Document of The World Bank Report No: ICR3193 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H2100 and TF093959) ON AN IDA GRANT H2100-TP IN THE AMOUNT OF SDR 4,830,950 MILLION (US$7.0 MILLION EQUIVALENT AT APPROVAL) AND A MULTI DONOR TRUST FUND TF093959 IN THE AMOUNT OF USD 25.1 MILLION TO THE DEMOCRATIC REPUBLIC OF TIMOR-LESTE FOR THE PLANNING AND FINANCIAL MANAGEMENT CAPACITY BUILDING PROJECT July 31, 2014 Global Governance Practice Group East Asia and Pacific Region CURRENCY EQUIVALENTS (Exchange Rate Effective June 30, 2014) Currency Unit = US Dollars 1.00 SDR = US$ 1.55 US$ 1.00 = 0.65 SDR FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Services Institutional Development and Capacity IDCBP AAPs Annual Action Plans (s) Building Plan Australian Customs and Border Protection IEG Independent Evaluation Group ACBPS Service International English Language Testing IELTS ADB Asian Development Bank System ASYCUDA Automated System for Customs Data IFC International Finance Cooperation Australian Agency for International Integrated Financial Management AUSAID IFMIS Development Information System BETF Bank Executed Trust Fund IMF International Monetary Fund CAS Country Assistance Strategy Instituto Nacional dan Administração INAP Consultative Council on Financial Pública CCFM Management International Public Sector Accounting IPSAS CCT Critical and Creative Thinking Standards COA Chart of Accounts ISRs Implementation Status and Result Report Country Policy and Institutional IT Information and Technology CPIA Assessment KPI Key Performance Indicator CPS Country Partnership Strategy LELI Lorosae English Learning Institute DBS Data Base System M&E Monitoring and Evaluation DFA Direct Funding Agreement MDTF Multi Donor Trust Fund DFAT Department of Foreign Affairs and Trade MoED Ministry of Economy and Development DG Director General MoF Ministry of Finance DGGS General Directorate of Corporate Services MoPF Ministry of Planning and Finance General Directorate of Policy Analysis and MOU Memorandum of Understanding DGPAR Research NDHR National Directorate of Human Resources General Directorate of Revenue and National Directorate for the Management of DGRC NDMES Customs External Support DN Directorate National NDP National Development Plan Development Policy Coordination NOL NO Objection Letter DPCM Mechanism NPV/ Net Present Value/ Economic Internal Rate DPMU District Program Management Unit EIRR of Return EU European Union NZAID New Zealand Aid Financial Management Information PAD Project Appraisal Document FMIS Systems Permanent Commission for Quotations and PCQT FY Fiscal Year Tender GDP Gross Domestic Product Permanent Commission for the GGP Global Governance Practice PCRSAP Recruitment and Selection Advisers and GoTL Government of Timor-Leste Professionals HCDF Human Capital Development Fund PDO Project Development Objectives HR Human Resources PDP Professional Development Program IBPs Integrated Border Posts Public Expenditure and Financial PEFA Implementation Completion and Results Accountability ICR Report PER Public Expenditure Review IDA International Development Association PF Petroleum Fund PFM Public Financial Management SMA Senior Management Adviser Public Financial Management Capacity SOP Standard Operating Procedures PFMCBP Building Program SPM Senior Program Manager PIO Project Implementation Officer STAN Sekolah Tinggi Akuntansi Negara PIU Project Implementation Unit TA Technical Assistance PM Prime Minister TF Trust Fund QALP Quality Assessment of Lending Portfolio TIN Tax Identification Number RETF Recipient Executed Trust Fund TL Timor-Leste SDP Strategic Development Plan TOR Terms of Reference SDR Special Drawing Rights TTL Task Team Leader Servico de Registo e Verificacao UN United Nations SERVE Empresarial UNDP United Nations Development Program Support and Improvement in Governance UNTL Universidade de Timor-Leste SIGMA and Management (SIGMA) USD United States Dollars Standard Integrated Government Tax WB World Bank SIGTAS Administration System GGP Senior Director: Mario Marcel Cullell Country Director: Franz Dress-Gross GGP Manager: Jim Brumby Project Team Leader: Hans Anand Beck ICR Team Leader: Hans Anand Beck ICR Primary Authors Christine Wong/Hans Anand Beck DEMOCRATIC REPUBLIC OF TIMOR-LESTE PLANNING AND FINANCIAL MANAGEMENT CAPACITY BUILDING PROGRAM CONTENTS 1. Project Context, Development Objectives and Design ........................................................................ 1 2. Key Factors Affecting Implementation and Outcomes ........................................................................ 4 3. Assessment of Outcomes ..................................................................................................................... 9 4. Assessment of Bank and Borrower Performance ............................................................................... 19 5. Lessons Learned ................................................................................................................................. 21 6. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .................................... 21 Annex 1. Project Costs and Financing ........................................................................................................ 23 Annex 2. Outputs by Component................................................................................................................ 25 Annex 3: Summary PEFA scores and Economic and Financial Analysis .................................................. 38 Annex 4: Bank Lending and Implementation Support/Supervision Processes .......................................... 44 Annex 5: List of International and National TA funded under PFMCBP ................................................. 48 Annex 6 : Stakeholder Workshop Report and Results .............................................................................. 52 Annex 7: Summary of Borrower's ICR and/or Comments on Draft ICR .................................................. 53 Annex 8 : Comments of Cofinanciers and Other Partners/Stakeholders ................................................... 59 Annex 9 : Results Framework analysis ...................................................................................................... 60 Annex 10 : List of Supporting Documents ................................................................................................ 68 Annex 11 : MoF Organizational Structure ................................................................................................. 69 Figure 1: Timor-Leste growth and poverty reduction (WB estimates) ....................................................... 11 Figure 2: Distribution of PFMCBP budget by program component .......................................................... 38 Figure 3: Capital spending projections (US$ million) ............................................................................... 39 Figure 4: Recurrent spending projections (US$ million) ........................................................................... 39 Figure 5: Petroleum Fund in 2012 ............................................................................................................. 40 Figure 6: Evolution of domestic revenue (US$ million)............................................................................ 40 Figure 7: Non-oil fiscal deficit % non-oil GDP ......................................................................................... 40 Figure 8: Expenditure contributions to non-oil Economic Growth............................................................ 41 Figure 9: Summary PEFA scores ............................................................................................................... 43 MAP ………………………………………………………………………………………………….…. 71 DATA SHEET A. Basic Information Planning and Financial Country: Timor-Leste Project Name: Management Capacity Building Program Project ID: P092484 L/C/TF Number(s): IDA-H2100,TF-93959 ICR Date: 07/23/2014 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: TAL Borrower: TIMOR-LESTE Original Total USD 7.00M Disbursed Amount: USD 7.43M Commitment: Revised Amount: USD 7.00M Environmental Category: C Implementing Agencies: MINISTRY OF FINANCE Cofinanciers and Other External Partners: AUSAID/DFAT, EU - Commission of the European Communities, Irish Aid, NZ-MFAT and Norway Ministry of Foreign Affairs B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 01/31/2005 Effectiveness: 11/15/2006 11/15/2006 02/19/2010 Appraisal: 11/08/2005 Restructuring(s): 05/19/2011 10/15/2012 Approval: 03/21/2006 Mid-term Review: 06/04/2010 Closing: 07/10/2011 01/31/2014 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Low or Negligible Bank Performance: Moderately Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Quality at Entry: Government: Not Applicable Unsatisfactory Implementing Quality of Supervision: Satisfactory Not Applicable Agency/Agencies: i Overall Bank Overall Borrower Moderately Satisfactory Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating Performance any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any time Quality of Supervision Yes None (Yes/No): (QSA): DO rating before Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 95 95 Sub-national government administration 5 5 Theme Code (as % of total Bank financing) Administrative and civil service reform 29 29 Macroeconomic management 14 14 Other accountability/anti-corruption 14 14 Public expenditure, financial management and procurement 29 29 Tax policy and administration 14 14 E. Bank Staff Positions At ICR At Approval Vice President: Mario Marcel Cullell Jeffrey S. Gutman Country Director: Franz R. Drees-Gross Xian Zhu Practice Manager: James A. Brumby Barbara Nunberg Project Team Leader: Hans Anand Beck M. Helen Sutch ICR Team Leader: Hans Anand Beck ICR Primary Authors: Christine Wong/Hans Beck F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) Sustainably strengthened planning, budgeting, public expenditure management and revenue administration for growth and poverty reduction, with emphasis on efficiency, effectiveness, accountability, integrity and service culture, and transparency. ii Revised Project Development Objectives (as approved by original approving authority) Capacity in the Ministry of Finance strengthened for prudent, effective and accountable planning and management of public finances to promote growth and poverty reduction. (for project indicators see Annex 9) G. Ratings of Project Performance in ISRs Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 06/28/2007 Unsatisfactory Unsatisfactory 1.42 2 10/20/2007 Unsatisfactory Unsatisfactory 2.17 3 07/11/2008 Moderately Satisfactory Moderately Unsatisfactory 3.73 4 06/01/2009 Moderately Satisfactory Moderately Satisfactory 7.23 5 06/11/2010 Moderately Satisfactory Moderately Satisfactory 7.31 6 05/23/2011 Satisfactory Satisfactory 7.31 7 04/09/2012 Satisfactory Satisfactory 7.31 8 04/15/2013 Satisfactory Satisfactory 7.40 9 11/12/2013 Satisfactory Satisfactory 7.43 10 06/13/2014 Moderately Satisfactory Moderately Satisfactory 7.43 H. Restructuring (if any) ISR Ratings at Amount Restructuring Board Approved Restructuring Disbursed at Reason for Restructuring & Key Date(s) PDO Change Restructuring in Changes Made DO IP USD millions 02/19/2010 Y MS MS 7.31 For details see section 1.7 05/19/2011 MS MS 7.31 For details see section 1.7 10/15/2012 S S 7.40 For details see section 1.7 Note: For details of combined IDA and MDTF disbursed amounts see Annex 1. If PDO and/or Key Outcome Targets were formally revised (approved by the original approving body) enter ratings below: Outcome Ratings Against Original PDO/Targets Moderately Unsatisfactory Against Formally Revised PDO/Targets Satisfactory Overall (weighted) rating Moderately Satisfactory iii I. Disbursement Profile iv 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal At independence in 2002, the new Democratic Republic of Timor-Leste inherited the daunting task of rebuilding a state from the ground up. Occupation and conflict left behind poorly functioning and understaffed government institutions, and destroyed most of the basic infrastructure. Human resources were also depleted as professionals, both in the public and private sectors, fled the country. Since then, Timor-Leste made progress in establishing the institutions of the state and credibly emerged from a crisis of internal violence and political upheaval in 2006/7. It created hard-won political stability and deployed its nascent state architecture to increase tangible services for the population, fostering credibility and confidence in government. Nevertheless, capacity remains weak and the government has identified the strengthening of institutions as a priority area of assistance to improve service delivery and outcomes. Timor-Leste faced a rapid expansion in petroleum sector revenues in the mid-2000s, allowing budgeted expenditures to rise very dramatically from $89m in 2006 to $1082m in 2013. This expansion was placing tremendous pressure on the GoTL’s weak public financial management system at a time when the country had an acute shortage of qualified technical expertise and difficulties in recruiting the key personnel that would form the backbone of the public finance management function. World Bank involvement in the Planning and Financial Management Capacity Building Project (PFMCBP) stems from the global knowledge the Bank brings to bear in public financial management, its experience in thin capacity, post conflict environments, and its coordination capability. The Bank’s involvement in the project was consistent with its overall assistance program as outlined in the Country Assistance Strategy (CAS), which recognized institutional capacity development as the “the Achilles’ heel of donor assistance 1 in Timor-Leste. The Program was designed to provide a single umbrella for all PFM capacity-building activities in the then-existing Ministry of Planning and Finance (MoPF). Donors, including IDA, would finance the overall Program through a pooled arrangement to avoid stand-alone and unconnected initiatives. The pooled arrangement included a Multi Donor Trust Fund (MDTF) and the alignment of donor support outside the MDTF with the overall Program. The PAD outlined a contingency plan for the use of IDA Grant (SDR 4,830,950 or US$7.0 million equivalent) if donors decided not to directly finance or co- finance the Program. In fact, PFMCBP was solely funded by an IDA Grant from 2006 to 2009. The MDTF Grant agreement was signed on March 18, 2009, gathering commitments from Australia, the EU, Ireland, New Zealand, and Norway. 1.2 Original Project Development Objectives (PDO) and Key Indicators Original program development objective: Sustainably strengthened planning, budgeting, public expenditure management and revenue administration for growth and poverty reduction, with emphasis on efficiency, effectiveness, accountability, integrity and service culture, and transparency. 1 Original PAD 1 Original overall outcome indicators 2: (i) Annual combined sources budget, including medium term fiscal framework, reflects petroleum savings policy and is consistent with sustainable growth and poverty reduction; line ministry budgets framed by sector performance indicators; (ii) Budget execution improved; (iii) Revenue performance improved as indicated by audits of petroleum companies and reduced clearance time for customs; (iv) Accountability, integrity and service culture strengthened; (v) Transparency improved as indicated by publication of budgets, execution reports and audited accounts; (vi) Sustainability improved as indicated by the increasing recruitment of local staff, phasing out of international advisors and staff performance assessments. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO was formally revised during implementation. Restructuring (level one): Rapidly growing oil revenues and government spending with low capacity, combined with a full restructuring of the Ministry of Finance, meant a rapidly evolving environment for the program. The Program underwent a level one restructuring in 2010 to allow greater flexibility and simplicity. The main reasons for Program restructuring were as follows: • Reorganization of the MoF: Responding to a request from the Minister of Finance to realign the Program with the new organizational structure of the MoF; • Revision of the Results Matrix: The original Results Matrix had over 60 indicators, making it difficult to monitor progress. The revised Matrix set out one PDO-level indicator and six intermediate outcome indicators. • Reduction of the scope and complexity of the Program: The restructuring focused Program support on the MoF and withdrew plans for direct support to line ministries, autonomous agencies or district entities, to consolidate results at the core central level; • Refocusing of support to enhance capacity building: The original PAD set out an indicative five- year training plan. This was revised to a more flexible Professional Development Program (PDP) to provide scholarships and training courses to fit the changing needs of the MoF • Strengthening program implementation and supervisor arrangements: This included a re- organization of the PIU and having a Dili- based TTL. Revised program development objective after restructuring: Capacity in the Ministry of Finance strengthened for prudent, effective and accountable planning and management of public finances to promote growth and poverty reduction. 2 This is a summary of the indicators. The original results matrix is attached in annex 2. 2 Intermediate indicators of the restructured project: (i) State Finances: General Budget of the State is prepared in accordance with the budget timetable based on enhanced coordination, quality and realism of line ministry submissions, reflecting government priorities and medium-term fiscal sustainability; (ii) Treasury and procurement functions are managed efficiently and transparently with due regard to accountability and quality of expenditure; (iii) Revenue and Customs: Government revenue functions are administered efficiently and transparently, with improved revenue performance in line with economic developments and compliance; (iv) Policy Analysis and Research: Government policies and budget decisions are better informed by timely economic analysis and projections based on reliable data; (v) Corporate Services: Accountability, integrity and service culture is strengthened by improved performance of core corporate support functions, and enhanced sustainability of MoF operations; (vi) Program Implementation: The Program is effectively implemented through maintenance of operational standards, M&E, and regular reporting on results. 1.4 Main Beneficiaries The scope of the original project spanned ten directorates in the Ministry of Finance, five line ministries and thirteen district agencies. The restructured project re-focused support to the Ministry of Finance and discontinued planned direct support to line ministries, autonomous agencies or district entities since no direct support had occurred beyond MoF at the time of restructuring. 1.5 Original Components The original components were as follows: a) Public expenditure management: planning, budget formulation and budget execution; financial management information system. b) Revenue administration and macroeconomic management: tax administration and petroleum revenue collection; customs; macroeconomic management. c) Program-wide activities: professional leadership, work ethic, basic training, and performance assessment; accountability and transparency in public financial management. d) Support for improvement in governance and management: strategic, transparent and effective management of MoPF and its resources. e) Program implementation: effective implementation of the program by the administration and it directorate. 1.6 Revised Components The following new and/or revised components were established in the restructured project in 2010: i. Support to directorate general of state finances: director general; budget directorate; treasury directorate; procurement directorate; asset management directorate; expenditure review unit. ii. Support to directorate general of revenue and customs: director general; domestic revenue directorate; petroleum revenue directorate; customs directorate. 3 iii. Support to directorate general of policy and research: statistics directorate; macroeconomic directorate; petroleum fund directorate; investment policy and analysis unit. iv. Support to directorate general of corporate services: professional development program; human resources; internal audit; legal; information technology; external communications; management development; strategic planning, policy and change management. v. Program implementation unit: advisor to program implementation officer; financial management; procurement; technical assistance performance management. 1.7 Other significant changes The project has seen three restructurings during its lifetime. The first and most significant one was completed in February of 2010. This was a Level 1 restructuring with a refocus of the project development objectives. MOF requested a formal restructuring of PFMCBP in September 2008 to better align the Program with the new administrative structure of MOF and streamline its activities and results matrix. The main mission to discuss program restructuring occurred in February 2009. Although the mission and Program Paper were finalized in the first half of 2009, the actual restructuring papers were not submitted to the Board until early 2010, to allow the GoTL to deal with objections in the public over PFMCBP consultants’ remuneration. The second restructuring was a Level II restructuring finalized in May 2011. It followed the June 2010 PFMCBP mid-term review, and focused on extending the project closing date from July 10, 2011 to November 30, 2012, for instance to allow completion of activities expected to slow down during the Presidential and Parliamentary elections scheduled in 2012. This extension was not included in the 2010 Level 1 restructuring as some contributing donors needed more time to get management approval for the extension period. The third and final extension of the program to January 2014 was approved on October 12, 2012, to maintain successful implementation of the Strategic Plan, and bridge to a follow-on program from Australia. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry The PAD highlighted relevant lessons learnt from the implementation of large programs in Timor-Leste, and from implementation of other capacity building projects both in Timor-Leste and abroad. The project also “attempts to deal with extreme post-conflict capacity constraints” 3. The design noted the importance of capacity and sound PFM systems when large budget support programs such as the then Trust Fund for East Timor, and the Transition Support Program, are implemented using GoTL’s budget systems and processes. The PFMCBP also incorporated lessons learnt from capacity building projects, noting that “short-term, off-site training programs unrelated to staff work programs and the systems and processes in which they work have not proved very effective in developing sustained capacity 4”. Hence, PFMCBP 3 2008 Quality Assessment Group report 4 Original PAD 4 adopted an approach to capacity building that placed an emphasis on mentoring, ‘on-the-job’ training and competency-based capacity building. Project design assessment As a post-conflict fragile state, with thin capacity, the government of Timor-Leste, and notably its Ministry of Finance, had to necessarily outsource some of its key functions and business processes, while also seeking capacity and knowledge transfer. Given its challenging initial condition (for instance, the Ministry of Finance as late as 2007 had no formally qualified accountants), the project was designed as ‘scaffolding’ to the institution, supporting its professionalization and policy deliverables, that could be moved around the organization as needs were identified. As the 2011 World Development Report on Fragile States and the literature 5on post conflict PFM strengthening suggest, the project would necessarily be the start, not the end of support for institutions that take decades, not years, to be built. Furthermore, it is often necessary to first focus on PFM performance, quickly bolstered by increasing emphasis on capacity building, in very low capacity post-conflict environments, where quick evidence of improvement in delivery of state services, for instance as a peace dividend, is needed. Finally, an economy that relies on public investment for well over half of its non-oil 6 growth between 2001 and 2011, and until the private sector picks up, must prioritize the strengthening of its MoF public financial management systems. Continuing throughout the life of the project, the PFMCBP’s design framework sought to balance technical assistance 7 with direct capacity building. This approach recognized the need to support the GoTL in establishing core PFM systems and processes as the basis for executing expenditure plans and delivering services. At the same time, the project design recognized the need for flexible and needs based capacity building, both on the job and via formal training. In addition, the 2010 Mid Term Review focused the project on organizational development, building the MoF and its systems as a whole, rather than the capacity of individuals alone 8. The ICR supports this overall design framework, and considers the PFMCBP to have been a crucial project for developing Timor-Leste’s core PFM functions. For instance, towards the end of the first restructured period, the Ministry, with project support, released a ‘New Approach’, consistent with the Busan ‘New Deal’ 9 for managing technical assistance (TA) that formally categorized TA roles in (a) Strategic policy and capacity development, (b) operational contractor (essentially in-line staff), and (c) skills development, and captured this in consultants’ terms of reference. As noted the PFMCBP’s design also sought to provide a coordination function by allowing the project to absorb and coordinate other donor PFM capacity building initiatives under one umbrella, including a multi-donor trust fund. The project support staff, with the Directorate General of Corporate Services, played this role, culminating in the creation of the highly recognized National Directorate for Management of External Support (to the Ministry of Finance). The ICR recognizes the importance of this design feature given the extremely low capacity of the GoTL at the time and the large number of donors involved in these reforms. 5 See for instance Public Financial Management Reforms in Post-Conflict Countries, World Bank 2012; and Strengthening PFM in Post conflict Countries: Lessons for PFM Practitioners and Country Programming Staff World Bank December 2012. 6 Non-Oil GDP is the preferred measure of economic activity in Timor-Leste. 7 This was mostly achieved through the placement of long-term technical and capacity building advisers. 8 Anecdotally, several senior managers in the MoF were at one time project staff, including the Vice Minister of Finance, Director General of Corporate Services, and head of the Directorate created to manage development partner assistance to the MoF. 9 The New Deal for Engagement in Fragile States, signed at the Busan high Level Forum for Aid Effectiveness, commits development partners to a new approach, based on the Peace and Stability Goals, and principles of FOCUS and TRUS. These include among others, strengthened country ownership, fragility assessments, increased use of country systems. 5 Project design was adjusted at restructuring in 2010 (as explained in section 1.3). By refocusing the project to support the Ministry of Finance only, and no longer line ministries, the restructuring recognized the need for strengthening PFM systems at a central level, and supporting the role of the Ministry as coordinator of reforms in line ministries. This also recognized the separate preparation of systems-support programs in the Ministries of Education, Health, and Transport (the latter through a road rehabilitation project). The realignment of the project with the new structure within the MoF was also an important change that improved relevance and project performance measurement (see annex 10 for the evolution of the MoF organizational structure). 2.2 Implementation The PFMCBP was implemented over a period of about seven years and two months (Nov 2006 to Jan 2014) with a total project cost estimated at US$31.8 million equivalent 10. The project was approved by the Bank’s Board on March 21, 2006 and became effective 8 months after on November 15, 2006. It closed on January 31, 2014. It is useful to distinguish the two distinctive stages of the project: (i) Stage 1: November 2006 to January 2010 (from effectiveness to first restructuring informed by the 2008 Quality Assessment of Lending Portfolio (see Box 1); and (ii) Stage 2: January 2010 to January 2014 (from first restructuring to completion11). Box 1: QALP-1 Main Findings • A collapse of security and political turmoil soon after the project started diminished the chances of the project working almost immediately. This affected the ability to recruit quality TA, and also the willingness of bilateral donors to cede their PFM programs to PFMCBP. After elections and a coalition government and a new Minister of Finance, there was an almost complete loss of institutional memory about what the project was about and why it had come into being. • Project design was a serious effort to address the situation the Bank found when it was asked by the Government to prevent a collapse of capacity as UN advisers were withdrawn, and to help the government get better results from existing PFM donor interventions. • The restructuring reflects changed conditions on the ground and the need to the GoTL’s revised strategy for PFM reform and capacity building. It is also recognition by the present task team and the government that the original design was too complex. The primary input provided by the project was the recruitments and oversight of a series of international and national advisors, mostly in long-term positions (Annex 5). The project also supported the MoF’s reform strategy and culminated by helping prepare its ‘2011-2030 MoF Strategic Plan’, reflecting the Nation’s 2011-2030 Strategic Development Plan and the New Deal for Aid Effectiveness. The Ministry of Finance was the implementing agency, supported by a Project Implementing Unit (PIU). While early implementation of the project was delayed by a complex structure in a context of thin MoF management capacity, as well as national insecurity, the proactive restructurings brought satisfactory progress. On balance, the project closed with a moderately satisfactory rating. The midterm review (June 2010) was a significant milestone in the project life cycle of PFMCBP. The review confirmed status of progress for each restructured component and provided concrete action steps to achieve the project results for the remainder of the program. The mid-term review recorded the 10 Total program estimate was US$$37.2 million at appraisal (US$7 million IDA and US$30.2 Donors’ pledge amounts). Total final project cost was US$31.8 million equivalent at project closing (US$7.48 million IDA and US$24.32 RETF). 11 The restructured project was due to be completed in July, 2011. It underwent an 18 month no-cost extension and closed in January, 2013. 6 following key findings and recommendations, reiterated in the IEGs assessment of PFMCBP 12. These have improved program implementation: The midterm review discussed three major areas of focus for the remainder of the program: (i) Priorities for the next stage of PFM reforms; (ii) Priorities for the next stage of capacity development; and (iii) Strengthening program management. Priorities for the next stage of PFM reforms Ensure effective and well managed decentralization of spending and procurement controls: The rapid decentralization of controls to line ministries (and eventually to districts) entails significant risks and requires MOF support to help ensure discipline and adherence to fiduciary standards. These risks are heightened by the absence of internal and external audit capacity. The mission recommended prioritizing capacity development of internal audit in MOF and a strategy to build capacity for this across government. The mission recommended that MOF extend client services in critical areas such as Treasury, Internal Audit and Asset Management (including training and standards setting), emulating the experience of the Budget Directorate, and help coordinate external assistance to PFM across the government. Continue to improve core tax and customs administration functions: Strengthening and stabilizing core tax administration functions help address tax avoidance and contribute to the Government’s objective of strengthening non-oil revenue mobilization. Secondly, the mission recommended that MOF consider securing the services of international tax auditors beyond the life of PFMCBP to support field audits of petroleum companies. The Customs Directorate General have received relatively less support from PFMCBP but have a clear agenda of reform with a number of initiatives already underway. Consolidate progress on strengthening policy analysis capability: With the establishment of an Economic Policy and Investment Agency, it is important to ensure that MOF maintains a strong policy analysis capability. Priorities for the next stage of capacity development The mid-term review mission recommended a shift in the program’s approach on capacity development, from a focus on individual competencies towards emphasizing the development of organizational capacity of the Ministry to achieve its goals and objectives. The mission recommended that Corporate Services continue to play a leadership role in this area, building on the achievements made in relation to the draft Strategic Plan, merit-based staff recruitments, the restructuring of the Ministry, and ongoing client surveys. The review recommended increasing the resources for Corporate Services - particularly in relation to its Human Resources Unit, its strategic planning function, and its professional development function. The mission recommended that organizational development should be central to the Strategic Plan. The mission recommended that the Institutional Development Capacity Building Plan (IDCBP) be fully integrated into the Ministry’s own strategy and plans. The mission recommended that a new strategy be prepared for the Professional Development Program (PDP) that prioritized professional training in MOF focused on foundation courses such as management, numeracy, and English skills as well as customized technical training based on Directorates’ standard 12 IEG evaluation of World Bank Timor-Leste country program 2000-2010 (2011) 7 operation procedures. The mission recommended that practical steps be taken to address the challenges presented by language, starting with an official circular from Corporate Services providing guidance on how to implement the official language policy in the Ministry of Finance. Other suggestions included a “language audit‟ to identify key laws and regulations, policy papers and circulars that are not yet available to Ministry of Finance staff in a working language (Tetun or Bahasa). The mission recommended that immediate steps be taken to establish the Internal Audit Unit in Corporate Services. And finally, the mission noted several important issues where Corporate Services needed to actively engage with the Civil Service Commission to improve performance outcomes. These include: the performance regime; the special career regime; the formalization of temporary staff; and the possible introduction of a graduate (‘Young Professional’) program in MOF that has absorbed graduates returning from PDP funded scholarship programs. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization The original M&E results matrix and reporting framework was complex. It had too many indicators, and was hence difficult to manage. However, restructuring, PIU support, and strengthened client MoF ownership reversed this. Restructuring, aligned the original results matrix better with project components, which were in turn closely aligned with the MoF’s organizational and accountability structure. It was also simplified to a smaller and more measurable, set of indicators. There was one indicator at the PDO level and the six intermediate outcomes were measured with 15 indicators at the results level. The new PIU supported reporting, recognizing limited institutional capacity in this area. It also supported the annual report preparation and was a secretariat to the Project Supervisory Committee that met twice a year, chaired by the Minister for Finance with Development Partners. These changes, combined with new management, strengthened GoTL ownership in providing policy direction and evaluating outcomes. By the end of PFMCBP, the project had supported the Ministry’s own results based management system cascading from the MoF Strategic Plan, through its five year and annual action plans, with Key Performance Indicators at the level of Directorates General, and Directorates. These indicators are measurable using real time government financial data in the MoF’s web-based transparency portal, as well as corporate information published in the MoF’s annual report. The project’s results indicators were mapped onto the MoF’s monitoring framework, so reporting on the project became synonymous with reporting on the ministry’s own work program. This synergy reflects best practice in using country systems for M&E, and will necessarily continue under budget support, ensuring sustainability. Building on this experience, the MoF is developing a planning and M&E framework (the Development Policy Coordination Mechanism, or DPCM) for the whole of government that lifts attention to growth, poverty and other key economic indicators set out in the SDP. 2.4 Safeguard and Fiduciary Compliance The program has no environmental or safeguard issues as it did not finance any infrastructure or civil works activities. Capacity within the MoF to undertake effective procurement and financial management was very weak at the start of the project. The risk assessment for financial management was ‘high’ and for procurement ‘substantial’. However, the Government mandated the use of country systems where possible, despite challenges at project appraisal. 8 These efforts have paid off in the long term as the program is being implemented seamlessly using largely GoTL procedures, notably in contract and HR management, payments, and audit. The PFMCBP has also been a vehicle to assist the GoTL in formulating its own guidelines and procedures, for instance a suite of standard operating procedures for everything from hiring, managing and remunerating staff, including TA, to selection of candidates for training. Since the program restructuring, fiduciary compliance has been rated ‘satisfactory’. The project unit should be commended for its diligent monitoring on fiduciary compliance. Mitigating procedures put in place in response to the 2011/12 fraud were implemented carefully. A full reconciliation of financial reports provided the clearest statement to date of the projected closing balance. This allowed an innovative use of some remaining funds whereby selected salary payments previously made from other donor sources, were instead met from the project, by reimbursement. 2.5 Post-completion Operation/Next Phase In 2012, the Minister of Finance requested a new modality of budget support to the Ministry of Finance to follow from the PFMCBP Recipient Executed Trust Fund approach. PFMCBP’s (14 months) extension in November 2012 provided a bridge and seamless transition for MoF’s reform program and TA support. Over the period 2014-2017, Australia and the EU will provide US$25.5m (of which Australia US$15.9m) in ‘Direct Budget Support to the Ministry of Finance. World Bank advisory services will inform the PFM policy dialogue, with PFMCBP funding replaced by direct Australian assistance. In this arrangement, donors will disburse a fixed and variable tranche of funds to the ministry of finance against the MoF’s own Key Performance Indicators from its own Operational Plan. Each year, the MoF’s progress will be verified by a team of independent experts. PFMCBP readied the ministry for this transition, including through accelerated capacity building efforts by the PIU during the final PFMCBP extension. First the project helped prepare the MoF Strategic Plan 2011-2030 containing the overarching set of sustainable policy reforms that budget support could back. Second, it supported professional corporate management systems in the DG Corporate Services that budget support could flow through, including the management and reporting of procurement, contracts and payments. And in terms of HR systems, a ministry wide mapping of staff and their tasks identified skills gaps and a corresponding ministry wide training and TA strategy. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation The PFMCBP’s objective to strengthen the government’s capacity to manage public finances has remained relevant through the life of the project. Reinforcing public finance management and government capacity continues to be one of the key intervention areas of the Country Partnership Strategy (FY13- FY17), which aims at “strengthening institutions for quality of spending and inclusive service delivery”. In particular, the CPS notes that through the PFMCBP the World Bank will continue to “focus on cross- sector public financial management, macroeconomic stability, and budget execution”. The objectives of the PFMCBP are also consistent with Timor-Leste’s Strategic Development Plan (2011- 2030) which prioritizes public financial management reforms, especially in light of the growing public expenditure and investment program. The fourth pillar of the SDP sets out to “improve the capacity and effectiveness of state institutions through civil service reform and good public financial management”, Besides its alignment with the CPS and the national development plan, PFMCBP maintained relevance in design and implementation through the restructuring of the operation in 2010 (see section 1.3). 9 The coordination function of the PFMCBP was also highly relevant to the circumstances of GoTL and the large number of donors involved in PFM reforms in Timor-Leste. It reduced the administrative burden on the GoTL, ensuring that the program placed much less strain on the already stretched capacity of government staff than it would have otherwise. As explained above and in greater detail in section 3.2, the program struck a careful balance between technical assistance and capacity building, thereby maintaining its relevance. Rating: Satisfactory 3.2 Achievement of Project Development Objectives See Annex 2 and Annex 9 for a detailed assessment of results. The ICR contains results updates in relation to the most recent interim project results report, incorporating additional evidence obtained. PDO Indicators Rating: Moderately Satisfactory PDO 13: Capacity in the Ministry of Finance strengthened for prudent, effective and accountable planning and management of public finances to promote growth and poverty reduction. Summary: There are three dimensions to the PDO, namely strengthened MoF capacity, improved PFM; and the promotion of growth and poverty reduction. First MoF’s capacity has been strengthened and it has become a competent, professionally managed institution, ready to receive donor budget support, and with clear plans to tackle its next challenges (for instance in asset management and supporting line ministries.) The MoF now uses fewer PFMCBP international advisors (18 at project closing compared to 45 at inception) to deliver a more ambitious policy agenda under the project. The Institutional Development and Capacity Building Plan (IDCBP) has been implemented and has evolved into a government wide Human Capital Development Fund, which is now a formal part of the state budget, and managed by the Ministry of Education. In the MoF the HCDF meets training needs, including through a new PFM training center. These needs are identified through a staff, task, and capacity mapping exercise completed this year under the project (see below and Annexes 2 and 9). Second, a recent PEFA repeat assessment (see summary scores in Annex 3) showed clear strengthening of PFM from 2010 (already better than 2007) to 2013. Strongest gains were recorded in policy-based budgeting and tax administration, while smaller gains were recorded in internal controls, accounting and recording, external scrutiny and budget credibility. Third as well as improving the management of public resources, the project has also supported an increase in domestic taxes as a share of non-oil GDP, which in turn has facilitated increased government expenditure and increased non-oil GDP growth. In other words, the project has helped transform a weak fiscal sector in Timor-Leste into a significant sector making meaningful investments in the economy for long term growth. Annual growth of 12 percent from 2007-12 in the non-oil economy is among the highest globally and public investment (which is better budgeted than it was previously) has contributed a 13 The ICR assess the post-restructuring PDO. 10 significant share of this. Overall, the project is likely to have had positive effects on growth and poverty reduction, although the size of these effects is difficult to quantify. Figure 1: Timor-Leste growth and poverty reduction (WB estimates) Having started from a very low base, with limited capacity in the Ministry of Finance to execute basic public finance functions, the results framework indicates that the project has had a significant impact on the quality of PFM processes within the MoF, some of which are at an advanced stage compared to other fragile and developing economies. In particular, the institutional advances achieved by the MoF within 10 years (seven of which with PFMCBP support) were described by the 2011 World Development Report on Fragile States as normally taking 15-30 years. These advances include a Treasury Single Account, timely and comprehensive budgets scrutinized by parliament, a comprehensive chart of accounts, and timely audited financial statements presented to Parliament. PFMCBP has been the main coordinating instrument around PFM since 2007, when MoF’s workload increased sharply with higher petroleum receipts and the 2006 crisis. While it is always difficult to identify the specific reasons underlying the success of particular PFM reforms, the mid-term review mission in 2010 found that technical assistance had been an important – and sometimes the crucial – factor in helping the Government respond to urgent needs. It also found that the program had taken a long-term view, for instance through the introduction of an Integrated Financial Management Information System (IFMIS); the strengthening of revenue administration; and the development of a policy analysis capability. Together with the MoF reorganization, these reforms have led to increased clarity over roles and responsibilities, and greater communication across the ministry, with management and staff growing in confidence. Advisers are now only invited to the Senior Management meeting on a case by case basis and the working language is Tetun. The program was also found to have had a positive impact on engagement with the line ministries, the Council of Ministers, and the Parliament. The project complemented policy advice and technical assistance with key analysis: (i) MoF Strategic Plan 2011-2030; (ii) Diagnostic Trade Integration Study; (iii) Procurement Analysis; (iv) Poverty profile; (v) Public Expenditure Review of Infrastructure and (vi) Timor-Leste Living Standards Survey. More recently, the 2013 PEFA report notes that Timor-Leste has continued to make “solid progress” in strengthening PFM and achieving fiscal transparency over the post-restructuring period from 2010 to 2013. It highlights a number of overall achievements that are attributable to the PFMCBP, including: 11 • the strengthening of public expenditure management through simplification and strengthening of treasury systems and processes, and increased delegation of authority to line ministries; • a complete overhaul of budgeting systems with timely budgets submitted within a more prudent fiscal envelope, documentation and financial management legislation; • improved revenue management, including increased transparency in tax administration and reinforcing Petroleum Tax administration; and • a gradual improvement in macroeconomic planning. Additional project supported achievements after the 2013 PEFA cut-off period include: the publication of the first full series of national accounts to 2011, preparation of financial regulations, a budget preparation manual, settling of payment arrears, a clean-up of databases for taxpayers, the preparation of a customs code and infrastructure for border-crossings, and the completion of only the second time release study for port cargo. The PDO points to the ultimate objectives of promoting growth and poverty reduction. The extent to which the PFMCBP contributed to these higher level outcomes depended on the effectiveness of public finances in supporting the implementation of policies, stimulating public investments and funding programs for increasing opportunities and reducing hardship. The project tangibly strengthened the management of public resources, helping to ensure that the budget was well planned in light of government strategy. It also supported an increase in domestic and petroleum tax revenues, which helped to increase the size of the expenditure program. For instance the share of petroleum rents accruing to the GoTL as revenues has increased in the last 7 years, as has the tax to non-oil GDP rate. Improvements in budget execution in the early years of the program also gave rise to continued growth in nominal spending, which directly translated into substantial non-oil GDP growth, and poverty reduction, particularly in urban areas (although budget execution has deteriorated more recently). In conclusion, the PFMCBP has provided substantial pooled funding and coordinated technical assistance to support the MoF and its strategic plans, delivering significant policy reforms, and a more professional institution, capable of managing itself and many more activities in the PFM cycle than when the project began, and with fewer advisors. While substantial progress has been achieved, the regular and sustainable transfer of skills and capabilities has also been beset by numerous challenges, including (see also section 5): • Capacity building was being pursued at the MoF starting from a low skills base, especially for technical functions. As a result, external advisors were at times unable to transfer knowledge to counterparts due to the lack of absorption capacity. Language barriers were also an important constraint that hindered communication between staff and advisors at times. • At times, PFMCBP advisors have had to assume more in-line functions than would otherwise be desired, due to the high levels of pressure to implement the MoF’s increasingly challenging reform agenda. Capacity development of Timorese staff suffered in these cases as advisors took on a direct implementation role rather than primarily focusing on supporting their local counterparts to deliver the task. The TA policy to address this multiple use of consultants was prepared towards the end of the program. • The MoF underwent two major re-organizations through the duration of PFMCBP, first in 2009 and then again in 2013. These organizational changes, combined with other staff movements, have resulted in staff rotations at the technical and managerial levels that moved trained staff to new functions. Although these movements were likely to be beneficial from an institutional development perspective in the medium term, they also resulted in disruptions to day-to-day capacity building work. 12 • Turnover of external advisors posed an additional challenge to capacity building as these movements interrupted the transfer of skills between individuals. Concerns about the effectiveness of capacity building in part reflect deliberate choices over sequencing and priorities and the need to get basic PFM systems in place before focusing on the transfer of skills. However, as the 2013 PEFA notes, this strategy risks creating a system that is heavily reliant on the presence of international advisers. Overall, the extent to which MoF staff are currently capable of independently realizing the objectives of their respective directorates is somewhat variable 14 . For instance, whereas budget planning and statistics functions are operating effectively without TA (including at the management level), other areas such as macroeconomic policy analysis, coordination of treasury operations and financial reporting continue to rely on support from external advisors. Relative to the start point, however, improvements in capacity have been significant across the board. Moreover, the foundation work in capacity building put in place through the various modalities supported by PFMCBP will continue in the next phase through budget support operation and the GoTL’s Human Capital Development Fund (HCDF) - part of the state budget dedicated to government capacity building. This will help ensure the sustainability of gains facilitated by the Program, and allow further improvements in the period ahead. The GoTL PFM Capacity Building Centre has been in operation since May 2013. This facility is to provide a targeted program of training for Ministry staff and public sector employees engaged in PFM activities. The Center will deploy a range of capacity building approaches. Finally, the Ministry Guidelines 01/2013/VGC/MF ensure best use of TA, by hiring them for particular needs, including: strategy and/or policy advisers; skills development advisers; technical advisers; and, technical professionals. Specific achievements relating to the PDO and progress in capacity building can be organized in terms of each of the intermediate outcomes (see Section 1.3 and results indicators in the data sheet): State Finances: General Budget of the State is prepared in accordance with the budget timetable based on enhanced coordination, quality and realism of line ministry submissions, reflecting government priorities and medium-term fiscal sustainability; Budget planning and preparation has been strengthened substantially as a result of support from PFMCBP. Recent budgets have been submitted on time and include multi-year estimates of expenditure and revenue. Fiscal discipline has been maintained, with reductions in the non-oil deficit as a proportion of non-oil GDP, apart from in 2013 when estimated non-oil GDP was revised down sharply. The recent PEFA finds that the annual budget formulation and preparation process is now carried out in a “more informed and orderly manner”. Capacity within the budget directorate has been strengthened, with the 2013 and 2014 budgets prepared with minimal input from external technical assistance. The budget documents are comprehensive (receiving the maximum PEFA score of A), and include highly relevant analysis and are available to the public. 14 See Annex 7 for the MoF’s outline of numerous areas where it no longer relies on foreign advisers. 13 Over the first years of the program, Timor Leste’s budget grew rapidly, resulting in challenges relating to the quality of spending plans. Budgets have declined over the past three years, to be more in line with the Government’s spending capacity, which remains low in line ministries. Despite the decline in budgets, execution rates have deteriorated in recent years, with 2013 showing particularly low rates in capital and development spending. In particular, there are a number of outstanding issues relating to the realism of capital budget expenditure projections. While execution of the recurrent budget remains closer to 90 per cent, infrastructure spending has fallen following the completion of large projects, notably electrification. Budget data indicate that major delays have been observed predominantly within roads, housing, and oil and gas projects, suggesting limited capacity to select and execute large infrastructure projects. Overall, however, measures to improve budget credibility are taking effect. Parliament has held as quarterly hearings on execution and the 2014 budget execution decree law commits to a reduction in the state budget if execution is not projected to reach 75 percent by the end of the third quarter. This more intensive monitoring, combined with lowering of budgets, and continued improvements to execution capacity are likely to mean overall execution rates rise sharply to over 85 per cent in 2014. The budget is submitted on time. It is generally formulated with due regard to Government policy. However, coordination among MOF, Major Projects Secretariat (MPS) and Line Ministries in overall project planning and management remains a challenge. Moreover, control over implementation of the annual budget as a whole has been adversely affected by large mismatches and changes in the allocation of budgetary resources across ministries. As a result, at times the budget has not responded to all policy priorities set forth in the national development plans. On strengthening PFM in line ministries, there has been considerable work to improve coordination between PFMCBP and TA support in the Ministries of Education and Health in particular. The World Bank-supervised programs have now prepared PFM strengthening roadmaps. The 2013 budget submissions in both ministries were within the fiscal envelopes. Treasury and procurement functions are managed efficiently and transparently with due regard to accountability and quality of expenditure Treasury reforms have advanced at a steady pace with support from the PFMCBP. Accounting, payments and reporting processes have been strengthened and a well-supported Financial Management Information System (FMIS) has been developed. The program has been critical in ensuring appropriate design, training and implementation of new FMIS modules, including a fully functional Transparency Module that allows real time monitoring of spending and revenue mobilization, with budget execution rates now defined and included online. The basic payments and reconciliation processes are handled by treasury staff with support and supervision from the technical advisors. Reconciliation of government bank accounts is occurring on a regular basis, albeit with some delay. Timor-Leste is one of the few developing countries to publish government financial statements in accordance with the IPSAS cash basis international public accounting standards. Audited statements are prepared and submitted to parliament, although again with some lags, due to delays in assessment by the court of auditors. Remaining focus areas of reform lie in payments management and financial reporting. An important challenge facing the treasury is the general lack of accounting capacity in Timor-Leste. The MoF is currently investing in training accounting graduates overseas. Sixteen students supported at Indonesia’s Public Accounting Academy (STAN) are being closely monitored by the MoF’s corporate services Directorate General, and will likely be reabsorbed, as other scholarship students, in the new Young Professional Program, set up under the project’s Professional Development Program (PDP). Revenue and Customs: Government revenue functions are administered efficiently and transparently, with improved revenue performance in line with economic developments and compliance 14 Significant improvements have been made in strengthening revenue and customs administration and compliance procedures, with considerable support from the PFMCBP. Government revenue functions are administered efficiently and transparently, with improved revenue performance, as indicated by increasing domestic tax collections as a percentage of non-oil GDP. Indeed, actual revenues have systematically exceeded non-oil revenue projections in recent years, and efforts to reduce these deviations will be necessary to enhance the credibility of the budget. There has also been encouraging progress in strengthening tax administration, including tax audit, legal procedures and public access to tax information. A clean-up of the tax identification number system while linking it to the important creation of a one-stop shop for business registration has helped clarify the tax base. Petroleum tax audits have been introduced and back-taxes claimed in court from petroleum producers. Capital gains tax assessments are now conducted. These measures have contributed to improvements in revenue collection. At the same time, significant capacity gaps exist in several areas such as audit, tax policy and legal reforms and continued support will be needed to institutionalize the procedures underpinning the recent administrative reforms. PFMCBP has supported the progress made on many of the priorities identified in the Customs Reform and Modernization Plan 2008 – 2013, including investments in customs facilities financed through the state budget and the adoption of customs efficiency and modernization processes. A recent Time Release study has shown an improvement in time taken to clear port cargo. A World Bank Group (IFC) customs modernization project will sustain support to complete the customs code and its business processes, and develop a customs brokers association. Policy Analysis and Research: Government policies and budget decisions are better informed by timely economic analysis and projections based on reliable data Economic Policy and Statistics is one of the most technically demanding work programs in the Ministry of Finance yet progress throughout the duration of PFMCBP has been notable and has been appropriately focused on building the foundations of the statistical and economic policy processes. The budget now includes a medium term outlook for economic growth, revenue and expenditure with direct inputs from the directorates for economic policy and statistics through the collection of key economic statistics and the development of Timor-Leste’s macroeconomic model. The MoF has been well supported with external technical assistance through the PFMCBP to both manage and produce key results such as economic and expenditure analysis, national accounts and national surveys. A medium term fiscal framework sets the annual fiscal envelope to start the budget preparation process. Capacity building in statistics has been relatively effective in establishing the capacity for the basic operations with only occasional input (e.g. to design national surveys). Unlike in 2007, the operational management of the 2013/14 Timor-Leste Living Standards Survey will be fully undertaken by the Statistics Office, with quality control and design support from external TA. Economic policy analysis on the other hand, for instance in compiling national accounts, and analyzing poverty, continues to require external support to deliver analytical outputs due to the lack of capacity within the Ministry of Finance. This is an area of work that will continue to require external support in the long term given the technical nature of this area and the persisting capacity gaps. Corporate Services: Accountability, integrity and service culture is strengthened by improved performance of core corporate support functions, and enhanced sustainability of MoF operations The Corporate Services Directorate leads the strategic planning and management functions of the MoF. The Directorate has made progress in areas of high importance to MoF, in particular the preparation and implementation of the MoF Strategic Plan 2011-2030. It also implemented a series of important initiatives to strengthen MoF management with support from PFMCBP including updated Annual Action Plans with key performance indicators to implement the MoF Strategic Plan and the new government Five Year Plan, MoF task and staff mapping exercises, a skills gap analysis, and a formal process for 15 identifying training needs, candidates and courses; a records management system, Standard Operating Procedures. Merit-based recruitment and promotion, and accountability of managers has increased. One of the objectives of the 2010 project restructuring was to refocus support to enhance capacity building efforts to implement civil service reform measures in MoF and enhance Timorese capacity. While the original PAD set out an indicative five-year training plan, the restructuring proposed a Professional Development Program (PDP) under the leadership of the Directorate of Corporate Services. The PDP was to provide scholarships, supplementary scholarships, customized training courses and knowledge exchange activities to staff across all four Directorates General of the MoF. An Institutional Development and Capacity Building Plan (IDCBP) was developed and incorporated in the Strategic Plan of the Ministry of Finance, 2011 to 2030.The PDP helped deliver the IDCBP. Subsequent work led to the development of an operational plan for the Ministry in terms of its 5 Year Plan 2012 to 2017. This Plan included specific key performance indicators for each work unit in the Ministry and this has been the basis of monitoring the reform program that included capacity building initiatives. The ministry deployed a three pronged approach 15to capacity building in line with best practice, namely institutional capacity building; organizational capacity building; and, individual or staff capacity building. Although the IDCBP was part of the Strategic Plan, there was an important element of analysis missing to inform capacity and training needs. The staff mapping analysis was completed only in early 2013 due mainly to ongoing organizational changes. The challenges in managing the implementation of the training plans of 2010, 2011 and 2012 suggests that the Ministry was not ready for this level of integration, nor did it have the appropriate structures to manage such a plan. The effectiveness of the PDP should be assessed in light of these premises. The PDP Secretariat did not have a clear mandate to promote the training programs envisaged under the PDP, it was also operating in a difficult transition period. The movement of staff due to the organizational changes also impacted on the Directorates to formulate their needs assessment for training and capacity building for their staff. Increasingly, there are structures, systems and processes, and the training facilities and leadership that will ensure that sustainable development programs can proceed (e.g. Ministry Training Plan). This includes the PFM Capacity Building Centre that serves all government PFM training needs. The clearest evidence of the impact and sustainability of the PDP, is that the Human Capital Development Fund (US$30m) was created in 2011, on the basis of the PDP in the MoF, to serve whole of government training and capacity building needs. Increasingly MOF sought funding under the Government’s HCDF, rather than the PDP. Despite all these challenges, the achievements of the PDP over the life of the project have been positive overall (see table in Annex 2). The spending on scholarships has been substantial, however, all graduates have integrated into the Ministry. Annex 2 also highlights an example of ‘good practice’ resulting in satisfactory outcome for the Directorate of Customs who has effectively used PDP resources to strike a twinning arrangement with the University of Canberra on a customized training on core customs modules which has benefitted 210 staff members. In summary, capacity building under PFMCBP is not only the PDP. All components of the project contribute to achieving the project development objective. In addition to capacity building through the PDP, it is important to record that the support from technical advisers, also as positive role models, has been significant in terms of capacity building for counterparts. Advisers provided on-the-job training, 15 ICR background paper: Update on Capacity Building in the Ministry of Finance , Democratic Republic of Timor-Leste 16 mentoring, informal and workplace workshops and training sessions. They provided strategic and operational advice to their counterparts, and when the MoF’s KPIs were put in place for all managers, the advisers were required to link their work plans and reporting, not only to their TORs, but also to the KPIs of their work unit, leading to greater accountability. Program Implementation: The Program is effectively implemented through maintenance of operational standards, M&E, and regular reporting on results The breadth of the agenda has meant less progress on some key program objectives such as maintaining policy dialogue with donors; and monitoring and evaluation of program activities. This is in part due to deliberate choices over sequencing and priorities and the need to get basic systems in place. The PFMCBP benefited from a dedicated PIU, Overall, the PIU contributed to the improvement of the management of the project, given the inadequate institutional capacity for project management (see annex 7). However, turnover of staff within the PIU was an important challenge to project management. These challenges were met in part through increased program supervision, as well as greater integration of the PIU into the General Directorate of Corporate Services. By April 2013, the fiduciary staff of the PIU (procurement and financial management) were integrated in the National Directorate for General Administration and Finance and the Senior Program Manager was working closely with the Director General, the National Director for Management of External Support (sharing an office), the Coordinator of Human Resources and the National Director, General Administration. 3.3 Efficiency The PFMCBP was not required to undertake a NPV/EIRR analysis. An economic analysis of the project’s benefits was also not applicable and was not included in the PAD due to the difficulty and complication in defining, measuring and separating specific economic benefits of capacity building projects. Nevertheless, the project was associated with a number of economic benefits for instance in terms of increased revenues and economic expansion through better economic management, especially of public finances. Annex 3 provides a detailed analysis of proxy economic benefits, summarized here. The credibility of the budget has improved as budgets have been moderated in line with spending capacity. While execution of the capital budget has faltered, budget execution in recurrent spending has been high since 2009. But looking ahead, the Government plans to stabilize public expenditure in the following years in line with fiscal sustainability. Improved efficiency in petroleum tax audits has contributed to the growth of the Petroleum Fund. Domestic revenues in 2013 were almost four times larger than in 2006. A better in- house macro-fiscal framework led to a strict fiscal envelope and budget, for greater fiscal sustainability. Public investment has made a large contribution to non-oil Economic growth. But the private sector will need to compensate, as public spending settles at a sustainable level. In terms of costs, an independent review, validated by subsequent program evaluations, found that PFMCBP consultant salaries were within international norms. See also Annex 4 a. 3.4 Justification of Overall Outcome Rating The PFMCBP contributed to strengthening the capacity of Timor-Leste’s Ministry of Finance for public finance management. The PDO remained relevant throughout the life of the project. Progress was made in a difficult context, albeit at an uneven speed across all components. The project contributed to the development of solid public financial management systems and set a sound foundation for further reforms that will be managed directly by the MoF through a budget support arrangement with development partners. In addition, the evidence so far supports the assessment that the capacity building objective and its achievements could be sustained, especially given the government’s ownership and commitment to reform. 17 Based on the rating relevance, effectiveness (PDO) and efficiency, the PFMCBP is rated as Moderately Satisfactory. Revenue Policy, State Corporate Program and Analysis and Finances Services Implementation Customs Research Relevance HS HS HS S S Effectiveness (PDO) S S HS MS S Efficiency HS S HS MS S HS=Highly Satisfactory; S=Satisfactory; MS=Moderately Satisfactory The individual component rating is based on assessments of results indicators (section 3.2 and data sheet); on efficiency section 3.3 including the level of spending vs. planned, during the life of the project. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development While there was not intended to be a direct impact on poverty, gender or social development, PFMCBP was associated with a period of strong economic growth and urban improvements in wellbeing. Insofar as there is some improvement in the government’s capacity to effectively manage public resources, this would result in efficiency gains and better management of public service programs and deliveries. These would in turn translate into better allocation of resources devoted to or relevant for the poverty reduction strategy, and in the delivery of public services to the poor and disadvantaged. (b) Institutional Change/Strengthening The project primarily contributed to institutional strengthening for MoF as discussed in sections 2.2 and 3.2. However, it also contributed indirectly to institutional strengthening for public finance management in line ministries. In addition, by supporting the significant level of transparency in public finances, PFMCBP has indirectly contributed to strengthen government, parliamentary and public oversight, with likely impact beyond the life of the project. (c) Other Unintended Outcomes and Impacts (positive or negative) Donor coordination was improved, making TA as a whole to the ministry, more efficient. After 2006, support for PFM capacity building provided through the PFMCB project was better coordinated among key development partners, better aligned with government priorities, and more consistent with the spirit of the Paris Agreement (IEG 2011 Timor-Leste country program evaluation). 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable. This section is not required for this report as this is a core ICR. 3.7 Assessment of Risk to Development Outcome The main risks to the development outcome concerns sustainability. The risk to Development Outcome is considered ‘low’ given the GoTL’s demonstrated strong ownership, commitment to the PFM reform agenda and to capacity building for all levels of staff, and the participation of development partners in the budget support policy dialogue post-PFMCBP. The focus on recruiting skilled staff and the generous resources allocated to the government’s human capacity development fund support these goals. Although the risk is likely to be low, the likelihood of sustainably attaining an adequate level of capacity with a 18 significant reduction in external technical assistance remains a long-term goal, especially given the relatively small pool of qualified national professionals residing in country. Box 1: A fiduciary and development risk assessment of Timor-Leste’s PFM system was undertaken in 2012 It found that systems are improving relatively fast, reducing inherent fiduciary, development and reputation risks. It also found strong commitment demonstrated from MoF leadership to reform and institutional capacity building, as acknowledged by development partners. In particular, the assessment found that PFM systems improved significantly since 2007, with fiduciary risks falling from high to moderate in the space of 3 years. Supporting evidence for these findings included: i) PEFA Assessments (2007 and 2010); ii) World Bank annual Country Policy and Institutional Assessments (CPIA); iii) Worldwide Governance Indicators; iii) Revenue Watch Index trends; iv) Open Budget Index; v) Corruption Perception Index trends; vi) Ease of Doing Business Ratings; vii) Macroeconomic Indicators; viii) UNDP’s Human Development Indices; ix) External Audits of GoTL’s Financial Statements; and x) service delivery assessments. 4. Assessment of Bank and Borrower Performance 4.1 Bank Performance Early program implementation was slow due to political and social instability, capacity constraints, as well as delays in establishing the Program Implementation Unit, delays in integrating existing bilateral projects into the Program, and insufficient in-country support and supervision from the Bank. However, this underperformance was turned-around by more intensive Bank supervision, including the appointment of a country-based TTL in November 2007, stronger government ownership (with a new Minister of Finance taking strong ownership of the Program following elections in 2007), and Program restructuring. (a) Bank Performance in Ensuring Quality at Entry The Bank worked in partnership with the government and donors on the design and preparation of the project to support the country’s National Development Plan (NDP). The PFMCBP adheres to the 2005 First Full Country Assistance Strategy (CAS) four principles of engagement: building institutional capacity; deepening the results orientation; strengthening transparency and communication; and consolidating and extending strong partnerships established among development partners. The PFMCBP was particularly focused on the good governance pillar of the CAS and on its corresponding outcomes. It also sought to contribute to the service delivery and job creation CAS pillars. The ICR recognizes that this was a far too ambitious agenda and complex project design. At the request of the Government, the project was restructured to (i) realign the program to the MoF reform and organizational process and (ii) simplify the program to allow for more flexibility. On instrument and funding: the pooled arrangement through the MDTF has been pivotal to the success of the program in Stage 2 – but at appraisal the MOU had not been fully endorsed by all donors – this led to delay in mobilization of funding which also contributed to the slow start of the project. Rating: Moderately Unsatisfactory (b) Quality of Supervision In normal circumstances, project implementation should start immediately at effectiveness; however, the country was under civil strife in 2006-07 and a new Government installed in 2007. In fact, implementation only started in early 2008 with IDA resources, the MDTF Grant Agreement to the recipient was signed in March 2009. 19 Early Bank supervision was insufficient for a project and environment of this complexity and the high turnover of task team leaders prior to restructuring may also explain the weak performance of the project in its initial period. Post restructuring, supervision was sustained with regular implementation support missions, including a component-specific topical theme that allowed a deeper substantive analysis of progress and challenges against the results framework. A mission in 2012 helped prepare the design for the approved follow-on World Bank Group customs operation. With a dedicated PIU team in place, financial management and procurement missions were regular. Rating: Satisfactory (c) Justification of Rating for Overall Bank Performance The diligent performance of the Bank Teams post restructuring, including task team leaders based in the field compensates for the limitation in earlier years. According to the ICR guidelines, overall ratings are dictated by the combination of ratings for Quality at Entry and Quality of Supervision. This implies a rating of Moderately Satisfactory for overall Bank performance. Rating: Moderately Satisfactory 4.2 Borrower Performance (a) Government Performance After a slow start, the Government of Timor-Leste took strong ownership of its PFM reform agenda, recognizing the importance of strong fiscal management for sustainable growth. Timor-Leste has world class petroleum revenue management systems, including the Petroleum Fund. But the pace and quality of spending has declined as spending institutions and systems are stretched by a demanding government program. Rating: Moderately Satisfactory (b) Implementing Agency or Agencies Performance The Ministry of Finance has been a strong manager of this program, using it intelligently and effectively to both define and implement its challenging reform agenda. Many, although not all, of the restructured results indicators have been met, and are on an improving trend. However, the reform agenda remains challenging. The MoF has also improved its program implementation, fully utilizing the support from the PIU. Rating: Satisfactory (c) Justification of Rating for Overall Borrower Performance The overall strong ownership by government and the implementing agency, as well as the consistent performance, as well as the willingness to remedy lagging areas, justifies an overall rating of Satisfactory. Rating: Satisfactory 20 5. Lessons Learned Project Specific • The high turnover of international and national advisors in the project (see Annex 5) impacted on the efficient and smooth implementation of the project. • Based on the results assessed in Stage 2 compared to Stage 1, dedicated PIU is highly desirable in a low capacity and post conflict environment. • Equally the high turnover of World Bank task team leaders has contributed to difficulties in managing the project. • Capacity building initiatives should be closely followed with an effective monitoring mechanism that can flag issues as they occur. • Integration of national PIU staff to the Corporate Services should start early in the process to maximize mentoring and transfer of knowledge and skills. • Need to focus on building core MoF capacity to steer national PFM systems and build capacity in line ministries. • PIU effectiveness enhanced when members have clear responsibilities and are co-located with relevant counterparts. • During consultant selection, emphasis should be placed on demonstrated teamwork, communication skills, capacity building skills in adviser selection criteria, together with relevant professional/technical skills. • Quality at entry - a more modest scope at entry to ensure quick wins may have been more prudent and cost effective. General • Continued and embedded long-term support is essential for sustainable capacity building. • The importance of clear government ownership and steering through the Ministry’s own governance structures. • Coordinating PFM donors under one umbrella supports capacity building in fragile low capacity contexts. • Need to balance implementation and capacity building roles of external technical advisors. • Use of country systems for cost effectiveness and sustainability. 6. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies Not applicable. (b) Cofinanciers The overall assessment by donors is that the project has been very effective in achieving its objectives. Co-financiers have noted a continuous improvement in supervision, and rate this as highly satisfactory at project conclusion. Donors with representations in country have voiced appreciation for regular project updates, and rapid responses to information requests. They also appreciate the Bank’s relationship built with co-financiers and the government, to support implementation. 21 A specific area noted for improvement is the need to have a task team leader in country throughout the project life, given the project’s complexity. Donors have also raised concerns about cumbersome World Bank procedures, in particular on procurement. Certain co-financiers have also questioned the long run appropriateness of the Recipient Executed Trust Fund approach in Timor-Leste, instead preferring budget support. (c) Other partners and stakeholders Not applicable. 22 Annex 1. Project Costs and Financing (a) Project Cost by Component before restructuring (in USD Million equivalent) Initial Appraisal Actual/Latest Percentage of Original Components Estimate (USD Estimate (USD Appraisal millions) millions) A. Public Expenditure Management 15.46 2.17 14% B. Revenue Administration and 9.60 2.15 22% Macroeconomic Management C. Program-wide Activities 7.05 0.08 1% D. Support for Improvement in Governance 2.30 1.82 79% and Management (SIGMA) E. Program Implementation 2.80 0.92 33% Total Project Costs 37.21 7.14 19.2% Note: The disbursements before restructuring were made solely from the IDA Grant H2100. Project Cost by Component after restructuring (in USD Million equivalent) Restructuring Actual/Latest Percentage of Appraisal Components Estimate (USD Restructured Estimate (USD millions) Appraisal millions) A. Strengthening Capacity in the General 7.20 7.34 102% Directorate of State Finances B. Strengthening Capacity in the General 6.52 6.29 96% Directorate of Revenue and Customs C. Strengthening Capacity in the General 2.01 4.46 222% Directorate of Policy Analysis and Research D. Strengthening Capacity in the General Directorate of Corporate Services ($6.66M) 13.06 13.64 104% • Professional Development Program ($4.0M) • Program Implementation ($2.4M) Total Project Costs 28.79 31.73 110% Total Project Costs at closing 32.10 31.73 99% Note: The restructuring estimates were more conservative – the confirmed contributions from donors totaled $21.5M for the RETF in 2010 and the IDA Grant was valued at $7.23M. Additional contributions were received later during the life of the project. The final contributions from donors for the RETF plus investment income allocated to the RETF totaled $25.1M. Re-allocations and adjustments within components of the project were made as more funds became available. As discussed in the main text of this ICR, the preparation and appraisal team costed the project based on IDA contribution of US$7.0M equivalent and the pledged amount from donors’ totaling US$27.0M equivalent in 2006. Some of this support came from: (i) the IMF to the Treasury; (ii) the Norwegian government petroleum resource management; and (iii) the Japanese government to Aid Effectiveness. 23 (b) Financing Appraisal Actual/Latest Type of Percentage of Source of Funds Estimate Estimate Cofinancing Appraisal (USD millions) (USD millions) Borrower In kind 0.50 0.50 100% IDA Grant 7.00 7.48 106% MDTF TF93959 RETF 25.10 24.32 97% Note: The GoTL in kind contribution over the life of the project exceeds by far the initial estimate but it is difficult to attribute a monetary value. The MDTF contribution was estimated at $21.5M at restructuring, additional resources of about $4.0M were provided to the program. Parent Trust Fund : 70932 - Multi Donor Trust Fund for the Planning and Financial Management Capacity Building Project in Timor-Leste Contribution Receipts in USD for Recipient and Bank Executed Activities Information is as of 15-Jul-2014 Donor FY08-FY10 FY11-FY13 TOTAL Department of Foreign Affairs and Trade (formerly known as 7,247,000 4,641,750 11,888,750 AusAID) EU-Commission of the European Communities 2,788,450 2,357,775 5,146,225 Ireland - Minister for Foreign Affairs/ Irish Aid 8,212,600 485,000 8,697,600 Norway - Ministry of Foreign Affairs 959,141 0 959,141 New Zealand Ministry of Foreign Affairs & Trade (including 1,000,000 0 1,000,000 NZAID) Total 20,207,191 7,484,525 27,691,716 24 Annex 2. Outputs by Component Stage 1: 2006 to 2010 Stage 2: 2010 to 2014 Link to Intermediate Components’ Structure prior Components’ Structure post to Outcomes to Restructuring Restructuring Public Expenditure Management A. Support to General IO-1: General budget of the State Directorate of State Finances is prepared in accordance with A.1 Planning, Budget • Director General the budget timetable based on Formulation and • Budget Directorate enhanced coordination, quality Budget Execution • Treasury Directorate and realism of line ministries’ • Procurement Directorate submissions, reflecting A.2 Financial • Asset Management government priorities and Management Directorate medium term fiscal Information System • Expenditure review Unit sustainability. IO-2: Treasury and procurement Functions are managed efficiently and transparently, with due regard to accountability and quality of expenditure. Revenue Administration and B. Support to General IO-3: Government revenue Macroeconomic Management Directorate of Revenue and functions are administered B.1.Tax Administration Customs efficiently and transparently, and Petroleum • Director General with improved revenue Revenue Collection • Domestic Revenue performance in line with B.2. Customs Directorate economic developments and B.3. Macroeconomic • Petroleum Revenue compliance. Management Directorate • Customs Directorate Program-wide Activities C. Support to General IO-4: Government policies and C.1. Professional Directorate of Policy and budget decisions are better Leadership, Work Research informed by timely economic Ethics, Basic • Statistics Directorate analysis and projections based on Training, and • Macroeconomic Directorate reliable data. Performance • Petroleum Fund Directorate Assessment • Investment Policy and C.2. Accountability and Analysis Unit Transparency in Public Financial Management Support for Improvement in D. Support to General IO-5: Strengthened Governance and Management Directorate of Corporate accountability, integrity and Services service culture is strengthened by Strategic, transparent • Professional Development improved performance of core and effective Program corporate support functions and management of MoPF • Human Resources enhanced sustainability of MOF and its resources. • Internal audit functions. • Legal • Information Technology 25 Stage 1: 2006 to 2010 Stage 2: 2010 to 2014 Link to Intermediate Components’ Structure prior Components’ Structure post to Outcomes to Restructuring Restructuring • External communications • Management Development • Strategic Planning, Policy and Change Management Program Implementation E. Program Implementation Unit IO-6: The Program is effectively • Advisor to Program implemented through Effective implementation of Implementation Officer maintenance of operational the Program by the • Financial Management standards, monitoring and Administration and IT • Procurement evaluation and regular reporting Directorate. • TA Performance on results. Management Achievements under Stage 1: a) Public expenditure management: FMIS, procurement, and treasury systems and processes have been simplified and strengthened, with an increased delegation of responsibilities to line ministries. This has improved efficiency and enabled a dramatic rise in budget execution — a chronic problem in the past and of critical concern during 2008. Execution of budgeted expenditure has risen from 49% in 2006/07 to 80% in 2008. At the same time, transparency has improved through the reconciliation of MoF records with bank accounts, the extension of Free Balance to line ministries, putting payroll onto Free Balance, and quarterly budget execution reports published on the web. Of note is that this has promoted more active and effective public and parliamentary scrutiny of the budget process. With the assignment of multi-year planning responsibilities to the Ministry of Economy and Development (MoED) from 2007, there has been less direct support from the Program to this function. b) Revenue administration and macroeconomic management: A detailed Customs diagnostic study was completed and now provides the basis for the reform and modernization of the Customs Directorate. The Program has supported a revision of the Customs Code and assisted with the implementation of the Automated System for Customs Data (ASYCUDA). Customs has benefited from strong management, despite very difficult working conditions following the destruction by fire of the Customs building, manuals and records. In the Domestic Tax and Petroleum Revenue areas, the use of the Standard Integrated Government Tax Administration System (SIGTAS) has improved, and a SIGTAS User Support Unit has been set up. Advisors have assisted national staff with desk audits to improve compliance and with tax reconciliations to promote transparency, and a concerted effort is under way to strengthen Petroleum Tax administration. c) Program-wide activities: Support to IT has helped to provide a stable operating platform for government-wide IT applications and support services. In other areas, however, there has been less progress. Much of the support that had been envisaged for the corporate services area (human resource management, leadership strengthening, professional development, internal audit and FM strengthening) has been delayed, largely pending the outcome of current Ministry restructuring (see below). The Program has enabled the MoF to recruit much-needed audit and legal services, but internal capacity remains weak as MoF does not have national legal staff or qualified audit staff. 26 d) Support for improvement in governance and management: The Program actively supported the MoF to prepare and implement an organization change strategy and to develop a new Organic Law for MoF. This has now been approved, setting out the Ministry’s new organizational structure, mandate and objectives. This provides a legal basis for a comprehensive reform program, which includes the strengthening of systems and processes, management and staff, subsidiary legislation, institution building and infrastructure. The Program has supported the design and implementation of an open and transparent process for implementing the reorganization. This has resulted in the appointment of four Directors-General and six National Directors across MoF. e) Program implementation: Over the past 18 months, the PIU has been successful in managing the considerable administrative load in delivering the Program, the finances of which are now managed on Free Balance. The PIU has also helped to re-establish a focus on capacity building through the development of capacity-building plans, which will be consolidated across the MoF over the coming months. A system for evaluating the performance of advisors is in place to monitor their contributions to the achievement of the Program objectives and to underpin performance management. Achievements under Stage 2: Component A: Strengthening Capacity in the General Directorate of State Finances Significant progress has been made in State Finances. In terms of administration, the consolidation of policy and research functions into the Directorate General for State Finances reflects recognition that economic management is almost exclusively a matter of fiscal policy in Timor-Leste, given the dominance of public spending in the non-oil economy. In terms of policy, deliverables included: a 2014 state budget prepared almost exclusively by civil servants; a Citizens Budget; implementation of Financial Management Information Systems upgrades; improvements of the Transparency Portals (e.g. budget execution rates are now defined and included on- line); strengthened control of state assets; improved governance of Autonomous Public Agencies through an audit of their business processes and finances; increased support to line ministries; and completion of cash flow and bank reconciliations. The 2014 budget is smaller than the 2013 budget, which was itself smaller than 2012. This seeks to align with spending capacity, which remains low in line ministries. The Yellow Road workshop held in May 2013 to set the fiscal envelope for the FY14 budget was opened to the public for the first time. The estimate was linked to policy priorities set out in the government's five year plan, and subject to macro-economic objectives including long term fiscal sustainability (spending in line with ESI and domestic revenue) and low and stable inflation. While the final budget presented to Parliament in December 2014 had grown from May 2013, it was still well below the 2013 budget. Budget execution rates have deteriorated, with 2013 showing particularly low rates in capital and development spending. However, this also reflects that spending is less lumpy (e.g. as the generators for the two power plants have now been procured). FMIS upgrades are now handled out of a separate unit, headed by dedicated staff. These upgrades have enabled improved reporting on expenditure (including better monitoring of virements) and revenue mobilization. The Program has been critical in ensuring appropriate design and implementation of new FMIS modules, including a Transparency Module that allows real time monitoring of spending and revenue mobilization. 27 On Procurement, PFMCBP is now open again to providing direct support with the PIU adviser now acting as the procurement adviser for the ministry as a whole. On expenditure review, the World Bank has the approval of the Minister to work on an Infrastructure PER in 2012. Work is now completed (May 2014). On strengthening PFM in line ministries, there has been considerable work to improve coordination between PFMCBP and TA support in the Ministries of Education and Health in particular. The World Bank-supervised programs have now prepared PFM strengthening roadmaps. The area of internal audit has now seen some progress. An international consultant has been appointed within the Ministry, with direct lines of reporting to the Minister. One of the key issues that will need to be addressed is that of mandate: the Office of the Inspector General in the PM's Office is proposing a role for itself in internal audit that would overlap with Treasury. In Summary: General Budget of the State is prepared in accordance with the budget timetable based on enhanced coordination, quality and realism of line ministry submissions, reflecting government priorities and medium-term fiscal sustainability. This outcome indicator is fully achieved evidenced by the publication of a Citizens Budget; implementation of Financial Management Information Systems upgrades and operational guidance; introduction of the Transparency Portals; strengthened control of state assets; improved governance of Autonomous Public Agencies; increased support to line ministries; and completion of cash flow and bank reconciliations. The FY13 budget was prepared with minimal support from external TA. The budget documents are comprehensive, include highly relevant analysis and are available to the public. They also reflect the government's policy priorities but there are some outstanding issues relating to the realism of capital budget expenditure projections. Treasury and procurement functions are managed efficiently and transparently with due regard to accountability and quality of expenditure. Treasury reforms have advanced at a steady pace with intensive support from external technical assistance. The basic payments and reconciliation processes are handled by treasury staff with support and supervision from the technical advisors. Some of the core treasury processes rely external TA, including the management of the payment process, the production of financial statements and the management of the planned deconcentration process. Rating: Satisfactory Component B: Strengthening Capacity in the General Directorate of Revenue and Customs In Revenue and Customs, there has been strong progress in stabilizing core tax administration functions; improving the level of compliance; introducing petroleum tax audits; conducting capital gains tax assessments; and strengthening customs clearance and post-clearance audit. DG Revenue and Customs has made some progress in implementing the recommendations of the 2012 Customs Review mission, notably in establishing a customs brokers association, ongoing training with the Canberra Customs School, and revising the customs code. In addition a Time Release study showed an improvement in time taken to clear port cargo. Together these measures supported improvements in several results indicators, including: Reducing the non-oil fiscal deficit; improving revenue out-turns; and improving the ratio of domestic tax to GDP. The IFC has engaged in this area with a trade facilitation program. This can help keep up reform momentum, as PFMCBP comes to a close. Adviser support in this area has benefited from review. The team of consultants in Revenue is now stronger; the team in Customs remains weak. The SMA essentially plays the role of a lead adviser in Customs. 28 In summary: Government revenue functions are administered efficiently and transparently, with improved revenue performance in line with economic developments and compliance. Significant improvements have been made in strengthening revenue and customs administration and compliance procedures, with considerable support from external assistance. Capacity gaps do remain in customs, mainly relating to downstream operational functions, understanding of tax rules and in the rationalization of the customs legislation. Rating: Satisfactory Component C: Strengthening Capacity in the General Directorate of Policy Analysis and Research There has been good progress in DGPAR. Government policies and budget decisions are better informed by timely economic analysis and projections based on reliable data. Key recent achievements are: (a) New national accounts 2000-2011 published using the income and expenditure method (and value added until 2010); (b) analysis of sources of economic growth; (c) analysis of inflation drivers and prospects; (d) preparation of a fiscal framework and underlying long term growth model. Ongoing improvements to data sources for macro modeling and analysis; (d) analysis and reporting on revenue performance. (e) preparation of the Timor-Leste Living Standards Survey, that should begin in April 2014, and provide data for a full poverty assessment with World Bank assistance. The establishment this year of a Macroeconomic Working Group is a significant step towards evidence based and coherent policy making across government, and testing whole of government economic policy for fiscal sustainability and coherence growth. A comprehensive program of training in the area of macro modeling, analysis and reporting has been put together for domestic staff, and the DG has recruited graduate economists on a consultant basis with support from the ADB. There have been improvements in forecasting both revenue and expenditure - DGPAR has also participated in the preparation of the 2013 Debt Sustainability Analysis. In summary: Government policies and budget decisions are better informed by timely economic analysis and projections based on reliable data. Key recent achievements are: (a) New national accounts 2000- 2011 published using the income and expenditure method (and value added until 2010); (b) analysis of sources of economic growth; (c) analysis of inflation drivers and prospects; (d) preparation of a fiscal framework and underlying long term growth model;(e) ongoing improvements to data sources for macro modeling and analysis; and (f) analysis and reporting on revenue performance. The establishment this year of a Macroeconomic Working Group is a significant step towards evidence based and coherent policy making across government, and testing whole of government economic policy for fiscal sustainability and coherence growth. Rating: Satisfactory Component D: Strengthening Capacity in the General Directorate of Corporate Services The DGCS has made progress in areas of high importance to MOF, in particular the Strategic Plan. The coincidence of a number of initiatives that significantly strengthen MoF management should be noted, including updated Annual Action Plans with key performance indicators to implement the MoF Strategic Plan and the new government 5 year plan, MoF task and staff mapping exercises, a skills gap analysis, and a formal process for identifying training needs, candidates and courses. Accountability, integrity and 29 service culture is strengthened by improved performance of core corporate support functions, and enhanced sustainability of MoF operations. The DGCS has made progress in areas of high importance to MOF, in particular the Strategic Plan. The coincidence of a number of initiatives that significantly strengthen MoF management should be noted, including updated Annual Action Plans (AAPs) with key performance indicators to implement the MoF Strategic Plan 2011-2030 and the new government 5 year plan, MoF task and staff mapping exercises, a skills gap analysis, and a formal process for identifying training needs, candidates and courses. In summary: Accountability, integrity and service culture is strengthened by improved performance of core corporate support functions, and enhanced sustainability of MoF operations. The DGCS has made progress in areas of high importance to MOF, in particular the Strategic Plan. The coincidence of a number of initiatives that significantly strengthen MoF management should be noted, including updated Annual Action Plans (AAPs) with key performance indicators to implement the MoF Strategic Plan 2011- 2030 and the new government 5 year plan, MoF task and staff mapping exercises, a skills gap analysis, and a formal process for identifying training needs, candidates and courses. Rating: Moderately Satisfactory The Professional Development Program (PDP) was introduced by the Ministry of Finance as part of the program restructuring exercise in April 2009 to package many of the various capacity development initiatives identified in the initial Project Appraisal Document (2006). In January 2009, a Secretariat was established, chaired by the Director General Corporate Services and including several heads of department and three advisers. PDP had an allocation of $4.0M at restructuring; the midterm conducted an extensive review of the program in close collaboration with the Directorate of Corporate Services and the HR Advisor. A series of recommendations and actions were agreed for the PDP, these recommendations were largely informed based on analytical work and priority areas identified in the Bitte (former HR Advisor at MoF) report. The PDP focused on four sets of capacity building and skills development activities, namely: scholarships; foundation courses; customized courses and overseas study visits. Scholarships received the largest allocation (51%), followed by customized training (24%) and foundation courses (22%). Due to slow progress and challenges faced in its implementation; a reallocation of its resources went towards the funding of extensions of Advisors’ contract during the restructuring of 2012. At project closing, the PDP had spent US$2.83M with a significant share for the scholarship programs. Some of the challenges faced during implementation: (i) Delayed formulation/implementation of the institutional strengthening and capacity building plan to guide an informed and targeted planning of training and capacity building activities under PFMCBP. The plan was developed and incorporated in the Strategic Plan of the Ministry of Finance, 2011 to 2030, but given the time remaining under the first extension of PFMCBP to July 2011, many activities could no longer be budgeted and instead went under counterpart funding. (ii) Unclear mandate of the PDP Secretariat to promote the program; (iii) Weak planning and monitoring methodologies for the PDP program as a whole which did not allow for timely actions and remedies to resolve issues; (iv) Posting of spending towards right category of expenditures due to high level of turnover staff at the PIU and non-existent handover notes; (v) Inadequate implementation support for this subcomponent. Achievements under the PDP since program restructuring: 30 Following the midterm review findings, the MoF tasked the PDP Secretariat to undertake substantial work on developing both general and technical English language courses, developing customised short- course training to be provided by the University of Timor-Leste, support the ongoing capacity development of the Information Technology Department and integrating training and development into the staff planning processes. The PDP also piloted Basic Accounting Course with the assistance of the PFMCBP Financial Adviser. To date, the supplementary support provided by the MoF has resulted in the graduation of 29 civil servants achieving diploma and master’s degrees. Recent PDP Developments: The PDP has continued to function as the coordination body for all capacity building activities in the Ministry including: training (both domestic and overseas); scholarship and, most recently, the Junior Professional Program. All DGs are represented on the PDP and participate regularly in discussions, particularly those of strategic importance to their respective area of concern. The principal source of funding for staff capacity building activities is now the Human Capital Development Fund (HCDF) that provides support for training, staff development and scholarship programs. It is worth noting that the HCDF utilises Ministry/Government systems, which, while not perfect, provides for sustainable development of robust operating procedures for the Ministry and Government. The Ministry has now established a PFM Training Centre that is responsible for sourcing training providers and coordinating the delivery of PFM training across the Civil Service, This includes support to core-training priorities of the Ministry including the systematic rollout of the Free Balance Financial Management System and the management of overseas training for Ministry staff. The PFM Training Centre also provides operational management of the Young Professionals Program, a recent initiative by the Ministry to recruit and provide professional development to alumni of the various scholarship programs engaged by the Ministry. The Human Capital Development Fund (HCDF) was created in 2011 as a government wide version of the PDP, essentially ensuring the program's existence beyond PFMCBP. However, this also meant that funding for scholarships and training shifted to the state budget. At the same time, failures in the project and senior management of the PDP meant limited uptake. Apart from a highly successful scholarship program, now providing graduate accountants to the MoF, foundation courses were neglected, depriving civil servants of critical basic skills (e.g. basic numeracy). The creators of the PDP has not received sufficient support from consultants or civil servants. In addition, there have been insufficient project design and procurement skills to move ahead with new training programs. 31 Achievements to date for PDP activities funded under PFMCBP Spending at Spending at Specific Outputs and observations on achievements PDP Agreed Categories of Total Spending Stage 1: 2008 Stage 2: 2010 and constraints Activities at Restructuring (US$) to 2009 to end project Source: GoTL report on Capacity Building dated July 2014 All categories $63K $2,773K $2,836K Scholarships $29K $2,502K $2,531K The following scholarships have been awarded: - Masters (overseas studies) - Undergraduate (overseas • Supplementary Scholarships to 67 MoF staff who have now studies) completed their Bachelor and Master’s degree in management, - Undergraduate (in Timor- finance and accounting, in local and Indonesian universities. Leste) • 67 full scholarship for Bachelor’s degree and 15 Master’s Degree. These students went to universities in Darwin and Adelaide, Australia, Jakarta, Indonesia, Bangalore (India), and UNTL (Dili- TL). Areas of study include finance, accounting, IT and statistics. • 9 scholarships for IT studies at Charles Darwin University in Australia. Six (6) of the IT students who were originally sent to India were re-awarded scholarships in this cohort of students 16. • Supplementary scholarships between 2009 and June 2013, which include additional or partial support to help MoF staff complete their studies, were awarded to 173 MoF employees who enrolled to complete their degrees in universities in Indonesia and Timor-Leste. Four (4) scholars finished their studies in 2012/2013 and have since been integrated into the Ministry. This includes one (1) Master in Accounting, two (2) Business Administration and (1) Bachelor in Law from UNTL. To date, the supplementary support provided by the MoF has resulted in the graduation of 59 civil servants. This comprised 35 Bachelor awards and 24 Masters degrees. 16 Thirteen (13) IT students originally enrolled in India returned to Timor-Leste, before the completion of their qualifications, due to accreditation issues with the Institution concerned that arose after the commencement of their studies. They were temporarily integrated in the MoF IT Department while awaiting further scholarship offers to be made. 32 Spending at Spending at Specific Outputs and observations on achievements PDP Agreed Categories of Total Spending Stage 1: 2008 Stage 2: 2010 and constraints Activities at Restructuring (US$) to 2009 to end project Source: GoTL report on Capacity Building dated July 2014 OVERSEAS STUDY VISITS $68K $68K Staff nominated for overseas training (who were assessed by a panel from NDHR and the PFM Capacity Building Centre) were required to meet the following criteria: 1) the relevance of the training to their current work experience; 2) their technical knowledge on the subject matter of the training; 3) knowledge and command of the language in which the training was to be delivered. The following Directorates successfully nominated staff as follows: • Customs: 17 staff (12 male/5 female) • Statistics: 23 staff (17 male/5 female) • Corporate Services: 1 staff (male) • State Finance: 13 staff (8 male/5 female) • Revenue: 2 staff (male) • Treasury: 1 staff (female) • Petroleum Management Unit: 2 staff (1 male/1 female) • g7+ Secretariat: 1 staff (female) Recent knowledge exchange visits with participating candidates endorsed by NDHR and PFM CB panel include amongst others: • Study visit to Canberra for the newly appointed NDMES to meet with AusAID and central agencies; • Study visit to Sydney in relation to archives and records management for the newly appointed archives and records management team (co- shared with DFAT); • Mission to Indonesia to develop an MOU for the provision of training, • Mission to Darwin, Sydney and Canberra to finalize MoU for Customs; • Adviser accompanying Director General Customs to international meetings in Brussels, supporting the contribution of the DG for Timor-Leste. • Joint mission to Malaysia for DPMU, State Budget, National Planning and World Bank on national development planning CUSTOMIZED TRAINING $33K $80K $114K 2011 to 2013: Customs Training Program, provided by the Centre for 33 Spending at Spending at Specific Outputs and observations on achievements PDP Agreed Categories of Total Spending Stage 1: 2008 Stage 2: 2010 and constraints Activities at Restructuring (US$) to 2009 to end project Source: GoTL report on Capacity Building dated July 2014 - Financial Management Customs and Excise from the University of Canberra. Approximately 210 - Revenue and Customs members of the Customs participated in: - Statistics - Microsoft ● 7 cycles of a 3 module Core Customs Training ; - CISCO ● 2 Train-the-Trainer courses; - OTHER ● 3 X 5 day Induction courses for new Customs recruits; ● A series of Customs technical English courses (developed and delivered by LELI); ● A Drug Identification Course for Customs Officers; 2013: Critical, Creative Thinking course for 271 staff. 2013: Leadership management course for 55 staff appointed to management positions under the new Organic Law. 2013: Media Training for members of the Media Unit. Other initiatives worth noting provided through existing TA: • 2011 to 2012: Audit training program, undertaken by Audit and Appeals staff, with focus on revenue collections, registration and taxpayer awareness. • 2012: On-the-job development programs for managers of DN Domestic Revenue, as part of the 2012 Domestic Tax work plans. • 2013: Basic Financial Management Course was piloted with the assistance of the PFMCBP Senior Financial Management Adviser. • Dec 2008 to June 2011: PFMCBP supported training on Free Balance through financing of 30 months of salaries and benefits for a full-time FB Trainer • Capacity Building Guidelines were prepared and provided to PFMCBP advisers as part of their orientation. A number of organizational development tools were developed by the PIU to assist the Ministry and advisers in systematically assessing capacity development requirements and preparing a capacity development plan. These have since been updated and have been incorporated in to the Corporate Services Manual. FOUNDATION COURSES Costs Costs Costs 2012: General English course for 49 participants. Of these, 26 successfully - English aggregated aggregated aggregated completed the course. General English course conducted by INAP to 10 34 Spending at Spending at Specific Outputs and observations on achievements PDP Agreed Categories of Total Spending Stage 1: 2008 Stage 2: 2010 and constraints Activities at Restructuring (US$) to 2009 to end project Source: GoTL report on Capacity Building dated July 2014 - Numeracy with with with participants, of which 6 completed the course. A third General English course - Other Customized Customized Customized was offered to 18 participants, but was canceled due to desistance of the Training. See Training. See Training. See majority. value above. value above. value above. 2012: English for IELTS training in India for the 13 IT scholars; all completed the course successfully. 2012: Administration course for 30 staff. 2012: Computer course for 20 staff. 2013: General English language training for 72 staff in 2013. 2013: Portuguese Language Training for 39 staff. 2013: Basic Accounting training for 11 staff from Corporate Services. PDP SECRETARIAT: $123K $123K One PDP Officer, contracted for 36 months between 2011-2013 CONSULTANTS’ AND ADVISORY Two PDP scholarship advisers contracted for a total of 64 months between SERVICES 2008-2012 Note: The ICR mission was not able to obtain spending numbers for each category of expenditures, aggregate values are used instead. Overall, the spending pattern has focused mainly on scholarships program: $2.5M. The consultants’ and advisory services for the PDP Secretariat were planned and costed under Corporate Services during restructuring. But it is important to capture this spending under PDP for the purpose of understanding the overall effectiveness of this subcomponent. PDP Expenditures by year (US$) PDP Activities 2008 and 2009* 2010 2011 2012 2013 2014 TOTAL Training and workshops 62,771.00 828,411.59 958,471.58 794,104.30 24,647.00 44,627.00 2,713,032.47 Training 33,460.00 16,119.05 5,422.00 48,820.00 9,864.00 113,685.05 Scholarships 29,311.00 812,292.54 953,049.58 736,254.75 2,530,907.87 Study tour 9,029.55 14,783.00 44,627.00 68,439.55 Consultans services* 19,800.00 28,251.77 38,671.46 36,000.00 122,723.23 TOTAL 62,771.00 848,211.59 986,723.35 832,775.76 60,647.00 44,627.00 2,835,755.70 Notes: *estimates based on information from GoTL report and IFR 2009. 35 Component E: Program Implementation Program management has been sustained overall in the last 12 months, and improved in specific areas such as joining the project and MoF own M&E framework. The quality of procurement management has improved over the past twelve months. All this is despite a gap in the first part of 2013 as the ministry took the decision to replace the SPM. Processes, program reporting, and general coordination of advisers have been strengthened. The PIU prepared an Annual Report 2012-13 which firmly linked program and MoF results frameworks. This marked a substantial improvement on previous reporting. In summary: The Program is effectively implemented through maintenance of operational standards, M&E, and regular reporting on results. A dedicated PIU supporting the Directorate of Corporate Services has proved to be key in advancing and supporting the PFMCBP. The project has disbursed close to 98 percent of project funds - thanks to the support services provided by the PIU. Another significant achievement is that the PIU staff is now fully redeployed within the National Directorate of Administrations. However, the PIU has not delivered fully on M&E and quality of reporting due to high turnover of staff at critical phase of project implementation. 36 Original indicators and revised intermediate outcomes under restructuring Original indicators Proposed intermediate outcomes Annual Combined Sources Budget, including Medium- General Budget of the State is prepared in accordance Term Fiscal Framework, reflects petroleum savings with the budget timetable based on enhanced policy and is consistent with sustainable growth and coordination, quality and realism of line ministry poverty reduction; line ministry budgets framed by submissions, reflecting government priorities and sector performance indicators. medium-term fiscal sustainability. Budget execution improved as indicated by: cash Treasury and procurement functions are managed spending > 80% of cash allocations by and beyond efficiently and transparently with due regard to FY08. accountability and quality of expenditure. Revenue performance improved as indicated by: Government revenue functions are administered periodic audits of petroleum companies; reduced efficiently and transparently, with improved revenue clearance time for Customs. performance in line with economic developments and compliance. Accountability, integrity, and service culture Government policies and budget decisions are better strengthened as indicated by: adoption and informed by timely economic analysis and projections implementation by MoPF of a mission statement and based on reliable data. agency codes of conduct; successful implementation of MoPF complaints response function as evidenced by annual report showing number and treatment of complaints; expansion of internal audit function across MoPF and in all program line ministries; improved integrity of tax and customs personnel as evidenced by the adoption of agency codes of conduct and annual public perception survey; improved tax and customs service delivery. Transparency improved as indicated by: publication of Accountability, integrity and service culture is annual combined sources budget, quarterly budget strengthened by improved performance of core execution reports, annual audited accounts, and corporate support functions, and enhanced sustainability management letter, all in accessible form including at of MoF operations. the district level and to Parliament. Sustainability improved as indicated by: recruitment of The Program is effectively implemented, through local staff, especially at levels 5-7; implementation of maintenance of operational standards, monitoring and performance assessment of staff and managers, with evaluation, and regular reporting on results. gradual reduction in international advisors and increase in the responsibilities and duties performed by national managers and staff. 37 Annex 3: Summary PEFA scores and Economic and Financial Analysis Components in PFMCBP are largely of a capacity-building nature, and, as such, it is difficult to quantify rates of return for every aspect of each component. However, Components A (State Finances), B (Revenue and Customs) and C (Policy and Research) have results that can be considered economic benefits. As noted, no economic appraisal was conducted during design. However, we attempt here to describe some economic benefits in Timor-Leste in 2007-2013, attributed to strong economic management by the Ministry of Finance, correlated with project activities. Table 1: Change between 2006 and 2013, selected indicators (US$ million) 2006 2013 Domestic revenue 40.9 149.0 Domestic Revenue % of non-oil GDP 8.8% 9.7% Non-oil fiscal deficit 70.2 931.2 Petroleum Revenue 611.9 2693.0 Share of petroleum rents captured as revenues 26.5% 81.4% Petroleum fund 1347.0 14,951.9 Non-oil GDP 462.6 1534.3* Total GDP 2823.7 6129.0** Source: GoTL, MoF, BB1 2010 and BB1 2014. Notes: *expected value, from BB1 2014. **forecasted value, from IMF Article IV 2013. Figure 2: Distribution of PFMCBP budget by program component (Actual amount paid by 31st March 2014, US$ million) E.PIU, 3.32 A. GDSF, 9.51 D.GDCS, 15.46 B. GDRC, 8.44 C.GDPAR, 4.54 Examples of benefits by program component: Component A: Support to general directorate of state finances: Credibility of the budget has improved as budgets have been moderated towards spending capacity. Capital spending projections (especially in Budget Book 1 for 2013 and 2014, i.e. as of 2012) have been adjusted to reconcile with actual spending (low execution) and budget execution capacity. 38 Figure 3: Capital spending projections (US$ million) 1400 BB1 2008 1200 BB1 2009 1000 BB1 2010 800 BB1 2011 600 BB1 2012 400 BB1 2013 200 BB1 2014 0 Actual 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 While execution of the capital budget has faltered, budget execution in recurrent spending has been high since 2009. But looking ahead, the Government plans to stabilize public expenditure in the following years so that total does not grow above US$1.3 billion 17. Figure 4: Recurrent spending projections (US$ million) 1400 1200 BB1 2008 BB1 2009 1000 BB1 2010 800 BB1 2011 600 BB1 2012 400 BB1 2013 200 BB1 2014 0 Actual 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Component B:Support to general directorate of revenue and customs: Improved efficiency in petroleum tax audits has contributed to the growth of the Petroleum Fund. In 2012, audit activities played a very important role and the revenues resulting from it represented 5% of the fund value in 2012. Nominally, the Petroleum Fund increased by 21% to 1.6bn in 2012. 26% of this was due to audit related activities in respect to the Bayu-Undan Audit. 17 PEFA 2013 recognizes improved orderliness and participation in the annual budget process, due to an orderly annual budget process and more active participation by the executive in the setting and approval of Budget ceilings. 39 Figure 5: Petroleum Fund in 2012 PF in 2012, US$ 11775 million Due to audit related activities in respect to the Bayu-Undan Audit (US$ 640 million) Domestic revenues in 2013 were almost 4 times bigger than in 2006. This represents a 10% increase in the participation of domestic revenue in nominal non-oil GDP from 2006 to 2013. Customs collections increased to USD 59m in 2012 from USD 47m the year before, or an increase of 26%. Figure 6: Evolution of domestic revenue (US$ million) 180 14 160 12 domestic 140 revenue 10 120 (US$ US$ million 100 8 million) 80 6 % 60 4 domestic 40 2 revenue 20 % non-oil 0 0 GDP 2006 2007 2008 2009 2010 2011 2012 2013 2014 Component C: Support to general directorate of policy and research: A better in-house macro-fiscal framework led to a strict fiscal envelope and budget, for greater fiscal sustainability. It also improved the multi-year perspective in fiscal planning, expenditure policy and budgeting. Figure 7: Non-oil fiscal deficit % non-oil GDP 120 100 80 60 % non-oil 40 fiscal balance % 20 non-oil GDP 0 2006 2007 2008 2009 2010 2011 2012 2013 40 Public investment has made a large contribution to non-oil Economic growth. But the private sector needs to contribute more, as public spending settles at a sustainable level. Figure 8: Expenditure contributions to non-oil Economic Growth Table 2: Timor-Leste: Key Indicators 2007 2008 2009 2010 2011 2012 2013 f 2014f 2015f 2016f Output, Employment and Prices Real GDP -6.7 -1.4 7.3 5.7 -3.2 -6.9 1.7 -2.1 (% change y-y) Real non-oil GDP (% 11.7 14.6 12.8 9.5 12 8.3 8.1 8 7.7 8.6 change y-y) Consumer price index (% 0.1 4.5 11.7 13.1 10.6 9.5 8.1 7.1 change y-y, annual average) Public Sector Government revenues (% 75.4 80.8 62.6 64.9 66.5 69.1 59.7 63.6 60.9 63.4 GDP) Domestic Revenue 2.7 1.7 2.8 2.3 1.9 2.2 2.4 3.3 3.7 4.2 Petroleum Revenue 72.6 79.1 51.3 55.3 59.7 62.9 53.4 56.1 53 55 Grants 4.9 4 3.9 4.2 4.2 4.2 Government expenditures 13.5 19.6 31.3 27 23.8 22.1 23.5 26.5 27.5 27.5 (% GDP) Government balance (% 61.9 61.2 31.3 37.9 42.7 47 36.2 37.1 33.4 35.9 GDP) Non-oil government -18 -20 -17 -17 -16 -17 -19 -20 -19 balance (% GDP) Non-oil government -85 -80 -78 -88 -74 -65 -57 -52 -44 balance (% non-Oil GDP) Public sector debt (% 0 0 0 0 0 0 0.7 5.6 11.1 16 GDP) /1 Financial Markets Domestic credit (% -9.8 1.9 1.1 5.9 21.1 20.5 21.2 21.7 .. .. change y-y) Short-term interest rate 15 12.3 11.2 11 11 12.2 … … … … 41 2007 2008 2009 2010 2011 2012 2013 f 2014f 2015f 2016f (% p.a.) Exchange rate (US$/US$, 1 1 1 1 1 1 1 2 … … eop) Real effective exchange 105.2 102.3 105.6 118.1 … … … … rate (2005=100) (period average) (% change y-y) -2.8 3.2 11.8 … … … … Memorandum items: Gross domestic product 1808 3035 3299 4216 5797 6300 6129 5673 5748 5730 (US$ million at current prices) Non-oil GDP 494 635 827 934 1128 1355 1615 1901 2171 2513 Oil GDP 1313 2400 2472 3282 4669 4945 4514 3772 3577 3217 Source: IMF Notes: f = forecast; /1 External Summary PEFA Scores 42 Figure 9: Summary PEFA scores 43 Annex 4: Bank Lending and Implementation Support/Supervision Processes (a) Task Team members WB Unit / Responsibility/ Names Title Other Specialty Lending/Grant Preparation Elisabeth Huybens Country Manager EASPR Country Manager Regional Governance Helen Sutch EASPR Team Leader Adviser Rosa Alonso Sr Public Sector Specialist EASPR Team Leader Adam Nelsson Consultant EASPR Amanda E. Van Kirk Consultant EASPR Alison Vale Gillies Consultant EASPN Consultant Allison Berg Operations Officer OPCCE Operations Support Amanda Green Research Analyst EASPR Analytical Support Bruce Pollock Consultant Australian TF Charles Sampford Consultant Australian TF Development Cooperation, Colin Hicks Consultant Ireland Cristiano Nunes Procurement Specialist EAPCO Procurement David Chandler Sr. FM Specialist EAPCO Financial Management Jan Morgan Consultant AusAID Consultant World Bank Laura Bailey Senior Operations Officer for Fragile States at OPCS Consultant Lynn Yeargin Senior Program Assistant EASFP Administrative/Ops Support Nicholas Drossos Consultant Financial Management Senior Procurement Nurul Alam EAPCO Procurement Specialist Mark Minford Consultant AusAID DFID funded Peter Boulding Consultant consultant DFID funded Peter Brooke Consultant Public Finance Management consultant Roch Levesque Senior Counsel LEGAM Legal Counsel Shilpa B. Pradhan Consultant PRMPS Consultant Tuan Minh Le Economist PRMPS Public Finance At the Implementation stage Country Manager / Team Antonio S. Franco EACDF Task Team Leaders Leader Douglas John Porter Economist EASPR Task Team Leaders Habib Nasser Rab Senior Economist EASPN Task Team Leaders David John Hook Governance Specialist EASPN Task Team Leaders Hans Anand Beck Senior Economist EASPN Task Team Leaders Stephen Paul Hartung Financial Management Sp. EASFM Financial Management Kylie Coulson Sr. FM Specialist EASFM Financial Management David Whitehead Sr. FM Specialist EASFM Financial Management Robert J. Gilfoyle Sr. FM Specialist GGODR Financial Management Jacinda Analyst EASPN Financial Management 44 WB Unit / Responsibility/ Names Title Other Specialty Maria Isabel da Silva Operations Analyst EACDF Financial Management Olivio Euclides Dos Program Assistant EASDF Financial Management Santos Bisma Husen Sr Procurement Spec EASRP Procurement Evelyn Villatoro Sr Procurement Spec EASR1 Procurement Joao Jose Augusto Procurement Specialist EASPN Procurement Gomes Manuela da Cruz Procurement Specialist GGODR Procurement Annabella Scof Consultant World Bank Consultant Anne Morant AusAID consultant AusAID PFM Specialist Bryan Christopher Land Lead Mining Specialist SEGM2 Bryan J. Gorddard Consultant World Bank Consultant Catherine M. Anderson World Bank Consultant EAS Operations Christine Wong Operations Officer EASPR Implementation / CB of PIU Colin Hall WB Consultant EASPN Consultant Cyrus Talati Senior Economist EASPR Economist Gaurav Datt Economist GGODR Consultant Gerard McLinden Senior TF Spec GTCDR Trade Facilitation Graham Scott WB Consultant EASPN PFM Specialist Guida P.C. Freitas Program Assistant EACDF Administration Harinder Jassal IT Specialist EACNF Information Technology WB Heather Baser CB Specialist Capacity Building Consultant Jose Mousaco Operations Analyst EASPN Ops support Juan Carlos Mendoza Manager Portfolio EACNF Portfolio & Operations Kanthan Shankar Manager Portfolio EACNF Portfolio & Operations Kishor Uprety Senior Counsel LEGAM Legal Counsel Lars C. Lund Consultant EASDE Consultant Lynn M. Gross Program Assistant GFMDR Administration Lynn Yeargin Sr. Program Assistant GGODR Administration Melinda Good Chief Counsel LEGES Legal Counsel Mihaly Kopanyi Snr. Infrastructure Sp. GWADR Consultant Nina Masako Eejima Senior Counsel LEGES Legal Counsel Paul Keogh Governance Specialist EASPR AusAid Consultant Raul Bernadino IT Specialist EACDF Information Technology Rick Fisher Senior Specialist World Bank Tax Administration Rideca R C Duarte Team Assistant EACDF Adm & Operations Rob Taliercio Lead Economist EASPR Lead Economist Robert Johann Utz Lead Economist EASPR Lead Economist Roch Levesque Senior Counsel LEGAM Legal Counsel Shilpa B. Pradhan Senior PS Specialist GGODR Public Sector Shireen Mahdi Economist EASPR ICR preparation mission Stefanie Stallmeister Senior Operations Officer EACDF Ops support Stephen John Morris Director of Custom World Bank Consultant 45 WB Unit / Responsibility/ Names Title Other Specialty Vivek Suri Lead Economist EASPR Lead Economist William Paterson Consultant EASPN Consultant William McCourt Sr.Public Sector Sp. GGODR Public Sector At the Completion Stage Team Leader / ICR Primary Hans Anand Beck Senior Economist GMFDR Author Christine Wong Operations Officer GGODR ICR Primary Author Kim Allan Edwards Economist GMFDR ICR – Economic Analysis Naysa Brasil Teodoro Research Assistant EASPN ICR – Economic Analysis Rideca Duarte Team Assistant EACDF Administrative Support Mildred Gonzalez Program Assistant GPVDR Publishing Support 46 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY2005 36.44 $ 149,506 FY2006 28.63 $ 188,132 FY2007 11.74 $ 55,755 Total 76.81 $ 393,394 Supervision/ICR FY 2006 1.00 $ 7,396 FY 2007 13.86 $ 116,504 FY 2008 39.38 $ 243,425 FY 2009 64.73 $ 68,163 FY 2010 57.79 $ 102,866 FY 2011 4.51 $ 21,748 FY 2012 2.30 $ 13,340 FY 2013 2.00 $ 15,909 FY 2014 4.33 $ 27,157 Total 189.90 $ 616,508 Staff Time and Cost (TF Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY 2005 – FY 2007 0 $ 0.0 Total $ 0.0 Supervision/ICR FY 2009 18.89 $ 177,147 FY 2010 40.80 $ 244,653 FY 2011 32.89 $ 207,233 FY 2012 38.14 $ 253,826 FY 2013 57.10 $ 400,109 FY 2014 34.50 $ 234,600 Total 222.32 $ 1,517,569 Note: These expenses capture the cumulative spending under the two child funds created to support the implementation of PFMCBP i.e. TF091230 (BETF AAA) and TF092247 (BETF Program Administration). The AAA resources have been utilized to deliver the following studies and analytical work: (i) MoF Strategic Plan 2011- 2030; (ii) Diagnostic Trade Integration Study; (iii) Procurement Analysis; (iv) Poverty Profile; (v) Public Expenditure Review of Infrastructure and (vi) Timor-Leste Living Standards Survey. 47 Annex 5: List of International and National TA funded under PFMCBP National and International Advisers funded under PFMCBP in stages 1 and 2 Stage 1: Nov 2006 to Jan Stage 2: Feb 2010 to Jan PFMCBP Components 2010 2014 International National International National TA Consultants TA Consultants A. State Finances 14 7 19 4 B. Revenue and Customs 9 0 12 2 C. Policy and Research 5 0 9 1 D. Directorate of Corporate 10 0 8 5 Services o Professional Development 2 2 Program E. Program Implementation Unit 7 7 13 16 TOTAL 45 16 61 30 Note: The number of TA reduced from 45 in the 1st stage to 18 at the closure of the project in January 2014. National and International Advisers funded under PFMCBP over its project life National International A. State Finances 10 25 B. Revenue and Customs 2 18 C. Policy and Research 1 10 D. Directorate of Corporate Services 8 15 E. Program Implementation Unit 20 16 TOTAL 41 84 Types and number of TA Contracts funded under PFMCBP over its project life cycle* PFMCBP Position Title National Component Advisor on Assets and FMIS A Accounts and Payments Technical Adviser A Adviser on Coordination & Performance Assessment of Advisors (ACPAA) E Advisor on Network Management D Advisor to Program Implementation Officer (PIO) E Applications Management Advisor D Asset Management Adviser (International) A Assets and Property Adviser A Budget Advisor (Post 1) A Budget Advisor (Post 2a) A Budget Expenditure Review Adviser A Budget Expenditure Review Adviser A Customs Adviser B Domestic Revenue Audit Adviser (International) B Domestic Revenue Audit Adviser (International) B Economic Policy adviser-International C 48 PFMCBP Position Title National Component Executive Adviser to the Minister of Finance D Finance Officer -Accountant E x Finance Officer -Bookeeping E Finance Officer -Bookeeping E x Finance Officer -Bookeeping E x Financial Adviser (International) - Autonomous Public Agencies A Financial Adviser (International) - Autonomous Public Agencies A Financial Adviser (International) - Decentralization A Financial management Adviser-International E Financial management Adviser-International E Financial management Adviser-International E Financial management Adviser-National E Financial management Adviser-National E x Financial management Adviser-National E x Financial management Adviser-National E x Financial Management Officer E x FMIS Trainer A HR and Capacity Building Advisor E Human Resource Officer (National) D x Human Resource Officer (National) D x Human Resource operations Adviser (International) D Internal Audit Adviser D Internal Audit Adviser D International Legal Adviser (Commercial and Business) D Lead Customs Adviser B Lead Domestic Revenue Adviser B Lead Domestic Revenue Adviser B Lead Domestic Revenue Adviser B Lead Procurement Adviser A Legal Adviser - International D Legal Advisor on Banking, Loans & Grants D Macroeconomic Advisor C Macroeconomic Advisor C Macroeconomic Advisor C Macroeconomic Advisor C National Accounts Adviser C National adviser -Application management D x National Adviser Decentralization A x National Adviser Decentralization A x National Adviser Decentralization A x National adviser -Network Management D x National Assistant to Legal Adviser (Legislative Drafting) D x 49 PFMCBP Position Title National Component National Petroleum Revenue Audit Adviser B x National Petroleum Revenue Audit Adviser B x ODI Fellow - C ODI Fellow - C ODI Fellow - C ODI Fellow - C Parliamentary Liaison Adviser D PDP Officer PDP x PDP Scholarship Adviser PDP x PDP Scholarship Adviser PDP x Petroleum Fund Analyst (National) C x Petroleum Tax Audit Advisor B Petroleum Tax Law Adviser B Petroleum Tax Revenue Adviser B PFM Adviser D Planning & Expenditure Review Adviser A Procurement adviser E Procurement Adviser- International E Procurement Adviser- International E Procurement Adviser-Client Management A Procurement Adviser-Reform A Procurement Advisers-National (Post 1) A x Procurement Advisers-National (Post 2) A x Procurement Advisers-National (Post 3) A x Procurement Advisers-National (Post 4) A x Procurement Advisers-National (Post 5) A x Procurement Advisers-National (Post 6) A x Program Administration Support Staff E x Program Administration Support Staff E x Program Management Support Officer E x Program Procurement Technical Staff E x Program Technical Support Staff E x Program Technical Support Staff E x Quality Assurance Adviser E x Recruitment Officer E x Revenue Collection Adviser B Revenue Collection Adviser B Revenue Collection Adviser B Revenue Legal Adviser B Revenue Legal Adviser (International), DGRC B Senior Adviser, HR and Capacity Development D Senior Budget Adviser A 50 PFMCBP Position Title National Component Senior Budget Adviser A Senior Financial Assurance Adviser A Senior Legal Advisor on Business and Contract D Senior National Adviser Decentralisation A x Senior Program Manager E Senior Program Manager E Senior Program Manager E SIGTAS User Support Adviser D SMA for D G Corporate Services D SMA on Policy Analysis A SMA on Revenue and Customs B SMA on Revenue Services B SMA on State Finances A SMA on State Finances A STA FreeBalance Trainer A State Assets, Provision Consolidate Manual A Tax Law Consultant B Taxation Compliance Adviser B Translator -Interpreter E x Translator -Interpreter E x Translator-Interpreter E x Translator-Interpreter E Translator-Interpreter E x Translator-Interpreter E Treasury Adviser-Internal Processes Civil Service Accounting A Note: *repetition of position tittles translates into numbers of advisers contracted under that position. 51 Annex 6 : Stakeholder Workshop Report and Results Not applicable 52 Annex 7: Summary of Borrower's ICR and/or Comments on Draft ICR Introductory comments The Ministry has reviewed the content of the ICR and welcomes the opportunity to make comment. The Ministry notes that there are many documents and reports that have been prepared over the life of the PFMCBP that provide evidence of the changes and developments that can be attributed to the program, working together with the Ministry staff. A key issue for the Ministry has been the successful working relationships that have been developed with donor partners and, within the Ministry, with the PFMCBP Project Implementation Office (PIU) and the advisors who have worked closely with their counterparts. During the period of funding under the PFMCBP, there have been many Government-led developments. The Ministry has been meeting its obligations as the central agency with responsibility for the financial management for the Government, working to meet external demands, as well as improving its internal processes. The PFMCBP demonstrated flexibility in terms of supporting the Ministry’s core functions, changing needs and change management initiatives. The Ministry also recognizes that a number of the recent developments have built on the gains made under the PFMCBP. The important role of the PIO and the PIU The appointment of the Project Implementation Officer (PIO), overseeing the program planning and implementation, working together with PIU has provided a sound approach to management and monitoring and reporting for the program. The embedding of the PIU personnel into the relevant National Directorates in Corporate Services was an excellent strategy, providing capacity building, while at the same time ensuring that the PIU systems and procedures were operating in accordance with requirements. Professional and career development Engagement with the PFMCBP has been of benefit to the professional development and career progression of those senior Ministry officers who have been appointed as the PIO and from within the PIU. This has included the former PIO who is now the Vice-Minister and the next PIO who was funded for a placement with the World Bank in Washington for six months in 2014. The National Directorate for the Management of External Support (NDMES) is now benefitting from former experience in the PIU, noting that the intention of PFMCBP was always to increase the impact of donor harmonization. Using government systems – the New Deal The Ministry recognizes that the PFMCBP and the PIU have focused, wherever practicable, on the use of government systems, and in doing so have built confidence and skills in Ministry staff, while at the same time identifying gaps and areas for improvements to procedures. This approach, which is clearly stated in the New Deal, is the overarching policy framework for the Ministry in terms of its partnerships with donors. One example was the transfer of the MOF scholarship program from the Professional Development Program funded by PFMCBP to being funded under the Government’s Human Capacity Development Program. The establishment of NDMES in 2013, within the General Directorate of Corporate Services, was to coordinate, manage and monitor all external support to the Ministry, and develop and maintain good working relationship with current and potential donor partners. In establishing NDMES, the intention was not to set up an internal MOF structure to replace the PFMCBP PIU, but rather to provide the management focus for all external support, working with the relevant Directorates within the Ministry to manage the component parts of the programs in terms of their core business. This reinforces the New Deal approach to work within the government’s systems. NDMES is the custodian of the PFMCBP files and provides advice to the Corporate Services Directorates on lessons learned from PFMCBP. 53 Increased capacity building and teamwork Evidence has been provided in the ICR of the areas where increased capacity building has resulted in less reliance on advisers. The Ministry acknowledges the work of the Ministry officials and advisers who have worked together to achieve this outcome. The Ministry is focusing upon teamwork and targeted capacity building that is based on the assessment of skills and training plans. The newly formed PFM Training Centre is providing the focus for capacity building and is responsible for approval of study tours, receiving reports and ensuring presentations to CCMF. This more strategic approach to capacity building (including formal and accredited training) and institutional strengthening is building on the good work of PFMCBP. PFMCBP coordinated the ODI Fellows Program, provided practical support. The ODI program is now operating through DFAT. These highly qualified young professionals added (and continue to add) significant value to the outcomes achieved in the Ministry. The flexibility of advisers – a mix of capacity building and implementation The Ministry has welcomed the flexibility of senior advisers who have provided capacity building when working with their counterparts, but have also stepped into implementation roles when required. For instance in April 2013, some advisers in the Ministry were appointed as Coordinators, when there were no suitable candidates who could be appointed, at that time. This was seen to be a temporary solution, but has been providing effective transition. The Ministry is focusing on the development of staff within the Ministry and supporting development of others who can take up specific technical and professional roles when they return from scholarships. A recent innovation has been the Junior Professionals Program where the Ministry has placed returning scholarship awardees into relevant positions within the Ministry. The Ministry notes that all advisers are role models for Ministry personnel. This is a form of capacity building, demonstrating good work practices and applying rules, procedures and abiding by Ministry protocols. The Ministry Guidelines 01/2013/VGC/MF identify differing categories of advisers, relating to the specific needs, including: strategy and/or policy advisers; skills development advisers; technical advisers; and, technical professionals. PFMCBP has highlighted the importance of the additional supplementary skills possessed by good advisers which should be assessed at recruitment stage, including: flexibility; good communication skills; team work; capacity building and training skills. PFMCBP redesigned the work plan and quarterly report formats for advisers in 2013, to require them to directly link their TOR and work priorities to Ministry priorities and be able to report upon the impact of their work. This approach has been adopted by the Direct Budget Support Program (DBS), directly focusing the effort of advisers on the highest priorities and requiring evidence of their capacity building work. Changing arrangements for CCFM Initially PFMCBP advisers routinely attended the CCFM meetings,. But in 2013, the Minister determined that this was a Ministry management mechanism and that advisers would only be invited, if for some reason their specific input/expertise was required. This provides evidence of Ministry managers taking responsibility for their own governance and management and reporting mechanisms, not simply relying on advisers. Institutional strengthening There were many institutional strengthening initiatives that were supported by PFMCBP, building on the capacity building initiatives identified with the advisers working with their counterparts including: skills transfer; training and development; and, mentoring and day-to-day hands on support to individuals and team. Priority was also given to the development of systems and procedures to underpin the good governance and management of the Ministry. Procedures provide the operational scaffolding for the Ministry. This ensures consistency and puts in place systems and procedures that form the basis of 54 training and skills development. The procedures will be regularly reviewed and improved. PFMCBP advisers identified opportunities and contributed to institutional strengthening initiatives. For instance, a range of institutional strengthening and capacity building strategies were implemented in the General Directorate of Revenue and Customs (later the General Directorate of Customs). An MOU was signed with Australian Customs and Border Protection Service (ACBPS) entering into mutually co- operative arrangements aimed at capacity development of Timor-Leste Customs staff. The Adviser also facilitated extensive training for Customs staff from the Centre for Customs Study, University of Canberra. On-the-job training was provided to the Integrated Border Posts (IBPs). Additional support was provided by the Adviser in relation to alleged cases of corruption. Another example is the development of the Standard Operating Procedures (SOPs) in Corporate Services. PFMCBP supported the Coordinator HR in the task analysis and preparation of job descriptions. The requirement from PFMCBP to provide justification for participants in study tours and reporting on return, now forms the basis of the improved systems that will be managed through the PFM Training Centre. The SOPs being developed in the General Directorate of Corporate Services, provide the basis for work flow analysis and for regular training and amendment when processes need to change. Uploading these documents to the MoF intranet provides a ready source of information for staff. The Budget Manual provides a tool for the budget processes, as does the manual that was prepared for the autonomous agencies. The PFM Training Centre provides the focus for these developments to be socialized and implemented, rather than just filed away. MoF planning framework – focus on performance management and accountability As noted in the ICR, one of the major benefits through PFMCBP has been the development and implementation of the MOF Strategic Plan, the 5 Year Plan and the associated KPIs that outline the activities and the performance required. From this work, supported by PFMCBP, the ongoing institutional priorities and performance of the Ministry is being managed and measured. This planning framework enables the Ministry to analyze its priorities against risk and impact, keeping the focus on the strategic objectives and minimizing ad hoc and disconnected approaches. The Ministry’s planning framework is open and transparent, providing other line Ministries and civil society with information on priorities and implementation timelines. Through the DBS joint monitoring, which is building on lessons learned from PFMCBP, the bi-annual validation processes monitor progress and, challenges, recommend realistic modifications to KPIs and provide feedback to the management team through a transparent scoring system takes account of complexity, risk and impact. The new structure for the Ministry, put in place in early 2013, with the official ceremony in May 2013, is supported by Ministerial Diplomas that state the responsibilities for each Directorate and Office. The planning framework, developed with support of PFMCBP, now sets standards (KPIs) and integrates organizational responsibilities and performance with staff TORs and performance. Alignment of PFMCBP ‘Results Matrix’ with MoF structure and planning framework The Ministry appreciated the alignment of the Ministry’s planning framework with the PFMCBP results matrix to list achievements, not only against the PFMCBP’s documentation but also against MOF priorities that had emerged from new Organic Law and the restructure. This also supported the preparation of adviser work plans and quarterly reports, enabling them to target the Ministry’s priorities in a more effective way. Economic Policy In March 2013, a new PFMCBP Economic Adviser commenced work in the Economic Policy Directorate and a detailed work plan and new key performance indicators were drafted. Before the end of PFMCBP, the following major activities were undertaken: 55 • Quarterly inflation reviews and templates and supporting documents were drafted • Government Finance Statistics Bulletins were drafted and published, together with supporting worksheets and mappings from the Government’s COA • A long term fiscal sustainability model was programmed and used to undertake a fiscal sustainability analysis • A work plan was drafted for programming a new economic forecasting model based on the IMF’s financial programming approach. A recent report has been released by the Ministry entitled Timor-Leste Economic Stability Report (9 June 2014). This report was developed with the support of the former PFMCBP adviser, building on the work been undertaken in that Directorate during the period of PFMCBP. In providing such reports, the Ministry is increasing transparency ad scrutiny of the analytical information on the economy of Timor-Leste. Budget and expenditure analysis PFMCBP was successful in building the capacity of the national budget office and gradually increasing the responsibilities of local staff. The number of advisers was gradually decreased from to one (1) only in early 2013 and to zero (0) by the end of PFMCBP. A short term adviser was contracted in 2013 to prepare a Budget Manual that has been now translated into Tetun. The activities of the budget office can be divided in five main areas: budget formulation and organisation; budget execution; management of the performance budgeting system; and, analysis of expenditure. Regarding budget formulation, initially advisers had a very hands-on role in organising meetings, drafting the budget circular, entering data and drafting the budget books. Over time, as capacity was built by observation and learning by doing, local staff took responsibility for arranging all meetings, collating data and organising the production of the budget books. By the middle of 2013, the entire budget formulation process (with the exception of drafting budget book) had been taken over by local staff. Regarding budget execution, initially advisers assisted reviewing transfer requests and entering them onto the system. By 2013, this work was being undertaken entirely by local staff with advisers only involved in policy and legal issues around particular transfer requests. Concerning management of the PB system, advisers initially had a very hands-on role. By 2012, advisers were overseeing and undertaking quality control of the system but were not logging onto the system every day. By early 2013, advisers were liaising with Free Balance regarding improvements to the system and new reports, but day-to-day management was undertaken by local staff. By 2014 these functions had been entirely taken over by local staff. Expenditure analysis was originally undertaken by external advisers. This function took the longest to handover as it is more difficult for officials with limited academic qualifications to learn analytical tasks than it is to learn process/management tasks. In 2011, a detailed expenditure review course of 4 weeks was provided to officials. By 2012, officials were drafting expenditure review reports with advisers and by 2013 this function was entirely handed over to local officials. PFMCBP was successful in maintaining or increasing the quality of work as functions were handed over to local staff. More specifically, in 2014, the PEFA Assessment (externally validated) rated the quality of budget documentation as “A” – the highest grade available. Improved procurement processes PFMCBP supported the improvement in MoF procurement processes and the contribution of the Ministry to the development of the Omnibus Procurement Law and Standard Bidding Documents. This has now 56 resulted in the more recent development of Contract Forms and Standard Operating Procedures. This is evidence of effective capacity building and institutional strengthening through PFMCBP, not only benefitting MOF, but also all line agencies. The current MOF and DBS procurement and contract management systems are benefitting from the lessons learned from PFMCBP and the World Bank. The Ministry appreciated the workshops by the World Bank procurement experts for MOF and line ministry staff on procurement, and welcomed the model proposed by the World Bank that standard world-wide processes should be revised to address local situations in Timor-Leste. A World Bank workshop provided information on Standing Offer Agreements supported the MOF’s implementation of an improved approach to ongoing procurement of stationery, fuel and catering. During 2013, the World Bank’s changed procedures that delegated NOL approvals to the Timor-Leste Office, retained the level of compliance that was required, but resulted in faster decisions. The Ministry’s procurement plans are developed through submissions and justifications and the Permanent Commission for the Recruitment and Selection of Advisers and Professionals (PCRSAP) that was formed by Ministerial order in late 2013. This ensures processes and decisions are approved as complying with all requirements. This staged approach builds on PFMCBP procedures, reflecting the procurement processes and the World Bank’s NOL approvals that ensured compliance. This approach is replicated for goods and services through the Permanent Commission for Quotations and Tender (PCQT). By having these two Permanent Commissions, the transparency and accountability of decision-making and monitoring of compliance is increased. Communication and engagement The Budget Books provide accurate information for line ministries and civil society, as do the Transparency Portal and provision of reports and information on the Ministry’s website (www.mof.tl). A specific example of a customer service model is the new ‘one stop shop’ – SERVE – that brings together domestic revenue information and registration of tax payers, together with front office functions for business operations from the Ministry of Commerce and the Ministry of Justice. The National Directorate of Domestic Revenue (NDDR) of the General Directorate of Revenue formed a project, designed and supported by PFMCBP advisers. New forms support the implementation the four Phase TIN re-registration project for all categories of tax payers. The goal is to correct errors and outdated information on the system and ensure in-business taxpayers are properly registered for all of the types of tax for which they are liable. Phase 1 is complete, Phase 2 is ongoing. In Phase 3, taxpayers will be given the opportunity to see and correct all arrears and non-lodgements on their accounts. In early 2015, Phase 4, the automated Certificate Dividas (CD) program designed by PFMCBP Advisers and programmed by C2D will be implemented. This automation will “automatically” increase taxpayer compliance with tax laws and the collection of domestic taxes by maximizing the use of systemic controls. Every time a request is submitted taxpayers whose TIN is not eligible for a CD from the automated system will be referred to Collection, where staff (to be trained in the next months), will guide them through the actions to resolve these arrears and non-lodgements. With systemic controls in place, taxpayers, who have arrears or non-lodgements on their TIN, will be automatically identified when they request a CD and resolution will require that they contact NDDR, rather than NDDR Collection staff trying to find them. This is a major achievement supported through PFMCBP and continuing under the DBS program. Integrating with other donor funded programs PFMCBP has worked closely with the Direct Funding Agreement Program (DFA) and AusAID (now Australia’s Department of Foreign Affairs and Trade), participating in its regular management meetings during 2013 and in the planning and for its absorption into the new DBS Program in 2014. PFMCBP’s 57 shared lessons learned, templates and procedures during 2013. Advisers in the Ministry have been funded under State Budget, DFA and PFMCBP. During 2013, PFMCBP supported an approach to eliminate potential silo effects on day-to-day work, teamwork and the achievement of Ministry priorities. PFMCBP supported the transition from PFMCBP to DBS. PFMCBP commenced the process of developing a list of ‘Frequently Asked Questions’ relating to ends of contracts and transition, as well as providing meeting/workshops for advisers on transition and what was expected of them prior to the closure of PFMCBP. The End of Assignment Report template was improved to provide more information for counterparts and more direct connection to the Ministry’s KPIs. Lessons learned from PFMCBP The Ministry notes that lessons learned from PFMCBP have been included in the ICR and recognizes that every program will result in lessons learned and opportunities for improvement. The Ministry notes that the Mid Term Review of PFMCBP addressed emerging issues, refocusing PFMCBP on the performance of the Ministry, rather than its earlier wider scope to work with line ministries too. The PFMCBP’s Mid Term Review simplified the results matrix with more strategic indicators. Although its relationship to the previous structure was complex, the realignment through the PFMCBP Annual Report 2012-13 assisted in providing the direct linkages. Further development needs The Ministry acknowledges that there continues to be areas for further development. These have been noted in the ICR and also discussed in other PFMCBP reports, and in reports from the DBS joint monitoring missions. The MOF planning framework makes it very clear which areas need new interventions and/or continued support. The Ministerial Guidelines set the rules for the way in which priorities for adviser support are identified and approved. The Ministry now has coordinated engagement with donor partners, eliminating ‘quick fixes’ and ad hoc arrangements, and aligning priorities for support to the planned priorities and assessments of need. As already stated, the support to the Ministry from donor partners is within the framework of the New Deal, ensuring all activities are using government systems which will enhance sustainability. The Ministry looks forward to continued engagement with the World Bank, in particular through the AAA Program. In Summary In summary, the Ministry acknowledges the significant contributions made by PFMCBP to the effectiveness and efficiency of the Ministry in the development of capacity of Ministry staff and of systems and procedures that now provide the basis for continued review and improvement. The Ministry is aware that it is because of these developments, the donor partners are confident to build on gains made to date and support the Direct Budget Support Program that will continue to strengthen the Ministry. 58 Annex 8 : Comments of Cofinanciers and Other Partners/Stakeholders The Cofinanciers of the PFMCBP did not provide written comments on the program, however their comments and feedback have been summarized in paragraph 7 (b). 59 Annex 9 : Results Framework analysis Revised Project Development Objectives (as approved by original approving authority) Capacity in the Ministry of Finance strengthened for prudent, effective and accountable planning and management of public finances to promote growth and poverty reduction. (a) PDO Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Institutional Development and Capacity Building Plan implemented and ongoing needs Indicator 1 : identified. Staff mapping IDCBP analysis completed established as a and used to IDCBP implemented in part sustainable and determine skills gaps. through MoF reorganization government PDP evolved into the Value and merit-based wide approach government wide quantitative or appointment process. to identifying Human Capital Qualitative) Agreed it will be finalized and overcoming Development Fund. as part of Strategic Plan skills gaps PFM center process to December 2010. among civil operational and merit servants. based recruitments implemented. Date achieved 06/03/2010 01/31/2014 01/31/2013 Met. The IDCBP is considered the precursor to the Government Wide Human Capital Development Fund (HCDF). Based on its success, the IDCBP evolved beyond the MoF into the government wide Human Capital Development Fund, which is now a formal part of the state budget, and managed by the Ministry of Education. In the MoF the HCDF meets training needs, including through a new PFM training center. These needs are identified through a staff, task, and capacity mapping exercise completed this year under the project. Comments (incl. % More specifically, an Institutional Strengthening and Capacity Building Plan was achievement) developed and incorporated in the Strategic Plan of the Ministry of Finance, 2011 to 2030. Subsequent work led to the development of an operational plan for the Ministry in terms of its 5 Year Plan 2012 to 2017. This Plan included specific key performance indicators for each work unit in the Ministry and this has been the basis of monitoring the reform program that included capacity building initiatives. In addition to the Key Performance Indicators (KPIs) adopted under the Ministry’s 5 Year Operational Plan, revised management responsibilities have been implemented to make Directors General (DGs), National Directors (DNs) and Heads of Offices/Units (HoO/HoU) accountable for the activities and outcomes of their respective work units. 60 (b) Intermediate Outcome Indicator(s) Original Target Values Formally Actual Value Achieved at Indicator Baseline Value (from Revised Target Completion or Target Years approval Values documents) Budget: prepared with three-year fiscal forecasts, submitted to Parliament 45 days Indicator 1 : before the end of the current fiscal year, and approved before the start of the new fiscal year. 2010 Budget submitted on time as per Budget and Budget Financial execution Multi-year estimates of Management Law. improved as expenditure and revenue Value Strengthen quality of indicated by: prepared based on macro (quantitative forward estimates. cash spending framework. 2011-2014 budgets or Qualitative) Multi-year budget >80% of cash submitted to parliament 45 days estimates but no top allocations by before end of fiscal year. down process driven and beyond by projected multi FY08. year fiscal aggregates. Date achieved 06/03/2010 01/31/2014 11/26/2013 Met. Comments Multi-year estimates of expenditure and revenue prepared based on macro framework. (incl. % FY11-FY13 budgets submitted to parliament 45 days before end of fiscal year, except achievement) 2012 budget delayed due to elections. FY11 and FY12 budgets approved prior to start of fiscal year and but FY13 budget approved two months late due to elections. The law, on which this indicator is based, provides for delays in an election year. Projected non-oil fiscal deficit <90% of non-oil GDP for the 2010 central government Indicator 2 : budget and <80% of non-oil GDP for the 2011 central government budget. Reduction in non-oil Non-oil fiscal deficit as a % of deficit (100% of non- non-oil GDP in 2010 = 71% oil GDP) following Non-oil fiscal deficit as a % of Value moderation in non-oil GDP in 2011 = 81.3% (quantitative spending growth for Non-oil fiscal deficit as a % of or Qualitative) 2009 and 2010 State non-oil GDP in 2012 = 78.5% Budgets. Non-oil fiscal deficit as a % of non-oil GDP in 2013 = 98% Date achieved 06/03/2010 01/31/2014 12/31/2013 Partially met. While dropping to roughly 80% and below 2011 and 2012, the deficit Comments increased to 98% of non-oil GDP based on a downward revision of estimated 2013 non- (incl. % oil GDP. Much of the volatility in this indicator stems from volatility and revisions to achievement) the non-oil GDP figure. Indicator 3 : Aggregate revenue and expenditure outturn at >=80% of budget in the last two years. Value Revenue outturn is Expenditure outturns for FY11 = (quantitative over 90% in 2009, 84% and in FY12 = 66%. or Qualitative) compared to around FY13=66% 61 Original Target Values Formally Actual Value Achieved at Indicator Baseline Value (from Revised Target Completion or Target Years approval Values documents) 75% in 2008. Expenditure outturn in Overall (including petroleum) 2009 is close to 90%. Revenue outturns for FY11=140%, FY12 = 194%, FY13=100.6% Date achieved 06/03/2010 01/31/2014 12/31/2013 Partially met. Revenue outturn systematically exceeding targets. Volatility is due to petroleum revenue. Production levels and prices are hard to predict, hence the best practice Comments sovereign wealth fund. The ration with domestic revenue alone is: Non-oil Petroleum (incl. % Revenue outturns for FY11=101%, FY12 = 103%, FY13=102% achievement) Expenditure outturn in FY12 below 80%, and remaining below, albeit closer to, 80% in 2013. Execution rate on recurrent spending has been FY10=93%, FY11=88%, FY12=92%, FY13=87% Quarterly publication of budget execution reports within two months of the end of the Indicator 4 : quarter. All quarterly reports Value in 2009 being All quarterly reports in 2013 (quantitative prepared and published within two months of or Qualitative) published on time. the end of the quarter. Date achieved 06/03/2010 01/31/2014 10/29/2013 Met. The transparency portal reports fiscal data and execution in real time (e.g. execution Comments rates by all classifications), and with greater accessibility of reports (including full data (incl. % downloads). achievement) All quarterly reports between 2010-2013 prepared and published on time but recent reports presented only in Portuguese making them less accessible to Tetum speaking citizens. Indicator 5 : Daily reconciliation of government bank accounts using FMIS. Bank reconciliations of the Treasury Bank reconciliation of Full reconciliation of the Treasury Single Account Value accounts 2005-09 (TSA) carried out within two (quantitative $850mn in receipts weeks of the close of each or Qualitative) and $800mn in month. Government accounts in payments. commercial banks not reconciled. Date achieved 06/03/2010 01/31/2014 12/31/2013 Comments Partially met. (incl. % achievement) MoF responsibilities met. MoF FMIS and internal processes are able to conduct daily 62 Original Target Values Formally Actual Value Achieved at Indicator Baseline Value (from Revised Target Completion or Target Years approval Values documents) reconciliation, but do not have a Central Bank electronic counterpart payment reports. Central Bank responsibilities, beyond MoF and Project control will be complete once electronic payment systems installed in CB. Publication of annual audited financial accounts within 30 days after its presentation to Indicator 6 : the Prime Minister (or within 30 days after the end of parliamentary recess, should it be closed on the date the report is delivered to the Prime Minister) In 2010 the gap between receipt of audited FS by parliament and Gazette publication was less than 30 days, but in 2011 and 2012 it Annual Audited was about a month and a half Accounts for 2008 are (i.e. more than 30 days). Value published as required (quantitative though with some or Qualitative) delay because of Audited accounts for 2010 change in auditors. published on 4 November 2011 Audited accounts for 2011 published on 11 December 2012. Audited accounts for 2012 published in November 2013. Date achieved 06/03/2013 01/31/2014 12/31/2013 Not Met. Project indicator measures time (target 30 days) between Parliamentary submission of the Financial Statements (FS) to Prime Minister and Official Publication. PEFA indicator measures time between end of Financial Year (FY) and publication. Comments (incl. % In 2010 the gap between receipt of audited FS by parliament and Gazette achievement) publication was less than 30 days, but in 2011 and 2012 it was about a month and a half (i.e. more than 30 days). More broadly, audited statements are prepared and submitted to Parliament, although with delay. Delays are caused by late submission by the Ministry of Finance to the court of auditors, as well as delays in assessment there. Improving results from public perception surveys, for each Directorate, of efficiency, Indicator 7 : effectiveness, ethics and integrity. In 2010, first survey Unpublished results of a survey by Asia Foundation by a local think tank, find year Value shows a poor public on year improvements in the (quantitative perception of perception of ethical behavior in or Qualitative) Customs, slightly the customs Directorate General, better for Revenue. and wider interactions with 63 Original Target Values Formally Actual Value Achieved at Indicator Baseline Value (from Revised Target Completion or Target Years approval Values documents) government officials, notably at the Port. Date achieved 06/03/2010 01/31/2014 12/30/2013 Met. Comments (incl. % While not published, the Ministry has reacted strongly to these survey findings, achievement) including engaging to improve training and regulation of customs brokers, and undertaking a repeat port cargo time release study. Indicator 8a : Increasing domestic tax collections as a % of non-oil GDP. Domestic tax collection as share of non-oil GDP in 2010 = 5.4% In 2009, domestic tax Domestic tax of non-oil GDP in Value was 9% of non-oil 2011 = 7.0% (quantitative GDP, an increase Domestic tax of non-oil GDP in or Qualitative) from 8% in 2007. 2012 = 7.3% Domestic tax of non-oil GDP in 2013 = 9.5% Date achieved 06/03/2010 01/31/2014 12/31/2013 Comments Met. (incl. % achievement) The increasing trend measured from 2010-2012 is evidence that this indicator is met. Additional revenue collected from Petroleum Revenue compliance activities (difference Indicator 8b : between submission and collection) Between 2010 and 2012, $300m Value additional petroleum revenues (quantitative N/A N/A were collected based on tax or Qualitative) assessments and audits of company submissions. Date achieved 06/03/2010 01/12/2013 01/31/2014 Comments (incl. % Met. achievement) Improving average time taken to clear green line Customs declarations – from time of Indicator 8c : entry lodgement with customs to the issue of a delivery advice by customs. Value 47.4 hours (quantitative No measurement 30.1 hours average average or Qualitative) Date achieved 06/03/2010 June 2011 November 2013 Comments (incl. % Met achievement) National accounts published by the Statistics Directorate and three staff trained as Indicator 9 : national accounts specialists by July 2011. Value Source data for National accounts published for (quantitative national accounts the period 2001 - 2012 based on 64 Original Target Values Formally Actual Value Achieved at Indicator Baseline Value (from Revised Target Completion or Target Years approval Values documents) or Qualitative) being established and improved expenditure and efforts under way to business activity statistics. Three appoint staff. SD staff members, trained on basic have set April 2011 to elements of the national account publish national compilation. However, this accounts and GDP activity still needs significant estimates. external support given its complexity. Date achieved 06/03/2010 01/31/2014 04/30/2014 Partially Met. Met, but with delay since the target deadline of 2011). Comments (incl. % An additional (since end 2013 reporting) staff member has returned from a statistics achievement) scholarship in Indonesia to work on National Accounts bringing the total count to three trained staff. Statistics Work Plan agreed by MoF and other stakeholders, with implementation plan Indicator 10 : agreed and funding secured by end-2010 The annual SWP is being Key elements of SWP implemented which includes the being implemented release dates for trade, CPI, Value (HIES, BAS and financial and other economic (quantitative APS). Additional data. The Statistics Directorate or Qualitative) funding secured from does not have a multi-year other donors. schedule of planned statistical and survey activities. Date achieved 06/03/2010 01/31/2014 12/31/2013 Met. Comments The National Directorate of National Statistics has been elevated to a Directorate (incl. % General of National Statistics. A Statistics Work Plan (including specific survey achievement) calendar) has been prepared that is more realistic than previous. It is embedded in the Ministries Annual Action Plan, and is fully funded from a combination of the state budget and support from Australia, the World Bank and other donors. Macroeconomic framework sets annual budget ceilings starting in 2009, with four staff Indicator 11 : able to update and interpret the framework by July 2011 A macro framework has started to set the annual budget ceilings. The model Macro framework developed is gradually being and is being used to establish Value updated and refined. fiscal ceilings and revenue (quantitative At this stage it seems envelope since 2011. or Qualitative) unlikely that four staff Government staff is not able to will be able to update fully manage the macro model. and interpret the framework by July 2011. 65 Original Target Values Formally Actual Value Achieved at Indicator Baseline Value (from Revised Target Completion or Target Years approval Values documents) Date achieved 06/03/2010 01/31/2014 01/31/2014 Partially met. Two Comments staff currently able to (incl. % update and interpret achievement) the framework, but only since 2013. • 75% of leadership and management positions rated as sufficient and above in performance; Indicator 12 : • 75% of Grade B and C position rated as occupied with qualified staff; • 75% of Grade D and E position rated as occupied with qualified staff. Staff review and revisions led to retaining and hiring high performing manager. Systematic Appointment of evaluation of managers (both Grades A-B Value current and potential) led to completed. (quantitative replacement of a number of Performance or Qualitative) senior managers and management system appointment of all managers and being developed. coordinators on performance contracts containing KPIs against 5 Year Operation Plan. Date achieved 06/03/2010 01/31/2014 01/31/2014 Met (exceeded): • All managers received rating of satisfactory (C) or above in performance assessment in November 2013. This follows a drive to appoint and retain based on merit. Systematic evaluation of managers (both current and potential) led to replacement of a number of senior managers and appointment of all managers and coordinators on performance contracts containing KPIs against 5 Year Operation Plan. Comments • Recruitment of all Grade B and C undertaken under the supervision of the DG (incl. % Corporate Service. To ensure qualified: hiring is against job description for the achievement) position; client department represented on selection panel, all new appointees undergone systematic induction training, and early performance assessment of staff against responsibilities in job description. • Recruitment of all Grade D and E undertaken under the supervision of the DG Corporate Service. To ensure qualified: hiring is against job description for the position; client department represented on selection panel, all new appointees undergone systematic induction training, and early performance assessment of staff against responsibilities in job description. Indicator 13 : 5 qualified staff appointed to the audit unit and at least 3 audit reports issued. Value Unit established and staffed. 80 (quantitative No progress to date. audits undertaken (University, or Qualitative) Port, Date achieved 06/03/2014 01/31/2014 01/31/2014 66 Original Target Values Formally Actual Value Achieved at Indicator Baseline Value (from Revised Target Completion or Target Years approval Values documents) Met. Comments New Organic Law established the Office of Inspection and Audit headed by the (incl. % manager at the equivalent level of Director General, supported by 4 staff (2 x Grade C, achievement) 1 x Grade D, 1 x Grade E). Audit Plan was prepared and approved by the Minister. 80 audits undertaken over 2011-13 and presented to Parliament. Indicator 14 : 3 qualified staff appointed to the legal unit and at least 10 legal opinions issued. Limited progress to date -- difficulty in Value finding suitably Unit Established and staffed. (quantitative qualified staff. The 150 legal opinions delivered in or Qualitative) Program has provided 2013 alone. important in-line function. Date achieved 06/03/2010 01/31/2014 01/31/2014 New Organic Law established the Office of Legal Support headed by a manager at the level of Director General. Fully staffed. A PFMCBP National Adviser was appointed as the Acting Coordinator, pending appointment of a qualified Unit Head. The Office of Legal Support currently has 2 additional national staff. PFMCBP supports two Comments additional international legal advisers support operations. Commercial companies are (incl. % also providing resident pro-bono commercial law advice. achievement) The Office of Legal Support has provided in excess of 150 legal opinions in 2013, and issued 210 formal pieces of legal advice. The unit has become de facto legal unit for the government. Indicator 15 : 80% of IT cases logged have been resolved. Value No accurate figures 90% of IT cases resolved within (quantitative on response time for - 24 hours. or Qualitative) IT cases Date achieved 06/03/2010 01/31/2014 01/31/2014 Met. Comments New Organic Law established the IT Unit. 90% of IT cases resolved within 24 hours. (incl. % All remaining issues resolved on a case-by-case basis, mostly within 48 hours. achievement) Accurate log of IT cases not available at time of preparation of this report. There are two national PFMCBP advisers in the IT Unit. Improvements in all aspects of program Value implementation All project supervision ratings (quantitative - though more work are rated satisfactory. or Qualitative) needed on FM, M&E, and reporting. Date achieved 06/03/2010 01/31/2014 01/31/2014 Comments Met. (incl. % Satisfactory ratings across all program implementation indicators. achievement) 67 Annex 10 : List of Supporting Documents Project Documents of the World Bank  Project Appraisal Document: Planning and Financial Management February 2006 Capacity Building Program, Report No. 33803-TP  Project Paper (first restructuring Level 1) February 2010  Mid Term Review Mission Report June 2010  Restructuring Paper May 2011  Restructuring Paper October 2012  Implementation Status and Results Reports, Sequence 1-10 Other World Bank Reports  Timor-Leste Repeat Public Expenditure and Financial 2014 Accountability (PEFA) Assessment 2013  Strengthening PFM in Post conflict Countries: Lessons for PFM 2012 Practitioners and Country Programming Staff  Public Financial Management Reforms in Post-Conflict Countries - 2012 Synthesis Report  Quality Assessment of the Lending Portfolio (QALP-1), 2008 Independent Evaluation Group  Timor-Leste Country Program Evaluation 2000-2010; Independent 2011 Evaluation Group International Monetary Fund Reports  Democratic Republic of Timor-Leste: Public Financial November 2010 Management—Performance Report  IMF Article IV Staff Report 2013 Documents of the Government of Timor-Leste  Timor-Leste Budget Book 1 2014 2014  Ministry of Finance Strategic Plan 2011-2030  Ministry of Finance Annual Report 2012  ICR background paper: Update on Capacity Building in the July 2014 Ministry of Finance, Democratic Republic of Timor-Leste 68 Annex 11 : MoF Organizational Structure 69 The revised structure implemented in April 2013 70 71