Given that the supplier could be considered to be a future
42
The team was advised that ITG has promised to install their GRDS system for “free”. The Ministry has paid US$
million 2,3 for EDDS. Quite apart from the procurement concerns, the MOE should negotiate with any systems
supplier for the future costs of ongoing maintenance and technical support, upgrades etc and ensure that they are
expressed in a legal contract. 43
Education decision support system.
Jordan IFMCA Education Sector
29
bidder for the provision of an FMIS for MOE, that will be linked to the system of the MOE, this
activity may represent a case of conflict of interest.
Once the situation has been normalized, the MOE should follow the well-established process for
preparation of a competitive tender for any system and implement it in a transparent manner
according to international procurement standards. Once a successful bidder has been selected, the
ministry should formally contract with the supplier for the implementation of the system, based
on a well-developed and fully costed work plan. The responsible project manager should monitor
and manage the implementation to ensure that the project is implemented on time and within
budget. The contract should also make explicit the services and costs that would be provided by
the supplier for ongoing maintenance of the system, as well as the basis for making upgrades and
other client-requested improvements.
Reporting
The overall reporting of the MOE follows the procedure described in chapter one (Government –
Wide factors). Thus, the MOE produces monthly reports of the commitments and the payments.
The reporting is semi-automated44
. Given the means used for this process, the team assesses this
reporting as acceptable even though the reliability of the commitments reports is still
questionable and the timeliness of the monthly reports could be improved. To this regard, the
GFMIS will make possible the full accounting and reporting of the commitments. Nevertheless,
the reporting of the MOE is largely above the average of other ministries, in particular for the
accuracy of the reporting of the payments.
The mission has concerns about the transparency of the two extra-budgetary teachers’ funds. It
was advised that the MOE understates the administration costs of the Social Security or the
Pension funds as it does not charge the funds for the operating costs of the two directorates that
administer them. As well, the funds do not operate transparently, as the annual financial
statements of the funds are not provided to all contributors. The study did not consider the
appropriateness of such funds, assuming that their existing legal framework accurately reflects
the government’s policy for additional compensation for its teaching staff. However, in terms of
governance of the fund, a more complete and accurate disclosure is necessary to meet minimum
standards. Also, the financial statements should be distributed regularly to all fund participants to
promote greater accountability for and transparency of their performance.
Internal Controls
Budget Controls
Regular budget controls are carried out in the ministry according to the government-wide
processes. As in all other ministries, the budget execution system has overlapping and
duplicative controls exercised by the Audit Bureau, MOE staff and MOF Controllers. The
observations made in the government-wide chapter are equally applicable for the Ministry of
Education.
44
In most ministries, the reporting is manual.
Jordan IFMCA Education Sector
30
Payroll Controls
The controls over payroll are in principle sound and complete. The tools utilized should allow a
secure set of controls as follows:
Payroll is centralized at MOE headquarters, administered by the payroll department at the
Directorate of employees affairs - HR (see chart - figure 1).
All increases in staff levels proposed in the annual budget process are closely reviewed
by the technical directorates for validity and by the HR directorate for staffing.
The resulting increases in staff, if approved in the budget process, are used to update the
ministry’s manning table.
There are standard salaries for each level of civil servant, set by MOF and augmented by
additional allowances for teachers with additional qualifications.
All payroll records are kept in a secure, centralized computerized payroll data base that is
updated daily from paper-based reports from the various directorates.
The data base is audited by an internal audit mission within the Directorate of employee
affairs to ensure that all changes are supported by appropriate documentation.
Additionally, there is a regular validation of the number of staff under the responsibility
of each directorate and district by site visits by MOE internal audit unit that also checks
the data quality.
The MOF and the Audit Bureau auditors also audit the data.
The mission believes these tools are sufficient to ensure secure controls but has not performed a
sampling exercise to verify this point, in particular the resulting modifications in the situation of
the agents in due time (retirement, secondment, …). However, the audit reports recently issued
have not reported problems.
Procurement Controls
MOE follows the procurement rules described in the government-wide chapter (Box A). The one
difference is the procurement procedures applied by the ERfKE project which follows the World
Bank’s procurement guidelines45
.
Fee Revenue Controls
There are no issues with locally-generated revenues. Fee revenues in the education system
represent a very small component of total expenditure in the ministry. Individual schools retain
local revenues, but spending from these revenues is controlled by MOF in the same fashion as
any other expenditure.
Internal Audit
The directorate in headquarters in charge of internal audit and quality assurance is composed of
two departments (internal audit and quality) and eight divisions. Figure 3 refers.
45
Tenders are sent by the unit to all embassies and advertised in the media; bids evaluated by a committee are sent
to MOF for no objection; and, the results of the tender are publicized. A modern, electronic notice board in the
procurement authority provides all suppliers and the interested public with the results of current bids and the
accumulated procurement to date. The process is designed to ensure transparency and fairness to all parties.
Jordan IFMCA Education Sector
31
Figure 3 - MOE Audit, Inspection and Quality Assurance
The directorate in charge of internal audit is large and well-developed. A staff of 22 auditors
performs five functions within the unit:
-five financial auditors audit all transactions; for transactions greater than 5,000 JD, the
Audit Bureau also performs an ex ante audit46
after approval by the directorate of financial
affairs and before the MOF Financial Controller. The financial auditors also perform ex post
transaction audits on a sample basis, review monthly financial statements from the directorates
and coordinate with their district auditor counterparts on the results of their work:
-the supply auditors audit all supplies – furniture and fixtures, computers, vehicles,
international project procurement, asset management and quality of goods- and check their
compliance with the purchase orders and other characteristics such as schools norms.
-the administrative auditors audit all administrative decisions, such as transfers of
teachers. They oversee the execution of the district audit plans and issue corrective action
notices. They do not perform payroll or HR audits.
-the engineers auditors conduct their audits through field visits to projects under
construction to assess the percentage of completion. They also exercise quality assurance
46
This task is being gradually phased out (see Chapter 1)
Internal Audit
Department
Quality
Department
Financial Audit
Supplies Audit
Administrative Audit
Engineering Audit
Complaints
Quality Assurance
Specifications
Performance & Follow up
36 Districts have an internal audit unit of up to 5 auditors for audit and quality work
Audit, Inspection and Quality
Assurance
Jordan IFMCA Education Sector
32
on the physical aspects of the project. The work is primarily related to international
projects.
-the complaints auditors receive and investigates complaints from all parties, either
directly or through an innovative web site.
The auditors do not use international standards in the planning, executing or reporting of their
audits; and international standards are not utilized as the basis for their training courses. As a
result, while the audit group is active, the ministry is not receiving the full benefits from their
activities that would be expected from modern internal audit processes and procedures.
Audit reports are discussed with the auditees and submitted to the Secretary General of education
and technical affairs. An annual audit report is prepared and sent to the Audit Steering
Committee, chaired by the Secretary General. ISO-certified auditors each received two days of
formal training for certification; there is no additional training provided on a regular basis. The
audit function in Ministry of Education has a number of the attributes of modern internal audit. It
would be a good candidate for a pilot on establishing an internal audit function when the
government decides to implement internal audit that follows international audit norms across all
ministries.
The Quality Department has three divisions and 70 staff at headquarters, all internationally
certified under ISO 2000. District audit staffs also perform the quality functions in their
respective districts. The Quality division ensures that staff follow the specified procedures set out
in procedural manuals, monitors the implementation of work and its efficiency and makes
appropriate recommendations for process improvements. The specification division audits the
technical specifications for projects to ensure compliance with MOE standards and for quality.
The performance division audits the implementation of all approved action plans for new
projects.
4. Capacity Building
MOE financial officers do not receive any sustained, planned and regular training to enable them
to maintain their skill levels or acquire additional skills. The general feeling was that the
financial officers possessed professional training of a university degree or an accounting
designation, and with on-the-job training, they were quite capable of maintaining their skill
levels. Given the National Agenda’s emphasis on development of modern skills and continuous
learning, the current approach warrants re-examination.
This approach is understandable in a stable financial management environment. But in a period
of significant change such as the government is now in the process of implementing, a more
proactive approach is required. The mission learned that MOE has not sent any agent to
participate in the training sessions offered by MOF47
(see chapter 1).
47
The MOF indicated to the mission that it has both the capacity and the capability to provide financial training
courses for other ministries at no cost other than travel and lodging where required. They are also establishing a
formal training centre that will provide a permanent training facility for future training of financial officers.
Jordan IFMCA Education Sector
33
The MOE should consult with the MOF and develop a formal training program for their financial
officers. Training should be designed to refresh current knowledge of budgeting control,
accounting, reporting and auditing and to impart
new skills required to accommodate the planned
changes to financial management processes. A
sample of the type of training that could be
offered is provided in Box G. The selection of
appropriate courses for the MOE financial
officers would be the responsibility of the
ministry’s financial affairs and Human Resources
directorates. A multi-year training plan should be
created, with training coordinated with the
expected implementation dates of projects to
improve the financial management functions. The
plan should then be discussed with the MOF so that the appropriate courses could be developed
and scheduled for future delivery. Here again, the MOPIC should consider playing a role in
facilitating the dialogue between both ministries.
Box G Potential Financial Courses
The FMIS and its processes
Principles of Accrual Accounting
Activity-based costing
Performance measurement in government
Performance information in budgeting
Program based budgeting
Results-based budgeting
Financial analysis and forecasting
Jordan IFMCA Education Sector
34
5. Performance Indicators
The Public Expenditure & Financial Accountability program (PEFA)48
, adjusted for sector
application, has been prepared for the Ministry of Education. The PEFA set contains 28
performance indicators for use in assessing a national government’s performance. Table 9
provides the data for the Ministry of Education which cover a set of 6 indicators as an illustrative
set of the overall performance of the system. A more comprehensive analysis is needed for full
use of the framework.
Table 9 Ministry of Education: PEFA Performance Indicators
48
PEFA is a recent donor’s agreed tool that regroups a set of indicators about the level of performance of a Public
Financial management system. Each indicator is rated from A (highest level) to D (lowest).
Indicator Description
Measure
Rating
Comments
Variance: Budget expenditures vs. actual expenditures over 3 years
Variance from Budget (%)
A - B
Three years of data
Effectiveness of payroll controls
integration or payroll & personnel records
timeliness of updating
internal controls on changes to records
regular payroll audits
A - B
HR is entitled to administer all payroll processes and payments
Effectiveness of internal controls for non-salary expenditure
Effectiveness, comprehensiveness of controls with high compliance rates
B - C
Overlapping functions in ex ante control purposes
Effectiveness of internal audit
Coverage, quality and management response to internal audits; frequency & distribution of audit reports
C
Modern internal audit not present but some aspects are positive
Availability of information on resources received by service delivery units
Information on resources actually received by service delivery units
A
Financial data routinely available; performance data now being developed and supporting systems under construction
Quality and timeliness of in-year budget reports for sector
Scope and coverage of reports; timeliness of reports and quality of data
C
Teachers Housing and Pension Fund reports not transparent
Jordan IFMCA Education Sector
35
6. Recommendations for the Ministry of Education
Short-term
1. The MOE should designate a senior ministry executive as the owner of the ministry’s new financial
management information system project, with full responsibility for the successful implementation of
the project. This person generally is not the IT Director. The MOE should also appoint a full-time,
qualified project manager to oversee project implementation.
2. The MOE should consult with the MOF to get his approval for the development of the MOE- FMIS
before proceeding further with any competitive arrangements for its provision.
3. The MOE should initiate formal and regular meeting with key MOF staff to coordinate on the
management and technical issues arising from the MOE- FMIS project implementation.
4. The MOE should seek explicit guidance from MOF and, if necessary, Cabinet before proceeding
further in his ministry’s dealings with ITG on an FMIS. Until direction is provided consistent with its
present relationship with ITG, it should suspend all of ITG’s activities relating to the FMIS.
5. The successful FMIS supplier should be selected using the Procurement Authority’s competitive
tender process.
6. The MOE should develop and implement now a long term training program for its financial staff in
close coordination with the MOF and its Training Institute. This should be implemented on a priority
basis to support the effective implementation of MOE’s significant budget reforms. The MOPIC
should also facilitate the dialogue between the MOF and the MOE.
Medium-term
7. The implementation of the FMIS should be covered by a contract between MOE and the supplier.
The contract should be for a fixed term and should specify the implementation milestones and costs as
well as the future costs of provision of system maintenance and support, and the basis for determining
the cost of client-requested changes and upgrades.
8. The MOE should be an early pilot for a modern internal audit function when the government decides
to implement an international standards-based audit function.
9. The MOE should disclose its direct costs for supporting the teachers’ Social Security Fund and the
Housing Fund in their annual financial statements. These statements should be accompanied by the
auditor’s opinion on the fairness of the financial statement presentation, in accordance with
international auditing standards. The MOE should distribute annually the audited financial reports of
the two funds to all participating staff, on a timely basis after Board approval.
Jordan IFMCA Social Development Sector
36
III. A The Social Development Sector Capacity Assessment
1. Background
Jordan has always placed the provision of social services and the alleviation of poverty at the top
of its priority list. The government has recognized the right of all citizens of access to health
services and is committed to fighting poverty. As such, in 2004, Jordan’s social services
spending amounted to 17 percent of GDP, a percentage that is among the highest in developing
countries. This anti-poverty theme directly supports the National Agenda goals relating to public
assistance and the well being of Jordanians. A National Agenda Committee on Social Welfare
has been created with a mandate to address issues relating to poverty, social security and
healthcare.
The Social Development sector consumes around 17 percent of total expenditures in 2003 and
8.2% of GDP. Pensions account for 6.7 percent of GDP; the balance of 1.5% is accounted for by
the government’s the anti-poverty programs and social safety nets. At present there are around
1000 local voluntary organizations and 41 foreign NGOs registered with the Ministry of Social
Development.
The Multi-Year Strategy
The MOSD prepared a three year strategy covering the years 2004 to 2006. This strategy was
developed to support the vision of HRH the King and the government of Jordan to achieve
overall sustainable development for all members of society. The main objectives of the strategy
are to: reinforce the national Jordanian identity; protect the family; build and develop individuals
to achieve social coherence; achieve fairness and social security for all members of society
across all geographic locations (with particular emphasis given to the most vulnerable members -
orphans, women, elderly, citizens with special needs and juveniles); face social challenges such
as poverty and unemployment by involving NGOs in developing local communities and in
providing training, rehabilitation and the needed support; invest in human capacities; enhance the
capacities available in society; enhance the concept of work and productivity; support individual
self-reliance and contribute to the overall development process; deepen society’s understanding
of development efforts to help individuals and groups in addressing their needs; reinforce
cooperation and coordinating between the public sector, private sectors and NGOs to invest in
national efforts to promote sustainable development; and to encourage individuals and local
NGOs to reinforce social productivity.
The strategy also identified policies on women’s role and importance in society, the priority of
children in development programs, protecting the family, scientific research as a basis for
planning and building programs, and continuous training to increase capacity and qualifications
of employees. It also proposed specific programs for the three year period by objective, target
and supporting groups and specified performance indicators.
Although substantial improvements have been achieved since 1997, poverty in the Kingdom
remains pervasive with 14.2 percent of the population living below the poverty line, mainly in
rural areas. In order to reduce poverty, the plan identified nine specific initiatives. Of relevance
Jordan IFMCA Social Development Sector
37
to the IFMCA is the initiative to restructure the National Aid Fund to permit it to deliver a
broader range of social and financial support to affected citizens.
2. Institutional Structures
Ministry of Social Development
Jordan’s social development ministry’s aims are to contribute to organizing citizens’ efforts,
educating them about investing in their personal capacity, improving their life status, providing
them with social services, safeguarding and solving society’s social problems and coordinating
with parties working in the social field.
MOSD has four technical directorates with responsibility for Projects, Special Needs,
Family/Women/Children and Social development49
. These are supported by directorates for
International Cooperation, Building and Services, Financial Resources, Communication and
public awareness, Studies & Planning, Human Resources Development. Figure 4 shows the
complete organization structure of the ministry. MOSD operates 30 field directorates, 22
supplementary offices and 47 centers across the Kingdom. The staff complement of the Ministry
is approximately 1,800 employees50
.
A number of other ministries and agencies support MOSD’s functions: the Ministry of Planning
and International Cooperation coordinates donor-related activities and budgets for JD 2 million
for housing grants that are administered by MOSD; the Ministry of Public Works and Housing
manages all construction bids above JD 20,000 on behalf of MOSD and other ministries; the
General Budget Directorate and the Ministry of Finance provide initial budget levels and
monthly expenditure reports respectively; NAF provides social subsidies to all citizens in
financial need (see section IIIB for a complete analysis of NAF’s operations). MOSD and NAF
cooperate in common field directorates; local and foreign NGOs that are registered with MOSD
receive support in cash or in kind from the ministry.
Field Directorates
The field directorates and offices carry out the work of the MOSD and NAF in their district.
Almost half of the ministry’s field employees work on NAF business, even though their salary is
covered in the ministry’s budget. All budget, expenditure and payment cycles for all the field
directorates, offices and centers are centralized in the MOSD.
Non-Government Organizations
At present there are 1,000 local voluntary organizations and 41 foreign NGOs registered with
MOSD. Its Directorate for Social Development contracts with NGOs to provide services to
geographic areas that MOSD cannot reach or to provide highly demanded services that exceed
the ministry’s capacity to deliver. The agreements between the NGOs and the ministry specify
the services required and the financial contribution of the ministry as well as other articles
relating to aspects of the NGO’s services. The NGOs are required by law to submit annual
49
Also called in this report Directorate for people with special needs. 50
22 percent have completed their mandatory education and 5 percent have a higher degree.
Jordan IFMCA Social Development Sector
38
audited financial statements to the Minister of Social Development. Contracts concluded
between the NGOs and international donors are effected through the MOSD or MOPIC.
The mission was advised that the MOSD currently has agreements with only 16 out of 41
registered NGOs. The ministry advised that it is facing difficulties in financing them as specified
in the agreements due to limited budget resources.51
The Director of Social Development
estimated that an additional JD 0.5 million would be required to fulfill the ministry’s obligations
under its contracts with the NGOs.
51
Of the JD 1 million requested in the 2006 budget, only JD 370,000 was allocated
Jordan IFMCA Social Development Sector
39
Figure 4 Organization of the Ministry for Social Development
Minister
NAF
Office of the minister
Internal Audit Unit
National Council
for Special needs
SG
Assistant SG
Diwan
SG Office
Legal unit
International
Cooperation
directorate
Media
division
Int’l &
foreign
NGO
division
Buildings &
Services
directorate
Bldg &
maintain.
division
Financial
resources
directorate
Accounting
division
Commun.&
public awareness
directorate
Commun. &
PR division
Studies &
planning
directorate
HR
development
directorate
Special needs
directorate
Family, women &
Children
directorate
People with
special needs
directorate
(Movt)
division
Payroll
division
Internal
audit
division
Budget
division
Supplies
division
Public
awareness
division
Public
service
division
Elec
document
& archive
Studies
division
Planning &
follow up
division
IT division
Library
division
Employees
affairs
division
Training
division
Promotion
division
Design &
fundraising
Implementa-
tion
Follow up
on pov
strategy
Hearing &
seeing
division
Physical
division
Mental
division
Diagnosis
division
Training
& VTE
division
Children
division
Youth
division
Women
division
Family
protection
division
Elderly
division
National
NGO
division
Enh. Pro.
& elimin.
Poverty
division
Projects
directorate
Housing
division
Jordan IFMCA Social Development Sector
40
3. Financial Management
One reason that financial management skills are weak in the ministry is due to the high degree of
centralization of the financial function. All major decisions, approvals and check payments are
performed in Amman. Although each field directorate has a finance officer, his main role is to
act as an intermediary between the Financial affairs Directorate at the field level and the
Ministry’s Financial Resources Directorate. This lack of experience on the part of field staff will
make it difficult for the ministry to implement a FMIS that enables to adjust the level of
decentralization of the financial management function (closer to the point of service delivery)
and to develop and implement performance budgeting to support increased managerial
accountability and responsibility.
The Financial Resources Directorate at the MOSD has 23 employees in 5 divisions as shown in
Figure 5.
Figure 5 MOSD Financial Directorate Organization
* Currently the division does not exist but the 6 employees are performing the work and reporting to the finance
director.
Budget Formulation and Execution
Budget Formulation
The Ministry budgeting process is quite weak, with low staff capacities to support planned
budgeting improvements. Projects such as performance budgeting or the implementation of a
modern FMIS will require considerable professional development and training for both financial
staff and managers who are responsible for budget planning and execution. At present,
fragmented and often manual systems are employed, with all decisions centralized in Amman.
The budget formulation process at MOSD is a bottom up data collection process that transmits
MOSD needs, but not in a medium or long term perspective. The budget preparation is not
guided by ceilings or priorities set at the Minister’s level or the Technical Directorates; instead it
is a fragmented approach where the plans are cut down at every level of review. The absence of
ceilings or priorities reduces the ministry Budget Office’s role to an aggregator of all
Financial Resources
Directorate
Budget
division
(1)
Supplies
division
(6)
Accounting
division
(4)
Payroll
division
(4)
Internal Audit
division
(2)
Deposits *
(6)
Jordan IFMCA Social Development Sector
41
submissions into one Budget plan52
. As a result, the annual budget is unconstrained in its
preparation and does not ensure a continuation of ministry programs or provide a basis to move
forward in the ministry’s strategy and vision. Given that the MOF is implementing a MTEF for
the 2007 budget cycle, the timing is excellent for the ministry to match its strategic planning
process with a complementary three-year expenditure plan. The Bank supports this program
since 2005 as part of the follow-up of the PER process.
The Ministry should develop and implement a three-year expenditure framework that will allow
it to plan and prepare its budget based on defined priorities. The absence of expenditure ceilings
for the ministry and its directorates results in a budget without adequate justification for its
contents. This disempowers the ministry, as it permits the General Budget Directorate to make
arbitrary budget decisions on its content53
.
An effective internal “budget challenge” process within the MOSD would significantly improve
the effectiveness of the budgeting process and enhance the transparency of the district capital
budgets. This would require financial training for the budget staff on modern budgeting
techniques, the ministry’s major programs and its budget priorities.
The field directorates’ role in the budget formulation process would also be enhanced if their
yearly budgets were based on agreed priorities and fixed budget ceilings. They should also be
responsible for preparing their current budget in two parts for MOSD and NAF operations, with
MOSD costs incurred for NAF operations charged to the NAF budget. This will increase the
transparency of NAF’s actual costs and permit a more accurate picture of the total costs of
MOSD and of NAF.
In fact, the field Directorates prepare a yearly plan of all proposed investment projects, based on
their local needs. Once these plans have been sent to the ministry headquarters, the field
directors’ involvement in the budget process finishes as the MOSD does not communicate the
approved budget to the field directorates or send them a monthly budget report.54
Once the Field
Directorates’ plans are received, the heads of the technical Directorates select the most
appropriate projects, based on ministry needs and ministerial priorities. These projects are costed
and converted into a capital budget proposal. As a result, there can be no financial accountability
of the field directors for the effective management of their financial resources.
The current budget is prepared using historic data, adjusted for changes in the number of staff,
operating expenses and other related expenses. Even though the field Directors work for both
MOSD and NAF, and at least one half of the ministry’s staff are essentially 100% working on
NAF business, the MOSD budget includes all field staff salaries and operating expenses. Each
NGO submits to the MOSD its proposed budget containing an unconstrained “wish list” of all
requests. The Social Development Directorate reviews these proposals, giving priority to the 16
NGOs with whom they currently have formal contracts. The Directorate also estimates resources
52
The budget process is bottom up driven. Based on a MOF’s circular, the MOSD requests its various technical and
field directorates to prepare a yearly plan of all proposed projects to be included in the capital budget. The current
budget is prepared by the budget division using historic data. 53
This year, the MOSD’s budget included an amount allocated to the National agenda which was prepared by the
Prime Minister’s Office and submitted to GBD for approval with no involvement from the ministry. 54
This is done to maintain the maximum budget flexibility for global operations.
Jordan IFMCA Social Development Sector
42
required for multi-purpose NGOs that are used to respond to an urgent demand for a particular
service on a non-contractual basis.
The current and capital budget plan is presented to the Secretary-General and the Minister for
their feedback. The Minister and/or Secretary General may at this point add or delete projects
before submitting the plan to the General Budget Directorate. The Minister, Secretary General,
Technical Directors, Financial Director and Budget Officer meet with the Director of the General
Budget Directorate to negotiate the final budget levels.
Budget Execution
The mission assessed the budget performance of the social development sector, using the
percentage of the budget requested to the budget actually approved by Parliament as a measure
of budget formulation efficiency. This approval ratio measures the ability of the sector to
formulate a realistic and feasible budget. Details are provided in Table 10. The two main lessons
learned form this table are the absence of availability of the data related to the budget requested,
which indicates the low ownership by the Financial resources directorate of the budget
procedure, and the erratic and poor performance of the budget execution vs budget approved,
that also confirms the low ownership of the budget process by the Ministry, in particular at the
field office level (see below).
Table 10: Social Development Budget Performance (JD Million)
2003 2004 2006 (*)
Program Current Capital Grants Current Capital Grants Current Capital
Administrative &supporting services
Budget requested (R) n.a. n.a. n.a. n.a. 1.84 1.81
Budget Approved (A) 1.66 1.27 1.67 0.72 1.70 0.29
Budget Utilized (U) 1.41 1.18 1.53 0.58 - -
Variance (R-A)/ R n.a. n.a. n.a.
n.a. n.a. n.a.
7.6% 83.9%
Variance (A-U)/ A 15.06% 7.08% 8.3% 19.4% - -
Children & family program
Budget requested (R) n.a. n.a n.a n.a 0.81 0.67
Budget Approved (A) 0.78 0.28 0.76 0.43 0.70 0.48
Budget Utilized (U) 0.70 0.26 0.71 0.29 - -
Variance (R-A)/ R n.a. n.a. n.a.
n.a. n.a. n.a.
13.5% 28.3%
Variance (A-U)/ A 10.2% 7.1% 6.5% 32.5% - -
Social protection program
Budget requested (R) n.a. n.a n.a n.a 0.65 1.13
Budget Approved (A) 0.60 0.79 0.63 0.83 0.60 0.84
Budget Utilized (U) 0.55 0.68 0.42 0.67 - -
Variance (R-A)/ R n.a. n.a. n.a.
n.a n.a. n.a.
7.6% 25.6%
Variance (A-U)/ A 8.3% 13.9% 33.3% 19.2% - -
Jordan IFMCA Social Development Sector
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2003 2004 2006 (*)
Program Current Capital Grants Current Capital Grants Current Capital
Special needs program
Budget requested (R) n.a. n.a. n.a. n.a. 1.18 2.34
Budget Approved (A) 1.21 1.76 1.00 2.49 0.99 2.39
Budget Utilized (U) 0.95 1.76 0.88 2.52 - -
Variance (R-A)/ R n.a. n.a. n.a.
n.a. n.a. n.a.
16.1% -2.1%
Variance (A-U)/ A 21.4% 0.0% 12.0% -1.2% - -
Local Community Development program
Budget requested (R) n.a. n.a. n.a. n.a. 0.60 1.55
Budget Approved (A) 0.61 0.59 0.58 0.68 0.50 0.70
Budget Utilized (U) 0.54 0.53 0.55 0.66 - -
Variance (R-A)/ R n.a. n.a. n.a.
n.a.
16.6% 54.8%
Variance (A-U)/ A 11.4% 10.1% 5.1% 2.9% - -
Total
Budget requested (R) n.a. n.a. n.a. n.a. 5.08 7.5
Budget Approved (A) 4.86 4.69 9.55 4.64 5.15 9.79 4.4 4.7
Budget Utilized (U) 4.15 4.41 8.55 4.09 4.72 8.81 - -
Variance (R-A)/ R n.a. n.a. n.a. n.a. 13.3% 37.3%
Variance (A-U)/ A 14.6% 5.9% 10.4% 11.8% 8.3% 10.0% - -
* 2005 data not available Source: Jordan, Budget Law for the Fiscal Year 2004.;
As described in the government wide chapter of this report, the budget execution process is
centralized in the ministries and is monitored by their financial directorates and MOF on a
monthly basis. The budget allocations are strictly controlled, and any variances at the economic
or organizational classifications down to the sub-item level are controlled by the General Budget
Directorate. Depending on the nature of the transfer, it can be only approved by the General
Budget Directorate, Cabinet or Parliament. The Ministry cannot restore to the approved budget
any project which was removed by the GBD. The Field Directorates play no role in the
management of the execution of the budget. This is due to the fact that the budget is not broken
down by field directorate, but is managed centrally. All spending approvals are made in
headquarters, far from the point of service delivery.
The expenditure cycle is a lengthy one with various ex-ante and ex-post controls. The budget
officer, the disbursement controller, the MOF controller, the internal auditor at the Financial
resources directorate, the internal audit unit at the Ministry level, the Audit bureau in some cases
review individual transactions to ensure funds availability and proper recording in the budget.
This situation was already addressed in the government-wide chapter of this report.
Accounting & Reporting
The accounting division at the Financial resources Directorate follows the cash basis of
accounting for recording expenditures. Each expenditure starts with a committed amount (pre
approved to ensure availability of funds) and goes through detailed inspection on an ex-ante
Jordan IFMCA Social Development Sector
44
basis before being approved and recorded. The MOSD manually records commitments but does
not prepare any report that will allow it to follow up on these commitments or to quantify their
amount. In other words, the notion of commitment seems to be used as a way to allow the
expenditure to be initiated and not as a tool to monitor the spending.
Field expenditures are centrally approved, recorded and maintained with their supporting
documents. Even though the field director is required to approve the expenditure requests before
sending it to MOSD, the field directorate finance officer is not responsible for recording these
expenditures or following up on them.
The ministry’s Financial Directorate prepares monthly financial reports for budget monitoring
purposes. They show the amounts allocated, committed, spent and remaining for every line item.
These reports are prepared manually and sent to MOF. The accuracy is uncertain. The same
format is used to report its final accounts; there is no public dissemination of these accounts. The
MOSD should also include in its external reporting of its final accounts, measures of its
performance relating to progress in attaining its objectives as included in its strategy and posted
on the web. Such moves towards transparency would contribute to increased public discussion
and greater understanding of the challenges facing the sector.
Currently the MOSD does not have a FMIS, and relies on the ex-ante control over transactions to
ensure accuracy and on its manual registers to ensure completeness. The mission believes that
the adoption of a computerized financial management information system is a critical component
of financial management reform that warrants strong interest and support form senior ministry
management. Because NAF is in an identical situation with respect to its FMIS, the two groups
should work cooperatively to develop a single FMIS to serve the work of both entities
Internal Controls
NGO Contracting
At present, the ministry has contracts with 16 NGOs for the delivery of a variety of social
welfare services. The mission was advised that they had difficulty in meeting their contractual
obligations for the services provided under these contracts. The Audit Bureau advised that the
NGOs, unions and other not-for-profit entities are all involved in service delivery on behalf of
the Ministry of Social Development. They noted that these entities had weak internal controls,
complicated by weak accounting systems and poorly trained staff. The Audit Bureau advised the
mission that in 2005, they audited the financial performance of the largest NGOs and detected
significant levels of fraud (JD 245,000, see below). These are clearly areas of risk for the
ministry.
The ministry also advised that they had informal agreements with a number of other NGOs that
were generally unfunded. These constitute unfunded liabilities that do not appear under the
existing cash-based accounting system, but which constitute liabilities of the ministry.
Payroll Controls
MOSD’s payroll functions and controls are centralized in the Human Resources Development
Directorate with the support of the payroll division in the Financial Resources Directorate. The
Jordan IFMCA Social Development Sector
45
HR Directorate has an Employees Affairs division that maintains the currency of the manning
table, the benefits, social security, promotions and retirement benefits for all employees using a
computer-based HR system. The payroll division is made up of 4 employees mainly responsible
for posting salaries, related allowances and benefits, calculating taxes and posting this
information in a payroll system. Despite the fact that both divisions communicate on a daily
basis, their systems are not linked. This requires regular reconciliations between the two systems.
Subject to the effectiveness of these reconciliations that the mission could not assess on a
sampling basis, payroll controls are complete.
Internal and External Audit
Internal Audit
The MOSD has three levels of internal audit implemented by the: (i) internal auditor in the
ministry’s Financial Resources Directorate (ii) the ministry independent internal audit unit that
reports directly to the minister and (iii) the MOF controller located in the ministry and reporting
to MOF. Because all expenditures are centralized in the MOSD, there is no internal audit
function in any of the field directorates. All audits focus on ex-ante compliance checks at the
individual transaction level. Comments and recommendations resulting from the internal audit
are documented on the payment voucher and are dealt with on the spot by the Financial
Resources Directorate.
The mission noted that none of the ministry auditors reviewed or evaluated the policies,
procedures and operations in place at the MOSD in terms of: support to ministry objectives;
identifying, assessing and managing risks to achieving these objectives; and ensuring the
reliability of information, accounts and data. This lack of investigation of the internal controls
procedures indicates that the Ministry is far from the main modern audit function requirements.
In addition, it was observed that the three levels of audit are overlapping and duplicative. The
government-wide factors chapter has made recommendations regarding potential changes to
internal audit function across government that remain available for the Ministry.
External Audit
The Audit Bureau is responsible for the external auditing of the ministry, using a dedicated audit
mission. According to the Audit Bureau, their external audit covers all the ministry activities,
including their specific programs, international projects and grants. It also evaluates the
ministry’s internal control processes and its financial controls over registered NGOs. The Audit
Bureau reported in a recent audit report covering a sample of the 10 main NGOs, an amount of
JD 245,00055
missed and that the MOSD does not exercise sufficient financial control over the
NGOs. Such a situation facilitates all types of fraud or abuses.
NGOs are required to have their accounts audited by private external auditors and to submit a
copy of their yearly audited report and financial statements to the ministry. The Field
Directorates’ technical staff is responsible for following up on audit observations of the private
sector auditors and those of the Audit Bureau. The Social Development Directorate is entitled to
55
It relates to amounts embezzled through cheques in one of the NGOs. The audit bureau together with an
anticorruption committee handled this case and almost 80% of this amount has been restored. The MOSD was not
involved, and a special committee follows up on corruption.
Jordan IFMCA Social Development Sector
46
review these reports in terms of the NGOs’ objectives and the amounts spent during the year. In
the absence of a genuine internal audit function within the Ministry, it is difficult to assess
whether this review is done, so that the mission is not able to evaluate the follow-up of the Audit
Bureau recommendations.
4. Performance Indicators
The Social Development sector subset of PEFA performance indicators56
presented in Table 11
provides the data for the MOSD57
.
Table 11 Ministry of Social development: PEFA Performance Indicators Indicator Description
Measure
Rating
Comments
Variance: Budget expenditures vs. actual expenditures over 3 years
Variance from Budget (%)
C
Variances are high and erratic
Effectiveness of payroll controls
integration of payroll & personnel records timeliness of updating internal controls on changes to records regular payroll audits
A - B
Centralized payroll management
Effectiveness of internal controls for non-salary expenditure
Effectiveness, comprehensiveness of controls with high compliance rates
B - C
duplications reduce the efficiency of controls
Effectiveness of internal audit
Coverage, quality and management response to internal audits; frequency & distribution of audit reports
D
Modern internal audit not present
Availability of information on resources received by service delivery units
Information on resources actually received by service delivery units
B-C
Some budget information is missing
Quality and timeliness of in-year budget reports for sector
Scope and coverage of reports; timeliness of reports and quality of data
B
Budget system produces monthly manual reports
Quality and timeliness of annual financial statements for the sector
Completeness and timeliness of annual reports; accounting standard used to prepare statements
D
Comprehensive social sector report not prepared
5. Capacity Building
The ministry financial staff performances are not assessed annually to determine their training
requirement, nor is there an annual training program. The Directorate of financial resources
advised that it was committed to providing each Diwan financial employee with a minimum of
one course per year; however this training does not cover the Finance Officers in the Field
Directorates. The courses are usually conducted by MOF and the National Training Center.
56
On PEFA indicators see chapter 2 57 Because these performance indicators were retrofitted to the study after completion of the field work, the data
might be incomplete.
Jordan IFMCA Social Development Sector
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The MOSD Human Resources Directorate Strategy for 2004 – 2006 envisaged that a total of JD
140,000 would be required for the ministry’s technical and financial training needs for the three
years. The proposal of the Human Resources Directorate was to: develop a database with all the
names, qualifications, posts and responsibilities of the MOSD staff; divide the staff into three
groups according to their academic qualifications; determine the needs of each group; and
conduct, with the help of the National training Center and universities, the training required. The
budget estimate was designed to provide annual training for all employees with university
qualifications and 40 percent of the remainder. However, the training resources have not been
made available.
The Ministry of Finance advised the mission that their financial courses are available to all
financial officers across the government at no charge to the employee.
6. Recommendations for the Ministry of Social development
Short-term 1. The ministry should use budget ceilings for its directorates in order to submit an overall budget that
reflects the ministry priorities and that contains costed items.
2. The Ministry of Social Development should establish an internal budget challenge process to review
its budget proposals to ensure that they are consistent with the ministry’s strategic priorities and its
budget ceilings set by the General Budget Directorate
3. The Field Directorates should prepare their budgets for the NAF and MOSD components, with the
costs incurred by the ministry on behalf of NAF allocated directly to the NAF budget.
4. MOSD should provide the field directors with a timely, accurate and complete monthly financial
statement showing budget utilization against the planned amount
5. MOSD should prepare a manual monthly commitment report for senior management and MOF and
assist the ministry in managing its cash requirements and in monitoring its utilization against the
approved budget ceilings.
6. The Ministry of Social Development should initiate early consultation with MOF in order to obtain
training for its financial staff in the headquarters and the districts in skills needed for the forthcoming
changes to the government’s financial systems (GFS 2001 chart of accounts, performance budgeting,
and GFMIS).
Medium-term
7. In order to enhance the accountability of the field directors, the MOSD should require every district
finance officer to record all field directorate expenditure, maintain an expenditure register and
provide quarterly expenditure reports to the MOSD Financial Resources Directorate.
8. The Ministry should revise the format of its final accounts to provide a comprehensive view of all
ministry activities, including its commitments and grants. These final accounts should be made public
in a timely manner and posted on the ministry’s web site.
Jordan IFMCA Social Development Sector
48
9. The Ministry of Social Development should explore, in cooperation with NAF, the priority of the
acquisition of MOF’s computerized FMIS once approved by MOF for use in ministries.
10. The Ministry of Social development should strengthen its financial controls governing the ministry’s
contractual relations with its NGOs; the audited annual financial statements of the NGOs should be
made public and posted on MOSD’s website.
11. The Ministry should consult with the NAF to see if they can work cooperatively on training of their
financial inspectors in modern internal audit standards.
Long-term
12. The Ministry of Social Development should ensure that its payroll and HR systems are linked to
decrease the frequency of errors and increase the efficiency of the payroll administration process.
13. The Ministry should seek to implement modern internal audit when the government agrees to
government-wide implementation
14. The Ministry should review its practice of incurring unfunded liabilities for NGO services provided
without formal contracts, and disclose fully these liabilities as a note in its annual final budget report.
Jordan IFMCA National Aid Fund
49
III. B National Aid Fund
1. Background
The National Aid Fund (NAF) was established in 1986 to provide support to Jordanians in need.
It is independent of the Ministry of Social Development, reporting to a Board of Directors, and
chaired by the Minister of Social Development. The Board reviews all aspects of NAF
operations and is composed of nine government officials and four private sector representatives.
The 80,000 recipients of aid are poor people whose income and ability to work are such that they
cannot be employed in their region. Individual assessments of their condition are conducted by
social workers located in the field offices. The majority of the cases are also from disadvantaged
groups, such as handicapped, divorced women and orphans. Approximately 8 percent of the
target families have incomes above the poverty line, but have more than two disabled family
members. They continue to receive the family allowance as it is less expensive than lodging the
disabled in special facilities.
2. Institutional Structure
The NAF consists of 36 field offices, where needs are assessed and services delivered. In
addition, it has a central Aid and Eligibility Directorate that establishes policies governing
NAF’s operations. Other headquarters directorates include Finance, Internal Audit, HR, Quality
and IT. Figure 6 provides more detail on NAF’s constituent components. The organization has a
total of 352 staff, 270 of whom are employed in the field.
The 36 field offices in the directorates are joint offices with the Ministry of Social Development.
The Head of each district office is a MOSD employee, supervising both MOED and NAF staff
and their functions. The mission was advised that up to 50 percent of the field staff is from
MOSD, of whom only 70 were officially seconded from MOSD to NAF.
National Aid Fund (NAF) was established in 1986 to provide Target
Jordan IFMCA National Aid Fund
50
Figure 6. NAF Organization Structure
Chair of the Board:
Minister of Social
Development
NAF General Manager
Internal Audit
Directorate
Quality
Directorate
Aid & Eligibility
Directorate
Financial
Directorate
IT
Directorate
HR
Directorate
Administrative
Audit
Financial
Audit
Social
Audit
Control and Follow
Up
Quality Assurance
Programming &
Analysis Dept.
36 Field Offices
Accounting
Department
Payroll
Department
Receivable &
Payable Dept.
Supplies
Department
Operations &
Maintenance
Dept.
Reports
Department
Planning &
Verification Dept.
Information and
Studies Dept.
Human Resources
Dept.
Human
Development &
Training Dept.
Administrative &
Support Dept.
Archive Dept.
Aid Department
Loans & Eligibility
Dept.
Training Dept.
Jordan IFMCA National Aid Fund
51
3. Financial Management
NAF Program
Eligibility
Individuals in need, apply to NAF social workers in the district offices. They are required to fill
out a questionnaire, provide documentary evidence and are interviewed. The approval decision is
made in the field office. Eligible beneficiaries must meet one or more of the eligibility criteria
established in law. Eligible recipients receive a green card that authorizes them to receive cash
benefits for six months. Fully employed persons are not eligible for NAF assistance. However
the director general of NAF has the flexibility to reduce the amounts paid if a beneficiary is able
to find a part time job. This is designed to encourage the beneficiaries to be more transparent
about their incomes and to motivate them to search for work.
Validation Process
The lists of new beneficiaries are verified at NAF headquarters in Amman. Validation consists of
social security registration, client files on the NAF system, civil service employment records, etc.
Social workers in the field offices review the case files every six months, conducting home visits
where they feel it is warranted. The lists of eligible beneficiaries are revised every six months by
NAF field staff. Each beneficiary is interviewed prior to renewing his NAF card. This card must
be presented by the recipients in order to receive his cash allocation.
The effectiveness of the control of the green card’s beneficiaries is assessed below (see Internal
and external audit)
Payment process
The NAF has outsourced its payment process to Jordan Post. Monthly lists of beneficiaries are
issued by NAF headquarters to the various post offices across the country, according to the
beneficiary addresses. The post offices cash the NAF checks at their local commercial banks and
pay all beneficiaries in cash, after presentation of their green card and a second ID. The recipient
signs the receipt ledger, as does the disbursement officer.
Budget Formulation and Execution
Budget Formulation
The budget formulation begins with a call letter from NAF to all directorates and districts for
their current and investment requests for the next budget year. The call letter has no ceilings and
no priorities. The directorates and districts prepare their requests and submit them to NAF
headquarters. 58
The current budget may vary due to the district’s estimated changes in mix of
the case load. The budget requests are reviewed by the headquarters financial staff and then
negotiated between NAF financial staff and the MOF-GBD.
58
These directors are often the same directors who prepare the MOSD budgets as well.
Jordan IFMCA National Aid Fund
52
The macro-economic forecast from which the estimate of the number of poor families requiring
assistance can be derived is provided by the MOSD which itself builds on the annual households
survey issued by the National Department of statistics, a neutral government agency. The
capacity of the MOSD to build on the households survey the statistics on poverty is too weak to
ensure the credibility of these data.
As a result, during the annual negotiation of its budget with the General Budget Directorate, the
NAF has limited bargaining power to justify increases. The mission was advised that NAF
usually gets an increase of approximately 4 million JD, but this amount is insufficient to
significantly increase from the current 42 %, the percentage of families in need served. In the
absence of valid and reliable third party forecasts of need, it is easy for the General Budget
Directorate to arbitrarily set the budget amount with no knowledge of the impact this will have
on the percentage of poor actually reached by the NAF subsidies. The lack of justification shields
it from the consequences of its funding decision. The mission was advised that there was a
waiting list of approximately 10,000 families in need who cannot be accommodated within
NAF’s approved budget levels
Given the government’s statements that it intends to use NAF subsidies to protect the poorest
citizens from the adverse impacts of eliminating essential commodity subsidies, the need for
such a forecasting tool is critical and technical assistance for capacity building at the MOSD is
crucial.
Table 12 provides a comparison of the original 2006 budget request vs. the approved 2006
budget.
Table 12: NAF 2006 Budget Request vs. Approved Budget (JD Million)
Program
Budget
requested
Budget
approved
Variance (requested-
approved/requested)
Recurrent aid 57.00 45.13 21%
Special needs aid 4.00 2.45 39%
Emergency aid 1.00 0,50 50%
Physical rehabilitation aid 0.18 0.18 0%
Vocational training for
beneficiaries' children
0.05 0.02 70%
Supporting the poor 0.45 0.35 22%
Administrative expenses 1.77 0.13 93%
Capital expenses 0.56 0.37 34%
Total 65.01 48.63 25%
As indicated, there are substantial shortfalls in amounts approved when compared to those
requested. In particular, the key aid programs of recurrent aid and special needs aid display large
shortfalls. The proposed revisions to the NAF programs would result in better justification of
budgetary requirements, based on agreed economic and social data on which the budget
discussion could occur. In time, this could result in a reduction in the resulting variances.
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Budget Execution
Budget execution is totally centralized. Individual budget officers in the districts are not even
informed as to what budget levels they have been given. All requests for commitments or
payments or expenditure are sent to the NAF headquarters where they are subject to the standard
control processes for any expenditure commitment or payment request from a Directorate. The
Financial Directorate manages the budget according to the balances in the NAF accounts,
practicing cash management by withholding payment of certain requests if funds are already
fully committed.
The fact that district managers are MOSD staff, responsible for both MOSD and NAF activities
within their districts, explains partially the lack of autonomy of the NAF field offices. This
centralized practice may also be required by the necessity for the MOSD to ensure the global
view of the poverty and a certain coherence and equity between the different regions in targeting
the poor population.
Nevertheless, the analysis led at the broader level of the poverty policy should take into
consideration the fact that this practice, that reduces the district manager opportunity to manage
its own budget and be accountable for the results achieved, is not the best incitement to
modernize the financial management system, in particular the reporting and accounting function
that are the basic components of any financial accountability. A reconciliation between these two
objectives is desirable.
A fact of relevance, NAF financial staff were unable to provide the mission with the budget vs.
actual expenditures for the three most recently completed fiscal years. This fact illustrates the
requirement for an improved budget management and reporting system for use in the NAF (see
below).
Accounting & Reporting
Accounting
The NAF was established originally to be outside of the government budget entity. This was
done to preserve its independence and to give it a higher profile among the citizens in need.
Subsequent reforms saw its accounts consolidated in the Treasury Single Account in the National
Bank. In addition, NAF is subjected to the same accounting, budgeting, financial and HR
controls as a budget entity. When this is considered with the commingling of MOSD and NAF
staff in all of the 36 districts, it appears that, in substance, the NAF is a budget entity. The
government should resolve this confusion regarding the NAF status as part of its planned
restructuring of the Fund and its responsibilities.
The accounting systems in NAF are manual. Updates are processed at headquarters after the
funds have been expanded. Although the NAF has WAN59
connectivity and email with all
59
Wide Area network
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district offices, there is no automation of the financial processes beyond monthly budget reports
generated by MOF. NAF advised that, in future, they planned to solicit donations from private
sector. However, the mission noted that there were no developed accounting and related budget
procedures within NAF to manage donor funds or future contributions from the private sector.60
Should the government decide, in its current review of delivery of services to citizens in need, to
include solicitation from non-governmental sources, then the appropriate accounting controls
would have to be developed. Current accounting would not establish sufficient transparency for
external donor funds.
The mission was advised that in cases where NAF benefits are not collected, these undisbursed
amounts are reported to NAF headquarters and deposited at month end in a NAF commercial
bank account. This has the potential to provide the Director with an off-budget source of funds
for ongoing operations. NAF and MOF should undertake to convert these district bank accounts
to zero balance accounts and to have the funds swept daily by the Central Bank for cash
management purposes.
The mission was advised that no action had yet been taken to implement the new GFS 2001-
compatible chart of accounts. Given that the new system will be implemented this year for use in
the preparation of the 2007 budget, NAF should initiate work now on their new chart of accounts
with functional classifications determined in consultation with MOSD.
Financial Management Information Systems
Manual financial systems operate throughout the NAF. It indicated that it is awaiting MOF’s
implementation of its GFMIS, after which it will follow MOF’s directions to implement a
compatible version of the same system. While this is a sensible approach, NAF should take steps
to ensure that it is scheduled for early implementation of the ministry-level FMIS as soon as
MOF certifies their system for ministry implementation. This would avoid delays in
implementation of any government commodity subsidy changes that might expand the base of
the poor requiring assistance, or require that NAF implement a new subsidy targeted at a larger
group of recipients. In addition, it should ensure that the new system has the capability to
accommodate future subsidy schemes and new beneficiary groups.
Reporting
NAF generates financial reports for its management and the Board of Directors. These include:
monthly reports showing total number of beneficiaries, amounts due and amounts paid; a
monthly budget report for internal management use; and an unaudited annual financial report
that is presented to the Board and to MOF. These reports are not made public. The Audit Bureau
audits the financial reports after the fact, but only for compliance purposes. The manual system
is unable to respond to ad hoc requests for prior years financial data, and hence management
analysis of financial performance is severely limited.
60
To date, there have been no contributions from the private sector.
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Internal Controls
The mission noted serious problems with the financial controls present in the NAF’s cash
distribution process (around JD 5 million are monthly distributed) currently provided under
contract by the Jordan Post network (350 offices):
1. The local post offices do not have the capacity or the physical layout to handle a monthly
distribution of cash payments to a large number of recipients (80,000) that can effectively
consume up to 10 working days per month of its operations.
2. Large amounts of cash (exceeding JD 100,000) are kept on hand in the larger local post
offices61
, stored in old, inadequate security safes, sometimes in plain public view beside an
external window in an office adjacent to the public areas. In smaller offices, the amount of
cash is less important, but the problem is also serious.
3. Postal staff is not provided with appropriate security when performing check cashing duties
for the NAF payments.
4. The amounts cashed are so large that the bank has insufficient small bills on hand to meet the
needs of the post office. In some cases, payment is largely made in large denomination bills,
requiring the postal staff to make creative arrangements with recipients because of their
inability to pay the exact amount due.
5. The post office staff is not insured against loss by theft or fraud.
6. The post office staff does perform appropriate separation of functions in the management and
administration of the cash to be disbursed.
The situation now is serious and demands immediate attention. However, what is even more
serious is the fact that the existing post office distribution system is stretched beyond limit at
present, and it would not likely be capable of handling any additional workloads without
additional investment in physical facilities, new equipment and improved internal controls.
The mission was advised that the Jordan Post contract is expiring in the immediate future. While
it may be too early for major changes to this contract, the government may wish to consider
whether the private sector banks would not be more suitable (but perhaps reluctant) partners for
future outsourcing contracts. 62
This could permit the issuing of an electronic funds transfer of
the monthly payment into individual, mandatory commercial bank accounts provided free to all
NAF recipients in urban areas. The recipients could then be issued with a commercial bank card,
and these banks would be encouraged to provide automated teller machine facilities at
convenient public locations nearby in urban areas. Remote areas, notably in rural, could
continue to be served by Jordan Post, albeit in vastly reduced numbers.
61
20 % of the offices are in Amman and suburbs. 62
This resistance is not unique to Jordan. The government could require the commercial banks to provide this
service, according to a negotiated fee-for-transaction basis that would cover the bank’s costs and return a small
profit.
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Internal and External Audit
The internal audit Directorate performs ex ante and ex post audits of the directorates and all
district operations through field visits. Four employees audit the Aid and eligibility directorate
and six perform the field audits. The mission was advised by the Audit Bureau’s NAF auditors
that the NAF internal auditors have been well trained by a local audit firm. Their ex ante audits
focus on compliance issues for new beneficiaries, changes in existing beneficiaries and a random
sample of beneficiaries. Entities are selected randomly from a grid of the country for special
audits by internal audit, the central follow up directorate and the district social workers.
In a recent study of recipients approximately 10 percent were found to be ineligible. Of this 2
percent was due to staff error and 8 percent to unrecorded changes in recipient status. A recent
Bank study concluded that poor design of the subsidy program could result in poor targeting of
up to 66 percent of beneficiaries. This has been an oft-quoted statistic used to justify a closer
look at NAF operations and underlying principles. Although the audits targeting effectiveness are likely to be beyond the scope of the current
internal auditors, it is exactly the kind of audits that would be carried out by a modern internal
audit group examining the NAF’s internal spending control systems. Modern internal audit has
the prospect of increasing the effectiveness of the targeting of NAF subsidies and making the
subsidy delivery processes more efficient.
The Audit Bureau advised the mission that their audits of NAF have resulted in a number of
recommendations to management. These included: reviewing the basis of the subsidies against
the eligibility of the target groups and reporting to the Minister all incidences of non-compliance;
and considering combining all entities administering subsidies to citizens into a single entity to
improve efficiency and effectiveness.
4. Capacity Building
NAF is a model when it comes to staff development. It has been continuously involved in the
regular training of all staff, using an annual budget of approximately JD 200,000 for its training
activities. Of this amount, approximately 10 percent is used for financial officer training in
accounting, budgeting and auditing. In 2005, NAF offered 8 training sessions for its internal
auditors and 3 sessions for its financial specialists. Every financial officer in the districts has
participated in at least one training course. NAF management stated that financial officer training
was essential to enable them to keep abreast of the changes in financial management that were
just beginning, and would continue at an accelerating rate in the future. Thus it provided course
training, seminars and specialist training where required. Their current priority is the training of
their Quality personnel. The NAF should review its current program in the light of the MOF
statement that their financial courses are available to all financial officers across the government
at no charge to the employee.
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5. Recommendations for the National Aid Fund
Short-term
1. NAF should insist on an immediate strengthening of the internal control system in the post offices for
dealing with cash management and cash distribution of NAF benefits.
2. NAF and the government should begin to consider further studies for other alternatives for cash
distribution to NAF beneficiaries that would provide a more secure, scalable and efficient distribution
process that meets internal control standards.
Medium -term
3. The government should build capacity at the MOSD to provide timely and relevant statistics to
support MOSD’s forecasts of families requiring assistance from the NAF. This forecast should be
prepared in time for use in the NAF budget submission for the forthcoming year.
4. NAF and MOSD should agree to seek for more accountability of the NAF field‘s budget officers while
the budget management must remain centralized at MOSD.
5. NAF and MOF should agree to convert the NAF district bank accounts to zero balance accounts that
would be swept daily by the Central Bank for cash management purposes.
6. NAF should initiate work on its new chart of accounts with functional classifications determined in
consultation with MOSD
7. NAF should take steps to ensure that it is scheduled for early implementation of the ministry-level
FMIS as soon as MOF certifies that their system is suitable for ministry implementation. It should also
ensure that any new FMIS has the capability to accommodate additional future subsidy schemes and new
beneficiary groups.
8. For greater transparency, the NAF audited annual report should be made public and posted on a
government web site on a permanent basis.
9. NAF should consult with MOF in order to determine the extent to which they could cost-effectively
provide financial training for its financial staff in the headquarters and the districts.
10. NAF should consult closely with MOSD for cooperative training for the ministry’s internal inspection
function’s use of international standards for internal audit.
Long-term
11. NAF should establish appropriate accounting and reporting procedures to manage external
contributions or investment financing with appropriate transparency..
12. When the government agrees to implement modern internal audit across all budget entities, NAF
should be an early implementer of the initiative.
Youth division Diagnosis division Housing division Projects
directorate