The World Bank Report No: ISR9599 Implementation Status & Results Iraq IRAQ: Public Financial Mgmt Reform (P110862) Public Disclosure Copy Operation Name: IRAQ: Public Financial Mgmt Reform (P110862) Project Stage: Implementation Seq.No: 5 Status: ARCHIVED Archive Date: 29-Mar-2013 Country: Iraq Approval FY: 2009 Product Line: Recipient Executed Activities Region: MIDDLE EAST AND NORTH AFRICA Lending Instrument: Emergency Recovery Loan Implementing Agency(ies): Key Dates Board Approval Date 26-Jun-2009 Original Closing Date 30-Jun-2013 Planned Mid Term Review Date 18-Sep-2011 Last Archived ISR Date 15-Apr-2012 Effectiveness Date 20-Jul-2009 Revised Closing Date 31-Aug-2013 Actual Mid Term Review Date 20-Sep-2011 Project Development Objectives Project Development Objective (from Project Appraisal Document) The Project Development Objective is to support the Government of Iraq's efforts to develop more effective, accountable and transparent public financial management. Support will be provided for strengthening budget management, improving public financial reporting and control, strengthening public procurement, and establishing the tools, systems and institutions required to build capacity for effective public financial management. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Strengthening Budget Formulation and Implementation 1.90 Strengthening Public Procurement 1.70 Strengthening Budget Execution and Implementation 3.30 Capacity Development and Project Management 3.10 Unallocated 0.00 Public Disclosure Copy Bank-executed TF (TA to BSA on External Audit and to MOF on Budget Management and IFMIS) 2.62 Integrated Financial Management Information System (IFMIS) 6.00 Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Unsatisfactory Moderately Unsatisfactory Overall Implementation Progress (IP) Moderately Unsatisfactory Moderately Unsatisfactory Overall Risk Rating Substantial Page 1 of 7 The World Bank Report No: ISR9599 Implementation Status Overview The Iraq Public Financial Management (PFM) project was started as an emergency operation in July 2009 under the Iraq Trust Fund (ITF). The project is to be completed in August 2013. The total estimated cost of the Project is US$18 million: i) US$16 million to be Recipient-executed; and ii) US$2 million to be Bank-executed on behalf of the Recipient. At the time of last ISR rating in April 2012, against the project cost of $16 million under the Recipient-executed part; only $1.6 million (11 %) was disbursed and $8.2 million (51 %) was Public Disclosure Copy uncommitted. Under the Bank-executed part, $1.4 million (70 %) was disbursed. There were significant delays in procuring goods and signing consultancy services contracts. The payment approval procedure used was not appropriate and led to delays in payments. However, as per Bank’s task team’s advice, the payment approval system has now been streamlined, eDisbursement system activated, and the project has made some good physical progress under all components since April 2012. As a result, under the Recipient- executed part, $4 million (25 %) has been disbursed so far and under the Bank-executed part, the entire $2 million (100 %) has been disbursed. Thus, against the total project cost of $18 million, $6 million (33 %) has been disbursed. Although there has been an improvement in the physical and financial progress recently, the implementation progress is still rated Moderately Unsatisfactory due to an overall low disbursement rate. Locations No Location data has been entered Results Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target Component 1: Capital budget execution rate Percentage Value 75.00 78.00 85.00 increases by at least 10 percentage points Date 01-Feb-2010 30-Mar-2012 31-Aug-2013 Comments Limited strategic planning; The capital budget execution Capital budget execution rate unclear and fragmented rate was 75 % in 2008, which increased by 10 %. project preparation rules/ has enhanced to 78 % (a 3 % procedures hindering efficient increase) in the first 2 years of and cost-effective project the project. While this implementation achievement is below the expected increase of 5 % in 2 years, the progress seems to be on track in the right direction.The PMT is advised to assist the Ministry of Planning in better monitoring Public Disclosure Copy and evaluation of the capital budget to identify implementation bottlenecks. (like delay in release of funds, clearances on procurement decisions, land related issues, etc.) and helping to remove those with the help of Ministry of Finance. Page 2 of 7 The World Bank Report No: ISR9599 Component 3: Outstanding balances in Percentage Value 39.00 9.00 spending units decline by 30 percentage Date 30-Mar-2012 31-Aug-2013 points, as a share of the budget Comments This PDO was to ensure that 30% reduction in outstanding Public Disclosure Copy outstanding balances in balances Spending Units decline by 30 percentage points, as a share of the budget. In June 2009 when the PFM program commenced, the cash balances at the Rafidain and Rashed (R&R) Banks were estimated at about 27 trillionID (39 % of budget). This was taken as the baseline and objective was to reduce it by 30 % of budget. However, there was a reclassification of accounts in 2009, due to which, the Cash Balances at 31 December 2009 were reduced to 3.843 trillion ID (5.5 % of the budget). The Cash Balances stand at 5.937trillion ID on June 2011 (6.1 % of the budget) as per new classification. There is thus a problem in comparing the progress with the baselines as the definition of indicator has changed. Thus, the PDO and its baseline needs to be adjusted. The best way forward for the PMT is to Public Disclosure Copy estimate the present cash balances as per earlier classification, by includingprovincial accounts, accounts of government trading enterprises, and accounts for the purchase of vehicles. This way, a meaningful comparison of results with the baseline will be done. Page 3 of 7 The World Bank Report No: ISR9599 Ministry of Finance training institute providing Yes/No Value No No Yes training on all operational aspects of PFM Date 01-Jan-2010 30-Mar-2012 31-Aug-2013 Project Comments Limited capacity in the While the Consultant Coffey Public Disclosure Copy training institute, both human International has done a resources, and physical preliminary Training Needs assets/curriculum Assessment and organized a few ‘Training of Trainers’, the MOF training institute is very far from being capable of providing training in all operational aspects of the PFM project onits own. Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Component 1 - Draft Sector Strategies Yes/No Value No No Yes prepared Date 30-Jun-2009 30-Mar-2012 31-Aug-2013 Comments Limited strategic planning This task of preparation of Selected line ministries sector strategies is being employing new strategies for dropped from the TOR as it is comprehensive sector budget being already done by the planning government with the help of another donor. Now the focus shall be on the assessing the convergence or otherwise of existing sector strategies with capital budget; and, recommending ways and means of ensuring their convergence. Component 1 - New procedures in place for Yes/No Value No No Yes project preparation and appraisal Date 30-Jun-2009 30-Mar-2012 31-Aug-2013 Public Disclosure Copy Comments Unclear and fragmented 10% improvement in capital project preparation rules/ budget execution procedures hindering efficient performance, as measured by and cost-effective project MoPDC and other relevant implementation revies Component 1 - New Budget Instructions Yes/No Value No No Yes approved and guidelines ready Date 30-Jun-2009 30-Mar-2012 31-Aug-2013 Comments Budget instructions have Consultancy underway Budget calendar adhered to. been fragmented and not 50% improvement in Page 4 of 7 The World Bank Report No: ISR9599 sufficiently clear, and compliance with ministry/ framework for expenditure agency budget requests 'ceilings' not in use. As a (based on realism, timeliness result, budget not adhered to. and completeness of Public Disclosure Copy submission, etc.) Component 1 - New Budget Call Circular Yes/No Value No Yes Yes (BCC) in use Date 30-Jun-2009 30-Mar-2012 31-Aug-2013 Comments Current BCC difficult to Target met New BCC with hard budget properly complete, as it does ceilings issued. not provide sufficient instructional clarity for ministries/agencies Component 2 - Sector-specific Standard Yes/No Value No No Yes Bidding Documents finalized for ministries of Date 30-Jun-2009 30-Mar-2012 31-Aug-2013 health, electricity and public works Comments SBDs not common practice SBD development ongoing New SBDs in use in target with new consultancy ministries. Improved contract, but delays in GoI procurement efficiency, approval of Inception Report transparency, and economy, in target ministries, as measuredby data on the method used to award public contracts available Component 2 - Design of single portal website Yes/No Value No No Yes for public procurement notices prepared Date 30-Jun-2009 30-Mar-2012 31-Aug-2013 Comments Limited procurement Bank will assist in drafting Future options for E- information available on-line TOR of Web-based portal for procurement developed in real-time publication of bidding (software and hardware opportunities and bidding requirements specified) documents, PMT will revise the TOR in consultation with public contracting directorate of MOP and send the final Public Disclosure Copy TOR and EOI with revised cost estimate for publication on UNDB by end of April of 2012 Component 3 - First round of training on new Yes/No Value No No Yes cash release system completed with selected Date 30-Jun-2009 30-Mar-2012 31-Aug-2013 pilot ministries Comments Current cash release system Consultancy underway New system demonstrates inefficient, does not respond 30% improvement in the to actual needs coherence between cash releases and actual needs - Page 5 of 7 The World Bank Report No: ISR9599 SEE PDO INDICATOR - this will need to be re-classified Component 3 - Detailed rules and regulations Yes/No Value No No Yes for new commitment control system developed Public Disclosure Copy Date 30-Jun-2009 30-Mar-2012 31-Aug-2013 Comments Commitments are not Consultancy underway New system rolled out to at monitored adequately least 4 total sector ministries Component 4 - Training program fully in place Yes/No Value No No Yes in MoFATC Date 30-Jun-2009 30-Mar-2012 31-Aug-2013 Comments Limited capacity in MoF The Initial TNA is completed, Training program continuing training department and the Comprehensive TNA to provide targeted training is ongoing, alongside according to needs; program numerous other activities. refined based on feedback This indicator is delayedbut from PY3. Long-term on track. business plan for sustainable operations of the MoF training department developed and approved Component 5 - System Resource Requirement Yes/No Value No No Yes (SRS) for IFMIS is completed Date 01-Feb-2013 31-Aug-2013 Comments The Government has agreed System Requirement Studies on the scope of IFMIS design (SRS) and Related Activities for IFMIS are completed in order to fully define the Government’s requirements and to prepare a Request for Proposal (RFP) Document that can be released for acquisition and implementation of the IFMIS. Data on Financial Performance (as of 13-Mar-2013) Public Disclosure Copy Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P110862 TF-94552 Effective 20-Jul-2009 20-Jul-2009 20-Jul-2009 30-Jun-2013 31-Aug-2013 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P110862 TF-94552 Effective USD 16.00 16.00 0.00 4.09 11.91 26.00 Disbursement Graph Page 6 of 7 The World Bank Report No: ISR9599 Public Disclosure Copy Key Decisions Regarding Implementation The management has taken following proactive decisions to improve the performance of project: a) Restructuring of the Recipient-executed project by adding a new component of Integrated Financial Management Information System (IFMIS); b) Granting a 2-month project closing date until August 31, 2013; and, c) Providing Additional Finance of $621,500 to the Bank-executed part. Restructuring History Level two Approved on 14-Mar-2013 Related Projects P124388-Iraq PFM Project - BSA Public Disclosure Copy Page 7 of 7