DOCUMENT OF
THE WORLD BANK
FOR OFFICIAL USE ONLY
FIDUCIARY SYSTEMS ASSESMENT
REPUBLIC OF ALBANIA
FOR
IMPROVING EQUITABLE ACCESS TO HIGH STANDARD PUBLIC SERVICES
THROUGH GOVTECH
P177845
February 2, 2023
Prepared by
The World Bank
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1. INTRODUCTION.................................................................................................................................................. 3
2. CONCLUSIONS .................................................................................................................................................... 3
2.1 REASONABLE ASSURANCE ...........................................................................................................................................3
2.2 RISK ASSESSMENT.....................................................................................................................................................3
2.3 PROCUREMENT EXCLUSION ........................................................................................................................................5
3. SCOPE OF THE FIDUCIARY SYSTEMS ASSESSMENT ............................................................................................. 6
4. REVIEW OF THE PUBLIC FINANCIAL MANAGEMENT CYCLE ................................................................................. 6
4.1 PLANNING AND BUDGETING ........................................................................................................................................6
4.1.1 PforR Program Expenditure Framework ..................................................................................................6
4.1.2 Adequacy of budgets ...............................................................................................................................7
4.1.3 Procurement planning .............................................................................................................................8
4.1.4 Procurement profile of the Program ........................................................................................................9
4.2 BUDGET EXECUTION ...............................................................................................................................................11
4.2.1 Treasury management and funds flow ..................................................................................................11
4.2.2 Accounting and financial reporting........................................................................................................13
4.2.3 Procurement processes and procedures ................................................................................................14
4.2.4 Contract administration .........................................................................................................................21
4.3 INTERNAL CONTROLS...............................................................................................................................................21
4.3.1. Internal Controls .......................................................................................................................................21
4.3.2. Internal Audit ............................................................................................................................................23
4.3.3. Program governance and anticorruption arrangements ..........................................................................24
4.4 AUDITING .............................................................................................................................................................27
4.4.1 Program Audit ........................................................................................................................................27
4.4.2 SAI mandate and current coverage .......................................................................................................27
4.5 PROCUREMENT AND FINANCIAL MANAGEMENT CAPACITY..............................................................................................28
4.5.1 Procurement staff capacity ....................................................................................................................28
4.5.2 Financial management capacity ............................................................................................................29
5. PROGRAM SYSTEMS AND CAPACITY IMPROVEMENTS ..................................................................................... 30
6. IMPLEMENTATION SUPPORT ........................................................................................................................... 35
List of Figures
Figure 1: Number and rate of direct contracts, government average and ICT, 2018-2021 ....................... 16
List of Tables
Table 1: Procurement Conducted Through Competition Procedure (Open Tender) ................................. 10
Table 2: FSA Program Action Plan (PAP) ..................................................................................................... 30
Table 3: Other agreed actions..................................................................................................................... 33
Table 4: Program Procurement Performance Indicators ............................................................................ 35
Table 5: Program Financial Management Performance Indicators ............................................................ 35
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1. Introduction
1. The World Bank (Bank) conducted a Fiduciary Systems Assessment (FSA, Assessment) in
accordance with the Bank Policy and Directive on “Program-for-Results Financing�?, and the Bank
Guidance Notes for “Program-for-Results Financing.�? The FSA evaluates whether the Program’s fiduciary
systems provide reasonable assurance that the financing proceeds will be used for intended purposes.
The assessment covers the Program’s institutional arrangements, financial management (FM) and
procurement systems, and governance systems, and pays due attention to the principles of economy,
efficiency, effectiveness, transparency, and accountability.
2. Overall, the FSA concluded that the overall fiduciary systems provide a reasonable assurance
that the Program funds will be used for the intended purposes. Selected cases of limitations and risks
were noted both in relevant procurement systems and FM systems, and adequate measures were
identified to mitigate the identified risks. The residual Program fiduciary risk is assessed to be moderate.
2. Conclusions
2.1 Reasonable assurance
3. The Program fiduciary systems identified during the assessment are generally deemed to
provide reasonable assurance that the financing proceeds will be used for their intended purposes, with
due attention to the principles of economy, efficiency, effectiveness, transparency, and accountability.
This will be subject to the implementation of the recommended risk mitigation measures as outlined in
the Program Action Plan and those supported through Technical Assistance (TA) which is financed through
the Investment Project Financing (IPF).
2.2 Risk Assessment
4. The Program’s residual fiduciary risk is rated as moderate. This takes into consideration the FM
and procurement risks, as well as the proposed mitigation measures agreed upon with the authorities, as
follows.
5. Overall, Albania has a well-functioning procurement system complimented by a well-
functioning e-procurement system. 97% of the procurement is conducted through open procedures,
capacities to conduct procurement are adequate, and there is an electronic complaints system for
aggrieved bidders. Procurement information is publicly disclosed in a portal of free access. The assessment
revealed some selected areas for improvement with regard to the Program Implementing Agencies, which
should be strengthened to further improve efficiency and value for money.
6. Key risks and their mitigation are briefly summarized in the following paragraphs. For further
details, please refer to the body of the text and the associated references.
Key identified procurement risks:
• There is a risk that procurement planning will not always be carried out systematically at the
beginning of the government’s financial year due to the budget availability for the AKSHI and
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beneficiary institutions. Beneficiary institutions submit their requirements throughout the
year, which does not allow for the consolidation of similar goods in the procurement process.
This could potentially impact upon value for money and can increase the workload for the
AKSHI to procure similar goods. To mitigate this, the AKSHI will sensitize beneficiary
institutions to submit their requirements at the beginning of the year. Clear timelines for
submission of procurement plans, consistent with Procurement Law, will be included in the
Program Operational Manual (POM). This risk will be mitigated further by consolidating the
budgetary processes within the Information and Communications Technology (ICT) sector, as
described in the FM risk mitigation section.
• There is a risk of potential delays in conducting the pre-procurement phases, such as market
analysis and preparation of technical specifications, which could have an impact on the overall
time efficiency of the procurement process and delivery of goods. To mitigate this risk, since
most of the goods are ICT products, the AKSHI will conduct an upfront market assessment and
continue to use standard specifications for common goods and make them available to
beneficiary institutions.
• There is a risk of canceled procurement procedures at the AKSHI, which could impact the speed
of Program implementation. Reasons for canceled procedures include a lack of technical
compliance from bidders, reallocation of available budget after the tender is opened, and a
low number of bidders, which may result in a low level of responsiveness. Market outreach
to expand the bidder base and staff training will help to mitigate this risk. The AKSHI will
prepare a procurement strategy for high value contracts to include a robust market analysis,
introduce Life Cycle Costing (LCC) into the procurement process, and identify agile forms of
procurement allowed within the current PPL, such as competitive dialogue and framework
agreements for ICT service providers.
• Potential risks that could relate to fraud and corruption will be addressed via different steps.
A web link for staff conducting procurement will be provided to the AKSHI to be published on
their website, to check the Bank’s list of debarred and suspended firms. The Procurement
Complaints Commission (PPC) will regularly share with the Bank the number of complaints
(received, resolved, time for resolution, and referred) on a biannual basis. The Anti-corruption
Department under the Ministry of Justice will share, annually, with the Bank allegations of
fraud and corruption under the Program. The AKSHI will also create awareness among bidders
during business outreach on fraud and corruption.
Key identified FM risks:
• There is an inherent risk related to the ability of the budgeting mechanism to fully provide for
envisioned Program costs. Although the short- to medium-term budget estimates do
sufficiently align with the Program Action Plan, there is a risk that the costs required to
implement Program activities and outcomes may not be fully funded in the state budget, even
with the planned World Bank financing. Furthermore, Program funds may be diverted to meet
other budget priorities (such as cash crunch, emergencies, period end). Therefore, a long-
term government commitment to the Program results is required and should be reflected
through sector prioritization, and Program activities should be adequately funded in the
budget for the entire Program lifetime, and beyond. In addition to proper management
oversight over the process, it is important to implement measures that strengthen the
budgetary processes within the sector and Program in particular.
• Existing budget preparation and execution instructions do not fully specify requirements for
the PforR instrument. It is common for some confusion to exist regarding the difference in
budgeting and spending requirements between PforRs and IPF operations.
4
• There are complexities in the Program implementation arrangements. As such, the specific
responsibilities of the participating institutions and the scope of required inter-institutional
coordination should be clearly defined, agreed upon, and maintained throughout Program
implementation (to be further defined in the POM).
• There are selected limitations in the established mechanisms within the AKSHI to produce
budget execution reports in full compliance with the legislation. For the purposes of Program
monitoring, the current financial reporting arrangements will require improvements in terms
of content and processes. Specific budget output(s)/project codes will be used to determine
the capital expenditure pertaining to the Program expenditure framework (which will be
further defined in the POM).
• Limitations in the AKSHI’s internal control systems. There is currently no manual of
procedures, which could lead to inefficiencies in the process of handling of requests,
commitments, payments, and reporting, mainly because the roles and responsibilities across
various divisions are not documented.1 Furthermore, the assessment found that commitment
controls are not always strictly enforced. Additionally, the AKSHI currently lacks an
operational internal audit (IA) function and there is no regular outsourcing arrangement in
place. In response, the POM, to be adopted by the AKSHI, will mitigate the risk related to the
lack of a manual of procedures. Best practices require the development of manuals, which
are made available to staff, for guidance and compliance regarding the AKSHI operations and
related internal processes. With respect to the IA, it is necessary to fully recruit the vacancies
and temporarily outsource the service.
• There is a risk that the size and capacity of the AKSHI’s FM function, which consists of two
staff, may not be able to effectively manage all of the Program implementation. This raises
concerns about whether the function will be able to adequately support the Program,
especially when the pace of Program implementation scales up. It is critical that additional
FM staff resources are hired either through internal vacancy recruitment and/or external FM
expert support, and that the AKSHI management continuously assess workload needs and
take measures to address any gaps.
2.3 Procurement Exclusion
7. The Program is not envisaged to finance any contract for works, goods, and consulting services
above the Bank’s Operational Procurement Review Committee (OPRC) thresholds.2 Given the nature of
the Program and its total amount (of US$136.58 million), it is unlikely that the Program will finance any
OPRC level contracts.3 Considering the Program of Expenditure, it is not envisaged that any work contracts
will finance any OPRC level contracts, and the value of the goods and services will be within the range of
previous contracts executed by the AKSHI. Historically4, the highest contract amount for goods is US$1
million, while for services, it was below US$3 million. However, should such OPRC level contracts be
financed, they would be excluded from the Program.
1 As required in the article 16 and 22 of the FMC law. These findings are noted also in the PEFA 2017.
2 OPRC thresholds for moderate risk projects are US$75 million for goods, information technology.
3 Refer to Section 3.1.4 “Procurement profile of the Program�?
4 During 2019-2021 procurement procedures that were desk reviewed during the Fiduciary assessment.
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3. Scope of the Fiduciary Systems Assessment
8. Scope of FSA. In accordance with the Program boundary and the Program Expenditure Framework
(PEF), the FSA covers the Program’s institutional framework, governance and anticorruption aspects,
fiduciary capacity, and implementation performance of institutions responsible for the Program
implementation. The relevant institutions include the AKSHI as the lead implementing agency, and
Ministry of Education and Sport (MoES) as a line ministry directly benefiting from the Program.
Additionally, it includes authorities in charge of overall public financial management, procurement and
related oversight functions, such as MoFE, State Audit Institution (SAI), Public Procurement Agency (PPA)
and Public Procurement Commission (PPC).
9. Data collection and methodology. The present FSA was conducted during June-October 2022,
based on a mix of a desk review and field meetings. The desk review covered relevant legislative acts,
available sector data, PFM diagnostic analysis,5 sector audit and review reports, and selected procurement
transactions and information on contracts executed. Several working sessions were held with key
stakeholders from participating institutions to verify or extend the findings from the desk review.
Additional evidence was also obtained from the Electronic Public Procurement Database. The Assessment
covered three calendar years, from 2019 to2021.
4. Review of the Public Financial Management Cycle
4.1 Planning and budgeting
4.1.1 PforR Program Expenditure Framework
10. Overall, there is a strong budget classification system applicable to the Government Program,
that permits all transactions to be tracked across the budget cycle, from budget formulation, to
execution, and to reporting. The budget classification and chart of accounts is consistent with the
international budget classification (Classification of the Functions of Government [COFOG]) as confirmed
by the last PEFA report (rated A).
11. The Government program is well-defined and properly identified in the government budget (as
elaborated in the accounting and reporting section). The program expenditures are classified by
responsible line ministry or agency, function, execution agency, source of financing, economic account,
and budget outputs. Furthermore, capital expenditures are detailed and allocated by project, defined at
the budget execution stage. Program Expenditures total US$136.58 million and cover specific Results
Areas and expenditures selected from the overall government expenditure program for the sector. For
the purpose of monitoring and reporting on the Program budget formulation and execution, specific
budget output(s)/project codes will be used to determine the capital expenditure pertaining to the PEF.
5World Bank. 2017. PEFA Performance Assessment Report – Albania. Washington, DC.; OECD. 2021. Monitoring Report 2021 –
Albania. OECD, Paris; IMF reviews, Open Budget Index, WB Governance indicators, A&A ROSC 2019 (WB), annual MoFE PIFC
reports, and so on.
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Recommendation for the Program Action Plan
- The Program expenditure would be defined by a set of specific budget outputs and/or project
codes to monitor budget planning and execution, and enable the Program’s financial reporting
(envisaged by April 2023).
4.1.2 Adequacy of budgets
12. The budget process in Albania has a medium-term perspective. A three-year medium-term
budget framework (MTBF) serves as the basis for annual budgets. The budget estimates are broken down
by institution (administrative classification), program, function, and broad categories of economic
classification. Economic classification categories include personnel expenses, other current spending,
capital investment, including that financed from domestic sources and foreign financed. The medium-
term budget plan (MTBP) also contains the classification by budget output and/or activity.
13. An Organic Budget Law (OBL) regulates the budgetary process for all levels of public budget,
including the budget calendar, which integrates all the stages of budget planning, budget preparation,
scrutiny, and approval. The set of instructions6 used for MTBP and budget preparation is comprehensive,
covers total budget expenditures for the full fiscal year, and provides clear guidance to budgetary units,
with a detailed budget calendar and expenditure ceilings. These instructions are largely adhered to by the
budgetary institutions, including the AKSHI and MoES. Budgets are detailed at the level of programs and
provide details on the main expenditure categories and sources of financing.
14. The budget preparation rules and mechanisms align with standard good practice but are not
always followed. Line ministries and agencies are required to develop the MTBP proposals and propose
policy and spending priorities in a process that allows for proactive discussion of budget proposals
between the line ministries/agencies, the MoFE, and SASPAC. Once the draft budget is approved by the
government it is submitted to the Parliament, which has a comprehensive review process led by the
Economy and Finance Committee, before final hearings and scrutiny by the full plenary. Generally, the
annual budgets are approved by the legislature before the start of the relevant budget year. Since 2019,
the AKSHI has a dedicated Strategic Management Group specifically designed for the purpose of reviewing
and endorsing the MTBP proposals before final submission to the MoFE. A similar mechanism is
established within the MoES, whereby at the beginning of the budget cycle internal working groups are
established to develop MTBP proposals. Each group is assigned responsibility for a particular program.
The groups come up with the proposed submissions for the programs assigned to them, including the
policy and spending priorities, which are then reviewed at a special ministerial meeting and based on the
decision of that meeting consolidated into the ministry MTBP submission. Both the AKSHI and MoES are
pilot institutions for the Albania Financial Management Information System (AFMIS).7 AFMIS is designed
to support MTBP preparation and budget formulation process. However, the working mechanism in place
cannot assure the link between the existing/planned sector strategies and MTBP submissions. The
Integrated Planning Information System that was developed to ensure the link is not yet functional. At
the time of the assessment, manual MTBP and budget submissions were still required together with
AFMIS submission. A 2020 SAI report indicates some cases of delays in the AKSHI’s submission of budget
6The standard instruction for budget preparation issued in 2018, and annual instructions issued in February/March and July.
7AFMIS was launched by MoEF in 2020. According to original plans pilots (including the AKSHI) were supposed to run the 2021
budget formulation process through AFMIS but piloting was delayed due to slippages in the preparation schedule as a result of
emergencies.
7
requests and related documentation for the purposes of the MTBP and annual budget law8. However,
during the examination of documents it was noted that the timing and quality has improved over
subsequent submissions. As mentioned, generally, there is confusion with respect to budgeting and
spending requirements between PforRs and IPF operations.
15. The present Program will be financed via the regular budgeting process, which carries some
risks. The AKSHI will be required to follow the general budget cycle procedures and timelines and ensure
that appropriate funds for the Program are confirmed in its annual work plan and requested and approved
in the annual budgets. While in the short to medium term the annual budget estimates9 do sufficiently
align with the approved digital strategy action plan and the Program, the experience with the most recent
budget submission indicates that, unless due management oversight and follow-up is exercised over the
process, there is a risk that the costs required to implement this Program’s activities and outcomes may
not be fully funded in the state budget or may be diverted to meet other emerging priorities (such as
related to a cash crunch, emergencies, period end needs and so on), which may adversely affect the
Program expected results. A long-term government commitment to the Program results is required and
this should be reflected through sector prioritization, and through the allocation of adequate funding for
Program activities in the budget throughout the Program lifetime and beyond. Measures that strengthen
the budgetary processes within the sector and Program in particular will be important, including
strengthening the data collation and validation and analysis underpinning program budget formulation
within the AKSHI and MoES, improving forecasts and monitoring reports, and ensuring the Program
budget aligns with the approved annual work plan.
Recommendation for the POM and capacity support through IPF
- Technical assistance to strengthen MTBP preparation and annual budget implementation for the
Program could be provided through the IPF. This includes strengthening the data collation,
validation, and analysis underpinning program budget formulation within the AKSHI and MoES,
improving forecasts and monitoring reports, and ensuring that the Program budget always fully
aligns with the approved annual work plan.
- Strengthening budget planning processes and tools, and budget reporting and monitoring.
4.1.3 Procurement planning
16. The legal and regulatory framework for Public Procurement allows for a relatively realistic
preparation of annual procurement plans based on budget allocation and requires the publication of
public procurement forecasts. Procurement planning is linked to the available budget, and procurement
procedures cannot be launched if the budget is not available to the Contracting Authorities’ (CA) budget.
Several delays in starting procurement at the beginning of each budgetary year were reported due to the
requirement of the MoFE instructions for budget execution, that CAs would have “fiscal�? access to their
budget before launching procurement. However, starting from 2018, the Public Procurement Agency
(PPA) has lifted this requirement and has instructed CAs to begin preparing their tenders immediately
upon approval of the annual budget. The e-procurement system (www.e-procurement.gov.al) is expected
to be integrated with the Albanian Government Financial Information System (AGFIS) to ensure automatic
check of available funds before the contract signature. All contracting authorities prepare the annual
8SAI audit report on the state budget implementation for the year 2020, page 11.
9Based on the analysis of the draft 2023 budget document approved by government on October 12, 2022. Analysis based on
earlier data is not possible, as digital agenda and action plan have been finalized only recently.
8
procurement registers in the electronic system within 10 days from the approval of the yearly budget and
the PPA should publish this register on its website (app.gov.al).
17. There is no entirely systematic planning system in place and current planning practices are not
fully aligned with the requirements of the Public Procurement Law (PPL). The Council of Minister
Decision No. 673, dated 22.11.2017 “On the Reorganization of the AKSHI�? as amended, appoints the AKSHI
as a centralized Procuring Authority for all ICT procurement financed under the state budget. While the
AKSHI is legally in charge of all procurement procedures as relates to ICT, in practice the procurement
planning function is divided between beneficiary institutions and the AKSHI. The assessment noted,
however, that procurement planning does not always adhere to the timeline stipulated in the PPL, which
requires Forecast of Procurement Registers to be prepared by January 15th of each budgetary year.
Beneficiary institutions send their requests to start procurement activities during the entire financial year,
posing the risk of a fragmented procurement planning process and difficulties in assessing the expected
workload for the AKSHI, thus creating potential delays in conducting procurement procedures.
Recommendation for the POM
- Prior to Program implementation, the AKSHI should develop and include in the POM a clear
timeline for procurement planning, aligned with the PPL provisions, to be adhered to by
program Contracting Authorities. Furthermore, the AKSHI will sensitize beneficiary institutions
on the Program procurement planning requirements which are consistent with the Law.
4.1.4 Procurement profile of the Program
18. The share of procurable items under the Program is about 97.14 percent of the total amount of
the PEF, with 70.16 percent refer to capital investments and 27 percent to recurrent costs for
maintaining goods and services, and 2.85 percent for current expenditure. The Program of Expenditures
totals US$ 136.58 million (of which US$60 million are financed from IBRD and US$76.58 million from the
Government of Albania) for specific activities, expenditures, and results identified under the following
proposed Results Areas, which are supporting the achievement of the Digital Agenda 2022-2026 strategic
objectives:
• Results Area 1: Enhancing E-Service Quality and User Experience. This results area will focus
on taking e-Albania to the “next level�? by increasing the speed, efficiency, quality, and pro-
activity of e-services. At the same time e-Albania platform will become more usable and
accessible for all citizens, drawing on the latest innovations in e-service delivery and
accessibility. Expenditure categories under this RA include investments to upgrade the E-
Albania system which in terms of procurement activities may consist of an upgrade through
a direct existing contractor or new investment/installation, platform, front end, back end,
database software, application server, SOA, microservices, new functionalities, and so on.
The value of the procurable amount under this RA is estimated to be US$ 54 million.
• Results Area 2: Improving Digital Skills and Digital Inclusion. This RA will support reduction
of the digital divide in service delivery and ensuring universal access, for all citizens and
businesses, to high-quality e- services, in line with best practices in digital service delivery.
The program will provide a package of infrastructure, special-purpose furniture and
equipment, online learning platform access, professional development support, a structured
maintenance and user support process, and a carefully developed implementation strategy
to ensure that the SmartLabs are used effectively to improve both digital and foundational
skills. The estimated procurable amount under this RA is US$ 44.9 million.
9
• Results Area 3: Strengthening Priority GovTech Enablers. This RA will support putting in
place the enabling conditions for the results under RA1 and RA2, including the adoption of
key policies/regulations, as well as provision of the technical assistance, capacity building
and change management needed for the effective uptake of these GovTech innovations.
Procurements under this RA are estimated at US$ 13.6 million, mainly in technical assistance
contracts.
19. The Procurement Procedures under the Program are relatively standard. They involve the supply
and installation of Information Systems (including Software/Database purchase with licenses), Hardware
(HW), Network (NW) Equipment, Engineering Systems, Cloud Platform, Service Bus, and Advisory Support
Technical Assistance for the preparation of Design and Technical Specs, Bidding Documents, Cost
Estimates, Capacity Building/Training, and Change Management. In some cases, Technical Support for
Software (SW) Enhancements, Data Analytics, or similar activities that include only Advisory Services may
also be included in this category (with no Software or License purchase or System Maintenance/Support
obligations).
20. The MoES will be responsible for managing the procurement process for a limited number of
activities under RA 2, with an estimated amount of US$4.47 million, mainly consisting of consultancy
service contracts. These activities include the diagnostic, learning content development and deployment,
teachers' capacity building and curriculum upgrading, as well as the learning monitoring and
accountability system.
21. The present Program’s procurement profile is similar to the Government program financed and
implemented by the AKSHI during 2019-2021, which can be indicative of what to expect. Detailed
analysis of the 2019-2021 program10 shows that the majority (about 80 percent) of procurement financed
under the Program for goods and services falls under the local open tender procedures, above the lower
monetary threshold determined in the PPL and its regulations (see Table 1).11 The procurement profile for
supply and service contracts, above the upper monetary threshold, constitutes almost 47 percent of the
procurement procedures conducted by the AKSHI during 2019-2021. In the MTBP 2022-2024, the new
investments under the Government Program for the ICT sector include mainly supply and installation
contracts above the lower threshold and service contracts for the preparation of designs, technical
specifications, or maintenance contracts for existing software.
Table 1: Procurement Conducted Through Competition Procedure (Open Tender)
Contract Contract size No of Share in No. of Share No. of Share Total
type based on Contracts 2019 Contracts in Contracts in 2019-
monetary in 2019 procedures in 2020 2020 in 2021 2021 2021
thresholds
Goods > US$350,000 21 25% 26 58 % 62 79% 109/
and < US$350,000 62 75% 41 38,8% 15 21% 47%
Services
10 Data collected by the register of procurement procedures conducted during 2019-20219 by the AKSHI available through
Albania E-Procurement System.
11 Article 11 of the CoMD no 285, dated 19.5.2021, for the approval of procurement rules, as revised indicates that the lower
monetary threshold for service and goods contracts is 10,000,000 Lek (approx. US$93,000) while the upper monetary threshold
is 40,000,000 LEK (approx. US$350,000).
10
4.2 Budget Execution
4.2.1 Treasury management and funds flow
22. The Program will rely on the existing treasury management and funds flow arrangements
applicable to the AKSHI program. Disbursement of the loan will be contingent upon achievement of the
DLIs based on the AKSHI’s and/or other implementation agencies’ respective technical documentation,
which will be verified by the Independent Verification Agency (IVA) following the Verification Protocols. .
The Bank will review the documentation submitted and will reserve the right for further due diligence on
the robustness of data as needed. After the Bank formally considers the DLI(s) as met, it will then issue an
official letter to the Government confirming the achievement of the DLI targets and the value of
disbursement. The Borrower will then submit a Withdrawal Application (WA), accompanied by the Bank
confirmation letter, for the disbursement of the respective amount, which will be deposited in the
Treasury Single Account. The Program funds will be distributed to the AKSHI through the standard
government budget planning and execution process. Considering that the loan funds will be disbursed
based on the achievement of the DLIs, and the total Program expenditure exceeds the loan amount, the
program expenditure will be prefinanced by domestic sources. Hence, the source budget code should
ideally be the same as the domestic budget. The AKSHI and MoES will release payments for the Program
through the treasury system, through annual allocations for current expenditure and specific capital
investments. The payment will be executed by the regional Treasury District Offices (TDOs) (for the AKSHI
and MoES, the Tirana TDO) upon approval from authorized officials and submission of relevant evidence.
In the event that the source budget code differs from the domestic budget, the Treasury should issue
specific official instructions to institutions using the funds (separate or as part of the standard budget
execution instructions).
23. Over the three years under observation, the initial budget release for the capital expenditure
under the AKSHI program has been finalized between end of February and March.12 Contributing factors
to such delays are the hierarchical budget structure, institutional fragmentation of the budget release
process, the AKSHI’s own internal procedures, and, in rare cases, delays in the approval of the annual
budget appropriation law. The process should be typically completed by the end of January, as it is a
prerequisite for the release of payments. To facilitate the Program implementation, the AKSHI and MoES,
in coordination with MoFE, should streamline the process to the greatest extent possible and advance the
confirmation of the detailed activities before the start of the budget year. The budget release instructions,
issued by MoFE, are prepared for each program, and addressed simultaneously to the two institutions.
24. The transactions related to the Program are processed using well-developed and documented
uniform treasury procedures. These payments are released by the Treasury Single Account held at the
National Bank of Albania and commercial banks. The General Directorate of Treasury (GDT or Treasury)
has the lead responsibility for budget execution, operating the Treasury’s Single Account, other
government accounts, and the Treasury’s information system. The General Directorate of Budget also
plays an important role in the process of budget execution, being responsible for monitoring and
reporting, including approving budget reallocation requests during the year (virements), consolidating,
and analyzing budget reports. The Treasury authorizes and processes the payments, while the line
ministries are primarily responsible for executing the budget. The budget institution’s Finance
12 February 27, 2020, March 17, 2021, and March 23, 2022.
11
Department (FD) is responsible for: (a) preparing the budget proposals; (b) executing the approved
budget; and (c) preparing the financial accounts. The MTBP and Budget program submissions are prepared
by the AKSHI management and MoES General Directorate of Policy, while the Finance Department staff
compiles the proposals and submits them to the MoFE for approval. Instructions for payments are
submitted by Finance Departments to the Regional Treasury District Office (through the AGFIS system),
which checks all supporting documentation, sends it back if incomplete or with errors, and, when
approved, executes the payment, subject to the availability of cash. The 2020 SAI report indicates that
AKSHI contracts are not regularly reflected in the AGFIS system, and there have been some cases of delays
with the processing of the payment requests within the 30 days legal limit.13 The AKSHI is indicated to be
among the institutions with the highest number of previous year contracts registered in 2020, with a total
amount of 3 billion Lek.14 AKSHI management explained that the challenge has been addressed by
enforcing stronger commitment controls through budget monitoring by activity and, more recently,
through the implementation of a modern contract management system.
25. The AKSHI General Director (Authorizing Officer) has overall fiduciary responsibility and
responsibility for sound budgeting and financial management for programs implemented by the
Agency. At MoES, this role is held by the Secretary General. Specifically, their responsibilities relate to
maintaining adequate systems and procedures for budget preparation, execution, internal financial
control, monitoring, accounting, reporting and internal audit. They also have an explicit over-arching
responsibility of ensuring the efficiency, effectiveness, and economic use of public resources. Finally, the
Authorizing Officer appoints an Executing Officer (for both the AKSHI and MoES, the Budget and Financial
Management Director) who is responsible for implementing the financial management rules, keeping the
accounts, and preparing the financial statements.
26. With respect to the IPF component, the project will rely on selected aspects of the country’s
budget formulation and execution processes; however, the treasury system will not be used. The
Treasury workflow is not adequate for multiple currency transactions and their recording and reporting,
so alternative funds flow arrangements will be adopted. A segregated designated account denominated
in loan currency will be opened at the Bank of Albania, earmarked for the proposed IPF activities, which
will be transferred to project bank accounts for Project use. Project-eligible expenditures will be
documented through statements of expenditures and records. The funds will be disbursed following
standard IPF disbursement procedures, including advances, reimbursements, and direct payments and
special commitments.
Recommendation for the POM
- The AKSHI and MoES, in coordination with MoFE, should streamline the budget release process
to the extent possible, including expediting the confirmation of the detailed activities before the
budget year commences. The agreed process will be defined in the POM. If necessary, a separate
budget release notice should be issued for the PforR Program.
- POM should include a detailed description of the fund flows for the IPF operation, as well as the
disbursement arrangements for both the PforR and IPF operations.
13 Budget Report 2020, pp 16-17
14 Budget Report 2020, pp 81
12
4.2.2 Accounting and financial reporting
27. The assessment confirmed that in general the central government’s accounting and financial
reporting systems are overall adequate. However, efforts are needed to ensure timely and adequate
records to be maintained for the Program. All government agencies, including the AKSHI and MoES,
utilize AGFIS for budget execution of their program expenditure and activities, which enables recording
of contracts, invoices and payments in the contract and payment module, and captures all the
transactions in the general ledger and vendors accounts. Generally, the system is adequate for the
Program accounting and financial reporting, and both the AKSHI and MoES have direct access in AGFIS.
The direct access enables timely update on entities’ budget execution, available to Treasury and other
MoFE departments for various analyses. The review of available audit reports indicates that the AKSHI
contracts were not regularly reflected in AGFIS system before 2021, leading to incomplete inventory of all
commitments in AGFIS. A lack of annual financial (internal and external) audit was contributing to that
end.
28. The E-government program (program code: 01140) budget execution reports are generally
consistent with budget coverage and classification, but further enhancement is needed to allow
effective monitoring of budget performance and to facilitate timely corrective measures. At the central
level, the e-governance program together with 8 other programs are monitored under Group 87 - Other
Governmental Institution. The overall e-government program is implemented by 3 institutions (namely:
the AKSHI - National Agency for Information Society holding 96 percent of the program budget, while the
rest is held by two smaller institutions: ASIG - State Authority for Geospatial Information, and ACESK -
National Authority for Electronic Certification and Cyber Security), whereby each prepares its periodic
budget execution report, organized by program and economic category. The financial and non-financial
information is then aggregated by MoFE in a consolidated monitoring report produced for Group 87.
Reports published on the MoFE website suggest that the AKSHI has not, in all cases, submitted budget
execution reports to MoFE. Based on the standard instructions for the budget monitoring, in-year budget
reports should be prepared every four months and submitted within four weeks to the MoFE unit
responsible for budget monitoring. These reports are used to measure the year-to-date performance
through the analysis of expenditures outturns with respect to original and revised budget estimates, and
to provide information by group economic accounts and source of financing, and budget outputs. The
reports should be complemented by capital investments progress schedules, presenting project
commitments, actual and cumulative expenditure, respective budget allocation and project status.15
Evidence suggests that the AKSHI does not always comply entirely with the requirements for budget
monitoring reports. In addition, the budget monitoring reports are not published on its website. More
frequent reports are prepared for management purposes, but these are not disclosed. Similar reporting
templates are used for annual budget execution reports and schedules required for the preparation of
the first phase of MTBP framework. For the purposes of Program monitoring, the current financial
reporting arrangements will require enhancements in terms of content and processes. These
improvements will be agreed and included in the POM.
29. Overall, the quality of the Program accounting records, and financial statements could be
further improved in line with international best practice, which is also aligned with an accounting
reform action plan. In addition to AGFIS, the AKSHI utilizes an automated accounting software (Alpha
web), customized for government entities accounting and financial reporting. The accounting in this
15Standard Procedures for the monitoring of the budget at central government budget (MoFE Instruction 22 dated 17.11 2016
and Annexes).
13
software is maintained in accordance with MoFE instructions on the modified accrual basis. The financial
reporting process relies on the regular monthly reconciliation process with the Treasury for accounting
purposes. Standard format financial statements are prepared on an annual basis and submitted manually
to the Treasury. They generally do not contain detailed commentary. The central government is
committed to the adoption of an International Public Sector Accounting Standards (IPSAS)-based public
sector accounting, taking steps in transition from cash accounting to full accrual accounting. At the
moment, draft instructions aligned with IPSAS have been prepared and are being piloted in selected
institutions, with the AKSHI being one of them. To date, the program expenditures are recorded and
reported in AGFIS using the cash basis of accounting.
30. For the accounting and reporting of the IPF operations, the AKSHI will use Alpha web. The
project funds and expenditures will be maintained separately, and the project chart of accounts will be
defined based on the IPF project activities. At the same time, the IPF operation will be accounted in the
entity financial statements. The accounting records for all project expenditures will be maintained by
category and by component. Periodic reconciliation will be performed between general ledger and project
bank accounts and the World Bank disbursement data. Quarterly interim financial reports (IFRs),
containing at least (a) the statement of sources and uses of funds (with expenditure classified by category
and component), (b) contract monitoring, and (c) a designated account (DA) statement, will be submitted
to the World Bank, by each implementing agency, within 45 days of the end of each quarter. The format
and content of the IFRs will be agreed with the Bank and included in the POM. The AKSHI will be required
to report on IPF operations to MoFE (Treasury and Budget departments). The annual project financial
statements will be prepared in accordance with International Public Sector Accounting Standards on a
cash basis. The financial reports will be prepared in the loan currency. The first quarterly IFRs will be
submitted after the end of the first full quarter following the first disbursement from the IPF.
Recommendation for the POM and capacity support through IPF
- For the purposes of Program monitoring, the current budget monitoring arrangements will
require improvements in terms of content and processes, timeliness, reporting requirements,
and disclosure. Such improvements will be agreed and included in the POM. The reporting
requirements for the IPF operation will be described in a separate section of the POM.
4.2.3 Procurement processes and procedures
Legislative and Institutional Framework of the Public Procurement System
31. The Legal Framework for procurement is well-established and provides the elements needed
for a functional decentralized procurement system. The Public Procurement Law (PPL), No. 162/2020
“On Public Procurement�? governs all aspects of procurement in the public sector, including procedures
for the award of public contracts and framework agreements, legal protection concerning public
procurement procedures, procurement procedures required for works, goods, and services, and the
relevant review mechanisms.16 The PPL is supported by its implementing rules17 and other secondary
legislation that set additional guidance, tools, instruments and templates and standardized bidding
documents for specific categories of services, goods, and works for the use of Contracting Authorities. The
entire legislative package is published on the website of the Public Procurement Agency (PPA)
16 Limited exceptions on the applicably of the PLL are defined in Articles 5 to 9. According to Article 30 of the PPL, open
competitive procurement is the default method of procurement. Articles 31–35 define cases in which other methods can be
used under specific circumstances and with specific justifications.
17 Adopted through a Decision of Council of Ministers no. 285, dated 19.05.2021
14
(www.app.gov.al) and is easily accessible to the public. The legal framework on public procurement and
relevant administrative and budget provisions are largely in line with the EU procurement directives.18
32. The Public Procurement Agency (PPA) and the Public Procurement Commission (PPC) are the
key actors in Albania’s public procurement system. PPA is the main regulatory body, established as an
independent organization accountable directly to the Prime Minister, to whom it reports on a yearly basis.
Conversely, PPC deals with complaints and appeals against decisions of Contracting Authorities. It has a
direct reporting line to the Parliament of Albania, which appoints and removes from office its chairman
and four other members.
33. Contracting Authorities (CA) are responsible for conducting procurement processes for all public
contracts financed through public funds. Each institution must be registered as CA at the Electronic
Procurement System (E-PS) and must have at least a dedicated responsible staff for procurement
procedure within the institution. The AKSHI operates as an individual Contracting Authority and also
serves as a centralized purchasing body for all ICT-related procurement activities. The beneficiary
institutions are requested to submit to the AKSHI the requests to launch procurement procedures for
which budget are foreseen in their respective institutions.
Assessment of the procurement processes and procedures
34. The Public Procurement Law (PPL) applies to the procurement of goods, works, and services
purchased by the central and local government authorities. The PPL indicates the following procurement
procedures: open procedure, restricted procedure, negotiated procedure with and without prior
publication of procurement notice, request for proposals, design contest, consultancy service procedure,
negotiated competitive procedure, Competitive dialogue, and Innovation Partnership.
35. Under the PPL, all procurement information must be published on the Electronic Procurement
System (E-PS). Bidding procedures are advertised through the public procurement portal and publication
of bidding documents on the public procurement portal is mandatory. Based on the law, the Public
Procurement Agency (PPA) provides a model of bidding documents, which must contain instructions to
bidders, a bid submission form, qualification requirements, instructions to prove the fulfillment of the
requirements, a model of contract, technical specifications/a bill of quantity/terms of references, and a
declaration of an independent bid. The Contracting Authorities are obliged to follow the standard PPA
tender documentation. For low-value contracts (annual estimated value between 100,000 to 1,000,000
Albanian lek, approximately US$ 930 to US$9,300) Contracting Authorities may use the “low-value
procurement method�?, but they need to publish notice and bidding documents on the E-PS.
36. The AKSHI operates as a centralized purchasing body for all ICT investments financed under the
state budget. During 2019-2021, the AKSHI was as the beneficiary for only a minority of procedures it
conducted (47 procedures or 20 percent of total), while the majority of procedures (182 or 80 percent of
total) it conducted on behalf of other government institutions. The same approach is expected to be
followed under the PforR Program: MoES will be the beneficiary institution for part of the Program
(Smartlabs) and will participate in the preparation of Technical Specifications, bid evaluations (if relevant
and to the extent possible) and contract monitoring. This implementation approach highlights the need
for robust procurement planning systems and coordination among the AKSHI and Program beneficiaries,
which are also pointed out in section no. 4.1.3.
18 European Commission. 2019. EU Commission Albania 2019 report. Brussels.
15
37. The mandatory use of the E-PS has significantly reduced the use of negotiated procedures
without publication of prior notice (direct contracting). One of the main issues identified in the World
Bank’s 2017 Public Expenditure and Financial Accountability (PEFA) assessment was the high number of
direct selection procedures, amounting to 30 percent of the total. Starting from 2018, the PPA has
enforced the use of E-PS, including for the negotiated procedures without publication of prior notice,
which significantly reduced the utilization of direct contracting and negotiated procedures without prior
notice. Since 2018, the share of direct contracting has decreased for the government as a whole, dipping
below 3 percent in 202119 (rising only briefly in response to the 2019 earthquake emergency and COVID-
19 recovery efforts), and even more precipitously for government procurement in the ICT sector (Figure
1).
Figure 1: Number and rate of direct contracts, government average and ICT, 2018-2021
All government Government ICT
Source: PPA 2021 Annual Report
38. The preparation of bidding documents and technical specifications is coordinated among
procurement units (or procurement-dedicated staff in small CAs) and technical divisions within the
institutions. The use of standard bidding documents is obligatory for each procurement process. Model
procurement documents and contracts are included as part of tender documentation for goods, works,
and services, and the content of the standard and mandatory clauses and templates of the standard
contract conditions is consistent with internationally accepted practice. The tender documentation does
not refer to any brand or manufacturer names or catalogue numbers. General conditions of the tender
documentation include number and names of the lots, qualification requirements, technical
specifications, agreement on participation, information on qualification, and the funds available (cost
estimate) for the tender.
39. The opening and evaluation of bids takes place through E-PS. Tender opening is public, and the
minutes are recorded and made available to authorized representatives of bidders. Evaluation is
19Source: PPA 2018 and 2019 Annual reports
16
conducted in accordance with the evaluation and qualification criteria in the tender documents and is
carried out in the E-PS by an evaluation committee of at least three members. According to the PPL,
members of the unit responsible for preparing the tender documents cannot participate in the evaluation
of bids.
40. The level of competition differs by type of procedure and nature of contracts. However, on
average the number of technically responsive bids in open competitive processes ranges between one
and two bidders. Open competitive bidding (applicable for large investment projects) has on average
three bids per tender, but the number falls to one during bid evaluation as on average two to three bidders
are rejected for being technically non-compliant. Taking into consideration that, in some cases this
number is reduced if the financial offer is above the limit disclosed by the CA, there is the risk of low
competition or cancellation of the procedure. Globally, the ICT sector is very specialized, and the number
of bidders is low for high-value specialized goods. Competition could be increased by boosting the number
of participating international companies, which is currently limited. In addition, there appears to be a
concentration of high value contracts (above 350,000 US$), typically awarded to three to four local
operators. Under the Program, the AKSHI should require a robust market analysis to be part of the
procurement process for high value /high risk procurement procedures to ensure that it fully understands
the market, the major contractors, and the average implementation cost and timeline before tenders are
launched. In analyzing the private sector responsiveness, the AKSHI will need to explore different
procurement approaches provided by the PPL to respond to the technical/functional requirements of
goods and services that will be procured.
Recommendation for the Program Action Plan
- Before Program effectiveness, the AKSHI should prepare a procurement strategy for high value
contracts, which should include a robust market analysis, the introduction of Life Cycle Costing
(LCC) into the procurement process, and the identification of agile forms of procurement allowed
within the current PPL (such as competitive dialogue and framework agreements for ICT service
providers).
- The AKSHI will organize yearly business outreach events to target national and international ICT
market and present the expected activities to be procured in that given year.
41. Although the PPL foresees the most economically advantage tender (MEAT) as the only award
criterion, the ICT sector could benefit from applying green criteria. The ICT sector could benefit from
applying the green criteria which will allow for the calculation of life cycle costs (LCC) to consider the costs
involved in using the product during its period of use. The Program procurement profile has the ability to
pilot the inclusion of green criteria in different phases of procurement procedures, such as minimum
technical specifications, qualification requirements of the bidder, and/or award criteria and contract
clauses if possible. The PPA is working on the preparation of a Guiding Methodology that will allow
Contracting Authorities to understand the application of green criteria in 18 different sectors, among
which two sectors are directly linked to ICT: electronic devices (computers, monitors, laptops/ personal
computers, tablets, smartphones) and data centers, server rooms, and cloud services. The Program is
expected to apply the green criteria (in one or more phases of the procurement cycle as described above)
for at least 30% of the annual ICT procured budget (for which procurement was successful). Additionally,
all hardware procured under the Program will include energy-saving certified hardware in the technical
specifications and award criteria (to the extent possible). The application of energy efficiency standards
will impact on savings over the life-cycle on use of energy, maintenance, and replacement for more
durable (often, more expensive) products.
17
42. The rate of canceled procurement procedures is below the national rate reported by the PPA,
which is a strength, yet the rate indicates the need for further improvement in the planning process and
quality of procurement documents. The rate of canceled procedures stands at 20.5 percent for the entire
government in 2021 (1042 out of 5079 published on EPS)20, while for the AKSHI the rate is 14 percent of
published procedures which are cancelled before finalizing the contract award for different reasons.
However, based on the report of procurement procedures realized during the specific years, it appears
that some of the canceled procedures are re-published with the same year or the following one. The CAs
should aim to reduce the number of canceled procedures, which increases the level of procurement
transactions within the procurement unit staff and other staff engaged in preparation and evaluation. In
addition, the timeline to implement program activities may be affected by the delays caused through
republication.
Table 2- Cancellation rate for procurement procedures 2019-2021
Year No of procedures published No of completed No of cancelled
extracted at E-PS procedures procurement procedure
with the specific year21
2019 83 55 7
2020 67 46 11
2021 78 61 10
Total 235 162 (69%) 34 (14%)
43. According to data from the e-Procurement system, the main reasons for cancellation include a
lack of technically compliant bids, bidders’ withdrawal, failure to sign contracts in a timely manner, or
lack of financial resources from the Contracting Authorities to continue the activity . The procurement
annulment rate raises the risk of contract awards and activities not being implemented as planned for the
Program work plan. These numbers suggest the need for remedial measures both by CAs, namely, to
improve the preparation of procurement procedures, and by the PPA, namely, to analyze the problem
cases and take appropriate measures towards legal improvements for the development of qualifications
requirements and training and other measures provided by law.
Recommendation for the POM
- CAs involved in the Program should ensure wide publication of tender notices under the
Program to obtain a satisfactory number of bids and ensure wide competition.
- CA procurement and technical staff will be trained on topics related to preparation of Bidding
Documents and on the establishment of adequate and fit-for-purpose qualification criteria to
increase the quality of procurement documents.
43. The average processing times for procurement activities generally comply with the PPL
requirements, with the main exception being the cases in which participating bidders lodge complaints.
The contract processing time varies by procurement method. On average, for open competitive bidding,
the time required from launching the procurement notice to contract award is 2 months for supply
20Data collected from 2021 PPA Annual Report
21Low value procurement and purchases of tickets are excluded from the total number of cancelled procurement due to their
low influence in the Program.
18
contracts and from 1-1.5 months for services. In a limited number of procedures, the timeline is prolonged
due to complaints. However, the duration of the pre-tender phase which is not regulated by the PPL has
taken longer than it normally should. In some reviewed procedures where the AKSHI was not the direct
beneficiary, it was found that the timing to finalize Technical Specifications and conduct a market study
to establish the cost estimate baseline, take almost 4-5 months compared to the duration of the
procurement procedures themselves (as described above for each type of contract).
Recommendation for the POM
- The AKSHI should include in the POM a procurement preparation timeline for the Program
activities with clear responsibilities divided within the final beneficiary and the AKSHI as
Contracting Authority. This timeline to respond should also appear in written communication
with economic operators during the market analysis process.
44. The most recent audit by the SAI on state budget execution suggests that the level of
procurement compliance in the public sector overall is still weak, especially for complex procurement
procedures.22 Considering that a state budget SAI report on the AKSHI’s procurement activity is not
available, the team has taken as a reference the key findings from the auding report of SAI on 2020 and
2021 annual budget execution in Albania. The main findings of the state budget audit indicate that 48
percent of the audited funds have been identified as having infringed upon procurement procedures. The
audit scope covers the type of procedure and all related decisions, bids, evaluation reports, decisions of
contract award, and the contract itself and its execution. The most common infringements relate to poorly
prepared procurement plans, lack of experience in public procurement, and particularly unrealistic needs
assessments. In total, 314 procedures were declared to have not correctly followed PPL and the secondary
legislation, of which 172 are during procurement process, 88 during the preparation of technical
specifications, and 54 during contract execution. Some general remarks on the legal gaps identified
indicate that the PPL is silent on the obligation to provide only bank guarantee as bid security. The audits
have noted that most bidders present only security policies issued by insurance companies, which expose
the contracting authorities to great risk. Furthermore, the lack of administrative penalties for first ranked
bidders withdrawing from the bidding process raises concerns of potential collusion. To mitigate such risk,
PPA should put some regulations introducing these types of penalties in place. The SAI audit also notes
that economic operators provide different prices for the same type of services/supplies/works during the
preparation of market analyses and the establishment of the fund limits are quoted higher than the
financial offer presented by the same operators. This practice results in artificially increasing the n the
limit fund and impacting the competition among bidders. The above are general findings for the wide
functioning of the public procurement system in Albania considering that the team did not find a complete
SAI Audit report on the AKSHI during the assessment.
Recommendation to the Program Action Plan
- The AKSHI should coordinate with PPA to deploy capacity building activities for CAs involved in
the Program, to boost the capacities of procurement staff and other technical staff involved in
the preparation of Bidding Documents. Although there are no recent SAI audit reports related
to the ICT sector, the capacity building could consider lessons learned from SAI audit reports in
other sectors.
22 This finding relates to the country-level public procurement system as a whole and is not related to the AKSHI, specifically.
19
45. Low motivation and high turnover of procurement staff in all Albanian CAs face present
potential challenges. This finding relates to country-level trends, but not to the AKSHI specifically.
According to the PPL, any infringements of the PPL and secondary legislation identified by the SAI should
be reported to the PPA, who should assess then and take appropriate remedial measures. The SAI and
PPA’s frequent resort to financial fines and disciplinary measures has led to low morale and high turnover
rates among procurement staff in CAs, resulting in loss of expertise and capacity. In 2021, under this
procedure, the PPA imposed financial fines on 44 employees involved in various stages of the
procurement process, while disciplinary measures are applied to 111 employees. Meanwhile, the SAI,
upon concluding its audits, proposed fines for 58 employees and disciplinary measures for 34 staff.23
Assessment of review and grievance mechanism
46. The Public Procurement Commission (PPC) is the centralized body responsible for reviewing
complaints pertaining to public procurement procedures. The PPC is the highest administrative body in
terms of reviewing complaints in the field of public procurement procedures, concession/Public Private
Partnership procedures, public auction procedures, and competitive procedures for issuing mining
permits. It has a fully legal and institutional independence from the government. The PPL24 grants every
person and company with an interest in a procurement activity the right to file a complaint. The PPL
stipulates that the PPC must decide on a request for protection of rights within 15 days of receipt of the
request, but no later than 30 days. The Assessment has noted delays in the decision-making process by
the PPC, as it has taken on average 45.2 days to process and rule on a claim. The new PPL provides for a
more streamlined complaint mechanism by requiring complaints to be submitted simultaneously to both
the CAs and the PPC, aiming to reduce the time for handling complaints. Furthermore, an E-Complaint
system operated by the PPC was made operational by mid-2021, with the aim to reduce the administrative
time for filing and processing the complaints. The effects of these 2 changes in the complaint mechanisms
(new provisions in the Law and the e-Complaint system) could not be assessed as there were no
complaints registered in the PPC website after the entry in force of the new PPL for procurement
procedures conducted by the AKSHI. However, the expected result is to note a reduction in the timeline
to decide on complains by PPC.
47. The rate of valid complaints about procurement in the ICT Sector is relatively low and few are
challenged in court. Only 3 percent of all procurement procedures conducted during 2019-2021 elicited
a complaint, and out of this number only one third were accepted by PPC. The number of PPC decisions
challenged in administrative court is insignificant: in 2021, only one case was brought to the administrative
court, and the ruling confirmed the PPC’s decision. Consequently, this evidence suggests that PPC
decision-making is sound, although, as mentioned above, the timelines to rule a complaint could be
accelerated.
Recommendation for the Program Action Plan
- The AKSHI will establish a monitoring mechanism involving the PPC and other Contracting
Authorities under the Program to ensure timely resolution of complains in ICT procurement
procedures.
23PPA annual report 2021
24The process for submission and resolution of complaints is clearly set out in the PPL by Articles 63 and 64 and is publicly
available on the website of the PPC, at www.kpp.gov.al/
20
- The PPC will share, with the Bank, complaints received under the Program, including the number
received, resolved, time for resolution and those referred to other authorities.
4.2.4 Contract administration
48. Contract management responsibility lies with CAs, and to fulfill this task, the AKSHI establishes
ad hoc working groups that are responsible for contract management, which include members from the
final beneficiary and the AKSHI technical staff. The contracting authorities are responsible for the
implementation of contracts that originate from public procurement procedures. In case of contractual
changes, they must decide on contract modification, and publish it on the public procurement portal.
While contracts are currently not publicly available, a register of public contracts is made available through
the public procurement portal. Data on the contracts signed are published also.
49. The Public Procurement Law (2020) narrowly covers the contract management phase and the
practice in this area is evolving. SAI reports identified contract management as an area that could be
further improved. The PPL (2021) limits contract amendments to 20% of the original contract. The efficacy
of this provision in the context of global inflation remains to be seen.
50. The current PPL foresees that PPA will also be responsible for monitoring CAs in contract
management processes. The PPA is to collect information regularly on the signed contracts, their amount,
the implementation timeline, and the agreed schedule of implementation. Contracting authorities must
also submit to the PPA mandatory quarterly reports with information on awarded public procurement
contracts, amended public procurement contracts, and execution of public procurement contracts. The
CAs must also report on contract modifications at the time they are being made. Further improvements
of the E-Procurement System are planned in the PFM Strategy 2019-2022, with the creation of a new
model that will enable contract implementation to be registered in the system. During the review, it was
noted that the AKSHI operates a simple contract management system that is being piloted to understand
its relevance for wider Contracting Authorities. The system captures data on price and time overrun,
deliverables milestones and their approvals, and respective payments made under the contract.
Recommendation for the POM
- The POM should stipulate that the AKSHI will register all contracts under the Program in contract
monitoring system and prepare quarterly implementation reports, which will be used to
consolidate the Program Annual reports to the World Bank.
4.3 Internal Controls
4.3.1. Internal Controls
51. Overall, Albania’s public sector has a sound legal framework base for financial management and
control. Roles and responsibilities are clearly established in the relevant primary legislation, including the
Law on Financial Management and Control25 and the Law of the Management of the Budget System26 and
25Articles 6 through 12 of the Law.
26Law on the Management of the Budget System in the Republic of Albania no 9936, dated 26.06.2008, amended with the Law
no. 57 dated 02.06.2016.
21
related sublegal acts.27 Key roles clearly prescribed in the legislation include the Minister of Finance and
Economy, the Principal Authorizing Officer (MoFE Secretary General), the entity authorizing officer and
subordinate authorizing officers, executing officers, and line managers. Furthermore, budget institutions,
including the AKSHI and MoES, have established organizational structures, complemented by job
descriptions and internal regulations describing the tasks, duties, and responsibilities, and reporting lines.
In addition, MoFE has developed secondary legislation with respect to budget formulation and execution,
reporting and management of assets.28
52. Notwithstanding the sound legal framework, certain areas for improvement and strengthening
are reported in de facto practices and implementation. The 2021 Public Internal Financial Control (PIFC)
report suggests that not all public institutions have manuals delineating audit processes and control
activities.29 Nevertheless, some progress in this area has been observed in recent years, such as the
development of process maps and audit trails for the key processes. However, there is no manual of
procedures providing details on the requirements and control activities of business processes, which may
lead to inefficiencies in the process of handling of requests, commitments, payments, and reporting. This
is mainly due to the fact that the roles and responsibilities of staff across various divisions are not fully
documented. In general, across budget organizations, there is a lack of understanding of the need for
business processes descriptions, which are often confused with job descriptions. These gaps in the control
environment are noted in most budget organizations, including the AKSHI and MoES, and they affect most
business processes. In the AKSHI’s case, the Agency has developed and endorsed the organizational
structure, internal regulations, and job descriptions (dated 2020), and also developed process maps and
audit trails, but lacks a detailed manual of procedures. Another important aspect with respect to the
composition of the finance and budget department is that the finance units seem to be understaffed
compared to the roles and competencies given by the PFM and financial management control (FMC) rules;
hence, undermining the principles of division of labor, segregation of duties and consequently the
achievement of the unit objectives. It is crucial that detailed guidelines and procedures and reporting
requirements are prepared and endorsed as part of POM, and all staff are properly trained.
53. Commitment controls have been strengthened recently, yet there remain areas for
improvement. The AKSHI has direct access to the MoFE controlled treasury information system (AGFIS).
However, until last year the multi-year contract functionality was not used as required by the budget
execution instructions. Instead, the annual portions of contracts were registered. The review of available
audits indicates that in 2020, the AKSHI was among the institutions with the highest number of contracts
pertaining to previous period recorded in 2020. In 2022, the AKSHI has implemented a modern contract
management system that improves aspects of commitment controls. Future plans envisage such a system
to be fully integrated with the public procurement system and AGFIS. The effectiveness of commitment
controls could be further enhanced if the AKSHI were to introduce regular reviews focused on the aging
of open purchase orders and purchase requisitions, reconciliations, monitoring and follow up of the stale
items as part of periodic management reports. To the extent possible, these control activities will be
adopted for the purposes of monitoring the present Program.
54. Payroll controls in the Albanian public sector are deemed adequate. Payment control
procedures are applied including checks made with treasury data. Payroll processes are fully integrated
between HRMIS and AGFIS. The audits indicate there are adequate links between the approved budget,
27 Ministry of Finance Instruction No. 2, dated 06.02.2012 On Standard Procedures on Implementation of Budget.
28 Ministry of Finance Instruction No. 30, dated 27.12.2011 On the Assets Management in Public Sector Units.
29 As required in the article 16 of the FMC law. These findings is noted also in the PEFA 2017.
22
personnel records, and payroll records, with payroll payments properly authorized through an automated
system.
55. Compliance with payment rules by the AKSHI is adequate. Treasury instructions on the
recording, processing, and reporting transactions are clear and are respected by the financial officers
involved in the preparation and entry of the transactions. The Treasury District Offices (TDO) are
ultimately responsible for payment execution. The treasury system has built-in checks that ensure that
errors are detected before entries are processed in the system. Specifically, every payment order
presented by the AKSHI is controlled by the financial officers at the TDO before being processed,
irrespective of whether the unit has direct access in the system or not. While there are no concerns with
the validity and correctness of the payment, the available reviews indicate that the legal 30 days deadline
is not always complied with.
56. Monitoring of the quality of the internal control system suggests strengths and areas for
improvement. The MoFE monitors the public internal financial control (PIFC) performance across public
sector units using a set of budget, treasury and financial management control (FMC) indicators, the results
of which are presented in its PIFC annual report.30 The AKSHI prepares and submits annually to MoFE a
self-assessment of its own financial management and control environment, which is further used to
generate FMC indicators and rank the institution compared to peers. Reports for 2020 and 2021 indicate
improvement in the AKSHI’s performance against the indicators assessed over the period. However, it
ranks among the mid performers (2021 report: scoring 40 out of a total of 72 points) which suggests there
are areas for improvement. The performance related to budget and treasury indicators (such as arrears
recording and reporting, timeliness of submission of contracts and invoices for payments and recording
of settlement plan for multiannual contracts) could be further improved. The AKSHI should take the
necessary measures to maintain an adequate performance on these areas over the term of the Program.
Recommendation for POM and capacity building through IPF
- Document internal control procedures for the key business processes, including financial
management controls, in the POM. Best practices require the development of manuals made
available to staff for guidance and compliance around the AKSHI operations and related internal
processes, which can be developed as part of the technical assistance for capacity building.
- The AKSHI will monitor FM performance annually through the set of indicators indicated in table
5.
4.3.2. Internal Audit
57. The Assessment concluded that the verification of the annual Program execution will primarily
rely on external audit, rather than internal audit (IA) reviews. The AKSHI has been unable to establish a
fully operational IA function, despite having a dedicated unit as part of its approved organizational
structure. The efforts to establish the IA unit are relatively recent following the AKSHI’s institutional
reform initiated in 201831. The main reason indicated has been the inability to attract qualified internal
auditors when related vacancies were advertised in 2020 and 2021. To temporarily address this gap in
organizational control environment, the AKSHI may consider outsourcing the functions to the private
sector or other budget organizations with a well-established audit function. In contrast, there is an
operational IA function in the MoES, with overall adequate capacity and qualification considering the well-
30Ministry of Finance order no. 89, dated 28.12.2015 on the methodology for performance monitoring of the public units.
31 Council of Minister Decision Nr. 673 dated November 22, 2017, as subsequently amended.
23
established certification and training program implemented by the MoFE. The unit operates based on an
approved annual audit program. All MoES programs are subject to the audit and the scope extends to all
institutions that received budget from MoES, including the regional education offices and the
municipalities. The entities to be audited are selected based on the assessed audit risk. Changes to the
original audit plan are approved by the Minister based on justification. Internal auditors submit their
reports to the Minister, the internal audit committee, and the head of the public entity audited. Audit
findings are generally reported to be followed up during subsequent reviews as well as through immediate
responses/actions taken by the respective heads and minister.
58. There is a comprehensive legal and institutional framework in place regulating the public sector
IA; however, recent reviews32 indicate that the internal audit function at the national level still has no
systematic or diagnostic nature in assessing the effectiveness of internal control. The Internal Audit
Law33 ensures compliance with international standards in terms of the IA function structure, mandate,
and audit methodology; the functional independence of the IA function through its direct subordination
and accountability to the head of the organization and internal audit committee; and establishes the
qualification requirements for auditors. In practice, however, internal auditors face a lack of support and
are confronted by misinterpretation of their function by their top managers. The Internal Audit function
primarily consists of ex-post reviews, which are focused on checking financial transactions and
compliance. On the other hand, the auditors have limited understanding of system-based auditing, and
the requirements of such are not reflected in their working papers and reports, even though their audit
plan indicates that they will perform an audit assessment of specific systems. IA activity is monitored on
a yearly basis from the MoFE Central Harmonization Unit.
Recommendation for the Program Action Plan
- Operationalize the IA function and IA committee through the recruitment of internal vacancies34.
In this regard, the AKSHI, in coordination with the Public Administration Department, will
relaunch the recruitment of the positions. In the short term, until the unit is operational, the
AKSHI should temporarily outsource the internal audit services by a private audit firm. The
internal audit service contract should be in place by June 2023, to be financed out of the Program
financing.
4.3.3. Program governance and anticorruption arrangements
59. Procurement remains a sensitive area, with high levels of perceived corruption but few cases
going through formal prosecution. Transparency International’s Corruption Perception Index (CPI) for
2019 places Albania in the 106th place out of 180 countries, suggesting significant levels of corruption.
Albania’s overall CPI score for 2019 is 35 /100 compared to 36/100 for 2018 and 38/100 for 2017, which
indicates a slow deterioration in the perception of corruption. According to a World Bank global report on
"Enhancing Government Effectiveness and Transparency: The Fight Against Corruption," it is indicated
that, although Albania has introduced innovative procurement measures to combat corruption (such as
the use of the e-Procurement System (E-PS)), certain continued practices, such as the increase of
unpublished procedures conducted as negotiated procedures without prior publication outside of the E-
PS, contribute to continued elevated perceptions of corruption.. During interviews conducted for this
32 World Bank. 2017. PEFA Performance Assessment Report – Albania. Washington, DC.
33 Law no 114 dated 22.10.2015 “On Internal Auditing on Public Sector�?.
34 The process will follow the procedures for the acceptance in the civil service or parallel transfer of the civil servants according
to the Law 152/2013 on Civil Servant.
24
assessment actors involved in procurement at both the central and local levels often cited perceptions of
corruption, but rarely confirmed if they were valid and reflected reality. For the ICT sector, there are no
official records for cases of fraud and corruption.
60. An adequate legal framework for anticorruption activities is largely in place, and the fight
against corruption is one of the five policies Albania is advised to prioritize in its European integration
process. Albania has signed and ratified all major international instruments against corruption, and fraud-
and corruption-related offences are sanctionable under the Criminal Code. These offenses include, but
are not limited to, passive bribery and active bribery, embezzlement, fraud, obtaining and using credit
and other benefits under false pretenses, abuse of trust, money laundering, abuse of position by a
responsible person, malfeasance in public procurement, abuse of authority in economy, forging of
documents, forging of an official document, and abuse of office and trading in influence. The Law on
Protection of Whistle-Blowers entered into force in June 2015 and some rules on whistle-blowers’
protection are included in the Law on Free Access to Information of Public Importance character and the
Law on Civil Servants. The Law on Civil Servants and the Code of Conduct for Civil Servants also contain
measures to increase integrity in the public sector. The Law on Public Procurement contains a dedicated
chapter on the prevention of corruption, requiring the purchasing authority to take corruption prevention
measures at all stages of the procurement process.
61. The GoA has approved the Intersectoral Strategy against Corruption 2015-2023, appointing the
Minister of Justice as the National Coordinator Against Corruption; and has recently also established a
dedicated Department of Anticorruption in the Ministry of Justice (MoJ). The Inter-Institutional Anti-
Corruption Task Force, responsible for inter-institutional inspections under the Action Plan of the Inter-
Sectoral Strategy against Corruption, is chaired by the Minister of Justice, National Coordinator Against
Corruption, and is composed of representatives from the Prime Minister’s Office, Public Procurement
Agency, and Central Inspectorate. The Intersectoral Strategy’s Action Plan (covering 2020–2023) includes
an objective that is directly relevant to public procurement: Increasing the transparency in planning,
detailing, managing, and controlling budget funds, for this purpose the good governance is achieved by
the collection of taxpayers' obligations and the good use of budget funds.
62. The MoJ’s Department of Anticorruption has the mandate to manage the network of
anticorruption coordinators in accordance with the Council of Minister Decision No. 618, dated
20.10.2021. To date, there are 78 Anti-corruption Coordinators located in 44 institutions at central level
and in specific regional agencies which provide direct services to citizens. The MoJ Department of Anti-
Corruption is responsible for supporting and coordinating the Network of Coordinators, as well as
conducting administrative investigations into corruption cases, suspected abusive or arbitrary practices,
preparing acts and bylaws in the field of anti-corruption as well as the development of programs, projects,
and policies in the field of anti-corruption.
63. To address the possible cases of fraud and corruption in the process of Program
implementation, the Program will rely on Albania’s existing country systems . The Ministry of Justice
(MoJ) through its Department of Anticorruption will be the main responsible agency for the
implementation of the Program’s anti-corruption measures in cooperation with other implementing
agencies. The Program implementation will be aligned to the Anti- Corruption Guidelines (ACG) applicable
to PforR operations dated February 1, 2012, and revised on July 10, 2015, and will include the below
measures:
a. Sharing a list of debarred firms and individuals with Program participating institutions. The
Program participating institutions will use the World Bank’s List of Debarred and Cross-Debarred
25
firms and individuals to ensure that persons or entities debarred or suspended by the Bank are
not awarded contracts under the Program during the period of such debarment or suspension.
The list can be accessed on the World Bank’s website (www.worldbank.org/debarr). Compliance
with the requirement will be checked by the Program’s auditor. Since multiple agencies will be
involved in procurement transactions, to avoid the risk of not being aware of the debarred list,
the following measures will be taken: (i) the PPA will publish on its website the updated list of
debarred firms and individuals and will issue a notice that this list is applicable to Contracting
Authorities participating in the Program; (ii) the updated list or lists will be shared by the CU on a
regular basis with the institutions in charge of procurement for the Program through a web-page
(if feasible, to be updated concurrently with World Bank updates); (iii) the TOR for the annual
audit of the Program will require auditors to check on a random-sampling basis whether any
contract has been awarded to ineligible firms or individuals; (iv) the regular Progress Reports
should contain written confirmations that no debarred or suspended individuals or firms have
been contracted under the Program.
b. Sharing information on fraud and corruption allegations. Annually, the MoJ through its
Anticorruption General Department will prepare and share with the World Bank a consolidated
report on all fraud and corruption allegations received under the Program, in a format agreed
with the World Bank. To this end, the MoJ will coordinate with the implementing institutions of
the PforR Program based on a Protocol for Fraud and Corruption Reporting for the Program to be
agreed upon between the MoJ and the AKSHI and included in the Program Operations Manual.
c. Investigation of fraud and corruption allegations. The implementing agencies will provide full
support to the MoJ and the World Bank when carrying out investigations related to fraud and
corruption allegations made during Program implementation. The MoJ will promptly inform the
World Bank on all credible and material allegations or other indications, together with the
investigative and other actions that the Borrower has proposed to take with respect thereto. The
World Bank will retain a right to investigate allegations, and the Borrower will provide the World
Bank the necessary access to needed persons and information applicable to the Program. Other
pillars of the Program Anti-Corruption system include use of independent auditors/verifiers for
the audit/verification of the Program. The auditors will be appointed from the list of auditors
acceptable to the Bank.
d. Awareness of fraud and corruption: The AKSHI, as part of its market outreach, will sensitize
bidders on Program requirements on fraud and corruption including eligibility requirements for
bidders to participate in procurement under the Program.
Recommendation for the Program Action Plan and POM
- The MoJ through its Department of Anticorruption will consolidate and share with the
World Bank, on an annual basis, information on all credible and material allegations on
fraud and corruption under the Program and actions taken or being taken.
- A Protocol for Fraud and Corruption Reporting for the Program will be agreed upon
between the MoJ and the AKSHI and included in the Program Operations Manual.
- The PPA will publish on its website the list of debarred firms and individuals and issue a
notice that this is applicable to CAs that will conduct procurement under the Program.
- The AKSHI, in collaboration with the Anti-Corruption Commission, will conduct awareness
campaigns on fraud and corruption as part of the market outreach.
26
4.4 Auditing
4.4.1 Program Audit
64. Albania’s State Audit Institution (SAI), or High State Control, will be responsible for the annual
audit of the Program financial statements. Language to this effect will be included in the Program legal
agreement, and arrangements have already been discussed with the SAI during Program preparation.
Program audits will need to be carried out starting with the first year of Program implementation. The
audit reports will need to be produced no later than nine months after the end of each fiscal year. These
audits will not be part of the SAI’s regular annual audit program, and thus the Program audit was
separately discussed and agreed.
65. The Program’s financial statements will include all budget lines, expenditures (annual and
cumulative), and liabilities associated with the Program. The Borrower will disclose the audit reports for
the Program within one month of their receipt from the auditors and acceptance by the Bank, by posting
the reports on the AKSHI website. Following the Bank's formal receipt of those reports from the Borrower,
the Bank will make them publicly available according to World Bank Policy on Access to Information.
66. The audit of Program financial statements will be carried out according to the Terms of
Reference (TOR) to be discussed and agreed upon between the AKSHI/MOES and the SAI, guided by the
World Bank to ensure adequacy and acceptability. The TORs will require the audit of the annual Program
financial statements and a report on any deficiencies of internal controls noted in the implementation of
respective budget lines. Auditors will also review the procurement procedures and respective control
frameworks and report on any high value contracts. Auditors will be required to confirm that all budget
program expenditures have been legitimate, including application of WB anti-corruption guidelines,
limitations related to large scale procurements and de-barred firms. The management recommendation
report will include information on how prior year’s audit recommendations have been addressed.
67. Annual audit of the IPF project. The project’s financial statements will be audited annually by
independent auditors acceptable to the World Bank, using specific terms of reference based on
International Standards on Auditing used for the projects covered by this agreement and cleared by the
World Bank. The audited project financial statements will be submitted no later than six months after the
end of the reporting period. Pursuant to the World Bank Policy on Access to Information (July 2010), the
IAs will have to disclose the audit reports within two months of receipt from the auditors, by publishing
the reports on their website. Following formal receipt of these reports, the World Bank will make them
publicly available.
4.4.2 SAI mandate and current coverage
68. All public-sector entities are subject to oversight by the SAI. The independence, mandate, and
organization of the Supreme Audit Institution of Albania (High State Control) are established and
protected by the Constitution and by primary legislation35. The SAI annually submits to the Parliament a
report on execution of the budget along with their compliance audit opinion. In addition to the annual
budget execution report, the SAI conducts periodic compliance/regularity audits covering all public sector
35Constitution of the Republic of Albania, Articles 162-165; Law No.154/2014 on the Organization and Function of the State
Supreme Audit Institution.
27
entities, and issues separate audit reports for each institution. In recent years, the SAI has begun to
provide an opinion as a result of their audits. Institutions are audited periodically, according to an annual
audit plan set on the basis of a medium term an audit strategy and assessed risk. The annual plan of audits
and audit reports produced (or in some case parts of it) are published on the SAI’s website. There is no
legal provision in the SAI Law on the timeliness for submission of audit reports to the legislature, but other
relevant legislation, such as the Constitution and the Organic Budget Law, require that the previous year’s
audit is submitted before the Parliament starts debating the following year’s budget. More specifically,
the SAI compliance audits on institutions are carried out on periodic basis based on the risk assessment.
Only one compliance audit has been carried out on the AKSHI during the last 10 years. The audit was
carried out in 2022 and covered the 5-year period (2017-2022), but the report is yet to be finalized. At the
time of writing, the Assessment team has not received a draft of the report findings.
69. While the SAI carries out the full range of audits, most of the SAI audits are compliance audits
with a focus on determining irregularities. The SAI law prescribes the types of audits that can be
undertaken by the SAI, such as financial audits, compliance audits, performance audits and IT audits. In
practice, most of the SAI audits on central government institutions are compliance/ regularity audits with
a focus on determining irregularities as well as highlighting any relevant material issues and systematic
and control risks. Financial audits are not yet widely used and not conducted on a regular basis, and SAI
auditors are not accustomed with its requirements and standards, mainly due to the absence of a financial
reporting framework consistently applied by the budgetary organizations. Various diagnostic reports
recognize there is lack of legislative scrutiny of the external audit reports and the level of implementation
of audit recommendations remains relatively low.
70. In recent years, the SAI has committed to a reform program to align the audit practice with the
International Standards for SAIs (ISSAI), and to focus the audit approach on identifying opportunities to
improve systems or address potential improvements in the efficiency and effectiveness of public service
delivery. Although revised and updated manuals and procedures were adopted in 2019 and 202036, there
is still considerable work to be done for their implementation in practice and improvement of the quality
of the audits.
Recommendation for the POM
- Taking into account that the SAI auditors are not familiar with the requirements for the
financial audits, it will be necessary to assign the same team over the duration of the project,
who will be subject of continuous training on the requirements for the financial audit and
reporting.
4.5 Procurement and Financial Management Capacity
4.5.1 Procurement staff capacity
71. The assessment of the procurement capacities at the entire institutional framework elaborated
under Section IIII of the FSA reveals that that:
36Revised and updated manuals for financial, compliance and performance audit, which fully reflect international standards,
were adopted in June 2020. In the same time period, the SAI also prepared or updated manuals on public procurement, detecting
corruption, and financial fraud. Revised procedures for quality control and quality assurance following international standards
were introduced in 2019.
28
a. PPA has mostly adequate human and financial resources to satisfactorily discharge its
duties, despite somewhat elevated staff turnover. PPA staff have extensive working
experience in the institution and to date only 3 out of 44 positions remain unfilled.
b. PPC counts a total number of 36 employees, which includes 5 members of PPC, 16
inspectors, and the rest is supporting staff. Currently, there are only 4 vacancies and the
organization appear to be well functional.
c. The AKSHI, as Contracting Authority of the Program, has a separate unit of 3 people
dedicated to legal issues and procurement, currently staffed with a mix of senior and
junior procurement specialists, who have experience in procurement under national
regulations. Considering the number of procurement procedures conducted during 2019-
2021 and the expected Program, there is the need to continuously assess the workload
and, if needed, provide additional resources to improve the overall time for preparing and
conducting procurement procedures.
d. MoES, as a CA responsible for the technical assistance activities under the RA.2, has a
separate unit on procurement with 2 dedicated staff. They have adequate experience in
procurement under national legislation; however, capacities need to be strengthened
regarding procurement preparation stage.
72. Overall procurement capacity, while adequate on the whole, could be further improved. One
reform area could help this effort would be the introduction of a standard certification program for
procurement professionals by the PPA. Albania has not yet started a tailored public procurement
certification but offers only continues training for procurement officials. The PPA, in cooperation with the
Albanian School of Public Administration (ASPA,) provides different level trainings on procurement, but
without regular frequency. Another reform focus should be on the provision of regular training for civil
servants in the field of procurement, including green public procurement. The level of understanding of
common public procurement procedures among procurement staff of the AKSHI and MoES is adequate,
but needs to be kept with the provisions of the 2020 PPL. Their ability to contribute to the process of
defining technical specifications can also be strengthened, which will improve the overall efficiency of the
procurement process. The PPA has delivered training sessions for procurement units of Contracting
Authorities on standard bidding documents and changes or updates of procurement regulations, more
the breadth and depth of training could be expanded. The PPA has delivered training sessions for
procurement units of Contracting Authorities on standard bidding documents and changes or updates of
procurement regulations; however, the breadth and depth of training could be expanded.
Recommendation to the Program Action Plan:
- The AKSHI should conduct an annual workload analysis to inform the adequacy of
procurement staff engaged in Program implementation and revise, if necessary, the
structure of procurement unit based on the results of the analysis.
4.5.2 Financial management capacity
73. The financial management capacities are generally adequate for the current Program, but
staffing adequacy could become a concern when the implementation of the Government’s broader
digitalization program speeds up and increases demand on staff time. The AKSHI has a well-defined
organizational structure, whereby financial management functions are primarily covered by the Budget
29
and Finance Sector37, responsible for budget development, budget execution, accounting, and financial
reporting, and the ICT Investment Management sector38, responsible for overall contracts monitoring. The
former consists of three staff - one head officer and two specialists – with one specialist position is vacant.
The latter consists of three staff, with one vacancy noted at the time of the assessment. The FM director
and head officer have adequate background and experience. The ICT Investment Management sector is
involved primarily with the contract management and monitoring and has one internal vacancy. The AKSHI
has developed and implemented a system for the management of contracts that reduces paperwork and
increases efficiency of staff. However, in terms of workload, the staff is fully utilized, which many become
a concern going forward as the implementation of the government digital agenda scales up in combination
with the implementation requirements of the PFM strengthening agenda. As a result, an increased
demand on budget processes, payments processing, financial controls, and reporting is expected. Other
AKSHI departments play an important role in the financial management of the Program, especially for
budget development and execution and contract management. The assessment indicates that training is
necessary on budgeting/planning and general requirements on the Bank operations. There are no
concerns on the MoES side, as their Program portion is much less significant compared to the total MoES
budget. In conclusion, it is critical that additional FM staff resources are acquired either through internal
vacancy recruitment and/or external FM experts support, to address workload challenges due to the
Program and the required strengthening of Program inancial management.
Recommendation for the Program Action Plan
- Implement a rolling training plan that is preceded by a Training Need Analysis (TNA) lead by PPA,
including main recurrent findings arising from SAI reports.
- Ensure the continuous and sustainable development of the capacity of staff in procurement and
contract management by providing regular training.
- Acquire additional FM resources through internal vacancy recruitment and/or FM external
support. The AKSHI to launch the recruitment39 for vacant positions in coordination with the
Public Administration Department by the latest end of February 2023. In the meantime, FM
external support, temporary as assessed by the AKSHI, will be provided through the IPF TA based
on terms of reference agreed with the Bank.
5. Program Systems and Capacity Improvements
Table 2: FSA Program Action Plan (PAP)
Risk Mitigation Action Timing Type of Actin
(PAP, DLI and so
forth)
Reduced effectiveness in 1. The AKSHI should prepare a Before the start of PAP
implementing program procurement strategy for high value contracts Program
activities due to the rate to include a robust market analysis to implementation and
of cancelled procedures, understand the market before any tender, updated regularly
low levels of competition introduce Life Cycle Costing (LCC) into the every year.
and limited participation procurement process and identify agile forms
37 The unit is part of a larger directorate on Budget and Finance of E-gov and ICT and supporting services.
38 The unit is part of a larger directorate on E-gov research and development.
39 The process will follow the procedures for the acceptance in the civil service or parallel transfer of the civil servants according
to the Law 152/2013 on Civil Servant.
30
of international of procurement allowed within the current
companies. PPL, such as framework agreements for ICT
service providers.
2. The AKSHI will conduct yearly Beginning of each
business outreach activities to inform the fiscal year
national and international ICT market on the
expected activities under the Program, with a
view to discussing innovations and raising
market awareness for all sizes of enterprises
and national and international enterprises.
Delays in processing the 1. The AKSHI to establish a Before start of PAP
complaints by the Public monitoring mechanism involving PPC, and Program
Procurement Commission other Contracting Authorities under the implementation
that affects extension of Program to ensure timely resolution of
procurement procedures complaints in ICT procurement
procedures.
2. PPC to share with the Bank Semi-annually
complaints received under the Program to
include number received, resolved, time for
resolution and those referred to other
authorities.
Limited human resources 1. The AKSHI to coordinate with PPA Continuously during PAP
at the AKSHI to perform to: (i) prepare and deploy activities at CAs implementation of
numerous and expanding involved in the Program to build capacities the Program
procurement procedures. of procurement and technical staff involved
in the preparation of bidding documents,
considering systematic issues/lessons
learned from SAI audit reports; (ii) ensure
continuous and sustainable development of
the capacity of staff in procurement and
contract management through regular
trainings
2. The AKSHI to conduct yearly Beginning of each
procurement workload to analyze the year during program
procurement resources allocated to the implementation
program
Complexity in ICT The AKSHI to hire additional experts to Every year PAP
procurement and the advise on complex contracts and monitor throughout
need to ensure that the procurement performance indicators Program
technical parameters of through established procurement KPIs and implementation
the contract are provide semiannual reports to the Bank.
reflected in the
procurement process
(preparation of bidding
documents, evaluation
process) and contract
monitoring.
31
Possible cases of Fraud 1. MoJ and the AKSHI will agree on the Before the start of PAP
and Corruption in protocols for Fraud and Corruption Reporting the Program
Albania during program for the Program;
implementation 2. The MoJ will consolidate and annually
share with the World Bank information on all Every year
credible and material complaints on fraud and throughout Program
corruption under the Program and actions implementation
taken or being taken
SAI auditors are not 1. Training on financial audit, reporting First year of PAP
familiar with and audit recommendations will be provided implementation,
requirements for to SAI auditors. and second year if
financial audits. 2. Training on combating fraud and necessary.
corruption will be provided for auditors.
3. To the extent possible, the same audit
team will be maintained over the term of the
project, to retain knowledge acquired through
the trainings.
PforR tag Establish appropriate PforR tag for the April 2023 PAP
Program expenditure through new specific
budget output and project code, to monitor
budget planning and execution, and enable
Program’s financial reporting.
FM resources adequacy 1. Acquire additional FM resources First year of PAP
through internal vacancy recruitment and/or implementation:
FM external support:
- Launch the recruitment40 for FM - By February
vacant positions in coordination with 2023
the Public Administration
Department.
- Finalize recruitment.
- Hire external FM support though IPF
budget with terms of reference - By June 2023
acceptable to the Bank. Upon IPF loan
effectiveness
Not operational IA 1. Recruit internal vacancies; temporary First year of PAP
function outsourced: implementation:
- Launch the recruitment41 of IA unit - By March 2023
vacant positions in coordination with - By December
the Public Administration 2023
Department. By June 2023
- Finalize recruitment.
- Contract internal audit services by
private firm.
40The process will follow the procedures for the acceptance in the civil service or parallel transfer of the civil servants according
to the Law 152/2013 on Civil Servant.
41The process will follow the procedures for the acceptance in the civil service or parallel transfer of the civil servants according
to the Law 152/2013 on Civil Servant.
32
Table 3: Other agreed actions
Risk Mitigation Action Timing Action required
in
Nonsystematic The AKSHI will sensitize beneficiary institutions on Each year during POM
procurement the Program procurement planning requirements implementation
planning process by issuing official notification letters to submit of the Program
as per the procurement forecast once the Budget Law is
common planning approved in Parliament.
process indicated
by the
Procurement
Law.
Lack of an Develop and implement a written methodology to Before start of POM
indicative specify an indicative timeline for conducting pre- Program
timeline in procurement activities with clear division of Implementation
procurement responsibilities between the AKSHI and direct
regulations to beneficiaries.
prepare
procurement
related
documents, such
as ToRs, Tech
Specification,
Market Analysis,
posing the risk of
delaying the
initiation of
procurement
process.
Limited level of The AKSHI should ensure wide publication of Continuously POM
competition and tender notice to be published under the Program during
failure to award to obtain a satisfactory number of bids that will implementation
the contract. ensure wide competition and to conduct business of the Program
outreach/market sounding events.
Contract The AKSHI will register all contracts under the Continuously POM
management Program in contract monitoring system and during
issues (time and prepare quarterly implementation reports which implementation
cost overrun) will be used to consolidate the Program Annual of the Program
reports to the World Bank.
Risk of awarding The PPA will publish on its website and issue a Every year POM
contracts to notice for the AKSHI to exclude firms on the throughout
debarred firms or debarment and suspension list. Program
consultants implementation
Strengthen Improved budget monitoring reports and financial Technical IPF TA/POM
budget statements templates will be agreed and included assistance to be
monitoring and in the POM. The POM will indicate the provided by IPF
reporting at the requirements timely submission to MoFE and TA. Agree on the
AKSHI public disclosure. TORs for the PFM
expert before
loan
effectiveness.
33
Outputs to be
included in POM.
Streamline The AKSHI and MoES in coordination with MoFE Throughout POM
budget release should streamline to the extent possible the Program
process budget release process, including advance the implementation,
confirmation of the detailed activities before the at the start of
budget year starts. The agreed process will be each budget year.
defined in POM. If necessary, separate budget
release notice should be issued for the PforR
Program.
Areas for Written internal processes will be produced and First year of IPF TA/POM
strengthening in will be available to staff especially around implementation,
the AKSHI’s planning, contract management, payments, and observed
internal control financial reports, assets management, and so on, throughout
systems in the POM. implementation
Best practices require the development of Terms of
manuals made available to staff for guidance and reference for
compliance around the AKSHI operations and activity will be
related internal processes, which can be agreed with the
developed as part of the technical assistance for Bank. The activity
capacity building. The activity will include training will be launched
of staff. upon loan
effectiveness and
will be
implemented
over two years.
Complex Program The specific responsibilities of the participating First year of POM
Implementation institutions and the scope of required inter implementation,
arrangements institutional coordination should be clearly and observed
defined and agreed in the POM, and maintained throughout
throughout the Program implementation implementation
Strengthen Technical expertise on streamlining and Technical IPF TA/ POM
budget planning strengthening MTBP preparation and annual assistance to be
budget implementation for the Program. provided by IPF
TA. Agree on the
TORs for the PFM
expert before
loan
effectiveness.
Outputs to be
included in POM.
IPF operation, FM IPF operation, FM arrangements, including Continuously POM
arrangements planning and budgeting, staffing, accounting and during
reporting, disbursement and funds flow to be implementation
described in a separate section of the POM. of the IPF
operation
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6. Implementation Support
74. During Program implementation, fiduciary implementation support will include:
• Working with the team to review implementation progress, examine the achievement of the
Program results and implementation of the proposed Action Plan.
• Helping the client to resolve implementation issues and to carry out institutional capacity support.
• Monitoring the performance of fiduciary systems, including via select Procurement and FM KPIs
(listed below) and audit reports, including the implementation of the legal covenants and PAP;
and providing recommendations to enhance efficiency and effectiveness.
75. The selected key procurement and financial management KPIs that will be used to monitor
the performance of the Program fiduciary system during implementation as presented in the tables
below.
Table 4: Program Procurement Performance Indicators
No Procurement Indicator Measure Baseline Target
1 Percentage of Number of 0 30 percent of the amount under each
procurement completed procedures DLI respectively during the 2nd, 3rd,
in support of DLIs launched and and 4th year of Program
achievement. awarded each year implementation
2 Timeline to finalize pre- Procurement 5 months Reduce to 2 months by end of 2nd
procurement process planning and year of the Program and maintain it
effectiveness throughout it.
3 Average number of bids Competition level 2 Increased to an average of 4 by the
end of 3rd year and to 5 at the end of
the Program.
4 Rate of canceled Procurement 14% Reduce by 2 % every year of Program
procurement procedure planning and implementation
bidding documents
quality
5 Percentage of cost Efficiency of design 20% Less than 10% at the end of the 3rd
overrun in management year and less than 5% at the end of
completed contracts the project.
Table 5: Program Financial Management Performance Indicators
No FM Indicator Measure Baseline Target/ Frequency
1 Variance: budget Ratio: Allocated N/A 95%/ Annual
allocated by (confirmed)funds/requested
Government vs budget funds (based on the
proposal by the AKSHI approved annual work plan)
(%)
2 Program expenditure Ratio: Originally approved Original 95%/ revised 100%/
aggregate and (and revised) annual Annual
composition outturn government funding the
Program / actual expenditure
35
at the level of Program
expenditure component
3 Quality of Program Completeness of account N/A 100% recorded and presented in
account payables/ payable records in the annual Program financial
arrears at the end of the AGFIS/accounting system as statements
reporting period at the end of accounting
period
% of such accounts payable Less than 10%/ Annual
at the end of reporting
period to the annual budget
Average aging of account Less than 30 days
payable at the end of the
reporting period (from the
date invoice issued/ receipt/
recorded)
4 Program budget Average business days More Less than 20 business days
allocation timeliness required for budgetary than 40
allocations to be enabled at business
the start of the year (this is a days
process fragmented between
the AKSHI/ SASPAC/MOFE)
5 Contract records in Completeness of contract Annual/ 100%
AGFIS records in AGFIS, with
payment schedule for
multiyear contracts/
Contracts concluded
6 Timeliness of Annual score received by 40 Annual / progressing score more
submission of contracts MoFE PIFC assessment of than 50
and invoices for treasury indicators for
payments. Program budget line.
Payment to be processed Less than 30 days from the
submission of payment
requests.
Contracts recorded Less then 2 working days from
signature
7 Aging of the open Periodic management No, ad on quarterly basis/ Yes
purchase orders and reports prepared including hoc
purchase requisitions, the periodic review of
reconciliations, and purchase/contract records in
monitoring and follow the AGFIS.
up of the stale items.
8 Quality and timeliness Completeness and timeliness N/A Audited annual financial
of annual financial of annual reports schedules of the Program with
statements for the unmodified (clean) opinion be
Program submitted to the Bank no later
than 9 months after the end of
the fiscal year.
36
9 Follow-up on Audit Evidence of timely and N/A Annual/ All audit
recommendations adequate follow-up by the recommendations are
Program management on implemented
audit recommendations
10 Public disclosure of the Timely disclosure on the N/A Annual/ interim / within two
AKSHI and PforR AKSHI website of (i) budget weeks from the endorsement of
documents, including program (the AKSHI program the document by the relevant
Program budget, budget and PforR); (ii) interim authority.
execution reports, budget execution reports
financial statements, (the AKSHI program and
audit reports. PforR); (iv) AKSHI financial
(Requirements to be statements; (v) PforR
included in the POM) Program financial statements
and audit reports.
37