Ignoring Corruption’s Enablers: A Tanzanian Story

This post was written by Thokozile Madonko and Jennifer Sleboda of the International Budget Partnership

All too often reports in the media and public discourse about cases of government corruption overlook two root causes: the lack of budget transparency and weak oversight in the management of public resources.  This is certainly the case in Tanzania where over the last five years the media has played an increasingly active role in exposing specific cases of corruption.

In recent months media reports of corruption in Tanzania have focused on the US$30 million that went missing from the Management of Natural Resources Programme (MNRP), which was funded by the Norwegian government and implemented by Tanzania’s Ministry of Natural Resources and Tourism (MNRT).  In 2006 an evaluation by independent auditors revealed that almost half of the funds allocated to the program over a 12-year period may have been lost to corruption and mismanagement.  The Tanzanian public only learned of the case in early 2009 when the independent audit report was leaked to the media. The  disclosure of the report findings sparked a national debate on corruption in the use of foreign aid.  In June of this year the Tanzanian government agreed to refund 2.8 billion Tanzanian shillings (US$1.87 million) to the Norwegian government to settle the dispute over the embezzled funds.  The refund is provided for in Tanzania’s budget for 2010-2011.

The recent media coverage about the settlement misses a key point, namely, that such corruption cases are symptoms of deeper problems in the structure of public finance management in Tanzania.  Like many developing countries that scored poorly on the International Budget Partnership’s Open Budget Survey 2008 (OBS), which measured budget transparency in 85 countries, Tanzania provides only minimal budget information to the public and has weak oversight institutions.

In spite of the critical importance of budget transparency to public finance management, none of the Tanzanian media reports asks how, or whether,  the Norwegian and Tanzanian governments were reporting to their citizens on the use of the funds intended for the MNRP.  In the end the settlement of the corruption case appears to have worked out better for Norwegian citizens, since a small portion of the misused funds will be returned to them, while their poorer Tanzanian counterparts will lose out completely..  Due to Norway’s more powerful position as a donor, the country was able to suspend funding and institute an external audit into the use of the funds granted to the Tanzanian government and, ultimately, recoup some of the stolen funds.  In contrast Tanzanians find it difficult to hold their government accountable when public resources are misused due to the lack of budget transparency and weak oversight institutions in the country.

A key question that arises from this case is why an external audit of the MNRP was required in the first place.  Although Tanzania’s Comptroller and Auditor General (CAG) audited the program on an annual basis and the CAG reports were reviewed by PriceWaterhouseCoopers (PWC) on behalf of the Norwegian Embassy, no major financial management problems were identified.  It was not until 2006, when the Norwegian Embassy and the MNRT conducted an evaluation of the program over the period 1994-2006, that critical financial management problems were uncovered.  It was then that the Norwegian Embassy appointed a team of independent auditors to carry out a comprehensive audit of the MNRP.  One of the key audit findings revealed that both internal and external oversight mechanisms did not perform well, i.e., the MNRT’s audit unit and the CAG, the Norwegian Embassy, and PWC.  Of most serious concern was that the CAG accepted all of the reports from the MNRT’s audit unit with only minor changes.

The fact that the Tanzanian CAG did not uncover critical financial management problems that led to the misuse of US$30 million in donor funds should not come as a surprise.  The findings of the 2008 OBS reveal that in countries that perform poorly on budget transparency, supreme audit institutions generally lack the necessary independence, authority, and resources to effectively carry out its role of monitoring the use of public funds.

Continuing financial management problems and weak oversight in Tanzania prompted donors that provide general budget support to the country to reduce their funding pledges by US$220 million for fiscal year 2010-2011.  The donors cited the slow pace of public financial management reforms as one of the key reasons for the cuts in funding and stated that the government’s weak performance on governance and accountability could affect future funding.

The media, as well as civil society and the public, needs to incorporate an analysis of the factors that create opportunities for corruption in their discussions and commentary on specific corruption cases, including the lack of budget transparency and weak oversight institutions.  Considering Tanzania’s heavy dependence on development aid — the country is one of Africa’s biggest per capita aid recipients — these problems could compromise the ability of the country to receive future aid disbursements and as a result hamper the Tanzanian government’s ability to deliver much needed services.