Hashemite Kingdom of Jordan Institutional Financial Management Capacity Assessment (IFMCA): Education and Social Development Sectors June 28, 2006 Document of the World Bank Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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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
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
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 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.
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