BANGLADESH Strengthening PFM Program to Enable Service Delivery (P167491) Cr.6368-BD Virtual Mid-term Review (MTR) Mission January 24-27, 2022 AIDE MEMOIRE Part 2 A. Introduction and acknowledgments 1. A World Bank team undertook the mid-term review (MTR) mission for the Strengthening Public Financial Management Program to Enable Service Delivery (P167491) during January 24-27, 2022. The main objectives of the mission were to: (i) review the achievement of the Disbursement Linked Results (DLRs); (ii) evaluate overall Program performance compared to the Program Development Outcome (PDO); and iii) propose any structural changes to the Program design and results framework that may be needed to enhance the Program outcomes. Part 2 of the Aide Memoire provides the key findings and agreement in achieving the Disbursement-Linked Results (DLRs). 2. Despite the challenges imposed by the ongoing COVID-19 pandemic with series of lockdowns, the Program is making progress towards achievement of the PDO. Figure 1 shows the overall status of DLI achievement. Outputs to achieve results for DLI 2 and 6 are awaiting approval for them to be submitted for independent verification. Scheme for DLI 9 was approved in September 2021 and awareness raising is ongoing for implementation. Figure 1: Overall Status of DLI achievement B. Public Expenditure and Financial Accountability (PEFA+++) 3. The PEFA exercise is progressing much slower than expected. Following the PEFA launch on October 27, 2021, series of virtual and physical training sessions were held with the Government Assessment Team (GAT), development partners, participating United Nations organizations and civil society organizations on technical issues regarding methodology and evidence requirements. Because of COVID-19 pandemic, preliminary questionnaire relating to the assessment was conducted through web- based Kobo Toolbox. Electronic submission of evidence against each performance indicator by the nominated GAT members are currently underway. 1 of 26 4. The preliminary assessment (Table 1 covering FY18/19 to FY20/21) for budget reliability shows significant variances which indicate that the budget is not fully implemented as originally approved by Parliament. Actual expenditure (including debt charges and externally funded project expenditure) was below budgeted expenditure by more than 15 percent in 2 out of the 3 years of the assessment (FY18/19 was 12.8 percent, FY19/20 was 17.3 percent, and FY20/21 was 15.5 percent) with a ‘D’ score for this indicator which shows a marked deterioration since the 2016 PEFA when it was scored ‘B’. Functional composition variance by GoB budget sector (excluding contingency and interest on debt) has been over 15 percent for the three years of the review period (FY18/19 was 25.6 percent, FY19/20 was 24.7 percent, and FY20/21 was 11.7 percent) with a ‘D’ rating for this dimension. This means that the policy intent of the budget is not implemented as approved by the Parliament. 5. Accurate revenue forecasts are a key input to the preparation of a credible budget. The preliminary assessment shows aggregate revenue collection deviating from the approved budget by more than 8 percent (FY18/19 was 25.9 percent, FY19/20 was 29.8 percent, and FY20/21 was 14 percent) in the three years of assessment with a ‘D’ rating for this dimension. Composition variance was more than 15 percent in 2 out of the 3 years (FY18/19 was 7.8 percent, FY19/20 was 16.6 percent, and FY20/21 was 21.4 percent) with ‘D’ rating for this dimension. Overly optimistic revenue forecasts can lead to unjustifiably large expenditure allocations that will eventually require either a potentially disruptive in-year reduction in spending or an unplanned increase in borrowing to sustain the spending level. Also, the composition variance points to inaccuracy of forecasts of the revenue structure or the ability of the government to collect the amounts of each category of revenues as intended. Table 1: Budget Reliability (FY2018/19, FY2019/20, FY2020/21) Performance Indicators (PI) FY20/21 FY19/20 FY18/19 PI-1. Aggregate expenditure out-turn = Score D PI 1.1 Extent to which aggregate budget expenditure out-turn reflects the amount originally approved, as defined in government budget 84.5 82.7 87.2 documentation and fiscal reports. PI-2. Expenditure composition out-turn = Score D+ PI-2.1 Expenditure composition out-turn by function = Score D - Difference between the original, approved budget and end-of-year 17.1 24.7 25.6 outturn in expenditure composition, by functional classification, during the last three years, excluding contingency items, and interest on debt. PI-2.2 Expenditure composition out-turn by economic type. = Score C - Difference between the original, approved budget and end-of-year 12.7 16.2 10.9 outturn in expenditure composition by economic classification during the last three years including interest on debt but excluding contingency items. PI-2.3 Expenditure from contingency reserves. = Score A 0 0 0 - The average amount of expenditure charged to the contingency vote over the last three years. PI-3. Revenue out-turn = Score D PI-3.1 Aggregate revenue out-turn. = Score D - Extent to which revenue out-turns deviate from the originally approved budget. 86.0 70.2 74.1 PI-3.2 Revenue composition out-turn. = Score D - Variance in revenue composition during the last three years 1. 21.4 16.6 7.8 Data source: Unaudited extract from iBAS++. Annual Finance Accounts not yet subimmted for audit. 1 This dimension attempts to capture the accuracy of forecasts of the revenue structure and the ability of the government to collect the amounts of each category of revenues as intended. It includes actual revenue by category compared to the originally approved budget using level three [3 digits] of GFS 2014 classification or a classification that can produce consistent documentation according to comparable hierarchical levels and coverage. 2 of 26 C. Detailed status of Disbursement Linked Results (DLRs) achievement and agreed next steps DLI 1 - Use of improved fiscal projections for budget-making 6. DLR 1.1 fully achieved. The Macroeconomic Wing (MEW) has finalized the macroeconomic model requirements after consultation workshops with the relevant stakeholders. Subsequently, the draft macroeconomic model requirement was finalized by the Finance Division. A 10-day long virtual training was provided to the MEW officials on the World Bank’s Macro-Fiscal Model (MFMOD) with support from the World Bank’s global macro-modelling team. Prior to that training, a demo country specific MFMOD version was prepared with the help of macroeconomic data previously collected. The MEW is currently working towards procuring the required number of ‘EViews’ license to operate the model. A second phase of the MFMOD training is expected to take place from June 2022. This phase of the training will cover advanced topics on coding with the software EViews. DLR 1.2 and DLR 1.4, which involves preparing and finalizing the model, is expected to be completed in FY22. 7. The TDM Wing has published a debt bulletin (DLR 1.3) incorporating updated debt data from the domestic and external sectors. The bulletin also includes the latest borrowing information from the government and the policy updates related to debt management. It is expected that the debt bulletin will be published on a quarterly basis from now on. The TDM Wing is currently preparing the first draft of the Medium-Term Debt Strategy (MTDS). A joint World Bank-IMF TA mission provided support to the TDMW earlier in July 2021. The MTDS is expected to be completed by June 2022. Following the completion of the MTDS, preparation of a Debt Sustainability Analysis (DSA) will start with aim of completion by December 22. 8. Another activity in the PFM action plan involves improving the maintenance of debt data through the Debt Management and Financial Analysis System (DMFAS). It has been recognized as a priority by the TDM Wing. Previously, United Nations Conference on Trade and Development (UNCTAD) installed the DMFAS system in ERD and BB and enhancements were done to include the sub-lending to State-owned Enterprises (SOEs). UNCTAD officials planned mission to support the DMFAS installation and integration was postponed due to COVID-19. A virtual meeting is being considered. Table 1: Progress and next steps for DLI 1 DLI 1: Use of improved fiscal projections for budget-making DLR Current Status Action Plan to be achieved within the next six months FY2018/19 Fully achieved. The Fully achieved. - DLR1.1: The Macro- macroeconomic model Economic model requirements have been approved requirements finalized by the MoF. ($2mil) FY2019/20 The full dataset of macroeconomic Complete all the necessary March 2022 DLR 1.2: The software variables for the real, monetary, procurements. application to operationalize external, and fiscal sectors has been the Macro-Economic Model completed. A training has been has been procured and conducted on the use of World configured with relevant data Bank’s Macro-Fiscal Model ($2mil) (MFMOD). The procurement of the software is ongoing. FY2019/20 Partially achieved. The debt Finalize the MTDS document. September 2022 DLR 1.3: An updated bulleting has been published. medium-term debt strategy Preparation of MTDS is ongoing. Capacity building workshop in (including a Debt Bulletin and the DSA. DSA) have been developed ($2mil) FY2020/21 A training has been conducted on Second round of the training is September 2022 DLR 1.4: The Macro- the World Bank’s Macro-Fiscal planned for June 2022. After the Economic Model has been Model (MFMod). An initial model model will be completed and completed, including the adopted. 3 of 26 integration of updated has been prepared in this regard databases ($2mil) using the current macro data. FY2021/22 Not yet started due to its December 2022 DLR 1.5: Projections from dependency on DLR 1.5. the upgraded Macro- Economic Model have been used for MTMF and budget preparation ($2mil) DLI 2 - Improved budget alignment with development strategy and gender, social, and climate considerations through better performance of BMCs 9. Progress needs to be accelerated: The Budget Management Committees (BMCs) and Budget Working Groups (BWG) ToRs were approved in June 2021. A validation workshop on a Peer Review Guideline (including a Performance Scorecard) took place on December 2, 2022. The performance scorecard was thereafter submitted to Sr. Secretary of Finance Division for approval. However, the approval and independent verification of the Performance Scorecard for BMCs is still lagging. This negatively affects the achievement of DLRs 2.2 and 2.4, which depend on the approval of the Performance Scorecard and conduct of the inter-ministerial peer reviews. Current shortcomings on low budget out-turns that are coming from preliminary PEFA 2022 findings could be attributed to some extent to weak capacity of BMCs. Hence, the need to quickly improve BMCS performance so that budgets can be better aligned with development strategy and fully executed. Capacity building is needed to further strengthen the BMCs and BWGs to effectively coordinate line ministries budget practices for the development and operating budget including gender and climate aspects as well as to monitor performance. Accordingly, a draft Training Strategy and Annual Training Plan 2020-2023 has been prepared for capacity development of the Finance Division and Line Ministry officials. 10. Administrative data from the budget speech 2021-22 show that actual spending on ‘social sectors’ is still low at 27.5 percent for FY 2019/20 to enable the achievement of the expected end Program target of 29.25 percent. Sector allocation for social infrastructure for the medium-term is also below the expected target. The mission team recommended again that the PIT in the Budget Wing collate the data on social sector spending as percentage of total public expenditure for DLRs 2.3 and 2.5. 11. The government produces separate documents related to climate and gender. For climate, there is a methodology to capture the climate expenditure for 25 relevant ministries. The gender budget so far covers three main areas: empowering women and enhancing their social dignity, improving women's productivity and participation in the labor market, and widening women's effective access to public sector services and income-generating activities. 12. Climate expenditure. The cumulative budget allocation of the twenty-five Ministries/Divisions selected for tracking climate change expenditures accounts for 57.33 percent of the total national budget of FY2021-22 2 - Figure 2. Out of this total allocation 7.26 percent is climate relevant. For these Ministries/Divisions, the total climate change relevant allocation in FY2021-22 has increased by 9.53 percent which is Tk. 2,185.53 crore compared to revised climate allocation and 4.36 percent in original climate allocation of FY2020-21. However, in terms of the percentage of total budget, the climate relevant allocation for FY2020-21 has declined to 7.26 percent as compared to FY2019-20. Actual expenditure against climate relevant allocation was 81.25 percent in FY2017-18 while in FY2019-20 it declined to 78.91 percent. The data on actual expenditure for whole year are yet to be finalized for FY2021-22. 2 Ministry of Environment, Forest and Climate Change; Ministry of Water Resources; Ministry of Agriculture; Ministry of Fisheries and Livestock; Ministry of Disaster Management and Relief; Rural Development and Cooperatives Division; Ministry of Housing and Public Works; Ministry of Women and Children Affairs; Energy and Mineral Resources Division; Local Government Division; Ministry of Chittagong Hill Tracts Affairs; Ministry of Primary and Mass Education; Ministry of Land; Ministry of Industries; Health Services Division; Power Division; Ministry of Food; Secondary and Higher Education Division; Ministry of Social Welfare; Road Transport and Highways Division; Ministry of Shipping; Ministry of Defence; Ministry of Textile and Jute; Ministry of Science and Technology; and Technical and Madrasa Education Division. 4 of 26 Figure 2: Climate Relevant Allocation and Expenditure in Selected Ministry/Division Budgets Table 2: Progress and next steps for DLI 2 DLI 2: Improved budget alignment with development strategy and gender, social, and climate considerations through better performance of Budget Management Committees DLR Current Status Action Plan to be achieved within the next six months FY2018/19 ToRs of BMCs and BWGs Performance Scorecard for BWG February 2022 DLR 2.1: A monitoring framework approved and GO issued in and BMC and Training (including a performance scorecard) for June 2021. Scorecard to be approved GO the BMCs has been drafted, consulted on, issued. and issued ($3mil) Peer-review Guideline (include a performance score card for BMCs) has been drafted, consulted, but not yet issued. Training Strategy have been prepared. FY2019/20 Not yet started due to Peer review committees of 10 September 2022 DLR: 2.2: 15% of BMCs have undertaken dependency on DLR 2.1 ministries to be formed. inter-ministerial peer-reviews in Orientation workshops with the accordance with the protocols established 15% ministries have been selected 10 ministries to be pursuant to the monitoring framework identified. organized. development under DLR 2.1 ($3mil). The peer review guideline should be approved by March 2022. So, by June 2022, it is possible to have 15% of BMC that have undertaken inter- ministerial peer-reviews for DLR 2.2. to be achieved by September 30, 2022. FY2019/20 Most recent available public Allocation for the medium-term September 2022 DLR 2.3: The Recipient’s expenditure on data for FY2018-19 show will need to be increased to Social Sectors has increased to 29% of total 25.3 percent spending on achieve the target of 29% actual actual public expenditure (in the relevant social infrastructure that is spending on Social Sectors fiscal year in which the DLR is being within the boundary of the compared to total actual public assessed) 29% ($3mil). Financing Agreement expenditure. definition of social sector. Since different MDAs Data on actual spending for contribute to social sector, the FY2019-20 is 24.3 percent. Budget Speech needs to incorporate the comprehensive list from a functional perspective so that execution reports can be consistent with the Budget Speech. 5 of 26 FY2020/21 Not yet started due to - DLR 2.4: The average performance score dependency on DLR 2.1. of BMCs evaluated through inter- ministerial peer-reviews has improved by at least 25% ($2.5mil). FY2021/22 Not yet due. The definition, baseline and - DLR 2.5: The Recipient’s expenditure on targets for social sector Social Sectors has increased to 29.25% of spending will be reviewed by total actual public expenditure (in the using standardized relevant Fiscal year in which the DLR is classification (GoB health, being assessed) ($2.5mil). education and social safety budget sectors, or classification of functions of government (COFOG 707, 709 and 710)). DLI 3 - Reduced number of days for DDOs to receive budget in selected MDAs 13. DLR 3.1 has been achieved. The Finance Division has drafted and issued circulars mandating the de- linkage of budget release from fund utilization report submission. 14. DLR 3.2 On track: Although DDOs are supposed to receive their budget online (through iBAS++) immediately after the budget is approved by Parliament, there are still significant delays as shown in Figure 3. As of July 2021, budget release was 56.97 percent and increased to 67.89 percent as of December 2021. Due to lack of awareness, DDOs continue to await the Government Order which details the amount allocated for their office. The mission team informed the PIT that the DLR 3.2 could be fully achieved with a structured monitoring by the Budget Wing while tracking the distribution information in iBAS++ on a weekly/daily basis and enforcing timely budget distribution by line ministry directorates to the lowest level DDOs. Figure 3: Budget Distribution and Release Status for FY2021/22 Table 3: Progress and next steps for DLI 3 DLI 3: Reduced number of days for DDOs to receive budget in selected MDAs - (education, health, roads, public works & local government) DLR Current Status Action Plan to be achieved within the next six months FY2018/19 DLR Achieved. Verification done and - - DLR 3.1: The Finance disbursement processed. A circular was Division has drafted and issued on 12 April 2020 to ease the fund issued a circular release process for 4th tranche of the mandating the de-linkage ‘grant in aid’ given to autonomous bodies of Budget Releases from and private institutions under Operating Fund Utilization Report Budget. submission ($3mil) FY2020/21 DLR partially achieved. Verification Design the iBAS++ monitoring July 2022 DLR 3.2: 80% of DDOs done and disbursement for partial report on budget release status have had their budget achievement has been made for 53.92 by sector and disaggregated released and distributed released by July 31, 2020 for FY2020/21. line-directors/DDOs. by July 31 (of the relevant As of July 2021, budget release was 56.97 6 of 26 Fiscal year in which the percent and increased to 67.89 percent as Conduct awareness and hands- DLR is being assessed) of December 2021. on training for the line- ($3mil) directorates on budget distribution/release reiterate that budget utilization report is not a mandatory requirement for budget release. DLI 4 - Timely and reliable payments of salaries and vendor invoices with a strengthened TSA and automated payment system 15. DLR 4.1: Initial stock-take of 454,823 government bank accounts. The mission noted that the Treasury and Debt Management Wing and Controller General of Accounts (CGA) officials have used the Bangladesh Bank data on Scheduled Bank Statistics: Deposits Distributed by Sectors and Types (All Banks3) as reference point to collate data on bank deposits of the government sector as shown in Table 7. The PIT has developed a bank account portal that will be used to compile the comprehensive stock-take of government bank accounts and balances including extra-budgetary funds and donor-funded projects by June 2022. 16. DLR 4.2: 50% of government payment transactions are made through EFT ($3mil). There has been limited progress in paying vendors through EFT. Figure 4 shows that EFT is done mainly for pay bill and pension with vendor payments at only 2 percent. Urgent steps are needed for DDO online bill submission to include vendor invoices and this effort should focus on the "Selected MDAs" under the Program – i.e., Finance Division and ministries responsible for primary education, secondary education, health, roads, public works, and local government. Figure 4: EFT analysis as of December 2021 Table 4: Progress and next steps for DLI 4 DLI 4: Timely, reliable payments of salaries and vendor invoices with strengthened treasury single account and automated payment system DLR Current Status Action Plan to be achieved within the next six months FY2018/19 Initial data on bank deposits of Report from the bank account June 2022 DLR 4.1: A stock-take of special government sector collected portal on comprehensive stock- accounts (including an assessment revealed 454,823 bank accounts. take of government bank of the number of special accounts accounts and balances including opened per year in prior years), The mission noted that DDOs extra-budgetary funds and EBFs and [EBCG] (outside the including those in SPFMS donor-funded projects by June TSA) has been completed ($2mil). maintain bank accounts for 2022. impress and recommended closure of such accounts. FY2019/20 DLR partially achieved. EFT Vendor invoices to be paid by December 2022 DLR 4.2: 50% of government done mainly for pay bill and EFT. payment transactions (in the pension relevant Fiscal year in which the DLR is being assessed) are made through EFT ($3mil). FY2020/21 21,000 of the 36,000 DDOs are DDO online bill submission to December 2022 DLR 4.3: 40% of DDOs submit all submitting staff pay bill online. include vendor invoices. bills (payment requests) online (in The task for developing a full- Implement Procure-to-Pay (P2P) the relevant Fiscal year in which the fledged DDO with provision for through integration with eGP to DLR is being assessed) ($2mil). support end-to-end digitalization 3 https://www.bb.org.bd/pub/quaterly/schbanksta/jul_sep_19/index.php 7 of 26 submitting all types of bills online of vendor transactions – See is on-going. Figure 2 on page 17 of June 2021 aide memoire. FY2021/22 Dependent on DLR 4.1 - - DLR4.4: The number of new special accounts (outside the TSA) opened (in the relevant Fiscal year in which the DLR is being assessed) has been reduced by 50% ($2mil). DLI 5 - Improved pension service (disaggregated by gender) through facilitation of payments through EFT no later than the following pension payment cycle after retirement. 17. On track. Out of five, four DLRs have been fully achieved and the remaining one made good progress so far. Disbursements has been made for the achievement of 90 percent DLRs. The CAO-Pension and Fund Management (CAO-P&FM) office have been made fully operational. Civil, Defence and Railway pay-points are paying a total of pensioners through EFT – Figure 6. Currently 316,000 number of pensioners are at CAFO-P&FM and rest are being paid through respective pay-points. 172,212 defence circle pensioners are being paid from the Office of Chief Controller of Defence Finance (CCDF), Pension and Fund Management. Bangladesh Telecommunications Company Limited (BTCL) pensioners have also been brought under EFT coverage. The scheme has drafted an Operational Manual of Pension Management for pay-point user which is under review and will be finalized very soon. Face detection-based Life Verification App is at piloting phase with more than 100 pay-points using this App for checking accuracy and performance. 18. A centralized pension office was established in 2018 and significant step towards streamlining pension processing have been initiated. An automated pension module has been developed and embedded in the iBAS++ system for all types of pensioners (Existing, Family, and Unregistered). Pensioners are smoothly receiving monthly bills and a system generated SMS to know about actual payment. CAFO- P&FM has launched a very useful website that includes all necessary information of the pensioner – Figure 5. A pensioner can easily access the website and check accuracy of their payment through Pension Calculator. Pension related updates or general information are also shared through SMS and publication in the newspaper. Figure 5: Pension and Fund Management System Website GPF module has also been made operational. Subsidiary Ledger of Officer and Staff have been created in iBAS++ and as soon as an employee (Officer or Staff) is enrolled in iBAS++ system and opens a GPF Account, his (her) subsidiary ledger is being created automatically in the system. Opening balance of 163,326 number of Officer (96.03%) and 768,785 number of Staff (95.69%) have been reviewed and approved. System generated 10-digit GPF account number are available for Officer and Staff. Options have been created for online account opening and online change of nominee. Option has also been created for automatic calculation of final payment and issuance of final payment authority. Control ledger at central level (CAFO/ Pension and Fund Management), pay point level (pay-point wise) are done. GPF Module has also been introduced for CGDF and Bangladesh Railway. Revised (slab-based) profit calculation mechanism is introduced from FY2021-22. Introduced sub-ledger debit mechanism (revised GPF Token Entry) in the case of deceased employee. GPF Operation Manual for pay-point user is in progress. The 8 of 26 mission advised that, like the cumulative balance shown on the GPF Summary Slip (GPF Accounts Slip), for consistency, the GPF Statement and Subsidiary Ledger reports should be improved to also show the cumulative balance along with unauthorized deposit (if any). The updated report will be used for the purpose of verification. 19. There is an active help desk to support pensioner in any pension related issues . A web-based grievance and redressal system (www.cafop&fm.gov.bd) is in place as part of streamlining pension processing. The office of CAFO-P&FM is authorized to monitor and resolve complaints and provide feedback to stakeholders. Pensioners, GPF accounts holders and other stakeholders had lodged some complaints through this new website and CAFO-P&FM were efficient enough to verify and resolve all those issues. Evidence regarding the issues that was resolved by CAFO-P&FM have been submitted to the OCAG for authentication. To raise awareness on new streamlined and expedited pension processing procedures, several outreach programs were planned that included pension week across the country and communication through electronic and social media. This activity however lagged due to COVID-19 pandemic. 20. Maintaining the on-going momentum will be critical to sustain the impressive progress related pension reform: To further accelerate pension reform as well as facilitate DLI achievements, the mission recommended the following: (i) As the service delivery has been improved through implementation of several DLIs and GoB’s own pension reform plan, it would be good to introduce “Pensioner satisfaction survey� in the country. The aim of the survey would be to identify pensioner satisfaction with the services received, identify gaps, and areas for improvement. Some issues related to pension GoB’s payment have been reported by field offices which require further follow up and investigation. (ii) 69.40% pension back log cases have been resolved. Total 744 cases were identified as backlog. Among them, 693 cases communicated to concerned Line Ministries and 51 cases to CGA in October 2020 through Finance Division. Latest status (up to January 2022) shows that 516 of those cases have been resolved. Study (Survey) on 450 Pension cases under 37 Ministries is completed to understand the Cause and Stages of backlog. (iii) It is good that the team has prepared a zero draft of pension manual with guiding principle of pension service process. However, the manual needs to be further reviewed and finalized. A stakeholder consultation needs to be arranged before finalization. (iv) Communication strategy for pension service is also very crucial to finalize. Bank has already given necessary feedback on the strategy. It is recommended to formally launch the strategy and combine the launching with “pension day/week�. Going forward, pension week can be organized as a part of communication strategy every year where pensioners’ feedback can be received. (v) It was good to note that ERD has started supporting the pension management process, there is a bookmark in ERD website with details of essential documents, pensioner list, welfare officer and rules for the pensioner. The same process can be followed by the other MDAs’. (vi) Enforcing pension rules and government orders issued by the Regulation Wing of the FD to simplify procedures for pension processing and payment (especially for family pensions) is important and needed immediate implementation. (vii) Make a complete list of the recent progress. The list should be able to relate (baseline) the previous cumbersome process and existing simplified automated system resulted by undertaking priority reforms. 21. Gender disaggregated pension data is provided in Figure 6 below. 9 of 26 Figure 6: Gender Disaggregated Pension Data All Pensioners (Civil, Defence and Railway) Description Total Male (M) Female (F) Ratio (M:F) EFT Coverage Pensioners 777,260 461,683 315,577 59:41 Fresh Pensioners (From September 2019) Description Total Male (M) Female (F) Ratio (M:F) Fresh Pensioners 56,946 43,000 13,946 76:24 Backlog Pensioners Description Total Male Female Ratio (M:F) Total backlog pensioners 744 604 140 81:19 In pension roll now 516 (69 %) 416 (69 %) 100 (72%) 81:19 Not yet in pension roll 228 (31%) 188 (31%) 40 (28%) 82:18 Table 5: Progress and next steps for DLI 5 DLI 5: Improved pension service through the EFT no later than the following pension payment cycle after retirement DLR Current Status Action Plan to be achieved within the next six months FY2018/19 DLR Fully achieved. The Pension To raise awareness on new streamline April 2022 DLR 5.1: The GP Service and GPF Module of iBAS++ and expedited pension processing Fund Module have been implemented and is procedures, several outreach programs ($1.5mil) and the operational. Disbursement for full are planned to include the use of Pension Service achievement has been made. communication tools such as electronic Module of iBAS++ and social media. have been implemented and An educational film/video will be are operational prepared explaining the pension ($1.5mil) payment process. Like the cumulative balance shown on the GPF Summary Slip, for consistency, the GPF Statement and Subsidiary Ledger reports should be improved to also show the cumulative balance. The updated report will be used for the purpose of verification. FY2019/20 DLR fully achieved. Disbursement DLR 5.2: A for partial achievement has been centralized pension made. Verification for the next roll with EFT disbursement is in process. payment capability A central pension office titled Chief has been Accounts and Finance Office Gradually rest of the pensioner June 2022 established and is Pension and Fund Management (264,398) will be brought under the operational (CAFO P&FM) was established in supervision of CADO-F&FM. The ($2mil) October 2018, within the Office of target is to complete this process for the Controller General Accounts 70,000 pensioners initially. This centralized pension roll has been maintaining a comprehensive CAFO P&FM to provide gender March 2022 pension database, with a direct link disaggregation of pensioners on EFT. with payroll and employee records. As a result of years of hard work of Pension Reform and Management Team, the GoB succeeded to provide pensioners improved service through 100 percent Electronic Funds Transfer EFT) and make many impressive policy and operational reforms. Using NID, electronic Pension Payment Order (ePPO) has been made fully operational FY2020/21 Deduction of GPF Subscription and Subsidiary ledger and control ledger June 2022 DLR 5.3: A Loan Repayment are linked with have been embedded in the iBAS++ government wide Budget Execution Module. system. Pension service and GPF annual GPF and 10 of 26 Pension Service reports will be produced and submitted report has been for OCAG verification. produced (covering March 2022 the relevant Fiscal CAFO P&FM to provide gender year in which the disaggregation of GPF holders. DLR is being assessed) ($1mil) FY2020/21 DLR Achieved. Verification is Establish a baseline by comparing the June 2022 DLR 5.4: The under process employee and pensioners databases and number of cases of 69.40% pension back log cases have looking for employees that despite delayed pension been resolved. List of Backlog reaching retirement age in last four payments is Pensioners was determined using the years do not appear in the pensioners reduced by 50% Employee database and the Pension database. Thus, the number of delayed ($2mil) data base of iBAS++. Each back log pension cases will be calculated. Pension case was verified by phone Determine the service standard and call and final list was produced. communicate same to pensioners. Request Letters to concerned administrative ministries to take initiatives have been issued by Finance Division. FY2021/22 DLR Achieved. Verification done Face detection-based Life Verification June 2022 DLR 5.5: 90% of and disbursement processed. App is now under piloting Phase- More new pensioners Since September 1, 2019, all the new than 100 Pay-points are using this App paid through EFT pensioners have been linked to the for checking accuracy and performance no later than the employee/payroll database and their Live verification system through pension payment monthly pension and allowances are mobile application will be made cycle following paid through EFT from the first operational. retirement ($2mil) month of retirement. CAFO P&FM to provide gender disaggregation of new EFT pensioners. March 2022 DLI 6 - SOE and autonomous bodies’ debt and contingent liabilities statement prepared and submitted to policymakers 22. DLR6.1 is on-track. The Procedure to Regulate the Debt and Contingent Liabilities of State-owned enterprises (SOEs) and Autonomous Bodies (ABs) has been approved by Senior secretary, FD on December 28, 2021 and Government Order (GO) in this regard was issued on December 30, 2021. The booklet of The Procedure to Regulate the Debt and Contingent Liabilities (DCL) of State-owned Enterprises and Autonomous Bodies has been published. The Procedure includes a set of Reporting Templates to collect data on debt and contingent liabilities as well as other financial and non-financial information of SOEs and ABs. The policy and procedures document includes the roles and responsibilities of each stakeholder (SOEs, ABs and line ministries to be involved), procedures for collecting debt and contingent liabilities related data. Stakeholder awareness-building activities for the DCL procedures are scheduled for mid- February 2022. 23. DLR6.2 is showing good progress. 27 SOE/ABs published their audited financial statements for FY2019/20 on their respective websites and none was published on the MoF’s website within the stipulated timeframe of 2 months after completion of the audit. As at the time of the mission, SOE-MC had complied audited financial statements of 92 SOEs/ABs for FY2019/20 on the MoF website. Nonetheless, DLR6.2 has not been achieved because the publication was not done within 2 months of completion of the audit. The mission noted that the IVA concluded that the DLR has not been achieved due to the untimely publication of the audited financial statements. As a legal reference point, Bangladesh Companies Act requires an Annual General Meeting (AGM) with 6 months of year-end and approval of audited financial statements is one of the main agenda. Also, consistent with good practice, the Bangladesh Companies Act requires notice of AGM to be issues at least 21 days before AGM, which means, audited financial statements should be ready before December 9 each year for fiscal years ending June 30. The mission recommended to adjust the verification protocol as follows: “to achieve this DLR, 100 SOEs will need to have their financial statements audited no later than six months after the end of financial year and published on the Ministry of Finance’s website and SOEs’ website no later than eight months after the end financial year�. 11 of 26 24. With the current baseline of 47, the minimum threshold to meet this indictor to fulfill disbursement is for 63 SOEs’ audited financial statements to be published on MoF’s website. However, in reviewing the baseline, it was observed that the reference to 47 relates to approved budgets and utilization reports and not published audited financial statements which means the baseline should be zero and minimum threshold to fulfill disbursement will be 30. If the baseline is reset at zero, then the new minimum threshold of 30 will be surpassed to fulfill disbursement for FY2020/21. Table 6: Progress and next steps for DLI 6 DLI 6 – SOE and autonomous bodies fiscal risk assessed, and their debt and contingent liabilities statement prepared and submitted to the policy makers DLR Current Status Action Plan to be achieved within the next six months FY2018/19 DLR fully achieved. SOE-MC will proceed to submit the February 2022 DLR 6.1: Policy and procedures Policy and procedure to regulate DCL procedure to IVA for the to regulate SOEs’ debt and State Owned Enterprises’ (SOE) verification of DLR. contingent liabilities (including debt and contingent liabilities of an upgraded framework for SOEs and ABs was approved on DCL procedures awareness building reporting by SOEs to the 30 January 2022. workshop to be conducted. Finance Division) have been drafted and issued by MoF ($2mi) FY2019/20 Progress but DRL not achieved. All SOEs are required to prepare their February 2022 DLR 6.2: 100 SOEs and IVA verified that only 27 SOEs audited financial statements in line with autonomous bodies have uploaded their audited financial applicable accounting standards (IFRS/ published their audited statements for FY2019/20 on IAS/BAS). All SOEs are required to financial statements (covering their respective websites within 2 complete audit of their financial the relevant Fiscal year for months from completion of audit statements within 6 months of the end of which the DLR is being but none published on MoF each fiscal year and upload on their assessed) ($2mil) website within the stipulated. respective websites for SOE-MC to compile on MoF’s website within 2 months from completion of audit. As at time of the mission, 46 The Bangladesh Securities and Exchange March 2022 SOEs have uploaded audited Commission (BSEC) requires that financial statements for financial statements of listed companies FY2020/21 on their respective (companies listed to stock exchanges) websites. If the baseline is reset shall be audited within 120 days and at zero, then the new minimum Annual General Meeting (AGM) of threshold of 30 will be surpassed listed companies shall be held within 06 to fulfill disbursement for months of the end of the concerned FY2020/21. financial year. On the other hand, Section 81 and Section 183 of the Companies Act of Bangladesh suggest that the maximum time limit for holding the AGM of a company is 09 months from the end of the concerned financial year. The directives of BSEC apply to listed companies while the provisions of the Companies Act are applicable to all the companies and all the SOEs are not listed companies. The draft comprehensive Populate database as part of transition to March 2022 database of financial and non- the web-site system. financial data and financial monitoring template to be approved by March 2022. FY2020/21 DLR partially achieved. SOE-MC to prepare a Debt and April 2022 DLR 6.3: SOE debt and A template for the debt and Contingent Liability Statement (DCLS) contingent liabilities statement contingent liabilities statement for the SOEs/ABs using their audited (covering the relevant Fiscal has been prepared. financial statements within nine months year for which the DLR is being Virtual stakeholder workshop of end of each FY. assessed) has been prepared by held on June 28, 2021 to finalize 12 of 26 MoF for all SOEs and submitted the Procedure to Regulate the to policy makers ($3mil) Debt and Contingent Liabilities of State- Owned Enterprises (SOEs)/Autonomous Bodies (ABs). The objectives of the Procedure are to: (i) monitor the debt and contingent liabilities of SOEs/ABs; (ii) provide a framework for effective, timely, and comprehensive consolidated reporting and analysis of the debt and contingent liabilities of SOEs/ABs; and (iii) strengthen fiscal discipline for better management of public money and preparedness for any associated fiscal risks. DLI 7 - Improved performance of the SOE sector and reduced subsidies as a percentage of total public sector spending 25. On-track. The Independent Performance Evaluation Guideline (IPEG) was approved, and the DLR achievement was verified. All members of the Independent Performance Evaluation Committee (IPEC) have been appointed and the first meeting was held during which the Director General of the SOE MC was selected as the Committee’s chairperson. The Bank team recommended that the IPEC chairperson should not be a board member of any of the nine SOEs and one AB that have been selected for the independent performance evaluation. The inception report for the independent evaluation is at an advanced stage and the launch workshop has been scheduled for late February 2022, pending COVID-19 constraints. For DLR 7.5 data has been collected for the establishment of a baseline to reduce the ratio of SOE transfers to total public spending by 15% by FY22, however, there are indications that it will be difficult to reduce transfers to SOEs as they will be needing more funds because of cash constraints arising from the economic effects of COVID-19. Preparation of the grants manual is underway. 26. There is increased recognition of improved corporate governance standards, and practices and a sense of urgency to strengthen the performance of SOEs to ensure their sustainability and mitigate mounting fiscal risks. To add value to the IPEG, the mission discussed that it is essential that the capacity of SOE leadership, as well as the capacity of policymakers and regulators be strengthened. The mission recommended that the SOE-MC can roll-out the SOE Leadership Toolkit (Figure 7) to add value to the ongoing SOE reforms. The key activities for roll-out of the toolkit will include customization to Bangladesh context; change management and strategic communication; domestification in IPF and possible partnership with other public or private training institutions; training of trainers; training of SOEs/ABs board of directors and executive members by using experiential and adult learning methods; and beneficiary feedback. 13 of 26 Figure 7: Scope and structure of the SOE leadership toolkit Table 7: Progress and next steps for DLI 7 DLI 7 – Improved performance of the SOE sector and reduced subsidies DLR Current Status Action Plan to be achieved within the next six months FY2018/19 DLR achieved. Stakeholder sensitization workshops to be September 2022 DLR 7.1: SOE Independent Performance conducted. Sufficient number SOEs/ABs to performance evaluation Evaluation Guideline (IPEG) that be completed so that five SOEs can be guidelines have been will cover 166 SOEs/ABs approved rewarded and ten SOEs can be selected for developed by the Finance and Government Order issued in turn around strategies. Division, with clear scoring March 2021. criteria ($2mil). Approval of action plan to roll-out of SOE June 2022 Leadership Toolkit. The SOE MC will continue to analyze all the Continuous SOE and ABs under its purview to identify additional entities for the IPE. FY2018/19 DLR partially achieved.  For better understanding of the stakeholders April 30, 2022. DLR 7.2: A policy and The list of 166 SOEs and ABs have and users, the Grants Manual will be prepared procedures manual that been approved. Policy and in Bangla along with a translated version in enables an effective review procedures manual for grant and English of grants to SOEs has been subsidy is under preparation.  Preparation of Draft Manual for effective drafted and issued by the review of Grants by March 2022. Finance Division ($2mil).  Collect feedback from stakeholders by April 2022. FY2019/20 In progress. Populate database to determine list of at May 2022 DLR 7.3: At least 10 SOEs The 10 SOEs have been selected. IPEC least 10 SOEs for first round of independent have undergone an will share the inception report by evaluation. independent performance February 28,2022 evaluation, in accordance IPEC to undertake independent May 2022 with the SOE performance performance evaluation of the 10 selected evaluation guidelines SOEs/ABs. developed under DLR 7.1 ($2mil). FY2020/21 Not yet started due to dependency To start on application of DLR 7.1. - DLR 7.4: Turnaround on DLR 7.3 and IPEC formation to strategies have been apply the IPEG. Adequate number from different sectors developed for at least 10 and ownership type will need to undergo non-performing SOEs the IPEG to determine the non-performing ($2mil) SOEs for turnaround strategies. At least 5 better performing or most improved SOEs will be rewarded. 14 of 26 FY2021/22 Data collected for establishment of Ascertain the baseline (average of FY2016, March 2022. DLR 7.5: The ratio of SOE baseline to reduce the ratio of SOE 2017 and 2018) of total transfer to SOEs. transfers to total public transfers to total public spending by The various types of transafers/ grants to be spending (in the relevant 15% by FY22. Ascertaining the categorized.: bail-out/ financial assistance, Fiscal year in which the comprehensiveness of the raw data service delivery grant, and capital project DLR is being assessed) has collected to match with the 166 grant. been reduced by 15% SOEs that are within the scope of ($3mil) SOE-MC. There are indications that it will be difficult to reduce transfers to SOEs as they will be needing more funds because of cash constraints arising from the economic effects of COVID-19. DLI 8 - Budget holders in selected MDAs effectively and transparently use financial information 27. On track. Out of six, three DLRs have been fully achieved and the remaining three made good progress so far. DLR 8.1 - DLR 8.1 was achieved, and disbursement was made in January/21. The 56- digit Budget & Accounting Classification System (BACS) was used to prepare and release budgets for FY2018-19, 2019-20 and 2020-21. 28. DLR 8.2 - Scaleup of DLR 8.2 by implementing interface with eGP, AMIS, PMAP, EMIS, HMIS. Interfacing with eGP will be critical to achieve end-to-end processing of online bills for vendors. Key benefits of iBAS++/eGP interface include: (i) checking for budget availability at point of requisitioning; (ii) commitment control at point of raising purchase order/contract; (iii) inbuilt validation of invoice/claim against purchase order/contract; (iv) creating obligations at point of receiving goods/services; and (v) cash management at point of making payment with automatic general ledger postings. 29. DLR 8.3 – At present, there is backlog of three years for submission of annual financial statements to the Office of the Comptroller and Auditor General of Bangladesh (OCAG). Civil Audit Directorate conducting audit on Finance Accounts for FY2016-17 and FY2017-18. Some of the causes of late preparation of the financial statements include delay in consolidating returns from embassies, self- accounting entities (especially Railway Department) and from donor-funded projects. New format of Finance Accounts was approved by Honorable President on December 28, 2021. Report on gap analysis of International Public Sector Accounting Standards (IPSAS) cash-basis and proposed new format for Annual Financial Statement was supported by Canada Trust Fund. 30. DLR 8.4 has been achieved with four SAEs using iBAS++ to record transactions. All offices of the following four SAEs are using iBAS++: Public Works Department (PWD), Roads and Highways (RHD), Public Health Engineering Department (PHED) and Forest Department. 31. DLR 8.5 – FD has started publishing budget execution reports on MoF’s official website. However, there is a delay of about 3 months and room to improve the user-friendliness and level of disaggregation in open data consistent with the “Bangladesh Open Government Data Strategy (2016): Data for all�. 32. DLR 8.6: 60% of Budget holders generate 10 or more monthly iBAS++ reports for budget execution decisions – initial progress. There has been 25,266 ‘views’ of the 10 Budget Execution Reports (BERs) see Figure 8. However, to be able to properly assess DLR 8.6, the audit trail (system log) report should include a column for the number of DDOs uniquely viewing each of the 10 reports to calculate the percentage of Budget Holders (DDOs) generating the reports based on total number of DDOs as at the time of assessment. The mission advised that dynamic budget vs actual by the various BACS dimensions should be designed instead of each time going to the system developers to extract reports. 15 of 26 Figure 8: Number of views of the 10 budget execution reports (BER) 33. The International Monetary Fund Government Finance Statistics (IMF-GFS) technical assistance mission conducted February 27 to March 3, 2022 reported that backlog of IMF-GFS reports from FY2016-17 to FY2020-21 have been submitted and accepted by IMF. System Requirement Specifications (SRS) for automation of the IMF-GFS reports (quarterly and annually) have been provided for deployment in iBAS++. The relevant reports will be generated from iBAS++ for submission by the agreed date of June 2022. The mission also drafted an IMF-GFS Handbook, revision policy, and an Economic Code Explanation Handbook incorporating definition, examples, exceptions and legal references has been prepared to facilitate proper recording of transactions. 34. International Standards Organization (ISO) 27001:2013 Information Security Management Services (ISMS) Certification 4. With complementary support from the SPEMP-BETF, PwC provided technical assistance to FD for implementation of the three-track roadmap to secure iBAS++. Seventy (70) information security related documents which includes Guidelines, Procedures, Work instructions and Templates as shown in Figure 9 below delivered to FD. Figure 9. Guidelines, Procedures, Work instructions and Templates 35. Support was provided to FD to implement processes and technical security controls in iBAS++ operations as per the approved guidelines, procedures, work instructions and template. Conducted secure code development training for 20 (twenty) iBAS++ developers; security awareness and good practices; user access management training for 50 (fifty) representatives from Finance Division, CGA, CGDF, ADG, including Team members of iBAS++ participated in this session; and delivered computer- based awareness training materials. PwC completed the source code review of the iBAS++ application and concluded that the quality of the source code with respect to security can be rated as ‘Medium’. Figure 10 below provides a snapshot of the level of implementation of process/documentation, system configuration change, and technology to be procured. 4 ISO 27001:2013 Information Security Management Services (ISMS) Certification. ISMS Certification is based on the core principles of Confidentiality, Integrity and Availability (CIA) of system-based information. The certification process is based on a three-year Certification Cycle in which an audit is done on 114 control areas to assess risk associated with CIA of information. 16 of 26 Figure 10: Level of implementation of required processes and controls 36. ISO 27001 Certification Readiness: With only 30 percent of the overall required processes and controls implemented (Figure 11), iBAS++ is not yet in a state of readiness to invite an accredited ISO 27001 Certifying Authority. Figure 11: iBAS++ ISO 27001 certification readiness status 37. There are significant gaps in iBAS++ functionality (Figure 12) due to ad hoc/piecemeal implementation approach without an overarching conceptual design. Such an approach adversely undermines the comprehensiveness and integrity of financial report. Key missing functionalities are commitment management, fixed asset management, user-defined reports, online bill submission for direct payment to vendors and seamless integration between payroll and human resource management system. 17 of 26 Figure 12: Snapshot of current capability of iBAS++ 38. During the proposed extension period, if requested, technical assistance can be provided for FD to follow proper implementation of Structured Systems Analysis and Design Method (SSADM) throughout the System Development Lifecycle (SDLC). Agile Project Management will be used to stabilize and/or operationalize functions in phase 1 (basic) and phase 2 (intermediary) of the full-fledged IFMIS implementation strategy (Figure 13) for GoB to achieve the targeted future state (Figure 14). Figure 15 provides an indicative high-level work schedule. Figure 13: Towards full-fledged IFMIS Implementation Strategy 18 of 26 Figure 14: Target Future State of iBAS++: A full-fledged IFMIS Figure 15: Indicative high-level work schedule Table 8: Progress and next steps for DLI 8 DLI 8: Budget holders in MDAs effectively and transparently use financial information DLR Current Status Action Plan to be achieved within the next six months FY2018/19 DLR achieved, verification done by Need to monitor that budget is Continuous DLR 8.1: The OCAG and disbursement processed in released consistently by July 31 FY2018/2019 budget (or, if January 2021. of each year. the DLR is rolled over, the Budget of FY2018-19, 2019-20 and budget for the relevant 2020-21 released using new BACS. The 19 of 26 Fiscal year for which the option in the accounting tab named DLR is being assessed) has “DDO Budget release status� shows that been released on the budget had been released through Recipient’s new BACS iBAS++ in DDO’s end. ($2mil) FY20219/20 DLR partially achieved. Improve the interface with NBR September 2022 DLR 8.2: 3 priority iBAS++ Interfaces completed with: for use in importing data related interfaces have been 1) Bangladesh Bank to revenue receipts of the implemented and are 2) Sonali Bank government. Also establish operational5 ($2mil) 3) MoPA interface to improve Revenue 4) Social SafetyNet Accounting at the Taxpayer level by facilitating reconciliation Work is ongoing to interface with between VAT returns and NID/TIN databases collections recorded in the Integrated VAT Administration System (IVAS). A technical report on eGP interface with As part of the priority iBAS++ December 2022 brief System Requirements Specification interfaces defined in the (SRS) has been prepared and several Financing Agreement, focus on meetings have been arranged between implementation of the eGP iBAS++ and eGP (CPTU). interface; improve the BB interface to be at the level of RTGS/ACH interfaces. Also, with regards to the service delivery dimension of the Program, make plans for iBAS++ to interface with Education Management Information System (EMIS); and the Health Management Information System (HMIS). FY2019/20 At present, there is backlog of three years Improve the timeliness of December 2022 DLR 8.3: Government-wide for submission of annual financial submission of annual unaudited annual financial statements to the Office of the government-wide financial statements, including annual Comptroller and Auditor General of statements for FY2021/22 to financial statements of SAEs Bangladesh (OCAG). Finance Account within six months of the year-end (covering the relevant Fiscal for FY2017/18 was submitted to OCAG and improve thereafter to within year in which the DLR is in November 2021 (i.e., 41 months after three months of each year-end. being assessed), have been the year-end). Civil Audit Directorate submitted to OCAG within conducting audit on Finance Accounts six months of the fiscal year- for FY2016-17 and FY2017-18. end to OCAG within 6 months of the fiscal year-end New format of Finance Accounts was ($2mil) approved by Honorable President on December 28, 2021. FY2020/21 DLR achieved. Roll-out IBAS-PMAP for donor- December 2022 DLR 8.4: 4 SAEs are using Six SAEs use iBAS++ on a real-time funded projects and establish iBAS++ ($2mil) basis with detailed transaction capturing; API with iBAS++ to support these SAEs are Public Works seamless generation of Department; Roads and Highways; comprehensive financial reports. Department of Public Health Engineering; Controller General of Defense Force; Forest Department and Railways. In addition to the SAEs, Bangladesh missions in Abu Dhabi, Dubai, New Delhi, and Singapore are now using iBAS++. 16 autonomous bodies and their 70 projects have been brought under Personal Ledger system (PL) within TSA. 5 At least the social safety net system and Bangladesh Bank/Sonali Bank 20 of 26 FY2020/21 FD has started publishing budget Improve timeliness, user- Continuous DLR 8.5 Detailed budget execution reports on MoF’s official friendliness, and level of execution reports published website. disaggregation. by the Finance Division on https://mof.gov.bd/site/reports/a4cf6d30- MoF’s official website on a 2002-492e-97eb-ba3e42840ab6 To facilitate budget execution quarterly basis, i.e., four decisions and assurance of reports published in the accuracy and comprehensiveness relevant year, (covering the of financial reports, this DLR will relevant Fiscal year in which be assessed against PEFA PI 28 the DLR is being assessed) ‘in-year budget reports’ to meet ($2mil) the following minimum requirements: (i) coverage and classification of data allows direct comparison to the original budget; and (ii) budget execution reports are prepared quarterly and issued within four weeks from the end of each quarter. FY2021/22 There has been 25,266 ‘views’ of the 10 However, to be able to properly September 2022 DLR 8.6: 60% of Budget Budget Execution Reports (BERs) see assess DLR 8.6, the audit trail Holders generate 10 or more Figure 9. (system log) report should monthly iBAS++ reports for include a column for the number budget execution decisions of DDOs uniquely viewing each for the relevant Fiscal year of the 10 reports to calculate the in which the DLR is being percentage of Budget Holders assessed ($2mil) (DDOs) generating the reports based on total number of DDOs as at the time of assessment. DLI 9 - Action taken on internal and external audit reports in selected MDAs and procurement post reviews in Finance Division 39. DLR 9.1 - Getting on-track: Following a two-year lag, there has been a breakthrough to initiate reforms for establishment of internal audit. Internal audit units will be established at departmental-level starting with high-risk and high-spending departments. The departmental internal audit units will report functionally to the Principal Accounting Officer (PAO), who according to section 19(a) of the 2009 Public Moneys and Budget Management Act is responsible “to ensure efficient and transparent financial management and internal control processes at the relevant Ministry or Division or Other Institution�. The internal audit ‘structure’ established at Finance Division, will be responsible for the development of a model internal audit charter, guidelines, risk-based audit manual, quality assurance and continuous training. As part of sensitizing the concerned departments about the objective of DLI 9 and to discuss their preparedness in terms of establishing internal audit units and support needed from MOF for strengthening the internal audit function a virtual workshop was arranged on October 11, 2021 followed by a face-to-face workshop held on December 14, 2021. The MOF has also completed recruitment of three Internal Audit experts who have started working on the preparation of Audit Charter and Risk Based Internal Audit Manual (DLR 9.1 US$1 m). It is expected that the preparation of these documents will be completed by June 2022. During the mission it was agreed that MOF will immediately initiate recruitment of an Audit Firm so that by the time the draft reports are ready, the Audit Firm is fully on board. The engagement of the Audit firm is to ensure quality assurance of the Internal Audit Charter and Audit Manual and to impart training to the Departments. 40. DLR 9.2 aims at establishing a system for annual procurement planning and post-review. It was agreed that post-review of procurement will be conducted at the procurement cell, established in the program office under SPFMS program and entrusted for entire procurement of the program. The post- procurement reviews of the Program will be conducted by the consultants recruited under this scheme. 21 of 26 Table 9: Progress and next steps for DLI 9 DLI 9 – Action taken on audit reports in selected MDAs - (education, health, roads, public works, & local government) and procurement post review in FD DLR Current Status Action Plan to be achieved within the next six months FY2018/19 No progress Approval of the Scheme. July 31, 2021 DLR 9.1: The Model Internal Audit Charter and risk based Finalization and approval of Model internal audit manual have been Internal Audit Charter and Risk Based issued by the Finance Division Internal Audit Manual. (US$ 1 mil). Analysis of different options for recruitment of Internal Auditors and decision on the right mix of expertise and sourcing. Meeting with all the selected MDAs sensitizing them on the formation of Internal Audit Units. FY2018/19 The Procurement Specialist has Post-review of procurement will be Continuous DLR 9.2: A System for annual been advising PITs on the conducted at the Procurement Cell, procurement planning and post- procurement plans and tender established in the Program office under review has been established by documents SPFMS program. the Finance Division and training on the system has been The first post-procurement review for conducted in FD (US$ 1mil). the Program will be submitted by March 31, 2022. FY2019/20 No Progress as this DLR is To be DLR 9.3: Internal Audit dependent on completion of determined reports prepared in accordance DLR 9.1 with the Model Internal Charter and the Risk-based Internal Audit Manual issued to the heads of the Departments and principal accounting officers of any two departments in any of the Selected MDAs (US$ 1.5mil). FY2020/21 No Progress To be DLR 9.4: The relevant Audit determined Committees resolve 50% of: (i) audit recommendations for each of the Selected MDAs 6 , other than the Finance Division and (ii) audit recommendations and procurement post-reviews in Finance Division, based on the stock of total audit recommendations and procurement post-reviews, as applicable, pending for each of the relevant Selected MDAs and the Finance Division respectively, at the beginning of the relevant Fiscal year in which the DLR is being assessed (US$ 3.5mil). DLI 10 - PFM Action Plan implementation is effectively led through an adequate governance structure and an effective change management approach (on-track) 6 "Selected MDAs" means the Finance Division and the Recipient's ministries responsible for primary education, secondary education, health, roads, public works, and local government. 22 of 26 41. On Track: Component 14 which coordinates all other components of the Program continues to benefit from PECT leadership and advise the PIT on the implementation aspects of the Program, including the change management approaches, recruitment and deployment of ISCs, and approval and implementation review of the demand-driven capacity development interventions under the program. Progress reports produced so far have been of good quality, are shared publicly through the Government website and, give a clear overview of progress and challenges that need attention. Data collection for reporting and monitoring has not been easy and can be further solidified through developing an automated monitoring system. Also, specific attention may be given to implementation lessons (and subsequent course- corrections) in future reporting as well as challenges and suggestions flagged by ISC. Recognizing the challenges and communication gaps being experienced by the PIT, the PECT noted the importance of the ISCs to support and improve the performance of the PITs and facilitate learning. The mission team is pleased that the PECT has completed the training and onboarding of the first cohort of 4 ISCs and completed the recruitment of a second cohort of 6 ISCs in December 2021.The ISC performance evaluation format was developed, refined, and approved in January 2022, with performance evaluations for first cohort of ISCs scheduled for March 2022. This will be an important addition to the Program to strengthen implementation further. 42. The Institute of Public Finance (IPF) needs to make and sustain progress towards becoming a knowledge hub for PFM reforms7. IPF importantly recruited additional staff and developed a high-level draft roadmap for the coming years and committed to support the implementation of the PFM Competency Framework and participate in the PEFA assessment. IPF coordinated a PFM research agenda and has been preparing a call for proposals that is vital in production and quality assurance of the relevant research under DLR 10.3. There have been significant delays with the call for proposal and selection of research projects which will require storing attention to achieve the DLR. It would be good for IPF to play more pro-active roles in preparing the (online) International Conference on PFM reform, where research and experience may be highlighted as well as on specific contributions to the program as foreseen (Box 1), including on sharing of good practice, roll out of the Competency Framework, training, and guidance for coaches/implementation consultants. A project extension would allow IPF more time to grow into this role. Box 1: Overview of key roles of IPF o IPF to rethink and possibly refine its revenue/operating model. During the program leadership will work on a revenue and staffing model that will finance the institution beyond the project lifecycle and will be enough to fulfill its fuller mandate. o As part of learning hub: institutionalize continuous and systematic learning and sharing of good practices. o IPF involvement in coaching: Implementation Support Consultants will be supported in coming together as a team to learn across teams and compare their learning notes. This role will gradually be taken over by IPF. ISCs modalities may be applied in other government programs. o Research coordination/production. The PFM learning hub produces and coordinates research papers on PFM reform lessons and publishes the said reports through its website. o IPF helps prepare an international Conference on PFM reform lessons to be held in Bangladesh o IPF supports the Competency Framework and Training in general. Civil servants get trained (with data disaggregated by gender). IPF will work closely with consultants on the development of a Competency Framework and TNA for PFM in Bangladesh. o Program Specific Training and Lessons. IPF turns relevant materials into training formats for operational learning: example PFM pocketbook to be used for training materials. And prepare suggestions and reports for the SC to overcome (local) implementation challenges in areas that are relevant across all Ministries. o IPF contributes to field inspections and innovation grants as these can be modalities that can also be leveraged potentially by the government for other programs. 7 Workshop on “driving the knowledge agenda through an IPF roadmap, knowledge exchanges and PFM research� held at Royal Tulip Hotel, Cox’s Bazaar (February 8-9, 2019). Reports were discussed on the knowledge exchange trips to India (10-14 January 2018), South Korea (21- 26 January 2018), and China (Feb 25-March 3, 2018). 23 of 26 43. The mission reminds the team of the identified need to integrate communication aspects into the M&E framework of the PITs. While M&E is an essential aspect in the tracking of the attainment of the DLI targets, the ability to communicate the results of the program will significantly deepen support for the program within and across sectors. As a way forward, suggestions include (i) leveraging the Bank’s dialogue platforms with universities and beyond to present the program, its objectives and create a strategic entry point for broader civic participation/engagement; (ii) ensuring that program teams in MoF, OCAG, NBR, Planning Commission and Cabinet Division work collaboratively to capture program results especially those pertaining to behavioral changes and communicate them to internal and external stakeholders. These suggestions no doubt should be enshrined in a communication plan designed for the Program with specific focus on results, impact, and knowledge management. In this regard, 2 new posts of Senior Consultant (change management and M&E) and Consultant (communication strategy) will be created based on terms of reference agreed with the Bank. 44. The mission team discussed the need for further alignment between the CIPFA consultant and IPF, followed by an implementation workshop that (a) reviews the PFM Competency Framework; and (b) discusses next steps for implementation for which IPF has committed to take an active role in supporting the further implementation in alignment with PECT8. 45. Specialized PFM related courses (DLR 10.6). The main courses offered by IPF are: the flagship Fiscal Economics and Economic Management (FEEM 9 ); Budget Management Specialist (BMS); Advanced Budget Management (ABM); and Introduction to Budget Management (IBM). To further expand knowledge and leverage on technology, the mission advised to consider participation in the e-learning courses offered by the International Consortium on Government Financial Management (ICGFM) in partnership with PFM Training Limited10. The Foundation Course (ICGFM Foundation Introduction) is a self-contained course that covers all of the basics of PFM. The ICGFM Diploma in Public Financial Management (DipPFM - ICGFM Diploma Fiscal Framework section) comprehensively covers all aspects of international government financial management. It addresses many of the issues and problems referred to in the foundation course and provides a comprehensive coverage of all areas of PFM. Key features of the course are self-paced e-learning; extensive online study material and video lessons; case studies reinforce learning; continuous assessment through online objective tests; and course completion certificate issued by ICGFM. With the four main courses offered by IPF on a full-time in-class basis, adoption of the e-learning module will provide opportunity to extend knowledge to a critical mass of the PFM practitioners within a short time, economically and efficiently. FD can consider making the ICGFM foundation course a mandatory requirement for enrolment to FEEM. Table 10: Progress and next steps for DLI 10 DLI 10 – PFM program is effectively led through an adequate governance structure and an effective change management app roach DLR Current Status Action Plan to be achieved within the next six months FY2018/19 DLR Partially achieved. Conduct verification. Continuous DLR 10.1: Two PFM Action Plan progress reports PECT prepared and published two Automation of annual work plan process (prepared on a semi-annual PFM Action Plan Semi-annual to ensure effective monitoring of the basis in a Fiscal year) have progress report. implementation progress. been submitted by the PECT to the Steering Committee So far four progress reports ($2mil). have been prepared and approved by the Steering Committee. FY2019/20 DLR Partially achieved. Conduct verification. June 2022 8 The PFM Competency Framework consists of a set of Behaviours, Skills, Knowledge and Attitudes (BSKAs). It will will be applied at the following three levels of PFM staff: (i) Level 1 front-line staff, dealing with the interface between service delivery and PFM; (ii) Level 2 staff represent the broad group of specialists and middle managers who constitute the interface between front-line staff and senior officials; and Level 3 staff are the highest decision-makers in PFM. 9 IPF holds FEEM twice/thrice a year, usually each batch accommodates 25 participants usually conducted within duration of ten weeks as a full-time non-residential training course. 10 https://pfmtraining.com 24 of 26 DLR 10.2: Two PFM Action The first stakeholder retreat was Arrange for the 2nd PFM Action Plan Plan stakeholder retreats held on 23-25th January 2020 at stakeholder consultation. conducted to review the Habiganj, where all institutions respective semi-annual PFM have actively participated to Action Plan progress reports share their progress according to prepared under DLR 10.1 in a the activities mentioned in the Fiscal year ($2mil). PFM Action Plan 2018-2023. FY2019/20 IPF has finalized 3 research Select the firm to complete the selected June 2022 DLR 10.3: The PFM topics. research agenda. Learning Hub has produced The guidelines for conducting at least 3 research papers on research by IPF has been PFM reform lessons and completed. Three research topics published the said reports have been selected and EOI was through its website ($2mil). published on the website of FD on 29 November 2021 (closing date for submission of EOI 26-12- 2021). The research topics are: The impact of fiscal stimulus on the economy during covid-19 Bangladesh perspective. MTBF process in Bangladesh: Assessing linkages of policies with resources performances: A comparative case study of MoHFW and MoEdu; An investigation into the women participation in labor in Bangladesh: Recent trends. On 26 December 2021 the submitted EOI has been opened by opening committee. 03 (three) research firms submitted Express of Interest (EOI). Evaluation process is ongoing. FY2020/21 DLR Partially achieved. Arrange to perform PFM field Inspection Continuous DLR 10.4: 6 field inspections Four field inspections were regularly. to government service delivery conducted in the district of centers to identify PFM- Natore, Bagerhat, Khulna and Prepare Inspection Reports with section related issues have been Kishorganj. on lessons, implications, and carried out ($2mil). recommendations. FY2020/21 4 ISCs were recruited in January Train cohort 2 of 5 ICSs March DLR 10.5: The PECT has 2021. The orientation training for 2022 prepared a report evaluating ISC’s had been conducted by the performance of coaches, World Bank and PECT. In Conduct performance evaluations for the March facilitators and/or September 2021 06 ISC’s have first cohort of ISCs. 2022 implementation support been recruited. 04 (Four) of them consultants engaged to have joined. One of them has support the implementation regrated to join and rest one ISC of the PFM Action Plan Joined in January. ($2mil). The nine ISCs have been assigned In addition to guidance by WB staff, ISCs with the responsibilities of 14 should be trained, coached by experienced June components of PFM Action Plan. facilitation consultants and this role will 2022 NPD has already instructed to gradually be taken over by IPF. recruit 5 more ISCs to cover 13 PITs as per scheme document. The PECT has already organized a day long orientation workshop with newly joined ISCs including the previously joined on 2nd January 2022. FY2021/22 19 officials have enrolled for Complete the consultation on PFM DLR 10.6: At least 100 civil master’s degree in different Competency Framework development with Continuous servants (with data universities. relevant stakeholders and arrange disaggregated by gender) have validation workshop. completed specialized PFM 25 of 26 related courses/certifications Need to balance the courses to go beyond ($4mil). master’s degrees to also cover professional certifications needed for competencies across the PFM cycle (e.g., project management, monitoring and evaluation, professionalization of accounting and auditing cadre including internal audit etc.). The ppecialized PFM related courses on these sites can be considered for sponsoring by the Program. https://elearn.icgfm.org/ https://www.ifac.org/knowledge- gateway/supporting-international- standards/discussion/train-trainer- introduction-ipsas 26 of 26