LESOTHO: 2008 FISCAL TRANSPARENCY REPORT

UNCLAS MASERU 000089

SIPDIS

SIPDIS

DEPT ALSO FOR EEB/IFD/OMA (ANDREW SNOW AND RICHARD FIGUERA),
AF/EPS (ANN BREITER AND ALLIOT REPKO),AF/S (AARON HALL)

E.O. 12958: N/A
TAGS: EAID ECON PREL LT
SUBJECT: LESOTHO: 2008 FISCAL TRANSPARENCY REPORT

REF: STATE 16737

In response to REFTEL, Embassy Maseru submits the following
information regarding fiscal transparency in Lesotho.


1. SUMMARY: The Government of Lesotho is committed to fiscal
transparency and accountability and works closely with the IMF
and the World Bank on the issue. Lesotho currently lacks the
capacity with regards to internal financial controls necessary
for top tier financial reporting, especially in the area of
publishing the nation's public accounts audits annually.
However, the Government of Lesotho has launched recent
initiatives to reform public financial management programs. The
GOL introduced new procurement regulations in 2008 which require
increased transparency, including advertising of tenders on the
Internet. The existing financial information system, GOLFIS, is
to be replaced by a more integrated system, referred to as
IFMIS, later this year. In addition, Lesotho participates in
the IMF/World Bank General Data Dissemination System (GDDS) to
improve the quality, coverage, timeliness, and dissemination of
Central Government fiscal information. END SUMMARY.


2. Within the Government of Lesotho, fiscal management
responsibilities are allocated through a division of authority
between the executive, legislative, and judicial branches.
Within the executive branch, government fiscal management is
regulated by Finance Orders Act of 1988 and Financial
Regulations Act of 1973. These laws divide financial and
accounting responsibilities between the Ministry of Finance, the
government's central financial agent, and other governmental
agents requesting such services.


3. GOL budget documents are publicly available on the
government's website. These budget documents provide an
adequate overview of the fiscal operations of the central
government. Such budget documents provide an annual estimate of
revenues, expenditures, and financing requirements as mandated
by the Finance Orders Act of 1988. GOL budget documents cover
three years: the relevant fiscal year, the previous fiscal year,
and one year of future budget projections. Though the budget as
published does not project allocations for additional future
years, such projections are included in Lesotho's Medium Term
Expenditure Framework (MTEF).


4. While the budget is comprehensive in its coverage of
expenditures and revenue, reporting on certain expenditures
(such as contingency and extra budgetary funds) is not complete.
Contingency liabilities are not reported in the budget as this
is not a requirement under the 1988 Finance Orders Act.
However, the law requires that the Auditor General (AG) prepare
and transmit annual accounts statements, including a report of
receipts, payments, and contingency liabilities. The AG audit
report is presented by the Minister of Finance to the National
Assembly. The latest available Audit Report on Public Accounts
is for the Fiscal Year 2002/2003.


5. The budget and accounts classifications are generally
consistent with "GFS 1986 Manual" economic and functional
classifications. The GOL is working to improve the coverage and
timeliness of fiscal reports. The Ministry of Finance and
Development Planning has begun a public finance management
reform program with the support of DFID, the World Bank, and
Irish Aid. In October 2008, the GOL will introduce an
integrated financial management system, or IFMIS, to improve
fiscal data reporting monitoring and control.


6. The Ministry of Finance also recently introduced a new
government procurement system to improve transparency and
decentralize procurement functions from the Ministry of Finance
to the various line Ministries. Technical capacity for
Government staff is being built in this area through the
Chartered Institute of Purchasing and Supply (CIPS),a UK-based
NGO, with financial support from DFID and World Bank. In
addition, Lesotho subscribes to the IMF/World Bank General Data
Dissemination System (GDDS) project to improve the quality,
coverage, timeliness, and dissemination of Central Government
fiscal information. Lesotho's GDDS data is posted on the IMF
external website.


7. Lesotho has no bilateral USAID mission and there are no
current U.S. government programs that promote accurate
disclosure of revenues and expenditures in the national budget.
However, in the coming months, a long-term U.S. Treasury
Department will arrive to work with the Lesotho revenue
Authority on a broad range of fiscal issues.

NOLAN