Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD789 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT IN THE AMOUNT OF SDR 3.3 MILLION (US$5 MILLION EQUIVALENT) TO THE DEMOCRATIC REPUBLIC OF CONGO FOR A PUBLIC FINANCIAL MANAGEMENT AND ACCOUNTABILITY PROJECT January 3, 2014 Financial Management Core Operations Services Africa Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank's policy on Access to Information. CURRENCY EQUIVALENTS (Exchange Rate Effective - October 31, 2013) Currency Unit = US$ US$1 = SDR 0.66 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank CAS Country Assistance Strategy CIPRAP Commission interministerielle de pilotage de la reforme de l'administration publique COREF Comite d'orientation de la reforme des finances publiques (Coordination Committee for Public Finance Reform) DFID Department for International Development (United Kingdom) DRC Democratic Republic of Congo DTO Direction du Trisor et de l'ordonnancement (Treasury Department) FARDC Forces armies de la Ripublique ddmocratique du Congo (The Army Force) GCEP Governance Capacity Enhancement Project (World Bank) GDP Gross domestic product HIPC Heavily Indebted Poor Countries (Initiative) IGF Inspection Gindrale des Finances (General Inspectorate of Finance) IMF International Monetary Fund LOFIP Loi relative aux Finances Publiques (PFM Act) M&E Monitoring and evaluation MDTF Multi-donor trust fund MTEF Medium-term expenditures framework PADDL Programme d'Appui a la Dcentralisation et au Dveloppement Local (UNDP/DFID Project on Decentralization) PAP Plan d'Actions Prioritaires (PFM Action Plans) PDO Project development objectives PEFA Public Expenditure and Financial Accountability (assessment) PFM Public financial management PFMAP Public Financial Management and Accountability Project PRCG Projet de Renforcement des Capacits en Gouvernance (GCEP) PSRFP Country PFM Reform Strategy UNDP United Nations Development Program VAT Value added tax Vice President: Makhtar Diop Country Director: Eustache Ouayoro Sector Director: Edward Olowo-Okere Sector Manager: Renaud Seligmann Task Team Leader Saidou Diop ii Democratic Republic of Congo Public Financial Management and Accountability Project (PFMAP) Table of Contents I. INTRODUCTION AND CONTEXT .............................................................................. 1 A. Economic and Governance Context ............1......................... B. Sectoral and Institutional Context .....................2..... ...............2 II. PROJECT DEVELOPMENT OBJECTIVES ......................................................... 11 A. Proposed Project Development Objectives ...........1........................1 B. Project Context ....................................................... 12 Component 1: Improving budget execution processes (US$4.5 million) ................. 12 Component 2: Strengthening budget oversight (US$5.1 million) ......... ............. 13 Component 3: Strengthening public financial management systems at provincial level (US$10.0 million)................................................................ 14 Component 4: Project management (US$2.5 million) ........................ 15 C. Project Financing ...................................................... 15 D. Lessons Learned ...................................................... 16 III. INSTITUTIONAL AND IMPLEMENTING ARRANGEMENTS ....................... 17 A. Implementing Arrangements ........................................ ..... 17 B. Monitoring and Evaluation................ ........................ ..... 20 C. Sustainability ......................................................... 20 IV. KEY RISKS AND ISSUES ......................................................................................... 21 V. APPRAISAL SUMMARY ......................................................................................... 21 A. Economic and Financial Analysis ......................................... 21 B. Technical Evaluation ............................................ ....... 22 C. Financial Management ........................................ ........ 22 D. Procurement......................................................... 23 E. Social and Environmental Reform ......................................... 23 Annex 1: Results Framework and Monitoring ........................................24 Annex 2: Detailed Description of the Activities .......................................29 Annex 3: Implementation Arrangements .............................. .........50 Annex 4: Operational Risk Assessment Framework (ORAF) ........................ 65 Annex 5: Implementation Support Strategy......................................70 Annex 6: Minimum Platform for Development Partners to Support Public Sector Reform at the Local Level ........................................................... 72 Annex 7: Donors Support Matrix in PFM ........................................76 Annex 8: Overall Summary of PFM Performance Scores in 2012 and 2008 ...... .........79 Annex 9: Proposed Team Composition and Resources ........................ ..... 80 iii PAD DATA SHEET Democratic Republic of Congo Public Financial Management and Accountability Project (P145747) PROJECT APPRAISAL DOCUMENT AFRICA AFTMW Report No.: PAD789 Basic Information Project ID EA Category Team Leader P145747 C - Not Required Saidou Diop Lending Instrument Fragile and/or Capacity Constraints [X] Investment Project Financing - Post-Conflict Financial Intermediaries [ ] Series of Projects [ ] Project Implementation Start Date Project Implementation End Date 30-Jan-2014 31-Dec-2018 Expected Effectiveness Date Expected Closing Date 28-Feb-2014 31-Dec-2018 Joint IFC No Sector Manager Sector Director Country Director Regional Vice President Renaud Seligmann Edward Olowo-Okere Eustache Ouayoro Makhtar Diop Borrower: MINISTER OF FINANCE Responsible Agency: COREF Contact: Godefroid Misenga Title: Coordinator Telephone 243813192957 Email: godemisengal@gmail.com No.: Project Financing Data(in US$ Million) ] Loan [ ] Grant [ ] Guarantee ] Credit [X ] IDA Grant [ ] Other Total Project Cost: 22.10 Total Bank Financing: 5.00 Financing Gap: 17.10 Financing Source Amount BORROWER/RECIPIENT 0.00 International Development Association (IDA) 5.00 iv Department for International Development (DFID) 17.10 Total 22.10 Expected Disbursements (IDA FY/US$ Million) Fiscal Year 2014 2015 2016 2017 2018 2019 Annual 0.50 2.00 1.50 0.90 0.10 0 Cumulative 0.50 2.50 4.00 4.90 5.00 0 Expected Disbursements (DFID FY/US$ Million) Fiscal Year 2014 2015 2016 2017 2018 2019 Annual 5.00 6.00 5.00 1.10 0 0 Cumulative 5.00 11.00 16.00 17.10 0 0 Proposed Development Objective(s) The proposed project development objective is to enhance the credibility, transparency, and accountability in the management and use of DRC's central and selected sub-national public finances.. Considering the complementarity with other donor and Bank-funded programs, the proposed MDTF project will focus on downstream PFM reforms of the central government and public financial management in selected provinces (Equateur, Kasai Oriental and Nord Kivu). Components Component Name Cost (US$ Millions) Component 1- Improving budget execution processes 4.50 Component 2 - Strengthening budget oversight 5.10 Component 3 - Strengthening public financial management 10.00 systems at provincial level Component 4- Project management 2.50 Institutional Data Sector Board Financial Management Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Mitigation Co-benefits % Co-benefits % Public Administration, Law, and General public 60 Justice administration sector Public Administration, Law, and Sub-national government 40 Justice administration Total 100 I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. v Themes Theme (Maximum 5 and total % must equal 100) Major theme Theme % Public sector governance Public expenditure, financial 60 management and procurement Public sector governance Other accountability/anti-corruption 40 Total 100 Compliance Policy Does the project depart from the CAS in content or in other significant Yes [ ] No [ X] respects? Does the project require any waivers of Bank policies? Yes [ ] No [ X] Have these been approved by Bank management? Yes [ ] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [X] Does the project meet the Regional criteria for readiness for implementation? Yes [X] No [ ] Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X Legal Covenants Name Recurrent Due Date Frequency Covenants applicable to project implementation Not Applicable Description of Covenant Conditions Name Type v1 Description of Condition Not Applicable Team Composition Bank Staff Name Title Specialization Unit Saidou Diop Sr Financial Task Team Leader AFTMW Management Specialist Chiara Bronchi Lead Public Sector Lead Public Sector AFTP5 Specialist Specialist Jean Mabi Mulumba Senior Public Sector Senior Public Sector AFTP5 Specialist Specialist Kolie Ousmane Maurice Sr Financial Team member AFTMW Megnan Management Specialist Bourama Diaite Senior Procurement Senior Procurement AFTPW Specialist Specialist Donald Herrings Lead Financial Peer Reviewer AFTMW Mphande Management Specialist Gert Johannes Alwyn Lead Financial Peer Reviewer AFTME Van Der Linde Management Specialist Franck Bessette Sr Financial Peer Reviewer MNAFM Management Specialist Aleksandar Kocevski Operations Officer Team member AFTMW Lucie Lufiauluisu Program Assistant Program Assistant AFCC2 Bobola Lanssina Traore Procurement Specialist Procurement Specialist AFTPW Angelo Donou Financial Management Financial Management AFTMW Specialist Specialist Thomas Maketa Lutete Consultant Governance Specialist WBIOG Non Bank Staff Name Title Office Phone City Mailan Chiche Governance Specialist Kinshasa Robert Cauneau PFM Consultant Locations Country First Location Planned Actual Comments Administrative Division vii I. INTRODUCTION AND CONTEXT 1. The Democratic Republic of Congo (DRC) is among the largest countries in Africa but remains vulnerable because of decades of conflicts despite its natural resources. DRC has a population of about 71 million people distributed over 2.3 million square kilometers. It has a vast mineral wealth and huge water resources, but decades of conflict and corruption have left it chronically unstable, lacking infrastructure and social services, and falling far short of its economic potential. As a result, DRC remains one of the poorest countries in the world with a per capita GDP below US$291. It was ranked 187 out of 194 countries in the 2011 Human Development Index. 2. A significant factor leading to the economic problems in DRC is the weakness of its current Public Financial Management (PFM) system. In view of the consequences from such a weakened system, the DRC Government, with the support of the Bank and the United Kingdom's Department for International Development (DFID), has developed a more comprehensive, sector-wide approach to support PFM reform. At the request of the Government, the World Bank is introducing a Public Financial Management and Accountability Project (PFMAP) to support the Government's PFM reform program, with support from DFID. The proposed World Bank project is being designed using a basket-funding mechanism by establishing a Multi-Donor Trust Fund (MDTF) for PFM reform to be administered by the World Bank and executed by the DRC Government. The initial allocation1for the proposed project is US$22.1 million including an IDA allocation of US$ 5 million and a Co-financing of US$17.1 million from DFID allocated over a period of three years from January 2014. This Project Appraisal Document provides the context and projections for the World Bank's intervention. A. Economic and Governance Context 3. Economic performance showed marked improvement thanks to strong trade performance and investment inflows, mainly driven by the mining sector. A favorable outlook for mineral production could help maintain the pace of growth at about 7 percent in 2012-13. However, inflation was well above the single digit target (9 percent) of the Central Bank of the Congo (Banque Centrale du Congo) in 2011 largely because of external factors. It has slowed recently to about 10 percent from July 2012 through September 20132 4. Addressing governance challenges and creating strong and capable institutions is an essential condition for DRC's exceptional resource endowment to be translated into long-term and sustainable growth. However, successive administrations have struggled to rise to this challenge. The regime of Mobutu Sese Seko (1965-97), during which the state slowly collapsed, was followed by a devastating conflict involving several countries. The transitional government, which took office in 2001, has been working toward re-establishing peace and reconstructing the economy. The country's latest democratic presidential elections were held in Other donors such as Belgium Cooperation, EU and AfDB are expected to contribute to the MDTF over time. 2 IMF Article IV consultation report (September 27, 2012) and WB- DRC Economic Update, September 2013. 1 November 2011. Although observers challenged the credibility of the 2011 elections, the previously tense security situation has returned to normal after the swearing in of President Kabila and the appointment of a new cabinet in April 2012. Mr. Matata Ponyo, who was credited with solid macro-economic management performance as Minister of Finance in the previous cabinet, was appointed Prime Minister on April 19, 2012. His new Government, mostly composed of technocrats, was formed on April 28, 2012, and the Government's program was approved by the National Assembly on May 9, 2012. The Government also faced renewed security challenges in Eastern Congo. 5. In addition to impoverishing the population, the war and political instability did lasting damage to DRC's institutions. The political support for institutions evaporated as elites became fragmented. Distrust for institutions increased in parallel with threat of force in reaching and adhering to agreements. This situation has led to poor governance affecting all institutions to the detriment of service delivery and economic development. Improving governance is essential for DRC to address persistent poverty and reduce threats to sustainable economic growth. Some governance issues were addressed in the context of Heavily Indebted Poor Countries (HIPC) debt relief, reached in early July 2010, including appropriate macro- economic policies supported by an IMF program and the adoption and implementation of a new Public Procurement Code. In addition, the Government is committed to addressing governance challenges and over the last five years has moved toward rebuilding a well-functioning PFM system. 6. Decentralization is a main feature of the 2006 Constitution. The Constitution redefines the state structure of the DRC as a decentralized unitary state, with 26 provinces and over 1,000 self-governing local authorities. Provincial authorities and territorial decentralized entities have their own elected governments and will take on responsibility for key aspects of service delivery, in health, education, and agriculture in particular. While most of the new structures remain to be established (the current 11 provinces were to be split into 26 in 2010 according to the Constitution and elections at sub-provincial level remain to be held), the establishment of elected provincial governments in January 2007 has already significantly changed governance dynamics in the country and exposed serious capacity challenges at the sub-national level. The risks posed by weak provincial and sub-provincial governance structures are among the key political challenges for the DRC in the coming years. B. Sectoral and Institutional Context 7. A Public Expenditure and Financial Accountability (PEFA) assessment was completed in 20083 and identified several weaknesses in the PFM system. Subsequently, a Strategic Plan for Public Finance Reform (PSRFP) was adopted by the Government in March 2010. Developed through a consultative process involving Government, development partners, and civil society, the PSRFP was approved in the spring of 2010. The PSRFP marks an improvement over previous efforts at economic reform and the following: (i) budget planning and preparation; (ii) fiscal management, (iii) expenditures management, (iv) accounting and cash management, and (v) oversight. PSRFP represents today to key document for all players supporting the PFM system with the view to ensure a greater coordination. A PEFA update was conducted in 2012. 2 8. A three-year action plan sets out for reforms to be implemented in five areas: budget planning and preparation, fiscal management, expenditure management, accounting and cash management, and budget controls. The Government strengthened the mechanism for co- ordinating and implementing public finance reforms by establishing the Coordination Committee on Public Finance Reform (Comite d'Orientation de la Reforme des Finances Publiques, COREF) in August 2009 which has the mandate to coordinate, and monitor the implementation of the reforms. 9. The 2008 and 2012 PEFA reviews identify a range of weaknesses in DRC's PFM system, including critical shortcomings in budget preparation and execution processes as well as in internal and external controls. As an initial response to these challenges, the Government developed the PSRFP. As a result of Government's efforts to address the identified PFM issues, there has been significant progress in the legal and institutional framework, with the adoption of a Public Financial Management Act (Loi relative aux Finances Publiques, hereafter LOFIP)4 and Public Procurement Code. Also, significant progress was made on improving PFM systems of local governments. Through the ongoing Governance Capacity Enhancement Project (GCEP), the World Bank supports key aspects of the DRC legislative reform agenda, such as the organic public finance law and related legislation on provincial and local financial management, the package of core decentralization laws, the package of core public service reform legislation, and research on the impact of decentralization. Despite these improvements, significant challenges remain. 10. Legal and institutional framework. The LOFIP sets ambitious objectives for PFM reforms, including performance budgeting, decentralization of commitment authority to line ministries, modernization of expenditures management, improving the efficiency and comprehensiveness of government accounting and financial management systems, and modernization of internal and external controls. These reforms, if implemented over the expected 7-year period (2011-2018), would be significant given the strong focus on results and principles, which contrast with the current rules-based traditional line item system. The LOFIP introduces new concepts such as program budgeting, decentralization of commitment authority to line ministries, accrual accounting system, and risk-based auditing. (Key elements of the LOFIP are summarized in Box 1.) A significant capacity building effort will be needed for people involved in the whole PFM process (budget preparation, execution and control). The full implications of these reforms are yet to be incorporated into the PSRFP and PAP, which have not been updated since their approval. In addition, the PSRFP does not include a clear monitoring and evaluation framework. 4Law No 11/011 of July 13, 2011. Promulgated by Decree on April 27, 2010 and effective since October 27, 2010 3 Box 1 : Key elements of the PFM reform strategy and LOFIP * Transition from traditional line item rules-based to a results based system; * Moving toward medium-term and program budgeting; * Modernizing public accounting through adoption of a new accounting regulation and the reorganization of the public accountants network; in the longer term, move toward double-entry accrual accounting at national and provincial level; * Improving treasury management and operationalization of cash plans; * Setting-up an integrated financial management information system; * Rationalizing the expenditure chain to improve expenditure management; * Improving debt management; * Revising the procurement code to ensure competition, transparency, and independent oversight; * Modernizing the tax system through the adoption of a new customs code and VAT law to rationalize fiscal pressure; * Promoting financial decentralization through a coordinated approach to PFM reform at decentralized level; and * Reinforcing the internal and external audit functions to hold spending bodies accountable. Source: IMF (2010) and COREF (2010) 11. Planning and budgeting.There is no coherent forward-looking perspective in the budget. Despite the development of medium-term expenditures frameworks (MTEF) in key sectors (i.e. health, primary, secondary and vocational education, agriculture, rural development and infrastructure), the link between sector policies and priorities and the budget is still weak. Major capacity constraints exist in various departments. The Directorates of Studies and Planning of line ministries still have difficulties in identifying and evaluating investment projects. Moreover, the new budget classification is still not operational, nor is it fully understood by all stakeholders. It has not yet been codified into the PFM information system. Furthermore, there is no clear plan to establish administrative and financial directorates in line ministries, although this is a key requirement of the LOFIP. Investment projects financed from external resources, while representing about 75 percent of the total capital budget, are in most cases developed outside the budget preparation process and not incorporated in the sector MTEFs. The LOFIP includes the adoption of a performance-based budgeting system. This approach will require a major change of the budgeting system and a significant strengthening of the capacity of line ministries. 12. Budget execution.Budget execution is affected mainly by (a) redundant and lengthy steps in budget execution processes, including various political interventions in the approval of commitments and payments; (b) abuse in the use of the exceptional/emergency procedures; (c) excessive centralization of budget execution authority in the Ministry of Finance and Ministry of Budget; (d) and non-incorporation of significant budget expenditures, including payroll into the budget management information system. Budget expenditure execution is extremely slow due, in particular as a consequence of the many departments involved;6 this results in redundancies of verifications and controls, with little value added. The personal interventions of the Budget Minister (commitment and verification) and the Finance Minister (payment authorization) also add another layer of delay and complexity. 13. An increased use of exceptional budget execution procedures (Mises & Disposition, Dipenses dites d'urgences) is not compliant with the regulatory arrangements that instituted those extra-ordinary procedures. The estimates for 2011 indicate that emergency 6There are about 19 steps for the normal budget execution procedure. 4 expenditure managed within the expenditure chain7amounted to 32.6 percent of total payments, and expenditure managed outside the chain was 14.0 percent of total payments. Thus in 2011 a total of 46.6 percent of all payments took place outside of regular expenditure controls and procedures .The situation is not stable from year to year. The 2011 percentages are similar to the situation in 2008 when 40.8 percent of expenditures were covered by emergency procedures. However, it appears that irregular expenditure declined in 2009 and 2010 around the time of HIPC completion and has since increased again. The Government has reported that over the past few years the number of emergency authorizations has fallen but has been reluctant to share data on the amounts of these emergency expenditures. The 2011 data on budget execution through regular procedure summarized in Figure 1. Figure 1: Budget Execution Through the Spending Chain Expenditure in 2011/ CDF billions 0 1 2 3 4 5 6 7 II I I I I II Cridits votis (budget appropriations) CDF 6,746 bn Engagements (commitment) CDF 4,184 bn 38% of budget appropriations do not Liquidations (validation of spending) CDF 4,165 bn proceed to the engagement stage Ordonnancements (payment order) CDF 3,844 bn Emergency expenditure is initiated at this stage. Previous stages are regularized ex-post. Paiements (payment) CDF 3,515 bn rglrzde-ot 16% of validated expenditures not paid by year end resulting in arrears Source: 2011 data from the Ministry of Budget website. 14. The data on use of emergency procedures and off-chain expenditure reveal the central problem in public expenditure management and budget execution. The use of emergency procedures has a substantial effect on budget execution at the level of individual ministries. Ministries benefitting from emergency expenditures are able to spend well in excess of their budgeted allocations. However, other ministries suffer because expenditures managed under regular procedures must be held back to make room for the additional allocations. The result is a substantial reallocation of resources between ministries that takes place outside of parliamentary control. This major deficiency in the PFM system was highlighted in the 2012 PEFA assessment, which scored the indicator PI-2 (Composition of expenditure out-turn compared to original approved budget) as a "D". The variance in expenditures composition of 7Expenditure chain refers to the 4 phases of the budget execution procedure: commitment (engagement); invoice validation (liquidation); issuance of payment order (ordonnancement); and payment (paiement). Expenditures managed within the chain refer to expenditures introduced at the stage of ordonnancement, without prior controls. Some expenditure however takes place entirely outside of the chain. 8Ministire du Budget, Cellule d'encadrement des d6penses du Cabinet du Ministre, Tableau r&apitulatifdes d6penses de rigularisation et d'urgences, lettres des finances et des ITPR dejanvier dfin d6cembre 2011. 5 the 20 largest budget departments is summarized in Table 1. Not only does this situation weaken the efficiency of the budget execution, but it also significantly undermines any effort to strengthen budget preparation, accounting, reporting and accountability. Table 1: Variance in Expenditure Composition of the 20 Largest Budget Departments 20 largest budget departments 2009 2010 2011 Common Expenditures 84% -35% -52% Presidency 58% 147% 206% Prime Ministry 54% 36% 84% National Assembly -3% -18% -16% Senate 9% -13% -10% Justice Department -53% -21% -34% State Department 130% 19% 34% Department of interior and Security -68% -49% -9% Department of defense 83% 38% 16% Ministry of Finance 9% -21% -30% Ministry of Budget 52% 58% -4% Ministry of Health -70% -18% -2% Ministry of higher education and universities -42% -20% 3% Ministry of Infrastructure and public works 23% 34% -38% Ministry of agriculture 392% -4% -31% Ministry of public service -47% -46% -25% National electorate commission -71% -54% 52% National Police -7% -5% -17% Provinces (own revenues) -64% -58% Provinces (Spending) -89% -100% Total -10% -30% -31% Source: 2012 PEFA. 15. The authorities have taken steps to address the challenges, including a commitment to establish finance and administration departments in line ministries and gradual decentralization of commitment authorities to line ministries. In addition, the personal involvements of the ministers (of budget and finance) who manage appropriations in expenditure commitment, verification, and payments authorization have been reduced. 16. Public Financial Management Information System. Launched in 2003, the computerization of the expenditure chain has modernized the public expenditure chain. The current procedures include (a) a single-step processing of commitment and settlement data by the Budget Supervision Department of the Budget Ministry, and of authorizations of payments data by the Finance Ministry's DTO (Direction du Tresor et de l'Ordonnancement); (b) an 6 expenditure chain in which each operator must act in turn by controlling and validating data and then passing the record on to the next operator; (c) real-time information access to budget execution data; and (d) management of confidentiality at all levels. 17. Despite these improvements, the computerization of the expenditure chain and the simplified transitional procedure has not led to the expected results in terms of the speed of processing expenditures and recordkeeping. This is partly due to the fact that the computerization was carried out without any modification or re-engineering of budget execution processes and procedures. 18. A more ambitious integrated human resources and PFM information system is being developed by the authorities and expected to be implemented in the next four years with the support of a World Bank-funded Governance Capacity Enhancement Project (GCEP) and its Additional Financing. The proposed PFM and Accountability MDTF will complement these operations and increase their likelihood of success. 19. Accounting, cash management, and reporting. One of the most important challenges in the modernization of the DRC PFM systems is the rebuilding of the entire accounting system. Both at the institutional and operational levels, accounting and financial reporting are characterized by considerable delays. A proposed reorganization of the various directorates in charge of accounting, cash management, and financial reporting is being developed. This reorganization includes the creation of a Directorate General for Public Accounts and the Treasury and the establishment of a General Regulation on Public Accounts. It also consists of the development and implementation of an accrual accounting system as well as the creation of a network of public accountants. This is an essential reform that should improve the quality and timely production of the accounts and periodic financial reports. However, it requires strong collaboration of the Central Bank that plays the de facto accountant general's role in the current PFM system. Successful implementation of this reform will require the implementation of change management activities to create broad consensus and identify key incentives around the other reform activities. 20. Internal audit. Internal audit falls under the purview of the General Inspectorate of Finance, which has overall authority to audit public finances. Operating under the authority of the Ministry of Finance, the General Inspectorate of Finance undertakes around 120 audits per year with about 70 inspectors. However, recent retirements have reduced the number of inspectors to around 30. Like many government services, the General Inspectorate of Finance suffers from lack of funding for its operating costs. In 2011, the Government transferred only about 30 percent of budgeted operating expenses. Consequently, the General Inspectorate does not have the capacity to perform its mandate adequately and cover key risk areas. It is therefore necessary to develop an ambitious program to support the General Inspectorate of Finance especially as the PFM system in DRC faces relatively high risk. 21. External audits. External audit is the responsibility of the Supreme Audit Institution (Cour des Comptes), which has made significant progress over recent years with support from various donors, including the European Commission. As a result, the Cour des Comptes has developed its strategic plan and reviewed the Government's audited financial statements from FY2004 to FY2008. However, significant challenges remain within the institution, including (a) 7 delays in the approval of its organic law, which reinforces its independence; (b) delays in judgment of the public accounts; (c) lack of follow up of audit recommendations and findings; (d) limited human resources capacity;9 (e) lack of audit manuals and a risk-based approach; (f) lack of resources to cover decentralized entities. . 22. Legislative oversight. The Constitution entrusts the Senate and the National Assembly with the responsibility of financial oversight over government spending. This oversight is accomplished through the annual vote to approve the audited financial statements of the previous fiscal year before reviewing the Budget Act for the forthcoming year. This provision was reinforced in the LOFIP. As a result, the Parliamentary Oversight Committees, with the support of the Law Committee, are in charge of reviewing the draft budget bill and then to audition Cabinet and administrative authorities concerning its content. However, the Parliament and Senate have not played their oversight role over the last years, except for the review of the annual budget laws. They have not yet reviewed the audited financial statements sent by Cour des Comptes and have not taken any actions to follow up on these findings and observations. Members of Parliament are also facing serious capacity constraints and receive no support that would assist them in actually carrying out their oversight function. Among necessary actions, there is a need to improve the interactions and communications between the Cour des Comptes and the Parliamentary Oversight Committees. 23. Public access to budgetary information. The 2008 PEFA notes that key budgetary information (i.e. annual budget documentation, in-year budget execution reports, year-end financial statements, external audit reports, contract awards, resources available to primary service delivery units) was not made available to the public. The 2008 PEFA gave a score of "D", a very low rating, to the indicator PI-10, Public access to key fiscal information. In 2012, the situation improved significantly with the rating for PI-10 rising to "C".1o However, serious challenges remain in the capacity of civil society organizations and the media to understand these budget documents and to convey key messages to the public. 24. Public sector and PFM systems at the provincial level. Decentralization has been central to the country's democratic processes since 2006 and was further strengthened by subsequent adoption of decentralization laws in 2008. It is broadly perceived as the only long- term option for preserving national integrity. The 2006 Constitution and various laws have organized the decentralization process around the following key features: * Creation of autonomous provincial (11 in the beginning and expected to increase to 26 by 2012, as per the Constitution) and sub-provincial entities (chefferies, territories, villes, communes); * Transfer of key central government functions to provinces (primary and secondary education, primary health); * Development of transparent and objectives rules for fiscal transfers between the central government and the provinces: 40 percent of domestic revenues should be retained by the According to its strategic plan, the Cour des Comptes would need to recruit at least 20 judges and 60 auditors to fulfill its mandate. 10 The PEFA rating scale ranges from "A" the highest, to "D", the lowest rating score. 8 provinces and 10 percent are to be distributed among them through a development equalization fund. 25. Partnership arrangements to support the provinces. With support from a World Bank-funded Governance and Capacity Enhancement Project (GCEP), a triumvirate of development partners that support public sector management reforms at the sub-national level, the Government, and sub-national authorities agreed in October 2010 on a decentralization framework. This framework agreement (plateforme minimale pour les provinces) sets minimum requirements that development partners must include in their programs when supporting sub- national governments. In addition, each development partner was assigned specific provinces with the understanding that the framework agreement will be the basis for supporting public sector reforms. Annex 6 includes a clear description of the framework agreement and assignment of provinces by donors. 26. Through a UNDP-funded program (Programme d'Appui a la D¢ralisation et au D6veloppement Local, PADDL), DFID has provided support between 2008 and 2012 to Nord Kivu, Equateur, and Kasai Oriental provinces. The DFID/UNDP program in the provinces includes some interesting features: it supports the provincial assembly, civil society's involvement in the budget processes, and lower levels of local authorities (Territorial Decentralized Entities - TDE). 27. While the development of the framework agreement has improved the public sector management of the provinces, there remain significant challenges. Despite the apparent support of central government authorities to the decentralization agenda, fiscal transfers to provinces fluctuated between 6 and 15 percent in the period of 2007-2011. In addition, the adjustment fund (Caisse de p6r6quation) is not functioning. Another key challenge is the delay in adoption of laws and regulations by the provinces. There are also few checks and balances at the provincial level. Ex-post controls (General Inspectorate of Finance and Cour des Comptes) are non-existent, and civil society oversight is still at its early stages. Provincial assemblies are still not exercising their oversight roles and tend to approve all documents submitted by the local authorities. 28. Coordination and monitoring of PFM reforms. To support the reform process, the Government has put in place a dedicated structure under the Ministry of Finance known as the Steering Committee for Public Finance Reform (COREF). COREF's role is to provide technical support to the Government and key institutions in preparing, implementing, and monitoring of the PSRFP and its subsequent updates. COREF plays a critical role in coordinating the implementation of the reforms through a network of thematic correspondents. The effectiveness of COREF is hampered by its lack of human resources, although additional recruitment of six PFM experts is planned. While charged with coordinating a large, complex, and technically demanding reform program, COREF still lacks technical specialist staff, with currently only two PFM experts. COREF's work is often diverted into managing emergencies and supporting donor missions rather than engaging in regular monitoring and long-term strategic planning. Communication and capacity to influence the reform program in powerful public administrations (e.g. revenue authorities and Central Bank) is also a key challenge facing COREF. However, some improvements have been noted over the period January to August 9 2012, with more frequent meetings and regular communications with thematic correspondents, especially at the local levels. 29. Donor practices. Donors have significant leverage and influence over PFM reforms in DRC. Annex 7 gives an overview of donors' active and pipeline PFM operations. An analysis of these interventions shows that a number of programs will be closing in 2013. Donors' technical assistance projects have mainly focused on upstream PFM reforms (MTEF, program budgeting, etc.) and decentralization. Few programs are coherently targeting budget execution, accounting, reporting, and auditing. This is mainly due to the recent adoption of the LOFIP that introduces new "downstream" reforms, such as decentralization of commitment authority to line ministries, reorganization of the accounting department, and introduction of accrual accounting. Moreover, donors' own PFM practices are limiting the extent of their influence, in particular because of weaknesses in donor coordination. To address this challenge and after the successful completion of the 2012 PEFA, international development partners that make up the PFM thematic group on public finances"and the Government signed a memorandum of understanding to monitor the implementation of the PFM reform program and harmonize international development partners' PFM interventions. The joint donor/government group will meet quarterly to (a) discuss the strategic direction and orientation of PFM reforms, (b) review the implementation progress of the PSRFP, and (c) discuss any coordination issues in the funding of the reform program. Successful implementation of the memorandum of understanding is expected to improve donor coordination and the sequencing of PFM reforms. 30. Political economy. The political economy studies conducted during 2008-2010 highlight the difficulties of implementing reforms in the DRC, for both institutional and sector reform. The underlying dynamics in the political system-inability of citizens to effectively articulate their interests, inability of elites to make credible commitments to each other, including on issues that are clearly in the broader public interest-combined with new political fault lines (coalition politics, the interplay of central and provincial governments) make implementing holistic reforms particularly difficult. 31. The greatest challenge for the PFM system reforms is resistance to change by some civil servants and managers who see these reforms as a threat. In the project, this resistance could surface primarily through a feeling of loss of power that the staff of the Budget Ministry could experience in the context of devolution of payment authorization, as well as fears created by strengthening the external audit. However, these same persons also stand to gain from these reforms. On the one hand, the reforms will allow them to focus their attention on the effectiveness of expenditures as opposed to just the volume of expenditures. On the other hand, these reforms set milestones for new results-based public management. In view of the important transparency support and citizen participation component in this program, the requirements could thus be met to pressure the Government to give it further incentives to focus on the results achieved by public policies. 32. Above and beyond these studies, the project's approach will be to assist the authorities in solving the specific problems that they experience, as opposed to imposing the implementation of international best practices as a single model of management. The risk of " These donors include AfDB, DFID, French Cooperation, German Cooperation, UNDP, and World Bank. 10 insisting on implementing these best practices, other than the fact that there is no single model of public financial management, would be that the implementation of the reforms by the authorities is too superficial to meet the real or perceived expectations of the international development partners. The goal of this project is to overcome this tendency of "isomorphism." 33. Analytical work underpinning. As a result of the weaknesses in its PFM system, DRC scored very low in the 2008 PEFA assessment: 22 out of 28 indicators that measure PFM performance were rated "D". In 2012 PEFA assessment shows an improvement in the overall scoring of the performance indicators. Only 17 indicators were rated "D" with a majority improving from D to D+. However, the 2012 assessment also highlights the continued weaknesses in key pillars of the PFM framework. With four "D" scores, budget credibility ranks as the weakest pillar of the overall PFM system. External controls and legislative oversight are also areas of concern and where significant improvements are needed. One interesting finding is the rating for PI 8, Transparency of inter-governmental fiscal relations, which slightly improved from "D" in 2008 to "D+" in 2012 despite the country's focus on decentralization. Another notable result is the static rating for donor practices. Like 2008, the 2012 scores rating donors' practices remain at "D", indicating a very low trust in the country's PFM systems by the donor community. During the review period, none of the donors provided direct budget support. Financial information about donor-funded operations is partially included in the budget documents.12 Annex 8 gives a comparative overview of the 2008 and 2012 PEFA ratings. II. PROJECT DEVELOPMENT OBJECTIVES 34. The proposed MDTF project for PFM reform is consistent with the Government's Poverty Reduction Strategy Paper (PRSP) II and is an integral part of the new Country Assistance Strategy (CAS) FY13-FY16.13 The first strategic objective of the CAS aims to increase state effectiveness and improve good governance with a focus on: (i) support to the implementation of DRC's public financial management action plan at central and provincial levels, (ii) strengthening the capacity of civil society organizations on demand side for good governance, and (iii) reinforcing the capacity of state oversight institutions, including the Parliament. A. Proposed Project Development Objectives 35. Considering the complementarities with other donor-funded programs, the proposed MDTF project will focus on downstream PFM reforms of the central government14 (i.e. devolution of commitment authority to line ministries, reporting and cash management, internal audit and external audits, legislative oversight, access to key fiscal information and demand side of governance) and public financial management in the provinces previously supported by (i) DFID through UNDP (Equateur, and Nord Kivu) and (ii) the Bank (Kasa:-Oriental). 12 According to the 2012 PEFA, less than 50 percent of external-funded operations are included in the budget documents. "The new Country Assistance Strategy FY13-FY16 was adopted by the Board on May 9, 2013. 14 Upstream PFM reforms are financed through the Bank funded program PRCG and donors' interventions in the sectors. 11 36. The proposed project development objective is to enhance the credibility, transparency, and accountability in the management and use of DRC's central and selected sub-national public finances. Annex 1 gives the PDO-level performance results indicators for the project. B. Project Context 37. The recipient-executed part of the proposed MDTF project includes four components: Component 1: Improving budget execution processes; Component 2: Strengthening budget oversight; Component 3: Strengthening public financial management systems at provincial level; and Component 4: Project management. Component 1: Improving budget execution processes (US$4.5 million) 38. This component will support the Recipient to empower its Line Ministries in the budget execution process and improve cash management and internal audits. This component includes three sub-components: (a) supporting devolution of commitment authority to line ministries; (b) enhancing cash management and (c) strengthening of the Office of Inspector General of Finance. This component will be used to link the program with other Bank projects in health, education, agriculture, infrastructure and rural development sectors. This will be done through regular meetings and sharing of information. This component will be implemented with due consideration of ongoing partners' capacity building and public administration strengthening efforts (such as the creation of national administration institute, development of curricula and training modules). 39. Sub-component 1.1: Devolution of commitment authority to line ministries (US$3.5 million).This sub-component will support the ongoing efforts of the Government to devote commitment authority to line ministries with the view for the decision makers in the said line ministries to be actually accountable in achieving their targets. This sub component will in the short run allow complying with article 103 of the LOFIP. The project will finance the following key activities: (i) supporting the establishment of administrative and financial directorates in Line Ministries and strengthening the capacity of their staff; (ii) strengthening the Technical Inspection Offices in the Line Ministries; (iii) strengthening the capacities of the budgetary comptrollers assigned to the Line Ministries; (iv) supporting the implementation of the newly adopted Accounting Regulation; (v) developing a master plan for the devolution of commitment authority to Line Ministries, including supporting the piloting of the plan in five selected Line Ministries; and (vi) creating broad consensus and identify key incentives for successful implementation of the devolution of commitment authority to Line Ministries. 40. Sub-component 1.2: Enhancing cash management (US$500,000). The purpose of this subcomponent is to improve the quality of the cycle that culminates in preparing the projected cash plan to improve the programming of the expenditures that may be incurred, taking their priority ranking into account. The following activities will be implemented: (i) harmonizing the procurement plans; (ii) harmonizing the commitment plans; and (iii) integrating data to have reliable cash position forecasting tool and improve the availability, quality, and consistency of 12 information flows used to prepare a projection matrix to produce a reliable cash plan. In the long run, they should provide funds to the payment authorization officers and fund managers at least three months in advance using reliable cash position projections as a basis. 41. Sub-component 1.3: Strengthening the Office of the Inspector General of Finance (US$500,000). The purpose of this subcomponent is to strengthen the Office of the Inspector General of Finance so that it is able to effectively carry out its missions as follows: (a) control, verification, crosschecking, and oversight; and (b) assess the performance of public entities and systems. The activities scheduled in this subcomponent are as follows: (i) revision of the institutional framework of the Office of the Inspector General of Finance, (ii) strengthening of the capacity of the Office of the Inspector General of Finance, (iii) support to conducting at least one performance audit in each of the priority ministries, (iv) acquisition of security and computer hardware and equipment. Component 2: Strengthening budget oversight (US$5.1 million) 42. This component will support the Recipient to enhance its external oversight in the management of public finances. This component includes three sub-components: (a) strengthening external audit processes; (b) strengthening the legislative oversight and (c) increasing public access to key fiscal information and participatory public expenditure management. 43. Sub-component 2.1: Strengthening external audit processes (US$1.2 million). The purpose of this subcomponent is to improve the technical capacity and effectiveness of the Cour des Comptes. The activities scheduled under this subcomponent are as follows: (i) supporting the implementation and dissemination of the Cour des Comptes Organic Law; (ii) supporting capacity building for its staff; (iii) improving coordination between the Cour des Comptes and the Office of the Inspector General of Finance; and (iv) improving its information system and its public account review. 44. Sub-component 2.2: Strengthening the legislative oversight (US$1.5 million). The purpose of this subcomponent is to strengthen the capacities of the Economics and Finance Committees in the National Assembly and the Senate. As a result, they will be able to better carry out their ex-ante and ex-post auditing missions under the budget laws. The subcomponent also aims to facilitate public access to information on the work of these two committees. The activities scheduled in this subcomponent are as follows: (i) improving the technical capacities of the Economics and Finance Committees in the National Assembly and the Senate; (ii) upgrading their information systems; and (iii) supporting the restructuring of said committees. 45. Sub-component 2.3: Increasing public access to key fiscal information and participatory public expenditure management (US$2.4 million). The purpose of the subcomponent is to strengthen the capacities of Congolese civil society in the areas of the budget and fiscal issues so that it can initiate proposals that reflect the concerns of certain sectors of society and so that it can assist with evaluating government action and audit public expenditures. The activities scheduled for this subcomponent are as follows: (i) support to facilitate civil society's access to discussions on the strategic budget framework, (ii) support to strengthen citizen control of budget execution, as regards both payment of expenses and 13 revenue collection, access to information, outreach, and the dissemination of budget and tax documents, (iii) prepare mechanisms to monitor the adoption of the laws that are essential for improving the budgetary environment, and (iv) prepare and implement instruments to establish participatory budgets in Territorial Decentralized Entities (TDEs) in close collaboration with their respective provinces. 46. Taking into account Nord-Kivu province volatile security situation in its eastern area and after lessons learned from experimentation by the World Bank Institute, through the PRCG, of Participatory Budgeting (PB) in the neighboring Sud-Kivu (that has a security situation similar to Nord-Kivu), PB aspects related to social stabilization and local administration re- foundation around citizen participation to local budget will be emphasized. Component 3: Strengthening public financial management systems at provincial level (US$10.0 million) 47. This component will support the Recipient to improve financial management systems and public services in the Provinces of Equateur, Kasa*-Oriental, and Nord Kivu (when the security situation will permit) or any other Recipient's Province. The entry point of all capacity- building activities funded under this component will be the Plateforme minimale agreed with all donors. The component includes 3 sub-components whose objective is to strengthen public financial management systems in each province mentioned above. Any support to Nord-Kivu province will be done in close coordination with conflict prevention and stabilization initiatives, in order to contribute to peace and stabilization in the province through enhanced governance, state-citizen trust and local level accountability. The below described sub-components will learn from PRCG's experience. Joint missions will be envisaged with PRCG, yet the provinces covered are not the same. 48. Sub-component 3.1: Strengthening public financial management systems in Equateur (US$3.6 million). The objective of this sub-component is to accelerate the implementation of the "plateforme minimale". This will be achieved through the implementation of the following activities: (i) strengthening the capacities of the Provincial Assembly; (ii) strengthening the provincial institutional and technical capacities, including the institutional and technical capacities of the directorate in charge of revenues for the Province; (iii) supporting the operation of the Steering and Monitoring Committee for Local Public Finance Reform; and supporting the development of a participatory budgeting and budget control by the provincial citizens. 49. Sub-component 3.2: Strengthening public financial management systems in KasaY- Oriental (US$3.2 million). The objective of this sub-component is to accelerate the implementation of the "plateforme minimale" in Kasal-Oriental. The activities are the same like those mentioned above for the province of Equateur: (i) strengthening the capacities of the Provincial Assembly; (ii) strengthening the provincial institutional and technical capacities, including the institutional and technical capacities of the directorate in charge of revenues for the Province; (iii) supporting the operation of the Steering and Monitoring Committee for Local Public Finance Reform; and supporting the development of a participatory budgeting and budget control by the provincial citizens. 14 50. Sub-component 3.3: Strengthening financial management systems in Nord-Kivu (US$3.2 million). The activities are the same like for other two provinces mentioned above and will be conducted with due consideration of the security situation. Nord-Kivu has an unstable security situation. Most of vehicles' and computers provided by donors to its provincial budget division have been looted by rebel groups that occupied its provincial capital Goma. To account for this, a gradual approach will be used: starting with PB at the TDE level for rebuilding local administration around citizen participation to budget and focus on capacity building at provincial level before tackling cost intensive infrastructure and equipment investments. Component 4: Project management (US$2.5 million) 51. This component will support COREF for the coordination, administration, communication, financial management, procurement, monitoring and evaluation, audit, and dissemination of the Project's activities at both central and local levels. At the provincial level, COREF will set up local teams comprising a provincial coordinator, procurement and financial management officers, and an administrative staff to oversee the provincial-level implementation of the program. The component will also support the activities related to the memorandum of understanding to monitor the implementation of the PFM reform program and harmonize international development partners' PFM interventions. The component will include change management activities to create broad consensus and identify key incentives around reform activities. C. Project Financing 52. Lending Instrument. The total estimate amount of the Investment Project Financing, to be implemented by the government, is US$ 22.1 million and will be co-financed by DFID (US$17.1 million) and IDA grant (US$5 million). The partners and the Government have agreed to adopt the Investment Project Lending (IPF) instrument for this project based on clear evidence that it serves as the appropriate instrument mechanism that responds to the specific needs of the Government' s approved PFM Reform Strategy. The objective is to ensure that the priority government reforms defined in the PFM Reform Strategy is implemented in a sequenced manner during the life of the project, and complementarily to the other reforms being delivered in the area of PFM by the other development partners. Other forms of instruments, including development policy operation, were considered but found not adapted with the objectives to be pursued in the PFM reform strategy. A retroactive financing arrangement is also built into the project, where notwithstanding the provisions of Part A of the Financing Agreement, no withdrawal shall be made for payments made prior to the date of the Agreement, except that withdrawals up to an aggregate amount not to exceed SDR330, 000 equivalent may be made for payments made 12 months prior to this date, for Eligible Expenditures under Category (1). 53. Program Cost. The program cost is described in the table below. 15 Table 4. Program Cost for the PFMA Project DEMOCRATIC REPUBLIC OF CONGO Public Financial Management and Accountability Program (PFMAP) Components by Financiers (US$ 'million) IDA DFID TOTAL Amount % Amount % Amount % Component 1 - Improving budget execution processes 1.Devolution of commitment authority to line ministries 0.8 - 2.7 - 3.5 15.8 2. Enhancing cash management 0.1 - 0.4 - 0.5 2.3 3.Strengthening the Office of Inspector General of Finance 0.1 - 0.4 - 0.5 2.3 Subtotal 1.0 - 3.5 - 4.5 20.4 Component 2 - Strengthening budget oversight - 1. Strengthening external audit processes 0.3 - 0.9 - 1.2 5.4 2.Strengthening the legislative oversight 0.3 - 1.2 - 1.5 6.8 3.Increasing public access to key fiscal information and participatory public expenditure management 0.6 - 1.8 - 2.4 10.9 Subtotal 1.2 - 3.9 - 5.1 23.1 Component 3 - Strengthening public financial management systems at provincial level - 1. Strengthening public financial management systems in Equateur 0.8 - 2.8 - 3.6 16.3 2. Strengthening public financial management systems in Kasaf- Oriental 0.7 - 2.5 - 3.2 14.5 3. Strengthening public financial management systems in Nord-Kivu 0.7 - 2.5 - 3.2 14.5 Subtotal 2.3 - 7.7 - 10.0 45.2 Component 4 - Project management - Support to Coordination of Project activities 0.5 - 2.0 - 2.5 11.3 Subtotal 0.5 - 2.0 - 2.5 11.3 Total Project Cost 5.0 23 17.1 77 22.1 100 D. Lessons Learned 54. The ODI study of PFM reforms in fragile states describes a certain number of lessons that were taken into account in designing this project. Moreover, the experience of Liberia, where such a project is under way with DFID, was taken into consideration. In sum, the key lessons learned are (i) Take political economy into account and the underlying reasons for the resistance so that interventions can be aligned with the context; (ii) Use the sequential approach, ensuring the simplicity of action taken with regard to weak capacities; (iii) Commit to a flexible long-term perspective; and (iv) Invest in donor coordination. Evaluation from the World Bank Institute and PRCG Participatory budgeting experience in Sud-Kivu provides the following lessons learned: (i) Using budget as governance entry point into Territorial Decentralized Entities (TDEs) administration re-foundation has benefits that go beyond those related to just good compliance with fiscal policies; (ii) the establishment of open space to discuss core problem between TDEs and province (revenue transfers, competencies, tax...) is essential; (iii) Using on-site coaching method for stakeholders at both TDEs and provincial level, allow better project implementation and (iv) In provinces with volatile security situation, an initial focus 16 should be given to capacity building. Infrastructure and heavy investment should occur when peace situation stabilized. III. INSTITUTIONAL AND IMPLEMENTING ARRANGEMENTS A. Implementing Arrangements 55. Financing arrangements. The Project will be financed through a Multi Donor Trust Fund administered by the World Bank and executed by the Government of DRC. The Bank will sign Administrative Agreements with donors willing to participate in the program. The initial allocation of the MDTF (GBP14 million) will be provided by DFID. In addition, World Bank will contribute to the MDTF with a financing of US$ 5 million from IDA grant. The Bank will sign an administration agreement that will detail the terms and conditions of the TF with DFID. Funding will be provided through a joint financing mechanism using common policies and procedures. For joint financing activities, World Bank will lead on the side of donors and Bank policies and procedures will apply. Bank will sign a Grant Agreement with Government of DRC, Ministry of Finance. In addition, the Bank will discuss with other donors the possibility of setting up a local basket fund to finance PFM reforms. 56. The MDTF should be able to take into account the fluctuating context of political economy in DRC, and the need to ensure the flexibility of the support of donors for the PFM reform. Some activities could be timely opportunities in terms of political commitment. They may include studies, surveys, diagnostic work or technical assistance, related to requests from government, the PFM donor group, NGOs and civil society. Funding opportunities should be selected on the basis of their complementarity and coherence with the components of the program and their contribution to building a solid evidence base on PFM reform in order to contribute to better policy formulation in future. The MDTF should be flexible enough, in order to allow the coverage of other provinces and the redeployment of at least some of the activities in the context of political economy, without having to go to the Board. At the time of the project preparation, AfDB and EU were envisaging a potential new operation to join the MDTF. For the existing operations and operation for which preparation is far advanced, it seems to be more difficult since it would require amendments of the grant agreements. France intends to pursue its support through Technical Assistance from its national technical institutions ADTEF and DGFIP. It has been agreed that all activities will be overseen by COREF with an aim of having one single report. 57. Implementation arrangements. Overall implementation arrangements will follow the existing structure established to monitor and manage PFM reforms. It will also take into account the existing implementation arrangements of Bank funded active projects, including Governance Capacity Enhancement project and Establishing capacity for core public financial management project. By building on existing structures and arrangements, the project will leverage on strong technical and fiduciary capacity to speed up implementation. Implementation will include the following structures: (i) Joint Government/Development Partners committee on PFM Reforms; (ii) COREF; and (iii) Beneficiaries of the reforms (Key PFM departments, Cour des Comptes, Parliamentary Accounts Committees, CSOs). 17 58. Joint Government/Development Partners committee on PFM Reforms. This joint committee was established after the 2012 PEFA in October 2012. It includes key stakeholders involved in PFM reforms. On the country side, it includes the Minister in charge of Finance (Chair), Minister in charge of budget, COREF, BCC, President of Cour des Comptes, Heads of Parliamentary Accounts Committees, heads of the key administrations in charge of the reforms (Revenue Authorities, Budget, Procurement, Accounting, etc.), local authorities (Provincial's Minister in charge of finance or budget, Provincial Head of Parliamentary Accounts Committee). On the Donors' side, the Joint Committee includes Development Partners involved in PFM reforms, including the Bank, IMF, DFID, AfDB, UE, French Cooperation, and UNDP. This committee will function as the steering committee of the project and will meet every quarter to (i) discuss the strategic direction and orientation of PFM reforms; (ii) review the implementation progress of the PSRFP; and (iii) discuss any coordination issues in the funding of the reform program. It should be noted that the quarterly meetings of the steering committee will be held on the occasion of the quarterly meetings of the joint committee. These meetings will be open to all donors involved in PFM reforms, but they will not replace the quarterly meetings of the joint committee itself. 59. COREF. COREF will be in charge of the fiduciary and technical coordination of the activities. Its current staffing includes (i) a coordinator, (ii) a deputy coordinator, (iii) a financial management specialist, and (iii) a procurement specialist. In addition, COREF has recruited six technical assistants in charge of monitoring the implementation of the activities with the focal points of the departments and institutions. COREF will hold monthly meetings with the focal points to discuss the implementation progress of the PSRFP, including project activities. Each focal point will be in charge of reporting to COREF the implementation progress of the activities of his/her department/institution. At the regional level, COREF will set up Provincial teams in charge of monitoring the implementation of the activities. The following diagram shows an overview of the project's implementation and institutional arrangements. Figure 2 : Overview of the Project's Implementation and Institutional Arrangements 18 Joint Government/Development Partners committee on PFM Reforms Government, Key oversight institutions, and Development Partners members of PFM thematic Local Authorities group Minister in charge of Finance (Chair) EU: Chair of the PFM thematic group COREF Secretariat at the central level, Provincial represensatives of COREF including thematice correspondents OvrigtI stiuin (Cour de Cope ,rimnayAcut 60. Financial Management and disbursement arrangements. Financial management and disbursement will be handled by COREF. The technical capacity of this body, which was not yet at an appropriate level, has been improved by to the recruitment of six Technical Assistants and the appointment of short-term consultants in order to provide advice and technical support. Thus, COREF will meet, in the coming months, the Bank's minimum requirements under OP/BP 10.00. A single budgeting, accounting, reporting, and auditing requirement will be required. COREF will produce a consolidated financial and physical progress report every quarter as part of the joint Government/Development partners meetings. In addition, a single audit covering all activities managed by COREF will be required. Disbursement arrangements will be based on the Bank's transaction-based disbursement method, i.e. using the Statements of Expenditures reimbursement mechanism. The target by mid-term review of the program is to set up a designated account to be pooled with other donors, to finance project activities. Another possibility of getting additional contributions from other donors will be through the MDTF managed by the Bank. Key advantages of this approach will be a single reporting and auditing requirement, limitation of double dipping in the financing of the activities, and a more harmonized and coherent response to PFM issues. Sub-accounts will also be opened in the Provinces to finance activities implemented at the local level. An overview of the funds flow arrangement is presented below. Figure 3: Overview of the Program Targeted Funds Flow Arrangements 19 DFID & IDA Other Donors Other Donors (e.g. AfDB) EU, France WB - PRC - GAP (managed by MDTF WB) (managed by WB) Local basket Fund - managed by COREF Sub accounts per province - managed by COREF antennas located at the province level I Suppliers /Service Providers Disbursement S- - > Reporting B. Monitoring and Evaluation 61. Progress in achieving the Project Development Objectives will be measured and monitored through the intermediate results described in Annex 1 under the leadership of the COREF with support from experts recently hired in the areas to cover the pillars of the PSRFP. Annex 1 provides details of the reference data, targets, and frequency of data collection, source, and methodology. It is based primarily on the PEFA framework for which frequent self- assessments by independent experts are scheduled. 62. The annual joint reviews of program implementation will round out the monitoring and evaluation system in order to identify the problems and stumbling blocks that could interfere with achieving the development objectives. Finally, the meeting of the joint Government/partners committee will be the final instance of the monitoring evaluation framework. C. Sustainability 63. Since it is based on the PRSFP, the logical framework developed for the design of the program ensures that the expected results will be sustainable. The proper balance and consistency between the activities of the central and local level will also prevent two-tiered reforms between these two levels. The attempt to find complementarity with the activities of the 20 other partners in order to provide assistance in the zones that are not covered will help bolster the achievements and results over time. IV. KEY RISKS AND ISSUES 64. The overall governance environment in DRC is conducive to risk given the country's fragility and political situation. In this context, successful implementation of public sector and financial management reforms is a challenge. The overall risk rating for the project is assessed as Substantial, influenced by the country's weak governance and capacity risk. The continuing dialogue with stakeholders and the close project supervision by the Bank and other development partners should contribute to managing the risks during implementation. Table 5 summarizes the key risks. Table 5. Risks Ratings Summary Table Risk Category Rating Stakeholder Risk High Implementing Agency Risk -Capacity Substantial -Governance High Project Risk -Design Substantial -Social and Environmental Low -Program and Donor Low -Delivery Monitoring and Sustainability Substantial Overall Implementation Risk Substantial V. APPRAISAL SUMMARY A. Economic and Financial Analysis 65. Identifying and quantifying the direct and indirect economic and financial benefits of capacity building interventions in PFM reforms are not straightforward. It is difficult to carry out credible and rigorous cost-benefit and financial analyses. On the other hand, the benefits of such reforms are widely agreed to be large. 66. While the costs are quantifiable (as depicted in the project financing table), the benefits are largely indirect, ultimately seen in improved public financial governance, service delivery and better performance of the public financial management institutions. The economic justification of the proposed project is its contribution to a better functioning government through improved PFM and capacity to implement the national development strategy at both central and sub-national level. 21 67. The benefits of the project will flow from improved budget credibility, strengthened budget execution, better internal controls, enhanced oversight and increased transparency in the management of public resources at central government and sub-national level. Experience suggests that the proposed intervention could lead to: (i) efficient, transparent, and accountable fiscal and budget management contribute to economic growth and reducing poverty; (ii) better program implementation and service delivery as a result of improved credibility and predictability of budget; (iii) improved budget credibility will also improve resource allocation and budget execution in line with DRC's Poverty Reduction Strategy priorities; and (iv) improved revenue mobilization and administration capacity will provide more resources for implementation of growth and poverty reduction activities. The project will also support the development of sustainable human resource capacity especially in the area of PFM. All of these benefits will be monitored in a consistent manner in the matrix of results, including indicators defined for the project. 68. Thus, through the achievable benefits of this project that were identified, all the benefits in terms of annual savings for the Government are likely to more than offset the costs of implementing the project. The economic and financial benefits that the program will generate should exceed the costs of the program in terms of current value. B. Technical Evaluation 69. The program is the response to the Government's strategy, built around implementing the Public Financial Management Act [Loi relative aux Finances Publiques LOFIP], in order to meet the needs of improving and strengthening the achievements to date while dealing with the challenges identified in public financial management. The program design is based on its technical viability and soundness, and with a foundation taken from the Strategic Plan for Public Finance Reform and the 2012 PEFA. 70. In addition, cooperation with the development partners for mapping their interventions, combined with the support of several donors for the activities that are not financed in the reform strategy, means that there will be no overlapping or duplication of donor support. Moreover, the project intervention areas are well delineated and sequenced, and the fact that the COREF is coordinating public financial management, now being strengthened, will ensure a more efficient coordination system to support the reform and implementation of the reform program. C. Financial Management 71. In accordance with the Financial Management Manual issued on Marchl, 2010, the financial management arrangements of the Strengthening PFM and Accountability Project have been reviewed to determine whether they are acceptable to the Bank with consideration for the country's post conflict situation. The proposed project will use the existing financial management arrangements set up under the existing PRC-GAP that will be strengthened by the additional mitigations measures described below. The overall FM risk at preparation is considered Substantial. The proposed financial management arrangements including the mitigation measures for this project are considered adequate to meet the Bank's minimum fiduciary requirements under OP/BP10.0). 22 72. The review revealed that the following actions will need to be completed: (i) updating PRC-GAP's existing manual of procedures to capture the specificities of the new project and ensure adequate ownership by the new stakeholders, (ii) recruitment of an additional financial management expert; (iii) installing of the accounting software bought with the Bank's no- objection for COREF within the framework of the on-going PRC-GAP; (iv) the recruitment of an acceptable audit firm for the purpose of the project's annual audit requirement. FM arrangements are included under Annex 3. D. Procurement 73. Procurement of the activities to be financed under this project will be the full responsibility of COREF, an institution set up in the ministry of Finance and reporting to Minster of Finance. Procurement will be carried out by procurement experts out of whom one is already in place. Given (i) the country context and the risk associated; (ii) the fact that COREF procurement team is not fully staffed and (iii) COREF is implementing the PFM component of PRC-GAP, a project aimed to support the government in the improvement of its PFM system that includes procurement, it has been recommended to hire a second procurement expert and one procurement assistant to help the team in administrative works, More details arrangements are described into the Procurement Annex. E. Social and Environmental Reform 74. The program is intended to have a positive social impact by improving the people's confidence in public financial management through projects in the area of transparency that the Government will undertake. Moreover, as a technical assistance project (Category C), it does not incorporate any issues related to environmental management. Consequently, the Bank's policies in this area are not in play. 23 Annex 1: Results Framework and Monitoring Country: Democratic Republic of Congo Project Name: Strengthening PFM and Accountability (P145747) Results Framework Project Development Objectives PDO Statement The proposed project development objective is to enhance the credibility, transparency, and accountability in the management and use of DRC's central and selected sub-national public finances. These results are at Project Development Objective Indicators .Data Responsibility Cumulative Target Values Sore fo Source/ for Unit of . End Methodolog Data Collection Indicator Name Core Measure Baseline YR1 YR2 YR3 YR4 Et Frequency Measure Target y PEFA-PI-1: Aggregate expenditure out- turn compared to original approved budget. At least Text D C PEFA 2017 PEFA 2012 Government 90% of the aggregate expenditures comparedto original approved budget 24 were executed PEFA-PI-10: Public access to Text C B PEFA 2017 PEFA 2012 Govermment key fiscal information. PEFA-PI. 16- Predictability in the availability Text D C+ PEFA 2017 PEFA 2012 Govermment of funds for commitment of expenditures PEFA- PI-20: Effectiveness of internal controls Text C B PEFA 2017 PEFA 2012 Government for non-salary expenditure PEFA- PI-26: Scope, nature Text D+ C+ PEFA 2017 PEFA 2012 Government and follow-up of external audit PEFA-PI-28: Legislative Text D C PEFA 2017 PEFA 2012 Government oversight of audit report. SNG PEFA PI- 1: Aggregate Sub expenditure out- SNG PEFA National turns compared Text C 2017 G Provinces to original t PEFA approved budget. SNG PEFA Pl- Text C SNG PEFA SNG PEFA Provinces 2: Composition 2017 25 of expenditure out-turn compared to original approved budget SNG PEFA PI- 3: Aggregate revenue out-turn Text SNG PEFA SNG PEFA Provinces compared to 2017 original approved budget Intermediate Results Indicators .Data Responsibility Cumulative Target Values Sore fo Source/ for Unit of . End Methodolog Data Collection Indicator Name Core Measure Baseline YR1 YR2 YR3 YR4 Et Frequency Measure Target y Average lead time of processing the Self expenditure Days 37.00 15.00 PEFA 2017 Assessment Government until the PEFA payment in the 5 pilots line ministries 26 Annex 1: Results Framework and Monitoring Country: Democratic Republic of Congo Project Name: Strengthening PFM and Accountability (P145747) Results Framework Project Development Objective Indicators Indicator Name Description (indicator definition etc.) PEFA-PI-1: Aggregate expenditure out-turn compared to At least 90% of the aggregate expenditures compared to original approved budget original approved budget. At least 90% of the aggregate were executed expenditures comparedto original approved budget were executed PEFA-PI-10: Public access to key fiscal information. Public disclosure of the following key fiscal information: (i) Annual budget documentation, (ii) In-year budget execution reports, (iii) Year-end financial statements, (iv) External audit reports, (v) Contract awards, and (vi) Resources available to primary service units, PEFA-PI. 16- Predictability in the availability of funds for Reliability and frequency of the financial information on the ceiling of the commitment of expenditures commitment of expenditures PEFA- PI-20: Effectiveness of internal controls for non- Level of compliance of procedures of processing and booking the transactions: Limit salary expenditure the extraordinary expenditures << hors chaine >> to 1% PEFA- PI-26: Scope, nature and follow-up of external (i) Scope of the verification: Audit of at least 75% of the total expenditures. audit (ii) Submission of the annual audit report to the Parliament: Reduce the lead time of submission from 7.33 months to 4 months. (iii) Follow up of audit findings and recommendations PEFA-PI-28: Legislative oversight of audit report. (i) : Timely review by the Parliament of audit report : Reduce the existing lead time to 12 months from the receipt by the Parliament starting from 2015 (ii) Investigation performed by the Parliament on the findings of the audit reports: In- depth hearings on key findings take place occasionally, cover only a few audited entities or may include with ministry of finance officials only (iii) Formulate recommendations to the Government: Action are recommended but are rarely acted upon by the executive 27 SNG PEFA PI-1: Aggregate expenditure out-turns At least 90% of the aggregate expenditures compared to original approved budget compared to original approved budget. were executed SNG PEFA PI-2: Composition of expenditure out-turn Variance of the composition of expenditure out-turn compared to original approved compared to original approved budget budget is less than 10% by end of the project SNG PEFA PI-3: Aggregate revenue out-turn compared Domestic revenues reach at least 92% of the original approved budget by end of the to original approved budget project. Intermediate Results Indicators Indicator Name Description (indicator definition etc.) Average lead time of processing the expenditure until the Average lead time of processing the expenditure until the payment in the 5 pilots line payment in the 5 pilots line ministries ministries 28 Annex 2: Detailed Description of the Activities Component 1: Improving budget execution processes 1. Objective of the component - The purpose of this component is to hold the ministries accountable for executing their expenditures, improve cash management, and strengthen the internal audit. It is divided into three (3) subcomponents: (a) support the devolution of commitment authority to line ministries; (b) strengthen the cash management; (c) strengthen ex- ante controls and the internal audit. This component will be implemented with due consideration of ongoing partners' capacity building and public administration strengthening efforts (creation of national administration institute, development of curricula and training modules). Subcomponent 1.1 - Devolution of commitment authority to line sectorial ministries 2. Objective of the subcomponent - Place the management of financial resources with the decision-makers in the sector so that they can actually be accountable for achieving their objectives. In the long run, this subcomponent aims to comply with Article 103 of the budget law. 3. Current status - The current status is characterized by: (i) a high concentration of the expenditure approval process (the Budget Minister alone validates commitments; the Finance Minister alone authorizes the expenditure); (ii) some audits are redundant (budget comptrollers assigned to the line ministries and a "pool" of comptrollers in the Budgetary Control Office); (iii) major discrepancies for the budgetary headings in the administrative classification, between the authorized appropriations and payments; and (iv) long expenditure processing times (an average of 37 days from commitment to authorization for the normal procedures, and of that, there are 23 days before the commitment is validated). 4. The four preceding observations show that at this time, the line ministries have not harnessed their spending. In the spirit of the reform, the process should be reversed, making them more autonomous and thus more accountable. However, to ensure that this important reform is implemented in an irreversible manner, and to prevent risks of slippage due to greater autonomy of ministers, the devolution of payment authorization provided for in the LOFIP should be incremental and accompanied by strengthening the budgetary management and control functions in the line ministries. 5. This strengthening is even more necessary since the administrative, financial, and inspection units of the priority ministries (Agriculture, Rural Development, Education, Infrastructure and Health) have employees who are often elderly,15 insufficiently trained in modern management methods, and in nearly all cases they work without up-to-date written procedures. These same units are woefully underequipped in terms of automated office equipment in particular. 6. A process of revising the organic frameworks of the ministries has begun (Agriculture, 143 percent of the employees in the central units of the Ministry of Agricultural are now entitled to retire. These percentages are between 25 and 50 percent for the other ministries concerned. 29 Health, Rural Development, Public Works and Infrastructure16) in order to streamline the sectoral technical entities, and in a crosscutting manner, to harmonize the administrative and financial entities of the Government. Staff retirement and reclassification programs should solve the issue of overstaffing. The schedule for staff reclassification has an obvious impact on the project. In addition, based on the study for establishing and/or strengthening the Directorate of Studies and Planning (DEP) and the Administrative and Financial Directorates (DAF) (February 2011), a draft decree that establishes these entities is now being finalized. The activities described above will be carried out when the decree is operational. 7. Activities - The activities planned as part of this subcomponent are as follows: a) supporting the establishment of administrative and financial directorates in Line Ministries and strengthening the capacity of their staff; b) strengthening the Technical Inspection Offices in the Line Ministries; c) strengthening the capacities of the budgetary comptrollers assigned to the Line Ministries; d) supporting the implementation of the newly adopted Accounting Regulation; e) developing a master plan for the devolution of commitment authority to Line Ministries, including supporting the piloting of the plan in five selected Line Ministries; and f) creating broad consensus and identify key incentives for successful implementation of the devolution of commitment authority to Line Ministries. Details of Activities Activities Sub-activities a) Support establishment of Administrative and 1. Support the adoption of legislation on the duties and Financial Directorates (DAF) organization of the DAFs, and legislation that authorizes hiring administrative and financial directors Objective: In the long run, each ministry and 2. Prepare/update the profiles of DAF management positions institution, at the central as well as deconcentrated (director, division head and unit heads) level, will have well-organized, competent and 3. Prepare the administrative and financial procedures manual efficient DAFs that will be able to manage 4. Implement the Administrative and Financial Directorates expenditures according to current and recognized 5. Train the appropriate staff regulations. b) Strengthen the Offices of Technical Inspections 1. Support the drafting of legislation that indicates the duties of in the ministries the Offices of Technical Inspections and that authorizes hiring a sufficient number of inspectors Objective: Have an inspection office that is capable 2. Organize the units and acquire the equipment required for of strengthening the current internal audit, them to operate identifying risks, and proposing mitigating measures 3. Support the drafting of internal audit procedures manuals so that the ministry's operations can be carried out 4. Disseminate theoretical and ad hoc training; conduct audits economically, efficiently and effectively in a manner using TeamMate auditing software under the leadership of consistent with its mission, the Office of the Inspector General of Finance c) Strengthen the accountability and capacities of 1. Design a budget control devolution plan the budget comptrollers 2. Revise the roles and respective duties of the Directorate of Budget Control and the assigned budget comptrollers to Objective: In the long run, and in each ministry, bolster CBA accountability and lessen redundant controls in have assigned budget comptrollers (CBA) capable of the DCB 16 It should be noted that the Ministry of Education is lagging somewhat in this respect. 30 Activities Sub-activities performing the ex-ante audit of expenditure 3. Revise and fine-tune the control procedures manual for the commitments, as well as their other duties as new role of the CBAs to introduce hierarchical control of established by the legislation. expenditures 4. Train and carry out capacity-building activities d) Support the implementation of the newly adopted Accounting Regulation 1. support the dissemination plan of the new accounting regulation e d le M 2. provide technical assistance for an effective implementation Objective: Build line Mimstries capacity to of the accounting rules implement the new accounting regulation 3. Train and carry out capacity-building activities e) Payment authorization devolution plan in the sectoral ministries; implement in five (5) pilot ministries 1. Support drafting of legislation on devolution and payment authorization; Objective: Give the ministry the responsibility of 2. Prepare the corresponding implementation plan managing expenditures. The DAF prepares the 3. Prepare a procedures manual for the new payment authorization officers (ministries) instruments for paying expenditures for all the units 4..Implemen the a in of4. Implement the plan five (5) pilot ministries f) Change management activities that ensure the 1. Organize high-level meetings to obtain acceptance by success of the reform and that limit risk factors decision-makers 2. Identify "champions" of the reform in the Administration Objectives: Identify possible resistance to change, 3. Organize information sessions to explain the reasons for the whether caused by the transfer of duties, by change, its implications for unit operations, efficiency gain, strengthening certain entities or insecurity due to the and its benefits, and thus reassure the staff of the units who organizational changes, and take steps to eliminate will lose some of their duties this resistance. 4. Organize regular meetings with all the stakeholders to take stock of the evolution of the reform 5. Organize meetings between pilot ministries to identify best practices and to ensure that all the units are able to benefit from them 31 Subcomponent 1.2 - Enhancing cash management 8. Objective of the subcomponent - The purpose of this subcomponent is to improve the quality of the cycle that culminates in preparing the projected cash plan to improve the programming of the expenditures that may be incurred, taking their priority ranking into account. The subcomponent will complement others activities supported by EU on the Accounting reform; and the Bank's PRCG activity to implement an integrated financial management information system (IFMIS). 9. Current status - The 2012 PEFA report pointed out a certain number of weaknesses which, in the end, prevent the entities from obtaining the required funds in time to carry out their public service missions. 10. The Public Sector Cash Plan Committee was established by ministerial decision 053/CAB/MIN/FINANCES/2011 of September 25, 2011. It consists of the representatives of the cabinets of the Ministers of Finance and the Budget, the DTO, the BCC, the DGDP, the DGDA, the DGI, the DGRAD, and the Reform Monitoring Technical Committee (CTR). The Director of the Cabinet of the MF chairs this conmmittee. 11. The cash plan is prepared on an annual, quarterly, and monthly basis. It is prepared so that it is consistent with the program with the IMF. Moreover, the in-year update takes into account the quarterly program objectives established with IMF staff. 12. The cash plan for a given month shows the execution of the previous month, the initial progranmming, and the adjusted projection of the current month. The initial programming is based on the government budget and the program established with the IMF. The adjusted projection takes into account the results of execution of the previous month and the initial programming. 13. In the annual budget circular letters, the Ministry of the Budget orders the preparation of an expenditure commitment plan to regulate the pace of consumption of available appropriations based on available resources. With the participation of the fund managers, the DCB prepares a quarterly commitment plan. First, it informs the fund managers of the expenditure ceilings for the following quarter (these ceilings are determined based on quarterly annual cash position projections prepared when the fiscal year begins). Next, each fund manager proposes to the DCB the breakdown of the envelope among the different budget line items. After verification and centralization, the DCB submits the quarterly commitment plan to the Minister of the Budget for signature. The plan is then submitted to the fund managers when each quarter begins, before the 10th day of the first month. It is incorporated into the expenditure execution IT chain and sets the upper limit of expenditures to be incurred during the period under consideration. 14. The principal deficiency in the budget commitment plan that the DCB prepared is that it fails to take into account the periodic cash plan updates. This situation is exacerbated by the existence of expenditures executed outside the IT chain (urgent expenditures) that are not included in the commitment plan. 15. The considerable overruns of funds and the accumulations of payment arrears recorded during the fiscal years corroborate the ineffectiveness of the budgetary regulation system that is in place. 32 16. Activities - The activities scheduled under this subcomponent seek to improve the availability, quality, and consistency of information flows used to prepare a projection matrix to produce a reliable cash plan. In the long run, they should provide funds to the payment authorization officers and fund managers at least three months in advance using reliable cash position projections as a basis. 17. The scheduled activities for this chapter are: a) harmonize the procurement plans; b) harmonize the commitment plans; c) include the data to have a reliable cash position forecasting tool. Details of Activities Activities Sub-activities in the procurement plans 1. Strengthen and harmonize the procurement plans in the sectoral ministries 2. Computerize the centralization and updating of procurement Objective: Be able to produce all the commitment plans in the Ministry of the Budget plans of the sectoral ministries in a single matrix. b) Harmonize outputs in the commitment plans 1. Strengthen and harmonize the commitment plans in the sectoral ministries Objective: Be able to produce all the commitment 2. Computerize the centralization and updating of procurement plans of the sectoral ministries in a single matrix. plans in the Ministry of the Budget c) Include the data 1. Prepare the flow chart for including the cash position data based on the cash plan, the procurement plan, and the Objective: Have a reliable tool for forecasting cash consolidated commitment plan in a single matrix requirements and for regulating the consumption of 2. Model the matrix. available funds. 33 Subcomponent 1.3 - Strengthen the Office of the Inspector General of Finance 18. Objective of the subcomponent - The purpose of this subcomponent is to strengthen the Office of the Inspector General of Finance so that it is able to effectively carry out its missions as follows: (i) control, verification, crosschecking, and oversight; and (ii) assess the performance of public entities and systems. 19. Current status - According to the provisions of Articles 121 and 122 of the LOFIP, which set forth its duties, the IGF falls under the Ministry of Finance. Currently, there are seventy (70) finance inspectors, and this number has decreased over the years since employees who retire are not replaced. Therefore, the IGF was forced to cut back its coverage of institutions. 20. In addition to the LOFIP (Articles 121 and 122), all the legislation that deals with the legislative and regulatory framework of the IGF is as follows: * The General Public Accounting Regulation or "RGCP" (now being revised); * Budget Law 83 - 003 of February 23, 1983, as amended and supplemented by Order 87 - 004 of January 10, 1987; * Law 078 - 0020 of January 6, 1976 on the general provisions applicable to public enterprises, as amended and supplemented by Law 08/009 of July 7, 2008; * Order 73 - 235 of August 13, 1973, establishing the cadre of public accounting officers; * Legislation and regulation on taxation and quasi-taxation. These instruments should be revised to take into account the change in missions brought about by the principles introduced in the LOFIP and to update the status of the inspectors. 21. There is considerable effort under way to upgrade the accounting verification and financial manuals and a performance approach is being added. Moreover, the IGF now has two effective auditing tools: TeamMate for preparing risk-based auditing programs, documentation, and for planning the interventions; and IDEA for data analysis. Training is in progress to familiarize the inspectors with the use of these software programs. 22. Activities - The activities scheduled in this subcomponent will build on EU's achievements in the area and will be set as follows: a) Revise the institutional framework of the Office of the Inspector General of Finance. b) Strengthen IGF capacities. c) Support conducting at least one performance audit of each of the priority ministries. d) Acquire security and computer hardware and equipment. Details of Activities Activities Sub-activities a) Revise the institutional framework of the Office 1. Support drafting the decree on the duties and organization of of the Inspector General of Finance the IGF (including standards for disseminating the reports) 2. Support the drafting of the decree on the rules of procedure Objective: Give the IGF a regulatory framework that of the Inspectors General of Finance 34 is tailored to the provisions of the LOFIP. 1. Support the finalization of sectoral audit procedures (with b) Strengthen the capacities of the IGF TeamMate) 2. Strengthen performance auditing and projects and programs Objective: Give the IGF methods and tools tailored to auditing the duties assigned to it. (see sub-activities to strengthen the offices of technical inspection in the ministries) c) Support conducting at least one performance 1. Map the risks of each of the five pilot sectoral ministries audit in one of the priority ministries 2. Conduct at least one performance audit based on risk- Objective: Introduce the risk-based audit approach in mapping the pilot ministries. d) Security and computer hardware and equipment 1. Acquire computer equipment for the IGF (servers and laptops) Objective: Give the IGF and the pilot technical 2. Purchase additional licenses for TeamMate for at least five inspection offices equipment and tools tailored to technical inspectors per pilot ministry carrying out the missions. 35 Component 2 - Strengthen Budget oversight 23. Objective of the component - The purpose of this component is to strengthen the external audit of public financial management. It consists of three (3) subcomponents: (a) strengthen the external audit process; (b) strengthen legislative oversight; and (c) improve accessibility to budgetary information and strengthen citizen control. Subcomponent 2.1 - Strengthen the external audit process 24. Objective of the subcomponent - The purpose of this subcomponent is to improve the technical capacity and effectiveness of the Supreme Audit Institution. 25. Current status - The Supreme Audit Institution (CDC) is part of the National Assembly. Its scope of authority extends to auditing the execution of the budget law, the accounts of the provinces, of the decentralized subnational authorities, and the independent government agencies. The provincial auditing sections are not yet in place. The CDC is governed by legislation that dates back to 1987. An organic draft law whose purpose is to modernize the organization and operation of the institution was prepared and is now being reviewed by Parliament. 26. The CDC's situation is characterized by a chronic lack of human resources given the extent of its duties. The CDC has only 19 judges, five directors, eight auditors, and 26 external auditors. The CDC obtains support from the European Union for hiring and training 60 judges. The project will provide additional training. 27. Moreover, with funding from the UNDP/DFIF, the CDC received support from the Regional Training Council for Supreme Public Finance Institutions Auditing in Sub-Saharan Francophone Africa. This support was used to produce audit methodology guides and acquire IDEA auditing software with a first phase of training session. 28. Coordination between the administrative auditing entities (the IGF and technical inspection offices) and the supreme external auditing institution (CDC) is nearly nonexistent. This situation heightens the risks of duplication of labor and scattering of efforts. 29. Activities - The activities scheduled under this subcomponent are as follows: a) Adopt, enact, implement, and disseminate the CDC organic law. b) Support capacity building for Supreme Audit Institution staff. c) Support strengthening coordination between the Supreme Audit Institution and the Office of the Inspector General of Finance. d) Disseminate the future organic law of the Supreme Audit Institution after it is enacted. e) Support improvements in the Supreme Audit Institution information system. 36 f) Support the improvement of judicial review. Details ofActivities Activities Sub-activities a) Aopt enct, mplmen an disemiatethe 1. Have Parliament scrutinize and enact the draft organic CDC a) Adopt, enact, implement and disseminate the law CDC organic law2. Enact and implement the organic law. Objective: give the CDC a modern and efficient legal 3. Produce the media for disseminating the organic law. fraewok nd btin heaccptnceoftheprncial4. Provide support for holding seminars or information framework and obtain the acceptance of the principal wrsoso hslw actors involved in the administration of the reforms 5 ort th r ane brought about by the new organic law. or law. b) Support the strengthening of staff capacities in the Supreme Audit Institution Objective: Give the Supreme Audit Institution the 1. Take the study trips that are scheduled as part of training for means to effectively carry out its external auditing 60 new judges. mission of budget execution for the entities of the 2. Conduct training using the IDEA software for CDC staff central government. c) Support the strengthening of coordination between the Office of the Inspector General of Finance, the Supreme Audit Institution and the finance and economy commissions of the parliament and the Senate. Objective: Improve the dialogue between the three 1. Draft a note that establishes the coordination systems between institutions in planning, programming interventions the two auditing entities and have both parties adopt it. and information sharing so that their activitiesst for ct . converge for auditing budget management while respecting their respective prerogatives. d) Support the improvement of the Supreme 1. Conduct a study to put in place a network between the Audit Institution information system Government (Ministry of Finance and Ministry of the Budget) and the Supreme Audit Institution. Objetivs: aciitat inormtio shaingbeteen 2. Put in place tools so that the Supreme Audit Institution has an the Government (Ministry of Finance and Ministry of prnoomcm amddsingsions ofa theite se, etc.) the Budget) and the Supreme Audit Institution. e) Support upgrading judicial review Objetiv: Iproe th coerae rte o juicil 1. Train the public accounting officers to prepare their end-year Objective: Improve the coedra at ofuiialogue treasury account reve.nthe end-yearntreafucersaccountsaof the 2. Train the judges of the Supreme Audit Institution in public govientitsaccouting oehom the 695 accounting and in assessing the end-year treasury accounts. .) Support for audits 1. Develop and disseminate a manual of procedures for Objective: Support the Supreme Audit Institution in management, financial audit and performance audit. the implementation of its audits annual program for 2. Coach the judges to conduct audit and follow up on Audit ministries, financial authorities and State companies. recommendations. 37 Subcomponent 2.2 - Strengthen the legislative oversight 30. Objective of the subcomponent - The purpose of this subcomponent is to strengthen the capacities of the Economics and Finance Committees in the National Assembly and the Senate. As a result, they will be able to better carry out their ex-ante and ex-post auditing missions under the budget laws. The subcomponent also aims to facilitate public access to information on the work of these two committees. 31. Current status - In the DRC a parliament comprised of two houses (the National Assembly and the Senate) exercises legislative authority and is administratively and financially independent. Each house has an Economics and Finance Committee. These committees are responsible for scrutinizing the draft budget laws in advance, including the original budget law, the supplementary budget law, and the budget review law before they are enacted. 32. The two committees use the expertise of the administrative entities (study offices) of their respective houses. To be effective, these offices should be upgraded and their capacities should be strengthened. They should also have the information and data necessary to prepare the documentation that is submitted to the committees. 33. Finally, the procedures for having Parliament scrutinize the drafts of the budget law are not formalized in the procedures manuals. 34. Activities - The activities scheduled in this subcomponent are as follows: a) Strengthen the technical capacities of the Economics and Finance Committees of both houses. b) Support the upgrade of the information system in the National Assembly and the Senate. c) Support the restructuring of the Economics and Finance Committees of both houses. Details of Activities Activities Sub-activities a) Strengthen the capacities of the Economics and 1. Hire and provide each committee with two or three Finance Committees consultants (macroeconomics, budget, and treasury) for a two-year period. Objective: Improve the quality of the budget analysis 2. Hold training seminars for the members of both committees of the Economics and Finance Committees of the on issues that pertain to certain aspects of PFM (budget National Assembly and the Senate. preparation, innovations in the LOFIP, budget execution, the TOFE and the Budget, etc.). 3. Prepare and adopt procedures manuals on scrutinizing the drafts of the budget law (original budget laws, supplementary budget laws and budget review laws) by Parliament. b) Support the upgrade of the information system 1. Perform a study for implementing a network between the in the National Assembly and the Senate administration (Ministry of Finance and Ministry of the Budget), the National Assembly and the Senate. Objectives: Facilitate information sharing between 2. Put in place tools so that the Economics and Finance the administration (Ministry of Finance and Ministry Committees of the two houses have an economic and of the Budget) and the two Economics and Finance financial database (server, search engine, procedures for 38 Committees in Parliament. Facilitate public access to adding to and maintaining the database, etc.) information on the work of the committees. 3. Perform a study on the current means of communication the two committees have with the media and make proposals to improve them (including a charter of publishable documents). c) Support the restructuring of the Economics and Finance Committees of the two houses 1. Conduct a study to propose a new organization of the committees with a view to implementing the LOFIP Objective: Tailor the structure of the committees to (budgeting by program). the reforms brought about by the LOFIP. 39 Subcomponent 2.3 - Increase public access to key fiscal information and participatory public expenditure management 35. Objective of the subcomponent - The purpose of the subcomponent is to strengthen the capacities of Congolese civil society in the areas of the budget and taxes so that it can initiate proposals that reflect the concerns of certain sectors of society and so that it can assist with evaluating government action and audit public expenditures. 36. Current status - At the time of the review of the Growth Strategy and Poverty Reduction Paper in the DRC (DSCRP) , Congolese civil society asserted that the budget of the DRC did not make a significant contribution to the country's development. It highlighted the following problems: (i) there are defects in the public accounting system; (ii) the distribution of the country's wealth is uneven; (iii) the proportion of the budget set aside for the provinces is not passed on regularly; (iv) the budget's role in the country's development is marginalized; (v) accountability is poor; (vi) citizen involvement in the budgetary process is insufficient; (vii) breaches of the rule on the expenditure chain are frequent; (viii) the statistics system in the DRC is defective; (ix) corruption is persistent; (x) control of budget execution and impunity is poor due to the lack of budget execution. 37. The PEFA reviews, and the 2012 review in particular, as well as the discussions that followed, described the management of Congolese public finances as follows: (i) obsolete legal framework; (ii) lack of budget credibility; (iii) lack of consistency between the budget and the national development strategy as defined in the DSCRP; (iv) the weak tax system; (v) an ineffective accounting and cash system; and (vi) a poor formal and citizen control system. 38. In such a context, the effective involvement of civil society organizations (CSOs) that contribute to restoring the credibility of the budget and strengthening the public finance control system is easily justified. The Government, through the COREF, and with support from its partners, decided to involve the CSOs in the public finance debate. 39. Along the same lines, the International Monetary Fund (IMF) also considers that civil society involvement in the budgetary process is a necessity. The institution even advised establishing a permanent dialogue entity for the budget. 40. The current situation is characterized as follows: (i) a lack of dialogue between the Government and civil society on the priorities it would like to have included in the government budget; (ii) a lack of synergy between civil society and parliament, which has the constitutional prerogative to debate the budget with the Government; (iii) a lack of access to budgetary information and the basic documents used to prepare the budget; and (iv) insufficient skills and means to interpret available budgetary documents and produce quality citizen reporting. 41. Currently there are two existing forums gathering CSO, the government and donors: i) the joint donors-government PFM group to follow up on PFM reforms which secretary is maintained by COREF. This committee's objective is to coordinate PFM reform between donors and government; it does not have a specific focus in involving CSOs to debate. (ii) The thematic Thematic note: Civil society's contribution to the DSCRP review 40 group on economic governance that gathers donors, government and CSOs. This is a large exchange and discussion group related to budget and PFM subjects. However the way this group is designed does not allow in depth or technical discussions. In addition it does not have a permanent secretary that follows up on decision and recommendations. 42. Additional important aspects linked to transparency and citizen controls are draft laws that would make public finances more transparent and the controls more efficient; but that are deadlocked either in the Government or in the parliament. Some of the laws are the law on public information or the law on protecting citizens who report misappropriations of funds (whistleblowers). 43. The Constitution of the DRC establishes three levels of governance: central, provincial, and territorial decentralized entities (TDE). Article 3 of the Constitution provides that the provinces and TDEs have legal status and are run by local bodies. The TDEs are entitled to 40 percent of the national revenue that is allocated to the provinces. But these funds are not regularly passed through, and when they are, payment is seldom complete. However these constitutional provisions provide an opportunity to design citizen participative PFM reform project at TDEs level. 44. The Government of the DRC has committed to promoting community dynamics by making this part of its 2007-2008 Priority Actions Program. Based on this policy, in 2010 the World Bank launched a pilot project that aims to establish participatory budgeting in the province of Sud Kivu. The project, which covered eight TDEs (communes of Kadutu, Ibanda, and Bagira, as well as the chiefdoms of Ngweshe, Wamuzimu, Kabare, Luhwinja, and Bafuliro), produced convincing results that encouraged the province to institutionalize the process through a provincial law that requires all the ETDs to prepare their budgets using the principles of participatory budgeting. This successful experience will be leveraged in the activities below. 45. Activities - The activities of this subcomponent are based on a logical progression of "goal to be achieved - constraints observed - specific objectives to be achieved," which determines the strategy that should be implemented. Figure 4: ICT4GOV: Goal, Constraints and Objectives GOAL CONSTRAINTS OBJECTIVES The citizens have insufficient access Increase the accountability of to budgetary information. governments to the citizens. Their understanding of budgetary Disseminate citizens views by Improve governance and information is poor. using the new information and Capacity d The governments are not accountable communication technologies development de enrlie acess to the citizens. (NTICs), so that they are key strategy The voices of the citizens and civil stakeholders in decision making society organizations are weak in this Require the governments to take regard. the citizens' needs into consideration. The activities scheduled for this subcomponent are as follows: a) Support to facilitate civil society's access to discussions on the strategic budget 41 framework. b) Support to strengthen citizen control of budget execution, as regards both payment of expenses and revenue collection access to information, outreach, and the dissemination of budget and tax documents. c) Prepare mechanisms to monitor the adoption of the laws that are essential for improving the budgetary environment. d) Prepare and implement instruments to establish TDEs participatory budgets in tight coordination with their respective province. Details of Activities Activities Sub-activities a) Support to facilitate civil society's access to 1. Support the establishment of a permanent strategic dialogue discussions on the strategic budget framework framework (CCSP) between the Govemment, parliament, civil society and the development partners. Objective: Establish a permanent strategic dialogue 2. Support the technical secretariat of the permanent dialogue framework (CCSP) for budgetary and tax issues framework in its duty of organizing and monitoring dialogue between civil society, the Govemment, parliament activities. and the development partners. 3. Establish links of cooperation with the National Statistics Institute for producing reports on the budget and tax matters. b) Support the strengthening of citizen control of 12. Prepare a dissemination campaign (displays in public places; budget execution, as regards both the payment of publication in the newspapers; publication on websites, etc.) expenses as revenue collection,, access to of important budget and information on revenue and information, outreach and the dissemination of expenditure execution. budget and tax documents 2. Develop an NTIC platform to support strengthening knowledge of the budget and taxes for academics, Objectives: Design and implement tools and representatives of the media and civil society, and the procedures to give civil society documentation on the population in general. processes of preparing, monitoring, and auditing the 3. Help promote monthly radio and/or television programs on the budget, and make information available on the major budget themes with participation by members of civil budget and tax matters so that the people understand, society and govemment representatives. 4. Support the drafting and dissemination of citizen monitoring reports (including support for using BOOST, the data analysis tool). 5. In each of the three provinces, identify and support training and study centers that develop CSO capacities and make skills sustainable. c) Prepare mechanisms to monitor the adoption of 1. i the CCSP, put in place a technical unit for monitoring the the laws that are essential for improving the laws. budgetary environment 2. Support the preparation and adoption of the law on access to govenment information. Objective: Monitor Parliament for enacting laws that improve the budget environment and that protect citizens who report misappropriations.i d) Prepare and implement instruments to 1. Support the establishment of a provincial steering committee establish participatory budgets for participatory budgeting. 2. Draft the teaching manuals and tools for implementing Objective: In the provinces of tquateur, Kasal participatory budgeting. Oriental and Nord Kivu, increase participation, 3. Train the officers of the TDEs and members of civil society in improve transparency and social accountability to the principles, methods, and tools for participatory budgeting redirect public resources to the poorest people and to (including budgetary issues and the management of public reconstruct the social link and general interest. This investments). activity in made in coordination with component 3.b 4. Roll out the NTIC platform developed in b) 42 Activities Sub-activities and 3.f. 5. Support the organization of the local consultation process for voting the budget and monitoring budget execution. Component 3 - Strengthen public financial management systems at the provincial level 46. Objective of the component - The purpose of this component is to improve public financial management systems and strengthen staff capacities in the provinces of Equateur; Kasa:- Oriental and Nord-Kivu18 using the minimum package reform platform agreed upon with donors and the respective roadmaps for each province. There are three subcomponents aiming to strengthen the public sector and the public financial management system of the provinces of Equateur; KasaI-Oriental and Nord-Kivu. Subcomponent 3.1 - Strengthen the public financial management system in Equateur 47. Objective of the subcomponent - The objective of this subcomponent is to accelerate the implementation of the minimum platform of PFM reforms agreed upon with the donors, including procurement reforms. 48. Current status - As in all the provinces of the Democratic Republic of the Congo, the province of Equateur has an executive body, the provincial government, and a legislative body, the Provincial Assembly. The provincial government consists of ten ministers and the Provincial Assembly has 108 deputies. These two bodies share budgetary prerogatives: the government prepares and executes the budget and the Provincial Assembly enacts the budget and debates the results of budget execution. There are six (6) committees: (i) economics and finance committee; (ii) sociocultural committee; (iii) policy, administration, and legal committee; (iv) reconstruction and development committee; (v) interprovincial and internal relations committee; and (vi) environment and agriculture committee. 49. The process of budgetary preparation and programming involves the cabinets of the Ministries of the Budget, Finance and Planning, as well as the governor's adviser, the provincial budget division, the provincial finance division, and the provincial planning division, as well as the other revenue-generating divisions. The budgetary process is not well organized as there is no budgetary calendar. 50. There is no institutional framework for the macroeconomic and macro budgetary guidelines or for preparing the medium-term expenditure framework (MTEF), although training has been provided on budget programming. 51. The procedures for scrutinizing the budgets and the administrative and end-year treasury accounts are not formalized in a procedures manual. The knowledge of elected officials of budgetary matters is insufficient Gust ten officials possess such knowledge); the lack of a technical support structure and the lack of equipment limit the Provincial Assembly's effectiveness. 1 Provided the security situation evolved positively. 43 52. The General Directorate of Revenue of the province of Equateur (DGRPE) was created in December 2009 and has been operational since 2010. It is divided into six (6) directorates: the directorate of levies, duties and fees; the tax directorate; the collection directorate; the coordination directorate; the directorate of administration and general services, and the human resources directorate. The DGRPE is deconcentrated at the district and subnational level. 53. The DGRPE is confronted with a certain number of difficulties that limits its operations. These are primarily: (i) there is no revenue execution procedures manual; (ii) there is no provincial taxpayer database; (iii) the DGRPE employees are unaware of the changes in the provincial tax legislation and regulations; (iv) employee profiles are unsuitable for the positions in which they serve; (v) employee training is insufficient; (vi) there is a chronic lack of office supplies and equipment such as official documents, means of travel, means of communication, PCs, etc., and (vii) the revenue chain is not computerized. 54. Civil servants in the office of the provincial governor, appointed by the central government, are in charge of expenditure management: provincial deputy payment authorization officer, appropriations sub-managers, and assignee budget comptrollers. The provincial ministers of the budget, finance, and the other sectorial ministers do not fully exercise their prerogatives for executing expenditures. The provincial directorates of the budget, the Treasury and payment authorization, payroll, and the procurement directorate have not been established. 55. The budgets that are enacted lack credibility. Rates of execution of own revenue are very low: 5 percent in 2010 and 6 percent in 2011. The execution of expenditures does not follow the standard procedure. 56. Budgetary accounting is kept in a rudimentary manner and the budget execution monitoring statements are not prepared routinely. Public expenditure management is not computerized. 57. For procurement, the new institutional framework provided for in the LOFIP and the procurement code have not been put in place. The tenders committee submits the procurement documentation to the national procurement directorate. The Provincial Assembly is now approving a draft procurement law. Employees in charge of procurement have insufficient knowledge of the new legal procurement framework. 58. A Public Finance Steering and Monitoring Committee of the province of Equateur (CPS) was established in 2010 and has been operational since November 2, 2011. The committee is involved in designing the reforms as well as monitoring their implementation. The committee carries out its duties satisfactorily. Support from the Programme d'Appui a la Decentralisation et au Developpement Local (PADDL) was decisive for the results the CPS achieved. 59. Activities - The activities scheduled in the context of this subcomponent are as follows: a) Strengthen the capacities of the Provincial Assembly. b) Strengthen the provincial government's institutional and technical capacities. c) Strengthen the institutional and technical capacities of the General Directorate of Revenue of the Province of Equateur (DGRPE). 44 d) Establish a provincial audit section. e) Support the operation of the Steering and Monitoring Committee for Local Public Finance Reform. f) Support the development of a participatory budgeting and budget control by the citizens in relation with component 2.3. 45 Details ofActivities Activities Sub-activities a) Support capacity building for the Provincial 1. Organize training for the provincial deputies on the Assembly presentation, preparation, and execution of the budget, as well as public accounting. Objective: Give the Provincial Assembly the means 2. Provide the Provincial Assembly with an expert in local to effectively carry out its missions of scrutinizing public finance for a period of one year. and enacting the provincial budgets and supervising 3. Design, disseminate, and distribute to the deputies a budget execution, procedures manual for the Provincial Assembly to scrutinize budgets, administrative accounts, and end-year treasury accounts. 4. Produce a compendium of the legislation that governs local public financial management in the DRC and provide it to the deputies. 5. Equip the Provincial Assembly with computer hardware, printers, uninterruptible power supplies, scanners, and photocopiers. 6. Organize study tours for the deputies to other provincial assemblies both in the DRC and abroad. b) Support the strengthening of the provincial 1 . Support the implementation of provincial directorates of the government's institutional and technical budget, treasury and payment authorization, payroll and capacities procurement: Train the employees and acquire computer hardware, printers, scanners, photocopiers, and generators. Objective: Give the public administration the 2. Support the establishment of Administrative and Financial technical and material resources they need to Directorates in three (3) pilot ministries. effectively manage provincial public finances. 3. Organize workshops to disseminate all the legislation that governs local public finance at the provincial level and in the decentralized subnational entities (TiDE). 4. Disseminate this legislation widely to all local public financial management stakeholders at the provincial and DE levels. 5. Organize a high-level workshop to analyze the organizational procedures for procurement in the province. 6. Organize workshops to disseminate the procurement code and its implementing regulations. 7. Support the preparation of procedures manuals for: (i) procurement at the provincial level; (ii) expenditure execution; (iii) provincial budget preparation; and (iv) administration, finance and accounting. 8. Support the preparation of the Table of Government Financial Operations (TOFE) in the province by training the employees involved. 9. Provide technical assistance for preparing the macroeconomic framework, macro-budgetary framework, and the MTEF: provide an expert for a period of three months. 10. Support the implementation of public accounting. 11. Computerize the expenditure chain. 46 Activities Sub-activities c) Support the strengthening of the institutional 1. Conduct the organizational audit of the DGRPE. and technical capacities of the DGRPE 2. Evaluate the revenue chain. 3. Create the provincial taxpayer database. Objective: Improve revenue management at the 4. Provide a technical assistant to the DGRPE for at least three provincial level. months. 5. For DGRPE staff, organize training workshops on local taxation. 6. Produce a compendium on local taxation applicable in the provinces and disseminate it widely. 7. For the DGRPE, organize specific training on taxation, public accounting, and data processing. 8. Computerize the revenue chain. d) Establish a provincial audit section 1. Adopt a regulation that sets up provincial audit institution sections and hire judges and administrative staff Objective: At the provincial level, set up an entity 2. Support Hiring of judges and administrative staff under the National Supreme Audit Institution with 3. Train the staff in management supervision and judicial review the task of performing an ex-post audit of the 4. Lease ad hoc offices finances of provincial public entities (management 5. Set up the provincial section of the audit institution supervision and judicial review). e) Support the operation of the Steering and 1. Hire and provide to the CPS two national resource persons for Monitoring Committee for Finance of the drafting and finalizing the draft legislation (edits) and province of tquateur (CPS) regulations to be prepared as part of the reform. 2. Support the CPS for organizing legislation validation Objective: Give the Steering and Monitoring workshops. Committee the means to better perform its duties. 2. Support the CPS for organizing training activities in local public financial management in the districts and decentralized subnational authorities in the province. 2) Support the development of a participatory budgeting and budget control by citizens. 1. Train the public on the process of budget preparation and execution. Objective: Promote the involvement of citizens in the 2. Train the public on the contents of local public finance. process of budget preparation and control both 3. Organize awareness activities to develop the involvement of expenditure and revenue, so that public spending citizens in the process of preparation, execution and oversight locally performed better meets their expectations. of the local budget. 47 Subcomponent 3.2 - Strengthen the public financial management system in KasaY-Oriental 60. Objective of the subcomponent - The objective of this subcomponent is to accelerate the implementation of the minimum PFM reform platform agreed upon with the donors, including procurement reforms. The activities will be the same as the activities planned in the Province of Equateur. However, they will be carried out one year later so that the experience acquired in the first province can be used to advantage. 61. Subcomponent 3.3 - Strengthen the public financial management system in the province of Nord-Kivu Objective of the subcomponent - The objective of this sub-component is to accelerate the implementation of the "plateforme minimale" in Equateur. The activities are the same like for other two provinces mentioned above. Nord-Kivu has an unstable security situation. Most of vehicles and computers provided by donors to its provincial budget division have been looted by rebel groups that occupied its provincial capital Goma. To account for this, a gradual approach will be used: starting with PB at the TDE level for rebuilding local administration around citizen participation to budget and focus on capacity building at provincial level before tackling cost intensive infrastructure and equipment investments. The activities will be conducted with due consideration of the security situation and will be implemented one year after to learn lessons and leverage on the outcomes and the investments made in Equateur. Component 4 - Project management 62. Objective of the component - This component aims to provide assistance to the COREF for coordination, administration, communication, financial management, procurement, monitoring- evaluation, in particular for the annual self-assessment of the PEFA indicators, auditing, and the dissemination of project activities to the central and provincial levels. At the provincial level, the COREF will put in place local teams consisting of a provincial coordinator and senior-level staff in charge of financial management and procurement to supervise the activities. This component will also support the activities of the standing dialogue framework to implement the public financial management reform program, including change management activities intended to build consensus and identify incentives for change. 48 Activities Sub-activities Strengthen the COREF 1. Hire the teams (coordinator, financial and procurement officers) to coordinate the COREF in two provinces. Objective: Manage project activities efficiently. 2. Hire additional financial management and procurement expert and a M&E specialist in the COREF. 3. Organize awareness workshops to build consensus around the reform. 4. Organize steering and mid-term review committees 5. Support the COREF in its activities for the PEFA self- assessment at least yearly in order to assess the changes in the intermediate indicators. 6. Audit project activities. 7. Finance the overhead cost for coordination. 49 Annex 3: Implementation Arrangements Project Implementation Arrangements 1. Overall implementation arrangements will follow the existing structure established to monitor and manage PFM reforms. It will also take into account the existing implementation arrangements of Bank funded active projects, including Governance Capacity Enhancement project and Establishing capacity for core public financial management project. By building on existing structures and arrangements, the project will leverage on strong technical and fiduciary capacity to speed up implementation. Implementation will include the following structures: (i) Joint Government/Development Partners committee on PFM Reforms; (ii) COREF; and (iii) Beneficiaries of the reforms (Key PFM departments, Cour des Comptes, Parliamentary Accounts Committees, CSOs). 2. Joint Government/Development Partners committee on PFM Reforms. This joint committee was established after the 2012 PEFA in October 2012. It includes key stakeholders involved in PFM reforms. On the country side, it includes the Minister in charge of Finance (Chair), Minister in charge of budget, COREF, BCC, President of Cour des Comptes, Heads of Parliamentary Accounts Committees, heads of the key administrations in charge of the reforms (Revenue Authorities, Budget, Procurement, Accounting, etc.), local authorities (Provincial's Minister in charge of finance or budget, Provincial Head of Parliamentary Accounts Committee). On the Donors' side, the Joint Committee includes Development Partners involved in PFM reforms, including the Bank, IMF, DFID, AfDB, UE, French Cooperation, and UNDP. This committee will function as the steering committee of the project and will meet every quarter to (i) discuss the strategic direction and orientation of PFM reforms; (ii) review the implementation progress of the PSRFP; and (iii) discuss any coordination issues in the funding of the reform program. It should be noted that the quarterly meetings of the steering committee will be held on the occasion of the quarterly meetings of the joint committee. These meetings will be open to all donors involved in PFM reforms, but they will not replace the quarterly meetings of the joint committee itself. 3. COREF.COREF will be in charge of the fiduciary and technical coordination of the activities. Its current staffing includes (i) a coordinator, (ii) a deputy coordinator, (iii) a financial management specialist, and (iii) a procurement specialist. In addition, COREF is currently recruiting [six] thematic correspondents in charge of monitoring the implementation of the activities with the focal points of the departments and institutions. The appointment of these thematic correspondents is expected to be completed before Board approval. COREF will hold monthly meetings with the focal points to discuss the implementation progress of the PSRFP, including project activities. Each focal point will be in charge of reporting to COREF the implementation progress of the activities of his/her department/institution. At the regional level, COREF will set up Provincial teams in charge of monitoring the implementation of the activities. The following diagram shows an overview of the project's implementation and institutional arrangements. 50 Figure 5: Overview of the Project's Implementation and Institutional Arrangements Joint Govern me nt/Developme nt Partners committee on PFM Reforms Government, Key oversight institutions, and Development Partners members of PFM thematic Local Authorities group Minister in charge of Finance (Chair) EU: Chair of the PFM thematic group COREF Secretariat at the central level, Provincial represensatives of COREF including thematice correspondents 4. Implementation management arrangements aimed to ensure coherent approach between programs (TTL based in Kinshasa, working in close coordination with the new PREM sector leader based in Kinshasa, and an Expert to oversee PRCG and PFMA support to accountability and participatory budgeting). Financial Management and Disbursement Arrangements Country PFM situation and Use of Country System 5. The Country Financial Accountability Assessment (CFAA), the Public Expenditures Review (PER), and the Public Expenditure and Financial Accountability (PEFA) 2008 and 2012 have shown an unsatisfactory economic and financial control environment including weak budgeting preparation and control, financial reporting, external audit and human resources. In-depth structural reforms are consequently required in the areas of economic governance, public expenditure management, financial sector and public enterprises to strengthen capacity in the public administration. To this end, with the support of the donor community, the Government of DRC has undertaken a series of PFM reforms in budget preparation and execution, adhesion to Treasury forecasts, preparation of regular budget execution reports, and simplification of the national budget classification system. The first critical step of these series of Public Financial Management (PFM) reforms is the adoption in July 2011 of a new PFM organic Law preceded by the adoption of a new Procurement code in December 2008. Additional decrees are being finalized to further clarify the organic Law. Yet, there is reason for cautious optimism; since it 51 will take time for these reforms to yield substantial improvements in the management of public funds. As a result, the overall country fiduciary risk is still considered High. The repeated PEFA, just concluded at the end of 2012, took stock of the areas of progress and revised the existing PFM strategy plan accordingly. This will pave the way for a new PFM Technical Assistance operation. In that vein, an assessment of the use of the country national PFM systems (UCS) has been undertaken in April 2013 with the aim to identify areas in which these systems could be relied upon for the implementation of Bank-financed projects. The UCS assessment report is scheduled to be available before the end of December 2013. 6. While waiting for the outcomes of the use of country system assessment, the proposed project will (i) be entrusted at the COREF, (ii) and rely on PRC-GAP fiduciary arrangements that will be strengthened Risk Assessment and Mitigation Measures 7. The Bank's principal concern is to ensure that project funds are used economically and efficiently for the intended purpose. Assessment of the risks that the project funds will not be so used is an important part of the financial management assessment work. The risk features are determined over two elements: (i) the risk associated to the project as a whole (inherent risk), and (ii) the risk linked to a weak control environment of the project implementation (control risk). The content of these risks is described below. Risk Risk Risk Mitigating Measures Risk after Remarks rating Incorporated into Project Design mitigation measures INHERENT RISK S S Country level H Finalize the preparation of the H The Bank last assessment Delay in the current project (US$ 22 million) in (September 2012) of the implementation of the support of the PFM reforms. This implementation of the different PFM reforms project will be prepared under the existing PFM strategy has that might hamper the Bank leadership as to address the shown an acceptable overall PFM key new challenges the country is progress. environment, facing. Use the current coordination unit in charge of the PFM reforms is required. Entity level M M None except additional COREF is familiar with IDA FM workload, procedures and staffed with experienced fiduciary consultants. Project level S COREF will strengthen ex-ante S The project funds would and ex-post control of funds Over be used for goals other allocated to the implementing implementation than the intended entities. The scope of the external purposes. audit will include review of expenditures incurred at all levels. FM staff will have ToRs acceptable to IDA and trainings during project implementation. CONTROL RISK S S 52 Budgeting M M Weak budgetary 2013 Annual work plan and budget execution and control prepared. The project FM Manual inducing budgetary of Procedures defined the overspending or the arrangements for budgeting, inefficient use of funds, budgetary control and the requirements for budgeting revisions. Accounting S S Risk of increasing of the Reinforce the current FM staffing Over The PRC-GAP's FM team workload with the recruitment of one implementation accounting software leading to some delays accountant and one treasurer, which has multi project, in the submission of the multi sites and multi required reporting donors' features will be installed and used. Internal Controls S S and Internal Audit The PRC GAP manual (i) Upgrade the PRC-GAP's The procedures of procedures used by existing manual of procedures to manual has COREF doesn't describe capture the specificities of the new been updated specifics the new project project; (ii) Internal audit functions before Internal controls will be assumed by the government negotiation procedures. internal audit institutions (snF) whose professional capacity will be strengthened Funds Flow S S (i) Risk of misused of (i) Payment requests will be funds and (ii) use funds approved by the administrative and to pay non eligible financial manager prior to purposes disbursement of funds et (ii) The ToRs of the external auditors will include regular field visits (physical verification of goods, services acquired). Financial M M Reporting (i) Delay in the (i) The existing computerized submission of JFRs due accounting system acquired under to the increase in the PRC-GAP will be updated to PCU activities; accommodate the PFMAP. (ii) format and content of (ii) The current content and format the FR my no beof the PRC-GAP's JFR are terwila t acceptable to IDA. The IFR of the aproedrate new project will use the same format and content. 53 External Auditing SS Extenal uditng S An External auditor acceptable to Scope of the audit may the Bank will be recruited under not cover key issues; ToRs acceptable to the Bank. poor performance of the external auditor; or delays in submission of audit reports Fraud & H Anti-corruption action plan H Corruptionincluding a specific safety Over Corrupiltionf mechanism that enables individual implementation Possibility of circumventing the persons and NGOs to denounce internal control system abuses or irregularities will be with colluding practices prepared in addition to the robust as bribes, abuse of FM arrangements designed to administrative positions, mitigate the fiduciary risks. The mis-procurement..., is a implementing agency will prepare critical issue, a code of conduct including clear procedures for disciplinary action pOverall FM risk S S 8. The overall risk rating at preparation is Substantial. Financial Management Action Plan to reinforce the control environment Issue Remedial action recommended Responsible Completion Effectiveness body condition or dated covenant Staffing Recruitment of an additional FM COREF Three months after expert effectiveness No Information system Update the accounting software COREF Three months after No accounting software acquired under PRC-GAP effectiveness Administrative, Upgrade the current PRC-GAP's COREF By Negotiation Completed Accounting manual of procedures used by COREF and Financial for PRC-GAP's implementation to Manual of include the specificities of the new procedures project and ensure adequate ownership by the new players. External financial Launch the Recruit process of an COREF Three months after No auditing External Audit Firm to audit the effectiveness Program 9. Governance and anticorruption considerations. The country political situation has weakened the governance and corruption environment. In the context of the project, the effective implementation of the fiduciary mitigation measures should contribute to strengthen the control environment. Also, the appropriate representation and oversight of the Steering Committee involving key ministers of Finance and budget actors and Donors, as well as the transparency in both project implementation and dissemination to stakeholders and the public should constitute a strong starting point to tackle governance and corruption issues during project implementation. 54 10. Staffing and Training: The COREF staffing should be adequate and commensurate with the extent of the operations project and activities under the project; should be sufficient to maintain accounting records relating to project financed transactions; and should be able to prepare the project's financial reports. Currently, COREF is staffed, on the FM side, only with a Finance Manager. This staffing must be completed by an experienced Accountant and a Treasurer. On the internal audit side, the team must be completed by an internal audit unit via the recruitment of an internal auditor. The team will have the overall FM responsibility over, budgeting, accounting, reporting, disbursement, internal control and auditing. The staff will have its capacity reinforced over the project implementation the rolling out of the training plan which includes among others, training on IDA disbursement procedures, training on OHADA accounting principles and its implication for a donor-financed operation, and training on IDA financial reporting arrangements. 11. Budgeting: The PRC-GAP's manual of procedures currently used by COREF already included detailed budgeting procedures, the preparation of annual work plan, and the adoption by the Steering Committee to the budget execution. It will be revised to incorporate the new project specifics. 12. Accounting Policies and Procedures: The PRC-GAP's manual of procedures currently used by COREF details the accounting policies and procedures which are in line with the Congolese accounting principles. This manual of procedures will be revised to include the new project's specifics. The accounting software acquired by PRC-GAP will be installed and used. This accounting software has features multi-projects, multi-sites and multi-donors. 13. Internal Control and Internal Auditing: Subject to revision of the manual of procedures, the existing internal control arrangements will be applied. Internal audit functions will be assumed by the government internal audit institutions (IGF) whose professional capacity will be strengthened. In this context, the detachment of an Inspector of Finance is required for the project's internal audit function. The internal auditor will report directly to the Coordinator and Steering Committee. He will undertake periodic assessments on the strengths and weaknesses of the internal control system at all levels. All control deficiencies or circumvented practices identified will be communicated in a timely manner to the overall senior management of the project for immediate corrective action as appropriate. One of each such report will also be communicated to the Bank. He will prepare relevant manuals and guidelines. 14. Funds Flow and Disbursement Arrangements: COREF will open a Designated Account (DA) in order to manage the project's expenditures. 15. A pooled Designated Account will be opened in a commercial bank on terms and conditions acceptable to IDA under the fiduciary responsibility of COREF. The Designated Account (DA) will receive funds from IDA and the MDTF financed by DFID.The DA ceiling will be set to US$ 400,000. The DA will be used to finance all eligible project expenditure under all components. Payments from the DA will be made in accordance with the provisions of the manual of procedures (i.e. joint signatures by the Coordinator and the FM Manager will be required for any payment). Sub accounts will be opened at COREF's antennas located at the province level. They will be used to pay the suppliers selected through acceptable Bank procurement procedures. Replenishment of these accounts will be done at least once a month by the project implementation unit upon submission of acceptable supporting documents. Disbursements to the Designated Account will be made on a prorated basis proportionally to each contribution 55 (IDA/DFID). The percentage of disbursement from each will be determined and reviewed as new contributions are committed to the MDTF. Payments from the sub accounts will be subject to acceptable arrangements for the Bank. Advance to the Designated Account will be made against withdrawal applications supported by Statements of Expenditures (SOE) and other documents as specified in the Disbursement Letter. All supporting documents should be retained at the project and readily accessible for review by periodic IDA implementation support missions and external auditors. Direct payments, will be made to service providers if need be. Figure 6: Transfer of Funds DFID IDA) 1 "I MDTF (managed by WB) Local basket Fund - managed by COREF I antennas located at the province level I I Suppliers / Service Providers Transfers of funds Flow of documents (invoices, good receipt notes, purchase order, - o Payment to suppliers 16. Disbursement arrangements: The transaction - based disbursement method will be applied. The DA will be used for all payments inferior to twenty percent of the ceiling and replenishment applications will be submitted as often as possible. 17. Disbursements by category: One single category will be applied for the program. All expenditures will be financed inclusive of taxes by the program. 56 Amount of the Amount of the Financing GatAlced Percentage of Expenditures Category Alocated (exGraAoed to be Financed (expesse iu (expressed in (expressed in miloso S) (inclusive of Taxes) lmillions of US$) (1) Goods, Works, Non- 5 17.1 Such percentage as shall be Consulting Services, agreed with the Recipient Consultants' Services, Operating and specified in the Annual Costs, Workshops and Training Work Plan for the Project Total Amount 5 17.1 100% 18. Financial Reporting and Monitoring: Financial reports will be designed to provide quality and timely information on Project performance to Project management, and relevant stakeholders. The Project will use the same format of IFRs as PRC-GAP which will be automatically generated from the accounting software bought by PRC-GAP with the Bank's no- objection. This accounting software has features multi-projects, multi-sites and multi-donors. The quarterly IFR includes (i) the statements of sources and used funds, and utilization of funds per category, (ii) the updated of the procurement plan, (iii) the physical progress, (iv) expenditure types and implementing agent, showing comparisons with budgets; (iv) Designated Account activity statements and explanation notes to the IFR; (v) and the summary of missions of internal audit as well as implementation status of the recommendations of internal or external audit and supervision missions. The IFR will be prepared and submitted to IDA, 45 days after the end of each quarter. In compliance with International Accounting Standards and IDA requirements, the Project will produce annual financial statements. These include: (i) a Balance Sheet that shows Assets and Liabilities; (ii) a Statement of Sources and Uses of Funds showing all the sources of Project funds, expenditures analyzed by Project component and category expenditures (iii) a Designated Account Activity Statement; (iv) an Implementation Report containing a narrative summary of the implementation progress of the Project; (v) a Summary of Withdrawals using SOE (transactions-based disbursement), listing individual withdrawal applications by reference number, date and amount; and (vi) Notes related to significant accounting policies and accounting standards adopted by management and underlying the preparation of financial statements. The financial statements will be submitted for audit at the end of each year or other periods to be stated. 19. External Auditing: The project financial statements and internal control system will be subject to external annual audit conducted by an Audit firm acceptable to the Bank. The external auditor will give one single audit report for all projects managed by COREF in accordance with auditing standards of IFAC. In addition to audit reports, external auditor will also produce a management letter on internal control to improve the accounting controls and compliance with financial covenants under the financing agreement. The project will be required to submit, no later than June 30 of each fiscal year, the annual audited financial statements. In line with the new access to information policy, the project will comply with the disclosure policy of the Bank of audit reports (for instance making available to the public without delay after receipt of all reports final financial audit, including audit reports qualified) and place the information on its official website within one month after acceptance of final report by IDA. 57 20. Implementation support Plan: FM implementation support mission will be consistent with a risk-based approach, and will involve a collaborative approach with the entire Task Team. A first implementation support mission will be performed six months after the project effectiveness. Afterwards, the missions will be scheduled by using the risk based approach model and will include the following diligences: (i) monitoring of the financial management arrangements during the supervision process at intervals determined by the risk rating assigned to the overall FM Assessment at entry and subsequently during Implementation (ISR); (ii) integrated fiduciary review on key contracts, (iii) review the IFRs; (iv) review the audit reports and management letters from the external auditors and follow-up on material accountability issues by engaging with the task team leader, Client, and/or Auditors; the quality of the audit (internal and external) also is to be monitored closely to ensure that it covers all relevant aspects and provide enough confidence on the appropriate use of funds by recipients; and, (v) physical supervision on the ground specially; and (vi) assistance to build or maintain appropriate financial management capacity. Procurement arrangements General: Procurement rules to be applied 21. Procurement for this project will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits "dated January 2011 (Procurement Guidelines); and "Guidelines: Selection and Employment of Consultants by World Ban Borrowers" dated January 2011 (Consultant Guidelines) and the provision stipulated in Financing Agreement. The various procurement actions under different expenditure categories are described in general below. For each contract to be financed under the Financing Agreement, the various procurement or consultant selection method, the need for pre-qualification, estimated costs, prior review requirements, and time frame have been agreed between the borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants" dated October 15, 2006 and updated January 2011, shall apply to the project. Reference to the National Procurement Regulatory Framework 22. For all contracts which are not advertised internationally, the Bank may authorize the use of the national institutions and regulations that comprise the law including its texts of application, the institutions set up for the control and regulation and the institutions responsible for procurement activities implementation .The national competitive bidding procedures currently in force in the DRC deviate slightly from the World Bank Procurement Guidelines NCB procedures for procurement of Works, Goods and services (other than consultants services); thus, they have been already reviewed and appropriate modifications have been proposed to assure economy, efficiency, transparency, and broad consistency with the provisions included in Section I and paragraphs 3.3 and 3.4 of the Bank Procurement Guidelines (refer to the paragraph below). 58 Requirements for National Competitive Bidding 23. National Competitive Bidding may be used subject to using the open procedure ("appel d'offres ouvert") set forth in the Recipient's Public Procurement Law No 10/0 10 dated April 27, 2010 (the "PPL") and the Manual of Procedures of the PPL as per Recipient's Decree No 10/22 dated June 2, 2010 (the "Manual of Procedures"); provided however that such procedure shall be subject to the provisions of Section I and Paragraphs 3.3 and 3.4 of Section III of the Procurement Guidelines and the additional following modifications: (a) Standard Bidding Documents: All standard bidding documents to be used for the Project under NCB shall be found acceptable to the World Bank before their use during the implementation of Project; (b) Eligibility: Eligibility of bidders and acceptability of their goods and services shall not be based on their nationality and/or their origin; and association with a national firm shall not be a condition for participation in a bidding process; (c) Advertising and Bid Preparation Time: Bidding opportunities shall be advertised at least in a national newspaper of wide circulation and on the website of the Recipient's Procurement Regulator (Autorit de Rdgulation des Marchis Publics) and bidders should be given at least 30 days from the date of invitation to bid or the date of availability of the bidding documents, whichever is later; (d) Criteria for Qualification of Bidders: Qualification criteria shall only concern the bidder's capability and resources to perform the contract taking into account objective and measurable factors. Such criteria for qualification of bidders shall be clearly specified in the bidding documents; (e) Bid Evaluation and Contract Award: A contract shall be awarded to the substantially responsive and lowest evaluated bidder provided that such bidder meets the qualification criteria specified in the bidding documents. No scoring system shall be allowed for the evaluation of bids, and no "blanket" limitation to the number of lots which can be awarded to a bidder shall apply. The criteria for bid evaluation and the contract award conditions shall be clearly specified in the bidding documents; (f) Preferences: No preference shall be given to domestic/regional bidders; to domestically/regionally manufactured goods; and to bidders forming a joint venture with a national firm or proposing national sub-contractors or carrying out economic activities in the territory of the Recipient; (g) Publication of Contract Award: Information on all contract awards shall be published in at least a national newspaper of wide circulation or in the Recipient's Procurement Regulator (Autorit de Rdgulation des Marchis Publics) web-site; (h) Fraud and Corruption: In accordance with the Procurement Guidelines, each bidding document and contract shall include provisions stating the World Bank's policy to sanction firms or individuals found to have engaged in fraud and corruption as set forth in the Procurement Guidelines; 59 (i) Inspection and Audit Rights: In accordance with the Procurement Guidelines, each bidding document and contract shall include provisions stating the World Bank's policy with respect to inspection and audit of accounts, records and other documents relating to the bid submission and contract performance; (j) Requirement for administrative documents and/or tax clearance certificate. The bidding documents shall not require foreign bidders to produce any administrative or tax related certificates prior to confirmation of awarding a contract; (k) Modifications of a Signed Contract: Any change in the contract amount which, singly or combined with all previous changes, increases the original contract amount by 15% (fifteen percent) or more must be done through an amendment to the signed contract instead of signing a new contract. Items to be procured and the methods to be used 24. Advertisement: General Procurement Notice (GPN), Specific Procurement Notices (SPN), Requests for Expression of Interest, and results of the evaluation and contracts award should be published in accordance with advertising provisions in the following guidelines: "Guidelines: Procurement under IBRD Loans and IDA Credits" dated January 2011; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated January 2011. For this purpose, COREF will prepare and submit to the Bank a General Procurement Notice (GPN). Specific Procurement Notice (SPN) for all goods, non-consulting services and works to be procured under International Competitive Bidding (ICB) and Requests for Expressions of Interests for all consulting services costing the equivalent of US$200,000.00 and above will be published in Dg Market, on the Bank's external website, and in the national press, in addition to other media with wide circulation. All other specific procurement notices and other requests for expression of interest shall be published at a minimum in the national press with wide circulation. 25. Procurement of works: works procured under this project will be exclusively for minor improvements to accommodate working space and environment. Procurement will be done under shopping procedures. Direct contracting may be used where necessary if agreed in the procurement plan in accordance with the provisions of paragraph 3.7 to 3.8 of the Procurement Guidelines. 26. Procurement of goods and non-consultancy services: goods procured under this project will include mainly items that will contribute in bettering the works conditions of COREF and institutions to be supported by the project; they comprise computer equipment; office furniture; data collection tools; and software. Non-consultancy services procured under this project will include workshops, maintenance of office equipment, training in the region and abroad. Depending on the size of the contracts, procurement will be done either under ICB using Bank procurement rules that include the related SBD or under NCB using National Standard Bidding Documents agreed with or satisfactory to the Bank. Small value goods may be procured under shopping procedures. Direct contracting may be used where necessary if agreed in the procurement plan in accordance with the provisions of paragraph 3.7 to 3.8 of the Procurement 60 Guidelines. 27. Selection and employment of Consultants: consultancy services would include advisory services, feasibility studies, and technical studies. The selection method will be Quality and Cost Based Selection (QCBS) method whenever possible. Contracts for specialized assignments estimated to cost less than US$ 200,000 equivalent may be contracted through Consultant Qualification (CQ). The following additional methods may be used where appropriate: Quality Based Selection (QBS); Selection Based on the Consultants' Qualifications (CQS); Selection under a Fixed Budget (FB); and Least-Cost Selection (LCS). 28. Short lists of consultants for services estimated to cost less than the equivalent of US$ 100,000 per contract for ordinary services and US$ 200,000 for design and contract supervision may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. However, if foreign firms express interest, they will not be excluded from consideration. 29. Single Source Selection (SSS) may be employed with prior approval of the Bank and will be in accordance with paragraphs 3.8 to 3.11 of the Consultant Guidelines. All services of Individual Consultants (IC) will be procured under contracts in accordance with the provisions of paragraphs 5.1 to 5.6 of the Guidelines. 30. Operating Costs: Operating costs shall consist of operations and maintenance costs for vehicles, office supplies, communication charges, equipment, utility charges, travel expenses, per diem and travels costs, training costs, workshops and seminar and associated costs, among others. Operating costs will not include salaries of civil servants. 31. Training and Workshops. Training and workshops will be based on capacity needs assessment. Detailed training plans and workshops activities will be developed during project implementation, and included in the project annual plan and budget for Bank's review and approval. Implementation arrangements for procurement and capacity assessment 32. While procurement of activities is the full responsibility of COREF with a team composed of two procurement officers. The team will receive training courses financed by the project during the first year of implementation so as to facilitate the partial transfer of responsibility during the second year and a complete transfer by project MTR. 33. Procurement capacities of COREF were evaluated in May 2013; although the procurement officer already in place has attended procurement training courses on World Bank financed projects and has an acceptable procurement experience in a PIA implementing a Bank funded project there will be a need to recruit an additional procurement officer and to strengthen their capacities. This is the reason why the COREF procurement team to be set up will be trained and coached. 61 Assessment of the risks and the related mitigation measures Risks that have been identified 34. The Key issues and risks concerning procurement for implementation of the project have been identified and include: (i) COREF has not yet set up its procurement team fully and appropriately staffed ; ; (ii) the record keeping is inadequate; (iii) the working environment is inadequate in terms of space for procurement records and working space for procurement staff; (iv) there is lack of clear procedures and guidelines spelled out in manuals; (v) Government officials likely to be involved in project procurement through tender and evaluation committees may not be familiar with procurement procedures according to World Bank guidelines and rules; (vi) Control and regulation mechanism according to the provisions of the Country procurement law and its application procedures could delay the procurement process if mandatory reviews are required. 35. The overall unmitigated risk for procurement is Substantial. Proposed corrective measures which have been agreed to mitigate the risk are summarized in the following table. Table 1: Action Plan for Stren$thenin$ Procurement Capacity Ref. Tasks Responsibility Due date Effectiveness Conditions or dated covenant 1 Recruitment of an additional Procurement Expert for COREF Ministry of Finance Three months No after effectiveness Training of staff on World Bank procurement procedures Ministry of Finance and Continuous No 2 COREF procurement team Set up the project filing system in order to better keep procurement COREF procurement Three months No 3 documents and reports and identify a staff responsible for this task. team after Train staff in data management. effectiveness 4 Establish a better working space for procurement records and Ministry of Finance Three months No procurement staff after effectiveness Identify the root cause of procurement delays at National level and World Bank Six months No 5 propose appropriate solutions after effectiveness Frequency ofProcurement Supervision 36. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of COREF has recommended two procurement supervision missions during the first 18 months to visit the field to carry out post review of procurement actions. After this first 18 months there will be one procurement supervision mission each year. These missions shall involve a Bank Procurement Specialist or a Consultant. 62 37. Contract Management and Expenditure Reports: As part of the Procurement Management Reports (PMR), COREF will submit contract management and expenditure information in quarterly reports to the World Bank for the whole project. The procurement management report will consist of information on procurement of goods, works and consultants' services and compliance with agreed procurement methods. The report will compare procurement's performance against the plan agreed at negotiations and as appropriately update at the end of each quarter. The report will also provide any information on complaints by bidders, unsatisfactory performance by contractors and any information on contractual disputes if any. These contract management reports will also provide details on payments under each contract, and will use these to ensure no contract over-payments are made or no payments are made to sanctioned entities. Procurement planning 38. The borrower has prepared a Procurement Plan for the first 18 months of the project implementation which provides the basis for the procurement methods. This plan was agreed between the borrower and the Bank during negotiation. It will also be available in the project's database and in Bank's external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Table 2: Thresholds for Procurement Methods and Prior Review Contract Value Threshold Contracts Subject to Prior Expenditure Category (US$ thousands) Procurement Method Review 1. Works 10,000 or more ICB All below 10,000 NCB All contracts above 5,000 and First two contracts below 5,000 below 200 Shopping None No threshold Direct Contracting All 2. Goods 1,000 or more ICB All below 1,000 NCB All contracts above 500 and First two contracts below 500 None below 100 Shopping All No threshold Direct contracting 3. Consulting Services Firms US$200 and more CQ;Single Source Selection All Less than 200 None No threshold All Individuals 100 or more IC All Less than 100 IC None No threshold Single Source Selection All All ToRs regardless of the value of the contract are subject to prior review. Details of the Procurement Arrangements Involving International Competition 63 Goods, Works, and Non Consulting Services (a) List of main contract packages to be procured following ICB and direct contracting None Consulting Services (a) List of main consulting assignments with short-list of international firms None 64 Annex 4: Operational Risk Assessment Framework (ORAF) Democratic Republic of Congo: Strengthening PFM and Accountability (P145747) Risks Stakeholder Risk Rating High Risk Description: Risk Management: 1. At Government Level. Political volatility 1. A pro-active approach to policy dialogue will be taken by the Bank team as well as the project around critical aspects of the agenda that is implementation team. These stakeholders will be assisted in formulating arguments and advocate for an being supported. Governance projects by agendaan agenda of transparency and accountability, at all levels of government. their nature are susceptible to political volatility. The DRC will continue to show 2.Pro-active and intensive dialogue with authorities to mitigate impact of political changes. This will such volatility as the result of divided build on the 'champions of decentralization' initiative that was funded under other Bank funded political elites and the lack of a programs (GPF TF, PRCG, etc.) and which assisted critical actors in the decentralization process in consolidated political party system. This better articulating proposals to move forward the process. project in addition deals with the sensitive Adapt Donors intervention to the geographical redistribution of provinces and emphasis intervention at issue of national-sub national relations TDEs level which will be necessarily linked to a province be it new or old. which poses further risk. Resp: Both Status: Not Stage: Both Recurrent: Due Frequency YetDae 2. At Sub-national level. Lack of stability Due and continuity and shifting coalitions in favor and opposed to decentralization. Resp: Both Status: Not Stage: Both Recurrent: Due Frequency Enacting of constitutional provisions on the Yet Date: 26 new provinces. Due Sub-national government, which is a critical beneficiary of the project, is subject to attempts at political intervention, which renders it more unstable than it would normally have been, hence making it more 65 difficult for the project to have sustainable impact. However, at the same time volatility has not impacted negatively on results at political level as successive political leaders in the various provinces have provided their support and engagement to project objectives. Capacity Rating Substantial Risk Description: Risk Management: 1. Capacity Risk. Capacity has been 1. Capacity risk. However, the program will build on COREF's experience in dealing with a multitude enhanced significantly, but remains fragile. of stakeholders. COREF's technical capacity is also expected to increase with the appointment of six Capacity constraints constitute a critical thematic correspondents. In addition, short term consultants will be appointed to provide advice and project risk for a project that involves technical support where necessary. numerous stakeholders, including 3 ministries, three provincial governments, 2. Fiduciary risk. Ensure that staff serving the project and beneficiary staff continue to consider the the supreme audit institution, and the project a worthwhile investment of time and effort so that created capacity is retained and further Parliament. strengthened. In addition, the Project Implementation Teams at central and provincial level have been significantly strengthened to improve implementation capacity. 2. Fiduciary Risk. Country fiduciary systems have been strengthened, but The Bank team will also maintain a close monitoring of the project's activities through the Bank capacity constraints remain significant. executed portion of the funding. A country based TTL will be appointed to supervise the project. Procurement and FM systems are evolving Independent and periodic assessments will be conducted. under new legal and institutional Resp: Both Status: Not Stage: Both Recurrent: Due Frequency frameworks, hence reducing the likelihood Yet Date: of major fiduciary problems. Project related Due systems therefore become less isolated and better embedded, reducing their exposure. However, new systems remain fragile and the potential impact of misconduct and mismanagement remains very high. Governance Rating High Risk Description: Risk Management: 66 Governance Risk. Economic governance An enhanced economic governance dialogue has been put in place since September 2010, and includes risks in the DRC remain high, and will critical aspects of institutional reform in the public sector and in national-sub-national relations so that continue to have a potentially negative a positive dynamic is built around project interventions. This includes an emphasis on procurement and impact on project performance. Economic PFM reforms that will help reducing governance risks overall and in projects in particular. governance risks in the DRC remain Resp: Both Status: Not Stage: Both Recurrent: Due Frequency considerable, and permeate the whole of Yet Date: the political, economic and social spheres. Due Successful implementation of any project that addresses areas of strong vested interest (such as decentralization, PFM and public service management) will therefore be affected by negative dynamics. Design Rating Substantial Risk Description: Risk Management: 1. Technically complexity with numerous 1. Project design will remain very simple and use existing arrangements allowing for a quick buy-in stakeholders at the central and sub-national and involvement of stakeholders. In addition, a joint approach to supporting decentralization and to levels. This is a technically complex define a division of labor between DPs has been agreed and is under implementation. project that targets critical pillars of central and sub-national govermments. 2. MDTF should be able to take into account the fluctuating context of political economy in DRC, and the need to ensure the flexibility of the support of donors for the PFM reform. Some activities could be 2. Rigidity of the programme. Execution timely opportunities in terms of political commitment. MDTF should be flexible enough, in order to conditions of the program may undergo allow the redeployment of at least some of the activities in the context of political economy, without change and require redeployment of the having to go to the Board. activities. Resp: Both Status: Not Stage: Both Recurrent: Due Frequency Yet Date: Due Social and Environmental Rating Low Risk Description: Risk Management: This is a 'C' project and therefore does not NA carry environmental risk. In terms of social IT1 . Resp: Status: Stage: Recurrent: Due Frequency risk, the projects is expected to have Date: 67 positive spin offs as a result of its emphasis on accountability and transparency. Program and Donor Rating Low Risk Description: Risk Management: Lack of donors coordination and multiple Donors' coordination and harmonization is expected to improve significantly with the implementation approaches in funding of PFM at the of the MOU to support PFM reforms. The project will support the implementation of this MOU by central and sub-national levels. Donors' providing technical and financial assistance to COREF. At the local level, the framework agreement to coordination and harmonization in support support decentralization will remain the entry point of all donor funded operations. of PFM reforms has improved, but remains Resp: Both Status: Not Stage: Both Recurrent: Due Frequency challenging. Yet Date: Due Delivery Monitoring and Rating Substantial Sustainability Risk Description: Risk Management: Delivery quality in this project is affected Pro-active dialogue with key stakeholders and engagement in team building. Invest in contract critically by capacity, government team monitoring at the level of final beneficiaries (line ministries). Finally, a solid and well performing coherence and continuity, all of which are results tracking system is in place which will help in keeping the project on track. currently significantly in place. However, Resp: Both Status: Not Stage: Both Recurrent: Due Frequency considering the country environment, these Yet Date: can also be easily lost thus enhancing the Due said risk. Other (Optional) Rating Risk Description: Risk Management: Resp: Status: Stage: Recurrent: Due Frequency Date: Other (Optional) Rating Risk Description: Risk Management: 68 Resp: Status: Stage: Recurrent: Due Frequency Date:: Overall Implementation Risk: Substantial Risk Description: The continuing dialog with stakeholders and the close project supervision by the Bank and other development partners should contribute to reduce the risk at substantial during implementation. 69 Annex 5: Implementation Support Strategy Strategy and approach for supporting implementation 1. The strategy for supporting the implementation of the projects was tailored to the characteristics and implementation capacities of the COREF. The risks and challenges mentioned in the ORAF were taken into account, as well as the following aspects: * The modest fiduciary and institutional capacity for implementing the project may delay the implementation process. * The involvement of several institutions may cause bottlenecks and interfere with proper implementation. Implementation support plan 2. The Bank team will support implementation through the following activities: * Hire a project leader (with experience in the area of World Bank operations and public finance reforms), to be based in the field so that there will be supervision missions at least twice a year as well as regular dialogue with the client and partners, * Fiduciary staff for implementing the project that will be strengthened to support financial management and procurement training, * Technical support. The technical team will provide regular support to the COREF on technical matters. In particular, it will review the terms of reference and drafts of the consultant report. * Support for procurement and financial management. There will be close supervision of procurement and financial management. Procurement supervision will consist of ex-ante reviews of procurement activities as well as ex-post reviews. Moreover, the progress of procurement based on the detailed procurement plan will be checked carefully. Regarding financial management, the project will be supervised using a risk-based analysis approach. Supervision will target the status of the financial management system to ascertain the relevance of these systems. The objectives of the financial management supervision mission will be included and will ensure that sound financial management systems are maintained throughout the duration of the project. By adopting a risk-based analysis approach to financial management supervision, the priority pillars will consist of evaluating the accuracy and reasonableness of the budgets, budget predictability and execution in accordance with the provisions on payments and budget execution in compliance with the payment and funds usage provisions, and the capacity of the systems to generate reliable financial reports. The fiduciary team based at the national office will provide daily fiduciary assistance and will coordinate upcoming issues with the project manager. There will be at least one formal review of financial management and procurement per year. 70 * There will be a mid-term review about 24 months after the project begins to assess the progress of the project compared to the project objectives and redirect project activities to adapt to the context 3. In addition the two evaluations planned in the DFID business case will be performed: (i) formative evaluation of donor support to PFM reform; (ii) evaluation of donor support to PFM reform and participatory budgeting in provinces. 71 Annex 6: Minimum Platform for Development Partners to Support Public Sector Reform at the Local Level 1. Objectives - Foster harmonized financial decentralization; - Give the provinces a self-assessment instrument for the public finance reforms; - Provide the provinces with an intervention framework for donors; - Allow the central government to monitor the evolution of public finance reforms in the provinces. 2. Content of the minimum platform 2.1 Construction of provincial and local taxation - Support the implementation of the statutory and regulatory framework; - Support the organization and implementation of own revenue collection mechanisms and structures in the provinces and ETDs; - Support the preparation of procedures manuals for the collection and computerization of the provincial and local revenue chain; 2.2 Expenditure management in the provinces 2.2.1 Support the implementation of the Public Expenditure Chain in the provinces and in the ETDs - Support the implementation of the statutory and regulatory framework; - Support the implementation of the procedures manual and the expenditure circuit in the provinces and ETDs; - Support the acquisition of software and its applications for the computerized management of expenditures compatible with the system the central government used, supported by a harmonized manual of the rationalized expenditure circuit in the province; - Design computerized management software for expenditures tailored to the ETDs and moduled up to the chiefdoms; - Give the provinces and ETDs computer hardware and a communication network for the computerized expenditure chain; - Network the parties involved in the expenditure circuit; - Design decision-making tools: PEB, PTR, and TOFE for the local and provincial governments and performance indicators; - Implement the provincial computerized payroll procedure (PTS): - Support the implementation of the transitional payroll procedures; - Support the implementation of the statutory and regulatory framework; - Organize the provincial units in charge of payroll; - Extend the streamlined transitional payroll procedure before implementing an integrated human resources and wage expenditure management system; 72 - Organize gateways between the payroll management system and the expenditure chain in order to produce comprehensive budget monitoring statements that include wage expenditures; - Provide the provincial units in charge of payroll with appropriate computer equipment and tools; - Build capacities: construct and/or renovate offices, train staff, and provide appropriate computers and other hardware. 2.2.2 Procurement management - Support the production and dissemination of the implementing regulations of the Procurement Code in the provinces; - Strengthen the administrative and technical capacities of the procurement entities (provide offices, equipment and data processing tools, and assign and train staff). 2.2.3 Support the planning, budgeting and monitoring-evaluation process - Strengthen the capacities of the provincial financial agencies in the budget preparation and development process (train the staff of the ministries whose duties include finance, the budget and planning), and provide data processing equipment and tools, renovate offices, etc.; - Organize the schedule for preparing the budgets of the ETDs and provinces; - Support the implementation of the implementing regulations for the budget law and the general regulation on public accounting: instruction on preparing the budgets of the provinces and ETDs, include activities under the purview of the provincial and local governments, etc. - Support the organization of the Ministries of Finance, Budget and Planning: clearly define the missions of each ministry and avoid duplication and conflicts of jurisdiction, design organization charts and assist in hiring staff; - Support organization and operation and strengthen the capacities of the entities in charge of producing statistics and monitoring-evaluation (identify the indicators, economic analysis, sectoral and administrative survey, etc.). 2.2.4 Implement a statutory and regulatory framework in the province and in the ETDs - Support the preparation of a financial regime in the provinces and ETDs; - Support the implementation of the statutory and regulatory framework on the construction of taxation in the provinces and ETDs; - Support the implementation of the statutory and regulatory framework on expenditure management in the provinces and ETDs; - Support the implementation of the statutory and regulatory framework for revenue collection in the province and in the ETDs; - Support the implementation of the statutory and regulatory framework on the planning, budgeting, and monitoring-evaluation process. 73 3. Methodological approach for implementing the minimum platform 3.1 Prepare a status update of the Public financial management System in the provinces The status update is useful because it shows the real current status in the province since some provinces began to obtain support from the development partners. This status update is an opportunity to identify the progress made by the provinces with support from the partners and what remains to be done. The findings of the status update should be presented at a validation workshop so that the provinces will take ownership and share the same vision of the assessment. 3.2 Identify priority needs Based on the results of the assessment, the partners(s) that support the province should be involved in financing their priority needs as identified in the four pillars of the platform that are shown in a matrix of priority activities using the logical framework model in accordance with the intervention logic between each pillar, the intermediate results, the activities, and the tasks to be carried out. This matrix lists all of the province's needs related to the content of the minimum platform and is indifferent to the implementation schedule and financing cost. 3.3 Adopt a roadmap Once the needs are identified, the province is to identify a roadmap with COREF financial support in order to satisfactorily implement the priority action plan. The objective is to align the activities according to a sequence in order to achieve the expected results. The adoption of the roadmap should also facilitate obtaining funding for the activities and identify each partner's point of application to prevent overlap in the interventions. 3.4 Implement the action plan Carrying out the reform in the provinces requires strong political and technical ownership. To this end, the institutional framework for managing the reform in the provinces must be clearly identified for the COREF to carry out its mission of coordinating all the reforms through its correspondents in the provinces. It is necessary to establish a technical committee under the supervision of the provincial Minister of Finance or the Budget, a focal point, or the COREF correspondent, who will be tasked with monitoring the implementation of the reform activities and to prepare periodic assessments. 4. Status update on the implementation of the minimum platform (October 2012) As of October 2012, the platform of the main donors providing support to PFM and Decentralization agenda is outlined in the following table. 74 Evaluation Elaboration Validation N° Province Partenaire Diagnostic Validation d'actions Validation c Feillede Feuilde Financier(1) (2) Diagnostic pdoitaires PAP réfornes route(4) route PAP (3) 1 Nord-Kivu PA2D 2 Kasai-Oriental PADDL 3 Equateur PADDL 4 Katanga PRCG Pas fait 5 Bandundu PRCG Pas fait 6 Sud-Kivu PRCG 7 Kasai-Occidental PRCG 8 Bas-Congo BAD Pas fait Pas fait 9 P-Oriental BAD Pas fait Pas fait 10 Maniema BAD Pas fait Pas fait Il Kinshasa (5) En cours Pas fait Pas fait Pas fait Pas fait Pas fait BAI) (1) PADDL programme d'appui à la décentralisation et au développement local du PNUD PRCG : programme de renforcement des capacités en gouvernance de la Banque mondiale PA2D : programme d'appui au début de la décentralisation de l'Union Européenne BAD : Banque Africaine de Développement (2) Diagnostic ou état des lieux sur les réformes en matière des Finances publiques dans la province 75 Annex 7: Donors Support Matrix in PFM PTF Program Objective Total Effectiveness Coverage Amount and Closing Date EU PA2D The objective of the Project is to 15 000 000 15/03/2011 - Kinshasa and support the Decentralization Euros 20/05/2015 Nord Kivu) process by making it more effective and accessible to all stakeholders. EU PAG - PFM The program aims to support 6 500 000 13/04/2009 - DRC Component the implementation of the PFM Euros 31/12/2015 reform strategy through the strenghthening of internal and external audit Institutions. EU PAG - Natural The Project aims at improving 9 000 000 13/04/2009 - DRC resource revenu collection from natural Euros 31/12/2015 component resource exploitation and encouraging adequate revenu distribution to local citizen. EU PAMFIP The project support the PFM 10000000 20/05/2010 - DRC program through the Euros 20/05/2015 development of MTEF, the modernization of public accounting and the improvement of Revenue collection. EU PAP The Project support the 5 000 000 01/04/2011 - Kinshasa strenghtening of the Parliament Euros 20/05/2014 and the provincial assembly of Kinshasa. 76 WB PAD The Project supports the 29 900 000 12/04/2011 - Kinshasa and capacity building program of the US$ 15/09/2016 provinces public administration at central and provincial level. WB PRCG1 - PAD The project supports the 50 000 000 01/03/2007 - Kinshasa and strengthening of Public sector US$ 31/03/2012 provinces capacity at central and provincial level. 77 Banque PRCG - PAD The project supports the 66 950 000 17/10/2011 - Kinshasa et mondiale strengthening of Public sector US$ 19/12/2014 provinces capacity at central and provincial level. PNUD- PADDL The Project aims to support the Nord-Kivu, UNCDF- improvement of local Equateur and DFID governance and the quality of Kasai service delivery at local level. oriental. 78 Annex 8: Overall Summary of PFM Performance Scores in 2012 and 2008 2012 2008 A. PFM-OUT-TURNS: Credibility of the budget scores scores PI-1 Aggregate expenditure out-turn compared to original approved budget D D PI-2 Composition of expenditure out-turn compared to original approved budget D+ D PI-3 Aggregate revenue out-turn compared to original approved budget D A PI-4 Stock and monitoring of expenditure payment arrears D+ D B. KEY CROSS-CUTTING ISSUES: Comprehensiveness and Transparency PI-5 Classification of the budget A A PI-6 Comprehensiveness of information included in budget documentation B B PI-7 Extent of unreported government operations D D PI-8 Transparency of inter-governmental fiscal relations D+ D PI-9 Oversight of aggregate fiscal risk from other public sector entities. D D PI-10 Public access to key fiscal information C D C. BUDGET CYCLE C(i) Policy-Based Budgeting PI-11 Orderliness and participation in the annual budget process B D+ PI-12 Multi-year perspective in fiscal planning, expenditure policy and budgeting D+ D C(ii) Predictability and Control in Budget Execution PI-13 Transparency of taxpayer obligations and liabilities C+ D+ PI-14 Effectiveness of measures for taxpayer registration and tax assessment C+ D PI-15 Effectiveness in collection of tax payments D+ D+ PI-16 Predictability in the availability of funds for commitment of expenditures D+ D PI-17 Recording and management of cash balances, debt and guarantees C+ C+ PI-18 Effectiveness of payroll controls D+ D PI-19 Competition, value for money and controls in procurement B D PI-20 Effectiveness of internal controls for non-salary expenditure C+ D+ PI-21 Effectiveness of internal audit D+ D+ C(iii) Accounting, Recording and Reporting PI-22 Timeliness and regularity of accounts reconciliation B C PI-23 Availability of information on resources received by service delivery units C D PI-24 Quality and timeliness of in-year budget reports C+ C+ PI-25 Quality and timeliness of annual financial statements C+ C+ C(iv) External Scrutiny and Audit PI-26 Scope, nature and follow-up of external audit D+ D+ PI-27 Legislative scrutiny of the annual budget law C+ C+ PI-28 Legislative scrutiny of external audit reports D D D. DONOR PRACTICES D-1 Predictability of Direct Budget Support D N.R. D-2 Financial information provided by donors for budgeting and reporting on D D+ project and program aid D-3 Proportion of aid that is managed by use of national procedures D D 79 Annex 9: Proposed Team Composition and Resources Preparation Schedule Milestone Forecast Actual AIS Release November 27, 2012 Concept Review February 28, 2012 Auth Appr/Negs (in principle) November 21, 2013 Bank Approval January 30, 2014 Sector Unit Estimate of Resources Required from Preparation through Approval Estimate of Resource Requirements (US$) Source of Funds Preparation Expenses to Date (US$) Fie Fixed Variable Bank Budget Trust Funds Team Composition Bank Staff Name Title Specialization Unit UPI Saidou Diop Senior Financial Management Specialist Team Leader AFTMW 271010 and FM Sector Leader Chiara Bronchi Lead Public Sector and Governance Team member AFTP5 Specialist and Cluster Leader Ousmane Kolie Senior Financial Management Specialist Team member AFTMW Jean Mabi Mulumba Senior Public Sector Specialist Team member AFTP5 Maketa Lutete Thomas Governance Specialist Team member WBIOG Angelo Donou Financial Management Specialist Financial Management AFTMW Bourama Diaite Senior Procurement Specialist Procurement AFTPC Aleksandar Kocevski Operations Officer Team Member AFTMW Emile Takeu Financial Management ETC Operations Support/Procurement AFTMW plan/Costing LucieBobola Program Assistant Operations Support AFCDRC Non-Bank Staff Name Title Office Phone City Robert Cauneau FM Consultant Peer Reviewers Mailan Chiche Governance specialist Peer reviewer DFID Franck Bessete Sr. Financial Management Specialist Peer reviewer LCSFM 80