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Public Financial Management in Sudan
Public Financial Management in Sudan
Abstract
Effective public financial management and financial control systems have an important role
in ensuring the accountability of the use of public fund, and safeguarding limited public
resources against corruption and other misuse and unlawful practices. This study aims to
identify and provide a description, assessment and analysis of the role of public sector audit
and other financial controls in safeguarding the country's public resources in the Sudanese
public sector entities at the federal, state, and local levels, and minimizing financial
corruption in the Sudan.
The objective of this study is to address the contexts where perverse incentives for financial
corruption exist, and try to provide practical solutions. The factors that can facilitate
financial corruption in the Sudan include weak and ineffective internal control systems,
deficiencies in the accounting systems, the penalties are not harsh enough, very low salary
levels, backlog of external auditing, and nepotism. The study revealed that financial
corruption in the Sudan is deeply rooted and is institutionalized.
The study will serve to underscore and guide the Sudanese administrative reformers who are
intending to combat financial corruption and introducing practical systems reforms.
Keywords: Public financial management, financial controls, financial corruption, Sudan.
Introduction
Although, the Sudan’s oil sector has grown rapidly over the past ten years, in addition to
many other sources of national wealth, Sudan is classified, according to many international
organizations, amongst the very poor and most corrupt countries in the world (CPI, 2008;
Economic Freedom Index, 2007, World Bank, 2007). In the Open Budget Survey (2008),
which included Sudan and 84 other countries, Sudan was joint bottom with 0 points along
with DR Congo, Equatorial Guinea and Sao Tome. The existence of poor public financial
management system and financial controls in the Sudan, in addition to the absence of
transparency in the functioning of government, the deficiencies of prosecuting agencies, the
ineffectiveness of procurement and audit, shortage of qualified accounting and auditing staff,
and low salary levels of public sector employees are the major factors which facilitate
corruption and misuse of the limited public funds in the Sudan (Logune, 2006; JAM, 2005).
It is generally recognized that many developing countries have sub-optimal governmental
financial control systems which often became worse in the ‘lost decade’ of the 1980s and
later. The serious deficiency in the financial control systems in the Third World is considered
as the major factor which facilitates the misuse of public resources and financial corruption.
Little attention has been given, at least until recently, to sound accounting and auditing
practices, and comprehensive training programmes for auditing and accounting staff in public
sector organizations (Johnson, 1992, Balkaran, 1993). The supreme audit institutions and
internal check in public sector units in many African countries are ill-equipped and lack an
adequate number of skilled staff members. On the accounting and reporting side, besides the
delays in producing consolidated treasury balances, the reliability of fiscal data is often
questionable. In practice, government auditors are generally not independent from the
Literature Review
In the last decade or so, corruption has attained a high profile in the development, political
economy debate and literature (Tanzi, 1998). It has been seen as the most serious economic
crime endangering the national security economic growth and public safety of any country
(Asis, 2000; Fantaye, 2004; O’Shea, 2004; Kaufmann and Vicente, 2005). In all countries,
and more noticeably in developing countries, corruption is detrimental to state efficiency. It
hampers budget equilibrium, diminishes expenditure efficiency, and distorts its allocation
between different budgetary functions (Delavallade, 2006). Corruption harms many Third
World countries where poverty is prevalent and the economy is poor and supported by
foreign aid and loans. In spite of the presence of oil and vast mineral resources in many
African countries such as Angola, Chad, the Democratic Republic of Congo, Nigeria and
Sudan, the situation continued to blight rather than enhance people’s lives because of
conflicts, corruption and power struggles (Khan, 2007). Peter Eigen (2005), the former
Chairman of Transparency International (TI), said that corruption is a major cause of poverty
as well as a barrier to overcoming it. However, others have argued that it is poverty which led
to corruption rather than the other way around (Chetwynd et al. 2003, Johnston 2009). To
show how corruption destroyed economy of countries, it is estimated that the annual
corruption industry worldwide is close to US $1 trillion (Kaufmann, 2005; Svensson, 2005).
Corruption results in a major loss of public funds needed for development, education,
healthcare and poverty alleviation, both in developed and developing countries (Peter Eigen,
2004). Gonzales (2000) stated that corruption distorts the allocation of local resources and the
performance of local governments. The TI Corruption Perceptions Index 2009 (CPI) shows
that 131 out of 180 countries (73%) scored less than 5 against a clean score of 10. This
clearly indicates the seriousness of corruption in many countries worldwide. In the paper
“Governance Matters IV” covering significant changes over the six-year period 1998-2004,
the control of corruption was shown to have significantly worsened in a number of African
countries, including Sudan (Kaufmann et al., 2005).
Public financial management usually covers the management of government revenue,
expenditure, and cash (Lubin, 2007). There appears to be a negative correlation between the
quality of public financial management systems and financial corruption (Lubin, 2007).
Reporting on work done by TI and the World Bank, Dorotinsky and Pradhan (2007) consider
that there are five systemic factors which increase the risk of corruption in public financial
management:
a. weak public financial management capacity which include record keeping,
reporting, accounting, and financial management staff;
b. inadequate internal controls;
c. limited internal fiscal transparency;
d. weak management and supervision, and;
e. weak external accountability in public spending.
The figures in the above table shows that although the amounts stolen from the public funds
detected and reported by the General Audit Chamber decrease from SUD 278.7 in 2000/2001
to SUD 276.9 in 2001/2002 and to SUD 168.2 in 2002/2003, it began to rose in the following
years until reaching SUD 904.3 in 2005/2006. The table reveals that least corrupt sector is
central government organizations located in Khartoum. The reason could be that most of
these organizations are central ministries and institutions, and thus are able to recruit well
qualified accountants who are able to produce their accounts and these are usually audited
and examined every year.
The table also shows that, over the period, the largest portion of detected and reported
corruption occurred in public companies and corporations which amounted to an average
The accounting classification of stolen public funds shows that, during the period, the largest
portion was stolen from revenues. Stealing of materials from warehouses comes second; and,
amounts stolen from expenditure are the third most important.
Table 3, below, shows the amounts recovered from public funds stolen during the period
2001-2007.
The above table shows that, on average, only 8% of public funds stolen from central
government organizations were recovered. This low level of recovery could encourage others
employees to steal public funds.
In the states, the situation was not better than in central government units and public
corporations. In the General Audit Chamber’s report of 2005/2006, the amounts stolen in
Northern states was SUD 187.3 million, from these amounts only 9% was recovered. In its
last report (2006/2007), the General Audit Chamber stated that the amounts stolen were SUD
364.9 million, from these amounts only 6.6% was recovered. The states in Southern Sudan
should be examined and audited by the separate Auditor General Chamber of the
Government of Southern Sudan, which established after the peace agreement of January
2005. Date on administrative corruption detected in southern states is not yet available.
Regarding government-owned banks or those the government has a share of not less than
20% of their capital, the GAC’s report of 2006/2007 revealed that the amounts stolen from
these banks were SUD 40 million (US$ 160000).
The Auditor General in a speech to the National Assembly in January 2008 regarding the
audit report of 2006/2007 mentioned that some government units in the Ministry of Internal
Affairs and at Nahr Alneel State prevented the General Audit Chamber’s auditing teams from
examining and auditing the accounts.