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36 Diagnosing Corruption in Ethiopia
Although Ethiopia’s system of budgeting and financial oversight is
structured appropriately, its implementation is weak except in the aggregate.
A recent Public Finance Management Assessment gave Ethiopia
high scores (A) on its federal budget execution, budget classification, and
budget process but low scores (C+) on controls in procurement, effectiveness
of internal audits, and quality and timeliness of annual financial
statements (FDRE 2007a).
Regional public financial systems are modeled on the federal ones,
and the recent Public Finance Management Assessment gave the
regions a largely favorable report. Regions received high scores for budget
classification comprehensiveness of information, payroll controls,
and effectiveness of internal audits, but low scores on effectiveness of
tax collection, value for money in procurement, and follow-up of
external audits (World Bank 2007).
Health sector financial management. For the health sector, regional
financial management systems are critical because the regions are responsible
for most public health sector expenditures. A large part of the funds
applied by the regions to health care services are received in block grants
from the general public budget system. The formula for allocating block
grants to the regions was recently changed to bring the amounts in line
with population, and it takes revenue-generating capacity into consideration
(FDRE 2007b). Most of our informants felt that the new formulas
were more equitable and less subject to manipulation.
The regions themselves then allocate resources by applying a regionspecific
budget allocation formula to the various sectors, zones, and woredas.
The regions have Bureaus of Finance and Economic Development
(BOFEDs) that transfer funds directly to the RHBs for regional activities,
including the funding of referral and regional hospitals. The BOFEDs also
transfer finances to woreda-level Offices of Finance and Economic
Development (WOFEDs) to finance the WoHOs, which generally do not
have their own finance departments but instead rely upon the WOFEDs
for financing processes.
Several reforms are in place to increase the woredas’ capacity to manage
their own finances, including training, investments in computerization,
and simplification of accounting. A typical woreda manages between
7 and 10 bank accounts to be able to provide reports to different government
and foreign agencies. For example, Asegede Tsimbele woreda manages
seven accounts: for block grant funds; agriculture; health; HIV/AIDS
(human immunodeficiency virus and acquired immune deficiency