CAG reveals improvement in public expenditure, but…

Under normal procedures, after being presented to the President, the Head of State later presents the CAG’s report to Parliament for debate and resolutions.

One of the most notable findings in the 2023/24 report is the significant improvement in audit results compared to the previous year.

According to Mr Kichere, 99 percent of the entities audited received a clean bill of health, indicating sound financial practices and transparency within government bodies. This is a remarkable improvement, as only a few public institutions had dubious or adverse audit opinions.

During the review period, the CAG’s office conducted a total of 1,485 audits, which included 1,301 financial audits, 15 performance audits, and 52 special audits.

The special audits were notably significant, with 44 of them being requested by various bodies, including investigative agencies, Parliament, and the CAG’s own office.

The summary of the audit report highlighted the overall success achieved during the period, with only four entities registering adverse audit opinions—an improvement from previous years.

Among the entities that received less favourable audits were the Keko Pharmaceutical Factory, the Tanzania Tea Board, the National Sugar Institute and the Tanzania Posts Corporation. These are all public institutions, and the negative opinions on their financial practices raised concerns about their financial management. Additionally, local entities such as the Arumeru District Council and the Health Fund were also flagged for receiving adverse audit certificates in relation to their development projects.

Tax collection: A mixed bag of success

The CAG’s report summary also covered the performance of the Tanzania Revenue Authority (TRA), highlighting a mixed success in tax collection for the 2023/24 financial year.

Tax collections contributed a substantial 56 percent of the total government revenue, amounting to Sh26.07 trillion.

This represented an increase of Sh3.49 trillion, or 15.46 percent, compared to the Sh22.58 trillion collected in the previous year. While this growth is impressive, the total collections still fell short by Sh659.61 billion —approximately 2.5 percent of the projected total tax revenue for the year, which was set at Sh26.725 trillion.

Despite this shortfall, Mr Kichere praised TRA for its efforts in improving revenue collection and noted that the agency had come close to achieving the government’s targets. The total tax revenue contributed significantly to the national budget and helped fund critical government projects.

In a positive development, Local Government Authorities (LGAs) surpassed their revenue targets for the year. LGAs collected a total of Sh1.23 trillion, exceeding the projected figure of Sh1.14 trillion.

Out of 182 councils, 110 exceeded their targets, while 72 councils fell short of their revenue expectations. However, the CAG pointed out that several councils, including Dar es Salaam City Council, Kinondoni, Ubungo, and Mwanza, faced significant shortfalls in their revenue collections.

For example, Dar es Salaam was expected to collect Sh15 billion but only managed Sh3.4 billion, while Kinondoni collected only half of its target. Further analysis revealed that unresolved tax cases, amounting to Sh9.85 trillion , remained a major issue for TRA.

There were 1,186 pending tax cases valued at Sh9.83 trillion that had not been resolved in the tax courts.

The CAG recommended greater oversight and better management of contracts and agents in local authorities to improve revenue collection efficiency.

Government debt: Still sustainable despite increase

Another key aspect of the CAG’s report was the country’s growing government debt. As of June 30, 2024, Tanzania’s government debt had risen to Sh97.35 trillion, marking a significant increase of Sh15.1 trillion from the previous year’s Sh82.25 trillion.

Despite this rise, Mr Kichere assured the public that the government’s debt remained sustainable, thanks to positive economic indicators.

The CAG explained that the government’s external debt stood at Sh65.4 trillion, while domestic debt amounted to Sh31.95 trillion.

The debt as a percentage of gross domestic product (GDP) was 41.1 percent, well below the 55 percent limit set by the government.

Furthermore, the real value of external debt accounted for 23.6 percent of GDP, well below the 40 percent threshold. Debt servicing, both as a percentage of government revenue and export earnings, also remained within manageable limits.

Mr Kichere reassured Tanzanians that the government’s debt management strategies were effective, with debt servicing accounting for only 14.5 percent of government revenue—below the 18 percent threshold—and 127.5 percent of export earnings, well under the critical 180 percent limit.

President Hassan welcomed the CAG’s report, commending the government for maintaining sustainable debt management while continuing to pursue development projects.

Losses in key government corporations

The CAG’s report also examined the financial performance of several state-owned corporations, with a particular focus on two major entities – Air Tanzania Company Ltd (ATCL) and Tanzania Railways Corporation (TRC). Both corporations reported significant losses for the 2023/24 period.

TRC incurred a loss of Sh224 billion, which Mr Kichere attributed to prolonged heavy rains lasting nearly four months and a shortage of locomotives and carriages.

The CAG further explained that the audit was conducted before the commencement of operations for the standard gauge railway (SGR), which began in June 2024, and which is expected to improve TRC’s performance moving forward.

Air Tanzania, on the other hand, recorded a loss of Sh91.8 billion, a 62 percent increase in losses compared to the previous year.

Despite receiving a Sh100 billion subsidy from the government, ATCL faced operational challenges due to extended repairs on its Airbus fleet, which resulted in grounded planes and operational bottlenecks.

The CAG’s report also revealed losses in other state-owned entities, including the Tanzania Telecommunication Company Limited (TTCL), the Tanzania Posts Corporation, and East Africa Cables, which all struggled financially during the year.

Recommendations for improvement

In light of these financial challenges, the CAG made several key recommendations for improving the performance of government entities.

For tax collection, Mr Kichere urged local authorities to strengthen oversight on revenue collection, particularly through better contract management and the implementation of compensation clauses for revenue agents who fail to meet targets.

He also recommended that government corporations undergo restructuring and review their operational strategies to improve efficiency and financial sustainability.

For example, ATCL and TRC must address their operational inefficiencies, particularly in terms of fleet maintenance and infrastructure development, to avoid further losses in the future.

The CAG’s audit report for 2023/24 paints a picture of significant achievements in terms of tax revenue collection and financial transparency, but also highlights critical challenges, especially in terms of government debt and the performance of state-owned corporations.

While the country has made substantial progress in managing its financial health, more work is needed to address systemic issues in revenue collection and improve the financial performance of key public entities.