52386 RWANDA ' Public Sector Capacity Building Project CONTENTS Page Introductory Statement ...................................................................................................... 3 Project Background............................................................................................................ 4 Reasons for project restructuring..................................................................................... 4 ImplementationArrangements ......................................................................................... 5 PAD Compliance Review ................................................................................................... 6 Proposed Changes............................................................................................................... 6 Transition Arrangements................................................................................................... 8 Summary of fiduciary capacity assessments for the restructured project .......... 8 Analysis ................................................................................................................................ 8 Expected Outcomes ............................................................................................................ 9 Benefits and R i s k s............................................................................................................... 9 Implementation Support Strategy .................................................................................. 10 List of Annexes Annex 1: Revised Results Monitoring Framework ............................................................ 12 Annex 2: Revised Detailed Project Description ................................................................. 23 Annex 3a: Original Allocation by Component & List o f Ongoing Contracts .................... 25 Annex 3b: Original Allocation & Status o f Disbursements/Commitments....................... 26 Annex 3c: Proposed Revised Allocation o f Funds ............................................................. 27 Annex 4: Revised Implementation Arrangements., ............................................................ 28 Annex 5: Revised Financial Management and Disbursements Arrangement .................... 30 Annex 6: Revised Procurement Arrangements .................................................................. 44 Annex 7: Implementation Schedule ................................................................................... 51 RWANDA PUBLIC SECTOR CAPACITY BUILDING PROJECT PROJECT PAPER AFRICA AFTPR ACRONYMS CFAA Country Financial Accountability Assessment CPAF Country Performance Assessment Framework CSR Civil Service Reform DA Designated Account DCA Development Credit Agreement DfID Department for International Development EDPRS Economic Development and Poverty Reduction Strategy FY Fiscal Year GOR Government o f Rwanda HIDA Human Resources and Institutional Capacity Development Agency HR u a H m n Resources HRCBA Human Resources and Capacity Building Agency IBRD International Bank for Reconstruction and Development ICT Information Communication and Technology IDA International Development Agency IFR Interim Financial Report IPPIS Integrated Pay and Personnel Information System IPSAS International Public Sector Accounting Standards ISR Implementation Status and Results M&E Monitoring & Evaluation MIFOTRA Ministry o f Public Service and Labor MINAFFET Ministry o f Foreign Affair and Cooperation MINALOC Ministry o f Local Government and Social Affairs MINECOFIN Ministry o f Finance and Economic Planning MSCBP Multi Sector Capacity Building Program MTEF Medium-Term Expenditure Framework OAG Office o f the Auditor General OBL Organic Budget Law ORINFOR Rwanda Information Office PAD Project Appraisal Document PDO Project Development Objective PFM Public Finance Management PRSP Poverty Reduction Strategy Paper PSCBP Public Sector Capacity Building Project PSCBS Public Sector Capacity Building Secretariat RIAM Rwanda Institute o f Administration and Management RITA/RDB Rwanda Information Technology Agency RPPA Rwanda Public Procurement Authority SDR Special Drawing Rights SFB School o f Finance and Banking SOE Statement o f Expenditures SPU Strategy and Policy Unit TA Technical Assistance US$ United States Dollar RWANDA PUBLIC SECTOR CAPACITY BUILDING PROJECT PROJECT PAPER AFRICA AFTPR Data Sheet tal category: C (No Environmental Borrower: Republic o f Rwanda Responsible Agency: Ministry o f Finance and Economic Planning PO Box 158 Kigali Rwanda Tel(250) 577 494 F a x 1 Current closing date: December 3 1 2009 Revised closing date: December 3 1 20 11 Indicate if the restructuring is: Board approved - X RVP approved - Does the restructured project require any exceptions to Bank policies? - Yes LNO Have these been approved by Bank management? - Yes - N o I s approval for any policy exception sought from the Board? - Yes -x N o 1 Revised project development objective/outcomes Revised PDO: Public sector institutions supported by the project achieve increased capacity for efficient and accountable use ofpublic resources. Revised outcome indicators: Efficient use: Proportion o f value o f public procurement contracts tendered competitively or, if not tendered competitively, non-competitive tendering adequately justified; Accountable use: Proportion o f audited public budget agencies receiving unqualified audit opinions; Proportion o f selected public sector institutions achieving satisfactory ratings during an external quality assurance review o f their integrated pay and personnel information systems, including with regard to compliance with public service management policy guidelines. Rationale: The proposed restructured project would maintain i t s focus o n strengthening capacity for core public sector functions but narrow i t s scope o n financial and human resources. Does the restructured project trigger any new safeguard policies ? No. Revised Financing Plan KJS$m) " Source Local 1 Foreign I Total I Government o f Rwanda I 0.80 I 0.00 I 0.80 IDA 0.00 20.00 20.00 Total 0.80 20.00 20.80 2 Introductory Statement 1. This Project Paper seeks the approval o f the Executive Directors to introduce the following changes to the Rwanda Public Sector Capacity Building Project (PSCBP) PO66386 (Cr. 3955) and any accompanying amendments to the project's legal documents. The proposed restructuring responds to concerns o f a l o w disbursement rate and a changed institutional environment for project implementation, notably the restructuring o f a number o f public institutions including the coordinating agency. It follows the recommendations from the midterm review and the PAD review exercise'. The proposed changes reflect a maturing o f key institutions which are n o w capable o f implementing their o w n capacity building initiatives as well as a grown recognition in- country that a clearer focus will enhance implementation o f reforms. 2. K e y components o f the original projects include Coordination o f the Multi-Sector Capacity Building Program (MSCBP), Strategic Human Resource Development, Cross- cutting Public Sector Reforms, Enhancing Agency Performance, and Information and Communication Technology. A summary table i s provided in Annex 1 to indicate the original and proposed changes in components. 3. The major changes proposed in this paper are: (i) changes in the project's development objectives and results monitoring framework by reducing the scope o f the Project Development Objective (PDO) and streamlining the number o f key performance indicators used in the project; (ii)change in project components and re-allocation o f credit proceeds across components to ensure efficient utilization o f project resources and to reflect the changing priorities o f government; ( i ) i i changes in implementation arrangements to adapt the project to the new institutional structures created by the govenunent; (iv) alignment with the new country financing parameters; (v) transiting to new procurement guidelines for IBRD loans and IDA credits published in M a y 2004 and revised on October 1, 2006; and (vi) extension o f project closing date for two years from December 31,2009 to December 3 1,201 1. 4. The proposed changes in the project are expected to lead to an increase in the capacity o f the project's beneficiaries to use their financial and human resources in a manner that i s efficient and accountable. This will be achieved by: (i)supporting budget agencies to produce financial reports in a timely manner; (ii) helping the Ministry o f Finance and Economic Planning (MINECOFIN) achieve i t s reform outputs based on the Public Financial Management (PFM) reform strategy; ( i ) i i building the capacity o f ministries to prepare and submit their implementation progress reports as required by the Economic Development and Poverty reduction Strategy (EDPRS); (iv) helping the Ministry o f Public Service and Labor (MIFOTRA) take the lead in the development and disseminating o f a c i v i l service management policy; (v) supporting central and local By the time o f the PAD review exercise, restructuring o f the project had already been initiated (see Government request letter received September 25, 2008, requesting to add a l l central ministries, the President's Office and the Rwanda Governance Advisory Council as project beneficiaries). However, the latest restructuring mission, April 13 - 30,2009, agreed on a simplification o f the project, thus reducing the number o f beneficiary institutions. 3 government institutions to publish service delivery directories; (vi) building MIFOTRA's capacity to manage the restructuring process, which aims to provide clear missions, functions, structures and appropriate staffing levels to public agencies; (vii) helping MIFOTRA achieve i t s civil service reform (CSR) outputs; and, (viii) providing support to the newly created Public Sector Capacity Building Secretariat (PSCBS) to prepare an annual report on the state o f capacity building in Rwanda. Project Background 5. The PSCBP was approved by the Board on July 8,2004, and became effective on March 30, 2005. The original Project Development Objective (PDO) was aimed at building the capacity o f public sector entities for a more efficient, effective, transparent and accountable performance in their newly redefined roles and functions. This was aimed at contributing significantly to the implementation o f the Rwanda Poverty Reduction Strategy Paper (PRSP) and the achievement o f the Government's strategic objectives. The project has supported the coordination o f capacity building interventions under the Government's Multi Sector Capacity Building Program, the establishment o f the Human Resources and Institutional Capacity Development Agency (HIDA)2,human resource development, civil service reform, P F M reform, the establishment o f a national M&E system, demand-driven support to public sector entities and parliament and the effective use o f Information and Communication Technologies (ICT) in the public sector. The original credit amount was SDR 13.7 (US$20 million equivalent) o f which US$9.16 million or 45% has been disbursed. 6. Implementation progress was rated moderately satisfactory in all Implementation Status and Results (ISR) reports until end 2008 and downgraded to moderately unsatisfactory following the April 2009 supervision mission. Progress towards achieving the PDO was initially rated satisfactory but was downgraded to moderately satisfactory in the December 2008 ISR report. Implementation progress has been uneven, with significant progress in public financial management and procurement reforms and a rapid uptake by sector ministries o f coaching support through Rapid Results Initiatives. The Midterm Review concludes that "Overall, the project has been successful in laying important foundations for public sector reforms and capacity building in the country and has made progress in cross-cutting areas o f reform, especially in Public Financial Management and, to a certain degree, also C i v i l Service Reform. However, not much tangible results were achieved in supporting sector ministries." Reasons f o r project restructuring 7. The project has been making good progress towards achieving i t s development objectives. However, the pace o f project implementation has remained below expectation. During the Midterm Review in December 2007, Government and World Bank teams jointly concluded that the slow pace o f project implementation i s due to: (i) 'In the DCA denoted as "Human Resources and Capacity Building Agency (HRCBA)", the name o f the agency during Project preparation. 4 complex institutional set-up, whereby the coordinating agency manages project funds and ministries implement; and (ii) lack o f effective policy coordination to support the MSCBP in its functions, which could be done through a public sector reform steering committee. 8. At the same time, the demand for public sector capacity building i s strong. Government and World Bank teams joined forces during the April 2009 restructuring mission. The teams, considering the history o f project implementation and the recommendations from the Midterm Review, proposed to simplify and focus the project in those areas that have a strong track record o f performance and are o f high importance within the ambit o f Government's public sector reforms. PFM, CSR as well as national M&E emerged as the key reform areas. In addition, human resource development, although a weak component under the project to date, was considered to be vital and would be maintained within the overall reform areas, albeit ceasing to be a self-standing component. Innovative approaches will be tried such as supporting professional organizations to enhance impact o f skills development and Rapid Results Initiatives. In the area o f PFM, development partner coordination as well as policy dialogue with government i s well established and serves as a model for improved coordination and dialogue on CSR. The Bank i s the lead donor for both reform areas and development partners have established a tradition o f carrying-out joint supervision missions. The Bank i s thus playing to i t s strengths, also in focusing its implementation resources. Implementation Arrangements 9. The Government in September 2008 dissolved HIDA, t~getherwith six other public agencies, into the newly established Rwanda Development Board. The public sector capacity building part o f HIDA's mandate was subsequently transferred to the MSCBP. During the restructuring mission, the Government presented its draft institutional framework for the PSCBS, consisting o f an inter-ministerial Technical Steering Committee at Permanent Secretary level and a support office headed by an executive secretary. The Government further informed the mission o f i t s intent to set up a policy coordinating mechanism for public sector reforms at the ministerial level. Under the restructured project, the PSCBS would resolve implementation differences, generate and exchange information and monitor public sector capacity building activities and reforms. Implementation responsibility for P F M and national M&E would be transferred to MINECOFIN and for CSR to MIFOTRA. The decentralization o f implementation responsibility i s expected to increase ownership, institutionalize support, thus enhance sustainability o f interventions and accelerate project implementation. MINECOFIN i s already the sole implementing agency for the Multi Donor Trust Fund for the P F M reforms, associated with the PSCBP, following the amendment o f i t s grant agreement effective January 2009. 5 PAD Compliance Review 10. As stated in the P A D Compliance Review3, all activities financed fall within the description and strategic direction o f the project. There are two activities that are not clearly identified in the PAD, but fall within the scope o f the project. These are: (i) the expansion o f the Rwandan Expertise Scheme to the President's Office; and (ii) Rapid Results Initiatives financed under the agency performance fund under component 4, as requested by participating ministries. Following the Midterm Review, additional public sector institutions have been added to benefit from support to strategic planning under component 4 (ORINFOR, the Rwanda Information Office, and MINAFFET, the Ministry o f Foreign Affairs and Cooperation). These expansions were recorded in Aide Memoirs, the Midterm Review Report and were to be reflected in the restructuring o f the project. However, given that the restructuring i s seeking a narrowing o f focus o f the project, this will no longer be possible or necessary. Proposed Changes (i) Revision o f Project Development Objective and Results Monitoring Framework: Revising the Project Development Objective and results indicators by narrowing the scope o f the project to strengthening capacity o f government entities for the management o f financial and human resources, national monitoring and evaluation and coordination o f public sector reforms (and accordingly, reallocating funds across components and adjusting expenditure categories), as well as simplifying results indicators by reducing the number o f indicators from 22 to 8 and by removing indicators that proved not to be measurable. The proposed changes seek to narrow the scope o f the project while keeping the same overall intent o f the project. The current PDO "Public sector entities have the capacity for more efficient, effective, transparent and accountable performance in their redefined roles and functions and for achievement o f their strategic objectives contributing to the implementation o f the PRSP", would be revised to read "Public sector institutions supported by the project achieve increased capacity for efficient and accountable use o f public resources" (Public resources include both human and financial; Supported by the Project = directly benefit from project resources). See proposed Results Framework in annex 1. It i s expected that the simplification o f the project will enhance i t s clarity, make it easier to implement and for the Bank, enable a more targeted implementation within fixed resource constraints. A summary table indicating the original and proposed changes in the performance indicators i s provided in Annex 1. (ii) Transferring implementation responsibilities'for P F M Reforms and national Monitoring and Evaluation (M&E) to M I N E C O F I N and for CSR to MIFOTRA, to increase ownership for implementation o f reforms; PAD Compliance Review done in December 2008. 6 (iii)Following the dissolution o f the current coordinating agency HIDA, removing this agency as coordinating agency in the Development Credit Agreement (DCA). Instead, it i s requested that the PSCBS be added as implementing entity, albeit with a reduced mandate. (iv) Changes in Implementation Arrangement: Adding MINECOFIN, MIFOTRA as well as the PSCBS as implementing agencies (the phasing in o f public entities as implementing entities had been envisioned in the PAD, and reflects an increase in key institutions' capacity); removing HRCBA from the project as it no longer exists (the DCA would stipulate that the HRCBA gets replaced by the PSCBS); changing project components and re-allocating credit proceeds across components as in annex 3; and consequently reducing the number o f participating institutions to the Ministry o f Public Service and Labor (MIFOTM); Ministry o f Finance and Economic Planning (MINECOFIN); the newly established Public Sector Capacity Building Secretariat (PSCBS) (replacing the former coordinating agency, the Human Resources and Institutional Capacity Development Agency - HIDA); local training institutions related to Public Financial Management (PFM) and Civil Service Reform (CSR) such as the Rwanda Institute o f Administration and Management (RIAM) and the School o f Finance and Banking (SFB) and supporting establishment o f two to four professional institutions/associations. Local governments (provincial, district and sector) will be included in nation-wide trainings. Support to existing entities will be phased out, allowing contracts to continue to completion. (v) Adjusting counterpart financing parameters to new country financing parameters allowing 100% financing for all expenditure categories4; (vi) Moving to the new "Guidelines: Procurement under IBRD Loans and IDA Credits" published in May 2004 revised in October lSt and "Guidelines: 2006; Selection and Employment o f Consultants by World Bank Borrowers" published in May 2004 revised on October lSt 2006; and revise upwards the "prior review" thresholds as follows: (a) goods contracts estimated to cost $300,000 equivalent or more; (b) employment o f consulting f i r m s estimated to cost the equivalent o f $200,000 or more; and (c) employment o f individual consultants estimated to cost the equivalent o f $100,000 or more; and (vii) Extending the project closing date by two years to December 3 1, 201 1 from its current closing date o f December 31, 2009. A two year extension will allow the completion o f activities required to achieve the PDO. A one year extension would not be sufficient to achieve the project objectives and allow for the new implementing institutions to fully absorb their new mandate and develop capacity for efficient implementation. The team believes that the changes proposed during the restructuring, both in terms o f narrowing the The revision o f the financing parameter will help facilitate procurement since all contracts will no longer require GOR counterpart finds for payment o f taxes. 7 scope o f the project and transferring implementation responsibility to ministries will have a highly beneficial impact on the implementation progress o f the project. The revised project description i s attached in annex 2. Transition Arrangements 11. T o ensure a smooth transition from the existing to the restructured project, the Government and World Bank teams agreed that ongoing contracts would be continued. This i s a reflection o f the fact that ongoing activities are valuable and that a narrower focus be phased in over time. Contracts o f existing staff at HIDA (and i t s successor, the PSCBS) will continue until December 3 1, 2009 and consulting contracts until their completion. For clarity, a complete l i s t o f ongoing contracts i s provided in the agreed action plan and budget and the procurement plan. 12. On PFM, the Government has requested all development partners to contribute to a basket fund to be effective starting January 2010. To comply with the Government's request, the P F M component o f the restructured project may be set up as a contribution to the basket fund. Implementation arrangements and activities are in line with the Government's P F M Reform action plan which would also form the basis for the basket fund. It i s expected that once the institutional arrangements for the basket fund have been defined, AFTFM and AFTPC would carry out assessments o f the proposed structures. Management approval would be sought on any resulting changes to the project. Summary o f fiduciary capacity assessments for the restructured project 13. Both the procurement and financial management capacity assessments revealed weak human, institutional and organizational capacity constraints, translating into substantial overall risks in both areas. They also identified mitigating factors and action plan which if implemented adequately would leave a moderate risk to the project. See Annexes 5 and 6. GoR has started implementing most o f the action points recommended here to ensure they are addressed before approval o f the restructured project. Analysis 14. None o f the proposed changes will have a major effect on the original economic, financial, technical, or social aspects o f the project as appraised; nor will they raise the environmental category o f the project or trigger new safeguard policies. A re-appraisal will therefore not be needed. Finally, the proposed changes will involve no exceptions to Bank policies. 15. The proposed restructuring does impact the institutional set up o f the project by altering the implementation arrangements. This i s done to reduce the complexity o f project implementation, ensure direct accountability for project activities by implementing institutions and therefore enhance project implementation. Detailed implementation arrangements are summarized in annex 3. 8 Expected Outcomes 16. The proposed changes to the PDO and results framework will help to simplify and focus the project, enhancing i t s clarity and making it more manageable. This simplification represents an evolution in the policy dialogue as well as a maturing o f key reforms such as P F M and CSR within Government. The proposed results framework reduces the number o f indicators from 22 to 8 that reflect the new focus o f the project but also because some indicators proved difficult to measure and were removed. Benefits and Risks 17. Benefits: The benefits o f the proposed changes are that government ownership will be increased, implementation capacity with implementing institutions will be strengthened and implementation speed will pick up. 18. R i s k s : A number o f risks identified in the initial project design did not materialize or were successfully mitigated: GoR commitment to the MSCBP and associated reform agenda remained strong; there was no resistance to reform from ministries, departments and agencies and contributions through other development partners (notably the Belgian Technical Cooperation, the United Kingdom's Department for International Development (DfID) and the European Commission, in addition to the Afiican Capacity Building Foundation which prepared their support in parallel to the PSCBP) meant adequate financing was available. 19. The one risk that did materialize would be addressed through the restructuring: "lack o f capacity to implement the agency performance fund, loss o f focus through ad- hoc requests as well as weak program coordination". It turned out that the issue was not so much a lack o f skills but the implementing arrangements which diffused the accountability between the ministries to benefit from capacity building support and the coordinating agency. Hence the restructured project would be implemented directly by ministries while the PSCBS would help resolve policy implementation differences across the different aspects o f public sector reform, aggregate annual reports and carry-out periodic assessments o f public sector capacity building in the country. 20. The following table presents the new risks facing the restructured project: 9 project implementation. MINECOFIN i s currently implementing the Multi Donor Trust Fund for P F M Reforms and acquiring project implementation experience. The project will support the Rwanda Expertise Scheme which aims to train and retain qualified staff. Lack o f strategic framework and vision Government has decided to formulate a for public sector and service reforms vision and strategic framework for Public which might lead to ad hoc reforms that Service Reform and has acquired services are not based o n sound analysis and not o f a consultant to advise them. However, coordinated for maximum impact. no overarching framework for public sector reforms has been developed. The World Bank has used recent supervision missions, including the Midterm Review December 2007, to discuss with Government various models for coordination o f public sector reforms. Government stated i t s intent to establish a National Steering Committee for public sector reforms. Frequent changes in the direction o f See above, formulation o f a comprehensive reforms that do not allow reforms to vision and strategic framework for reforms. mature, especially in CSR, lack o f Government stated i t s intent to establish a adequate coordination mechanism for National Steering Committee for public public sector reforms, and disconnect sector reforms. Policy dialogue will be between what analytical studies have continued. In addition, once such a recommended and the actual decisions coordination mechanism has been put in taken, especially in CSR. place, the project will finance a public sector reform advisor to ensure a smooth start o f this new mechanism. A DfID financed Public Sector Management Specialist has been recruited to enhance policy dialogue and development partner coordination around CSR. Implementation Support Strategy 2 1. Considering that the project has disbursed only 45% o f i t s total allocation over a five year period and that i t s overall implementation progress was rated moderately unsatisfactory, the team i s taking the approach o f a very close implementation support. At least two implementation support missions will be carried each year, jointly with other development partners active in the areas o f PFM and CSR. To help maximize the impact, the implementation support missions will be organized to coincide with, or slightly before the bi-annual joint GoR-DPs budget support reviews held around April and 10 September each year. More targeted and regular implementation support missions will be carried out, taking advantage o f the fact that the Country Office based team i s now able to cover major PFM and CSR areas. Support will also be provided by Head Quarters based colleagues on areas requiring specialist skills such as IFMIS, and depending on issues to be addressed, these resources will be sought whether during the general April/September reviews or during targeted implementation support missions. To help lift the project from a problem project status to a project that achieves its PDO, the team will make a case for adequate implementation support budget commensurate with problems at hand. Annex Annex 1: Revised Results Monitoring Framework Annex 2: Revised Detailed Project Description Annex 3a: Original Allocation by Component & List o f Ongoing Contracts Annex 3b: Original Allocation & Status o f Disbursements/CommitmentsAcross Original Components Annex 3c: Proposed Revised Allocation o f Funds Across Restructured Disbursement Categories Annex 4: Revised Implementation Arrangements Annex 5 : Revised Financial Management and Disbursements Arrangements Annex 6: Revised Procurement Arrangements Annex 7: Implementation Schedule 11 8 E E L w n & t? 4 Y n E $1 I I I I I i - E m C c E m L 0 Y I I I s n I s - l 0 F 00 0 n I s IA s m 0 F 3 3 a 8 .e u 8 x e 3 4 cd n 9 b-l n v, 9 b b 3 m 0 3 b 3 PSCBP Results Framework Comparison Matrix (original PAD vs. restructured) Project D e v ~ l o ~ ~Objective (PDO) et~t Rationale Restructured Project PubIic sector i n s t ~ ~ ~ t i ~ ~ s by support~d theproject achieve iracreused capacity jbr eflcierzt attd a c ~ o u ~ ~ l e of' ~ ~ wsb public resources `* Indicators Original Project Restructured Project % o f surveyed beneficiaries o f Measure o f efficiency (financial New Indicators move f i o m central government entities that resources): perception-based and difficult to perceive improvements in 0 Proportion o f value o f public measure indicators to objectively transparency and accountability in procurement contracts tendered verifiable indicator that have a government operations. competitively or, if not tendered closer link w i t h the interventions o f YO f surveyed government o competitively, non-competitive the restructured project employees who c o n f m that the tendering adequately justified. work environment i s more enabling N e w Indicators also use country and they are better facilitated t o Measure o f accountability (financial systems to get data (e.g. Country work resources): Performance Assessment % o f MDAs that achieve improved Proportion o f audited public Framework (CPAF) and Auditor utilization o f resources in the budget budget agencies receiving General reports) (planned versus actual expenditures) unqualified audit opinions. Rising % (proportion) o f public expenditure o f previously Measure o f accountability and centralized functions that i s efficiency (human resources): decentralized, outsourced or Proportion o f selected public contracted-out. sector institutions achieving satisfactory ratings during an external quality assurance review o f their integrated pay and personnel information systems, including with regard to compliance with public service management policy guidelines Component I:Coordin~tion the of New Component 4: Coord~na~jon of MSCBP Public Sector Reforms % o f HIDA's senior positions filled N o longer part o f the project after with competitively and transparently G o R restructured HIDA, w i t h i t s recruited staff and formally private sector and c i v i l society parts confirmed by the Governing Council going into the Rwanda 0 % o f resources utilized in line with Development Board. The public DROPPED sector parts are to be partially annual work plan and budget 0 # o f MDAs entering into "MOU" integrated into the Public Sector w i t h HIDA and thereby committing Capacity Building Secretariat to coordination principles (PSCBS) 0 # o f international develoDment 18 partners who subscribe to an `MOU' on harmonizatiordcoordination o f capacity building initiatives under the M S C B P # o f capacity building programs/projects Annual "State o f Capacity Building" Will measure the key contribution sustainably monitored and evaluated by report prepared and disseminated to o f GoR as coordinator in Capacity the H R C B A (cumulative) stakeholders (Yes/ No) Building issues Component 2: Strategic Muman Resource Development % o f senior posts in MDAs that are either DROPPED N o longer part o f project vacant or staffed with expatriates % o f civil servants trained against targets DROPPED Will be mainstreamed into PFM, in training needs assessment and plan CSR and M&E components - not measured separately % o f senior public servants attending in- DROPPED Will be mainstreamed into PFM, service training in local institutions CSR and M&E components - not measured separately Component 3: Cross-cutting Public Sector Reforms Subcomponent PFM New Component 1: PFM % o f ministries that produce complete % o f budget agencies that produce Adjusted to be in line with GoR annual financial reports within stipulated complete annual financial reports used Indicator timeframes and receive clean audit within stipulated timeframes. certificates (no major audit queries) # o f MDAs with satisfactory compliance This indicator was adjusted and w i t h new national procurement policies moved to the P D O level and rules YO f annual reform outputs supported o Measures MINECOFIN's capacity by the project in M I N E C O F I N and effectiveness at implementing achieved. the reform activities as planned. Subcomponent CSR New Component 3: CSR # o f MDAs that have completed plans for N o longer part o f project scope decentralization, contracting-out and out- DROPPED sourcing o f non-core functions C i v i l service management policy Measures the GoR progress in developed, adopted by cabinet and implementing CSR reforms disseminated to stakeholders # o f restructured public agencies with Measures government progress in clear missions, functions, structures restructuring which began with and approved staffing levels. ministries and districts. # o f Central and Local Government Measures increased accountability institutions that have published o f government vis-a-vis its citizens. service delivery directories o n the website and distributedthem at a l l levels o f central and local government administration % o f annual reform outputs supported Measures MIFOTRA's capacity by the project in MIFOTRA achieved and effectiveness at implementing the reform activities as planned. 19 This indicator w i l l measure the main functioning o f the EDPRS M I N E C O F I N by the deadline M&E system related to the progress reports and i s also in line with the indicator used by GoR priorities within MTEF ceiling # o f participating MDAs that satisfactory I DROPPED use APF to-enhance performance in line w i t h PRSPPRSC benchmarks # o f "quick wins" proposed approved and DROPPED implemented Component 5: information and DROPPED ion ~ o m ~ u ~ i c # tTechnology # o f MDAs that apply new I C T policy DROPPED # o f personnel trained in computer DR0PPED applications who achieve satisfactory level o f competency % o f target beneficiaries o f the national I DROPPED I C T maintenance shop that acknowledge satisfactory resolution o f maintenance problems by the facility # o f MDAs w i t h internet- based websites DROPPED to facilitate access to information on government operations % o f I T graduates interns under the DR0PPED project who secure long-term emdovment PSCBP Progress on original PDO indicators Baseline Progress PDO Level Indicators Value 1. YO o f surveyed beneficiaries o f central da 47% in pilot 2007 Knowledge, Attitudes and Perception government entities who perceive improvements in Survey transparency and accountability in Government operations 2. % o f surveyed government employees who da 89% (2008 Knowledge, Attitudes and Perception Survey). c o n f m that the work environment i s more enabling land they are better facilitated to work 20 3. YO f MDAs that achieve improved utilization for o 0% Overall, actual expenditure represented 99% o f planned resources in the budget (planned versus actual expenditure in 2008 expenditures) 4, Rising % (proportion) o f public expenditure o f 0% not monitorable. previously centralized functions that is decentralized, outsourced or contracted-out Intermediate outcome indicator@) 1. Component One: % HIDA's senior positions 0 out o f 7 out o f 10 (80%). filled with competitively and transparently recruited 10 staff and formally confirmed by the Governing Council 2. Component one: % o f resources utilized in line 0% 52% for 2008 budget with annual work plan and budget 3. Component one: # . o f capacity-building 0 Four: HIDA effectively monitors 3 projects (PSCBP/World programs/projects sustainably monitored and Bank, Grant 143 and Grant 65/ACBF and BTC). However. evaluated by the HIDA HIDA conducted a survey in 2007 for all ongoing CapaciQ Building projects in the country. 4. Component one: # o f MDAs entering into 0 10 out o f the 11 partner institutions currently supported by t e h "MOU" with HIDA and thereby committing t o project have signed M o U s with HIDA. coordination principles 5. Component one: # o f international development 2 Five: ACBF, WB, Belgian Technical Cooperation and EU and partners who subscribe to an "MOU" o n (ACBF DfID through the Multi Donor Trust Fund o n PFM Reforms, harmonizatiodcoordination o f capacity building and WB) through the PSCBP. 'initiatives under the MSCBP 6. Component two: % o f senior posts in MDAs that greater 40% o f all positions in the Public Service are vacant 01 are either vacant or staffed with expatriates than temporarily staffed o f which 4.3% are staffed w i t h foreigners 10% Majority o f these are in M I N E D U C as teachers. Source National Skills Audit Report 7. Component two: % o f civil servants trained 0 Training follows a needs assessment or adoption o f nev, against targets in training needs assessment and plan legislation such as the N e w Organic Budget L a w 0 1 Procurement Code. T o date PSCBP trained 1,540 civi' servants. 8. Component two: % o f senior public servants n/a Under the PSCBP, virtually a l l training takes place at loca: attending in-service training in local institutions training institutions except for international conferences anc specialized training for select HIDA staff and I C T specialists. 9. Component three: YO o f MDAs that produce 96% produced reports but only 3% o f those audited receivec complete annual financial reports within stipulated an unqualified audit opinion timeframes and receive clean audit certificates (no major audit queries) 10. Component three: # o f MDAs that have 0 Twenty-five: a l l ministries have undergone decentralization oj lcompleted plans for decentralization, contracting- IIfunctions in early 2006 GoR has developed an overall Country Performance provides timely and relevant indicators o f outcomes Assessment Framework for the EDPRS. Most ministries have and impact in the PRSP framework developed detailed results frameworks and recruited M&E I I officers; some have baselines. 21 12. Component three: # of MDAs that use M&E to 0 Five : MINISANTE, MINEDUC, MINAGRI, MINALOC, improve their strategic plans MININFRA 13. Component four: # o f participating MDAs that 0 not monitored. achieve at least 80% of target outputs in their annual plans 14. Component four: # o f participating MDAs that 0 Seven: MINECOFIN, MIFOTRA, MINEDUC, MINISANTE, consistently prepare annual plans that incorporate MININFRA, Parliament and RIAM sector targets and own capacity building priorities within MTEF ceiling 15. Component four: # of participating MDAs that 0 Seven: Office o f the President, MININFRA, MINEDUC, satisfactorily use Agency Performance Fund to MINISANTE, MINAGRI, National University of Rwanda and enhance performance in line with PRSPPRSC MINALOC have benefited from demand driven support. benchmarks 16. Component four: # of "quick wins" proposed, 0 8 Rapid results initiatives completed in 5 approved and implemented institutions(MINEDUC, NUR, MINISANTE, MINAGRI, MINALOC) 17. Component five: # of MDAs that apply new ICT 0 Policy exists (NICI 2006-2010) but standards not yet in place. policy and standards in their new I T installations Planned for 2009. 18. Component five: # of personnel trained in 0 450 trained but data on pass rates not availed. computer applications who achieve satisfactory level of competency 19. Component five: YO target beneficiaries of the of 0% Zero: Shop has not been set up as GoR has outsourced national ICT maintenance shop that acknowledge maintenance to private companies. Indicator needs to be satisfactory resolution of maintenance problems by removed during restructuring. the facility 20. Component five: # of MDAs with internet-based 0 13 out of 14 ministries have websites plus Prime Minister's websites to facilitate access to information on and President's Office, 7 commissions, 4 agencies, 4 provinces government operations and the city of Kigali and a number of other government institutions. 21. Component five: % of I T graduate interns under 0% 100%. First batch o f interns was recruited in February 2007. the project who secure long-term employment All 10 have secured employment (8 in 2007 and 2 remaining in 2 008). Second batch started in Nov 2008. 22. Component three: # o f MDAs with satisfactory 0 Auditor General's report: 9% of audited institutions did not compliance with new national procurement policies have any cases of non compliance with existing public and rules procurement procedures. 22 Annex 2: Revised Detailed Project Description PUBLIC SECTOR CAPACITY BUILDING PROJECT Project Description 1. The PSCBP i s designed to support key government reforms in public financial management, national monitoring and evaluation (M&E) and civil service reform and contributes to public sector reform coordination. Capacity building as understood under the project targets three spheres o f intervention, namely individuals, organizations and institutions, understood as rules o f the game. 2. The implementing entities will be MINECOFIN (Ministry o f Finance and Economic Planning), M I F O T R A (Ministry o f Public Service and Labor) and the Public Sector Capacity Building Secretariat (PSCBS). As part o f implementation o f reforms, all central government institutions, provinces, districts and sectors as well as local training institutions in these reform areas will benefit from project interventions. Components Description 3. The PSCBP will contribute to capacity building o f the public sector in four important ways: Component I : Public Financial Management (US$ 6.61 million) 4. Component 1 seeks to contribute to improved capacity o f budget agencies to manage public finances and reporting. To this end, it will support the implementation o f Rwanda's Integrated Financial Management Information System SmartFMS in all ministries and some local governments, build capacity o f government accountants and auditors through the Rwanda Expertise Scheme for Accountants and Internal Auditors and through support to the creation o f Rwandan/East African professional associations o f public sector accountants/internal auditors/ budget managerdfinance officers etc. and strengthen the capacity o f local training institutions to deliver high quality P F M related training. Similarly, the project will train government procurement officers, support the establishment o f a professional institute for procurement professionals, support the Rwanda Public Procurement Authority to transition from prior reviews to purely regulatory functions and strengthen the capacity o f local training institutions to deliver high quality training in public procurement. The Bank will consider transforming component 1 into a basket funding arrangement once the Government and development partners have agreed upon institutional arrangements and content. Component 2: National Monitoring and Evaluation (US$ 0.69 million) 5. This component will support the implementation o f the Government's national M&E system that monitors progress in achieving Economic Development and Poverty Reduction Strategy (EDPRS) indicators. It would finance training and capacity building events o f government M&E officers, support review o f the current Management 23 Information System at sector levels and develop or customize single software that can be mainstreamed in all sectors to help them in timely reporting. Component 3: Civil Service Reform (US$4.31 million) 6. Component 3 seeks to contribute to improved capacity o f public sector institutions to manage and develop civil servants. To this end, it will support the implementation o f the draft c i v i l service management policy, including amending legal texts impacted by the new policy and dissemination and training in the new policy. It will support the finalization and operationalization o f the Integrated Pay and Personnel Information System (IPPIS) through provision o f technical assistance, equipment and workshops. The project i s supporting functional reviews in 37 public agencies and will also support the implementation o f findings from these reviews and the dissemination o f service delivery directories, providing citizens with the information they need to access government services. 7. Furthermore, the project will strengthen MIFOTRA's internal capacity to I effectively implement and coordinate civil service reforms across government and ensure linkages with related public sector reforms, including training, technical assistance and rapid results initiatives. Component 4: Public Sector Reform Coordination (US$1.32 million) 8. Coordination o f capacity building and reform efforts are vital to the effectiveness o f public sector reforms. The project will therefore support fiduciary staff and an M&E specialist at the PSCBS which Government has put in place to ensure technical coordination o f public sector reforms. The PSCBS will also be supported to issue an "Annual Report on the State o f Capacity Building" in the country. In addition, government has expressed interest in establishing an inter-ministerial public sector reform coordination committee. If and once that mechanism i s established the project will finance a public sector reform coordinator to facilitate the establishment, functioning and strategic direction o f such mechanism. 9. Support provided under the PSCBP will take the form o f training, workshops, technical assistance and related equipment. 24 Annex 3a: Original Allocation by Component & List o f Ongoing Contracts PUBLIC SECTOR CAPACITY BUILDING PROJECT Original Components Original AIlocation 1. Coordination of the MSCBP 4,600,000 of which Onpoinp contract^:^ 616,037 (a) Upgrading MSCBP Website h Content 21,800 18,800 3,000 Management (6) MSCBP StaffContract h Oper. Costs(Sa1aries h 84,9 76 14,991 69,985 beneflts) (c) MSCBP Oper. Costs (telephone, insurance, 450,761 439,694 11.067 translation etc.) (4 Staff Development HIDA 58,500 4,672 53,828 I of which OnpoinP Contracts:' I 1,302,439 108,948 1,354,496 (a) Renovation and extension o training Space at f 297,420 108,948 197,491 HAM Of which Activities at Contract Negotiation: 1,157,005 1,157,005 (a) Twinning o H A M with MSM (Netherlands) f 800,000 800,000 (5) Development o a long term remuneration policy f 196,000 196,000 (MIFOTRA) (c) Employer Graduate tracer studies for NUR 91,400 91,400 I 69,605 295,360 1,37 1,377 (a) Development o Baseline Data h establishment f 94,060 197,649 o a Database at MININFRA f (b) Institutional h Functional Review o 37public f 524.I 7 3 Commissions h Agencies (c) Finalize the development o Citizen Guides f 78,082 341,603 (4 P F M Reform Coordinator 64,I73 66,047 (e) Review formula h design guideline forflscal 59,045 I,905 transfers from MINECOFIN to Districts Of which Activities at Contract Nepotiation: (a) Recruitment o a Civil Service Reform advisor at f 240,000 240,000 MTFOTRA ' Ongoing contracts & contracts under negotiation will be implementedby MINECOFIN Ongoing contracts & contracts under negotiation will be implementedby MINECOFIN Ongoing contracts & contracts under negotiation will be implemented by MIFOTRA 25 4. Enhanced Agency Performance 4,400,000 984,799 of which Ongoing Contractd 1,7 18,039 501,841 1,032,436 (a) Training Program for Parliament 638,224 63,817 5 74,407 (b) Comms. Strategv & secure equipts.for 58,815 43,267 15,548 Parliament (balance) (c) Support to 2 Tech. Advisorsfor SPU/O@ce o the f 951,000 394.757 556,243 President of which at Contract Negotiation: 70,000 124,403 (a) Strategic and business plan for ORINFOR 70,000 70,000 (b) Rapid Results Phase I (Balance) 54,403 (a) Support RITA/RDB to review an develop ICT 39,840 3 7,029 2,811 Standards & Guidelinesfor Government institutions (b) ICT Training o Civil Servants (ICDL) f 57,463 40,701 16,762 (c) Specialized Training o ICTprofessional f 20,144 I I,788 8,366 (d) ICT Employment Fund (ICT interns) 125,632 104,699 20,934 GRANDTOTAL I I 20,000,000 I I 7,067,011 1 I 12,932,989 Annex 3b: Original Allocation & Status o f Disbursements/Commitments Across Original Components 3. Cross-Cutting Public Sector 5.10 2.94 2.16 Reforms 4. Enhanced Agency Performance 4.40 0.98 3.41 5. I C T 1.70 0.56 1.13 Ongoing contracts & contracts under negotiation will be implemented by PSCBS 9 Ongoing contracts will be implemented by PSCBS 26 Annex 3c: Proposed Revised Allocation o f Funds Across Restructured Disbursement Categories 100%of foreign expenditures (1)Goods and works under Original Project and 90% of local exPenditures (2) Consultants' services including audits 100%of foreign expenditures under Original Project 3,000,000 and 85% of local exoenditures (3) Training under original Proiect 740,000 I 100 (4) Ooerating Costs under Original Proiect (5) Refunding of Project Preparation Advances (6) Goods, works, consultants' services (including audits), Training, and Operating Costs under Parts 1and 2 of the Proiect 3,700,000 100 (7) Goods, works, consultants' services (including audits), Training, and Operating Costs under Part 3 of the Project 2,420,000 100 (8) Goods, works, consultants' services (including audits), Training, and Operating Costs under Part 4 of the Proiect ~ 2,470,000 100 (9) Unallocated 270,000 100 Total 13,700,000 27 Annex 4: Revised Implementation Arrangements PUBLIC SECTOR CAPACITY BUILDING PROJECT 1. . The proposed implementation arrangements comprise three implementing entities. The Ministry o f Finance and Economic Planning (MINECOFIN) will be in charge o f component 1 on Public Financial Management Reforms and component 2 on national Monitoring and Evaluation. The Bank will consider transforming component 1 into a basket funding arrangement once the Government and development partners have agreed upon institutional . arrangements and content; The Ministry o f Public Service and Labor (MIFOTRA) would be in charge o f . component 3 on C i v i l Service Reforms; The Public Sector Capacity Building Secretariat would be in charge o f component 4, public sector reform coordination. 2. Each implementing institution would be fully accountable to IDA for the funds allocated to them, including: Implementation (including drafting TOR, managing consultants, applying outputs towards reforms) Carrying out procurement (including preparing procurement plans and submitting them to IDA for no objection) Ensuring financial management (maintaining their separate account; submitting FMRs directly to IDA) Preparing annual work plans and submit to IDA for no objection Preparing annual reports and monitoring the results indicators related to their component Provide occasional updates to IDA as might be required during project implementation Policy dialogue with WB and other DPs Coordinating D P support to their CSRBFWnational M&E reform agendas 3. While the P F M Steering Committee already exists, the project would support the establishment o f the CSR Steering Committee at MIFOTRA. This process will be embedded in the development o f a vision and strategic framework for CSR, a consultancy that i s ongoing and expected to be completed in December 2009. 4. The Technical Steering Committee for Public Sector Capacity Building, supported by an office, for Public Sector Capacity Building would assume the following . functions with regards to PSCBP: . Resolve policy implementation differences across PFM, CSR and National M&E Enable exchange o f information, experience and best practice. Issue "Annual Report on State o f Capacity Building in Rwanda" 28 . . Review aggregate annual work plans and budget for consistency, overlaps or synergies. . Prepare/compile annual report including aggregate (but not produce except for those data on component 4) M&E and financial data and submit it to IDA Provide coaching support to staff recruited at MIFOTRA and MINECOFIN for monitoring and evaluation, financial management and procurement aspects o f the project. Organizational Chart: MIFO'I'RA MINECOFIN Civil Service Reform Nationai M&E 29 Annex 5: Revised Financial Management and Disbursements Arrangement PUBLIC SECTOR CAPACITY BUILDING PROJECT EXECUTIVE SUMMARY 1. This report i s a record o f the results o f the assessment o f the financial management (FM) arrangements o f the restructured Rwanda Public Sector Capacity Building Project (PSCBP) PO66386 (Cr. 3955) in response to concerns o f a low disbursement rate and a changed institutional environment for project implementation. 2. The objective o f the assessment i s to determine whether: (a) the financial management u n i t s o f the implementing institutions have adequate financial management arrangements to ensure funds will be used for purposes intended in an efficient and economical way; (b) the implementing institutions financial reports will be prepared in an accurate, reliable and timely manner; (c) arrangements exist for an independent audit o f the sources and uses o f funds; and (d) that the implementing institutions' assets funded with the PSCBP funding will be safeguarded. 3. The FM assessment was carried out for MINECOFIN and MIFOTRA in accordance with the Financial Management Practices Manual issued by the Financial Management Sector Board on April, 2009. ISSUES COUNTRY 4. The Country Financial Accountability Assessment (CFAA) prepared in 2005 documented the evaluation o f the Public Financial Management (PFM) environment in Rwanda. It revealed that despite continuing weaknesses in the P F M system, the Government has made tremendous strides towards improving accountability. The adoption o f the Organic Budget L a w (OBL) and o f accompanying financial instructions and continuing efforts to adapt Government's institutional arrangements are some o f the tokens o f government resolve to strengthen P F M in the country. There i s evidence o f government action to address issues identified in previous reports. The budget preparation process has been strengthened with the introduction o f the MTEF. The process is much more structured, with increased levels o f stakeholder participation, particularly o f civil society and development partners. The achievements culminated in the preparation o f the first set o f consolidated financial statements for the year ended 2006 and subsequently those o f 2007 which lead to a comprehensive review by the Office o f the Auditor General o f the consolidated financial statements for the year ended 2006 and those o f 2007 presented to parliament in February 2009. Inadequate support o f expenditure, non compliance with the reporting requirement o f the OBL and poor preparation o f financial reports s t i l l remained the significant shortcomings in most entities audited and hence the underlying weaknesses in PFM. 5. Notwithstanding the recent progress, continuing weaknesses in the financial accounting and auditing systems pose a major fiduciary risk. The biggest challenge facing Government i s the severe human resource capacity constraint. The ability to attract 30 and retain technically trained and qualified financial management personnel i s central to the sustainability o f P F M reforms. 6. The Government has adopted a number o f measures to address the shortcomings indicated above. These mainly center on the creation o f suitable capacity to implement the provisions o f the new legal and regulatory framework, ensuring the availability o f sufficient guidance to P F M personnel, and commencing the regular preparation o f financial statements. The Government has taken measures to enhance the procedures for budget preparation (strengthening the alignment o f budgets with strategies) and the control over i t s treasury resources. The Government carried out a needs assessment that identified the financial management skills required in government, including accountants and internal auditors. The Government has embarked o n a recruitment exercise to fill the vacancies in this area. Workshops have been conducted for the existing personnel and programs for annual refresher courses have been suggested in the P F M reforms. The roles o f the audit institutions have been clarified to remove previously existing redundancies. The Government has adopted International Public Sector Accounting Standards for accounting and financial reporting. RISK ASSESSMENT D MITIGATION AN 7. The Risk Assessment and Mitigation tables below show the results o f the risk assessment from the Risk Rating Summary. These identify the key risks that the implementing institutions may face in achieving the strategic objectives and provide a basis for determining how they should be addressed. 31 0 z s E 2 N m n n n 3 L E E vr d m m z E 4 4 2 2 7 2 B B A d m B n 3: cn E 3 1, - d c vl m cr 0 3: 0 0 Z z; E E E 3: z z E - cdm 0 0 Q) E % cd 0 3 'T n Financial Management Action Plan 8. The action plan below indicates the actions to be taken by the implementing institutions to strengthen their financial management arrangement and the dates that they are due for completion. Action Date due by Responsibfe 1 Recruit an accountant for the implementation t o November 30,2009 MIFOTRA support the existing weak capacity in the Finance (now being fmalized) Directorates in both Ministries 2 Open a designated account to receive IDA funds December 30,2009 MINECOFIN under the PSCBP funding at the national Bank o f Rwanda. Obtain a letter from the Office o f the Auditor Within one month after MINECOFIN/MIFOTRA/ ~ 3 General to provide a single opinion o n the effectiveness o f the PSCBS implementing institutions designated accounts and amendment statements o f expenditures or appoint other satisfactory external auditors for audits o f the - Project financial statements. 4 Revise and adopt as such the Financial first draft was PSCBS, in consultation Management Annex o f the Program Operations submitted to the Bank with M I N E C O F I N and Manual by November 30,2009 MIFOTRA (Condition o f effectiveness o f - amendment): 5 Fill the vacant post o f FM Specialist who will also December 3 1,2009 PSCBS provide coaching support to accountants (process already started) INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS 9. The proposed implementation arrangements comprise three implementing entities. M I F O T R A would be in charge o f CSR; MINECOFIN o f P F M and national M&E reforms; and the Public Sector Capacity Building Secretariat in charge o f coordination. Each implementing institution would be fully accountable to IDA for the funds allocated to them and will have implementation and financial reporting responsibilities. BUDGETINGARRANGEMENTS 10. The budgeting arrangements are documented in the financial instructions developed alongside the Organic Budget L a w issued by M I N E C O F I N in 2007. Budget analysis will be conducted to ensure budget variances are addressed in an adequate and timely manner. ACCOUNTINGARRANGEMENTS Books o f Accounts 11. Adequate books o f accounts which shall include ledgers, journals and the various registers will be maintained by the FM Specialist dedicated to PSCBS. The accounting 38 system documented in the financial instructions developed alongside the Organic Budget L a w issued by M I N E C O F I N in 2007 will be used to track, record, analyze and summarize the financial transactions o f all implementing institutions. The implementing institutions' accounts will be prepared o n a cash basis in accordance with International Public Sector Accounting Standards (IPSAS), the amended credit agreement, and the laws and regulations in Rwanda. The accounting systems will allow for the proper recording o f project's financial transactions, including the allocation o f expenditures in accordance with i t s components, disbursement categories, and sources o f funds. Appropriate controls over the preparation and approval o f transactions should be put in place to ensure that all transactions are correctly made, recorded, and reported upon. Staffing arrangements 12. The financial management units (directorates) will be strengthened by recruiting an accountant for M I N E C O F I N and M I F O T R A while the PSCBS will fill the vacant post o f FM Specialist who will also provide coaching support to accountants at M I N E C O F I N and MIFOTRA. They will report to the respective steering committees within the institutions. The Director o f Finance o f each implementing agency will maintain the responsibility for the preparation and submission o f the un-audited Interim Financial Reports (IFR) to the World Bank within 45 days from the end o f the quarter in the formats prescribed by the World Bank. 13. The key staff members identified to support the implementation arrangement that will account for the Credit funds will include:- 0 The executive secretary o f the PSCBS assisted by i t s Technical Steering Committee, 0 The Finance Director o f the Implementing institutions 0 The accountants Information systems Both implementing institutions will continue to use SAGE PASTEL software to maintain i t s books o f accounts. The software has been successfully implemented by GOR as a stop gap measure before the implementation o f the Integrated Financial Management Information System while the Secretariat will continue to use Tompro-accounting systems. MONITORING REPORTING FINANCIAL AND Accounting and Reportinghnterim Financial Reports: 14. To enhance financial reporting, each implementing institution will be responsible for the preparation o f quarterly un-audited Interim Financial Reports (IFR) submitted to the World Bank within 45 days from the end quarter being reported. This i s a departure from the previous reporting arrangement where PSCBP was responsible for the 39 consolidated reporting o f the credit and where weakness attributed to high staff turnover had hampered adequate reporting arrangements. All the implementing institutions have agreed o n the formats, content, and frequency prescribed by the World Bank. AUDIT ARRANGEMENTS 15. Human Resources and Institutional Capacity Development Agency (HIDA) has maintained to date a satisfactory Audit Reporting compliance in accordance with the provision o f section 4.01 (b) (ii) f the financial covenants o f the D C A . However, o following i t s dissolution and subsequent removal as the coordinating agency in the Development Credit Agreement (DCA); and the transfer implementation responsibilities for P F M Reforms and national Monitoring and Evaluation (M&E) to MINECOFIN and for CSR to MIFOTRA, to increase ownership for implementation o f reforms; each implementing institutions will be responsible for the audit arrangements o f IDA funds. They shall separately obtain a consent letter o f audit from the Office o f the Auditor General to conduct the audit or appoint other satisfactory external auditors for audits o f the Project financial statements within a month o f effectiveness. An annual audit report including a management report will be submitted to the IDA within six months following the end o f each financial year. The Auditor General will provide a single opinion o n the implementing institutions designated accounts and statements o f expenditures. The AG will be required to carry out a comprehensive review o f the implementing institutions internal control procedures and provide a management report outlining any recommendations for their improvement. Terms o f Reference containing the audit scope to ensure the efficient use o f funds for intended purpose and state whether the audit has been conducted in accordance with International Standards in Auditing has been agreed with the implementing institutions. INTERNAL CONTROL A D INTERNAL AUDIT N Internal Controls 16. The implementing institutions internal controls are documented in the financial instructions developed alongside the Organic Budget L a w issued by M I N E C O F I N in 2007. These constitute basic principles designed to ensure that the accounting records are complete, relevant and reliable and that accounting practices are followed consistently. They will be used by: (i) to assess the acceptability o f the accounting, reporting and IDA Internal Control Systems under the implementing institutions; (ii) staff as a reference manual; and (iii) the auditors to assess their accounting systems and controls and in by designing specific audit procedures. 17. Specific aspects to be covered in the Financial Management manual include: (i) flow o f funds; (ii) i i accounting system (including financial and accounting policies; ( i ) centers for maintenance o f accounting records, Chart o f Accounts, formats o f books and records, accounting and financial procedures); (iv) procedures for authorization o f transactions, budgeting, and financial forecasting; (v) financial reporting (including 40 formats o f reports, linkages with Chart o f Accounts and procedures for reviewing financial information); (vi) auditing arrangements; and (vii) aspects o f human resources. Internal Auditor 18. Internal auditors, staff o f the Chief Internal Audit office participating in capacity building activities outlined in the PFM strategy will conduct reviews which will include ex post verification o f expenditure eligibility, as well as physical inspection o f works and goods acquired by the implementing institutions. The findings and recommendations of the Internal Auditors will be used to improve its implementation in areas related to financial management and procurement. Internal audits will be carried out in accordance with the Internal Audit Charter published in June 2008, which lays down internationally accepted audit standards. Audits are performed on the basis o f an agreed six months action plan. Funds Flow: Disbursements arrangements and methods 19. Following the dissolution and subsequent removal o f HIDA as the coordinating agency in the Development Credit Agreement (DCA), and the transfer o f implementation responsibilities for PFM Reforms and national Monitoring and Evaluation (M&E) to MINECOFIN and for CSR to MIFOTRA, to increase ownership for implementation of reforms, each implementing institution will its own DA, thus the restructuring would increase the number o f DAs from one to three. Each implementing institution will receive disbursements from PSCBP Funds on the basis o f incurred eligible expenditures (transaction-based disbursements). Upon effectiveness o f the amended Credit agreement, an initial advance ("Advance" method) will be disbursed from the proceeds o f the Credit and will be deposited into Designated Accounts (DA) operated by each implementing institution departing from the single designated account held under HIDA to expedite project implementation. Actual expenditures will be reimbursed ("Reimbursement" method) through submission o f Withdrawal Applications (at least monthly) supported by Statements o f Expenditures (SOE). The implementing institutions will also be allowed to use the Direct Payment method, whereby payments may be made directly to third parties (e.g. a supplier, contractor, and consultant) at the Recipient's request. They may also use as a disbursement method for withdrawing proceeds o f the Credit the Special Commitment method. Under this method, payments may be made to third parties for eligible expenditures under special commitment entered into, in writing, at the implementing institutions' request and on terms and conditions agreed with IDA. Types o Supporting Documentation f 20. Disbursements will be supported with: (i) Statement o f Expenditures (SOE) summarizing eligible expenditures paid during a stated period for amounts below the SOE documentation threshold specified in the Disbursement Letter; and (ii) records evidencing eligible expenditures (e.g., copies o f receipts, supplier invoices) for all other 41 amounts. In all cases, the implementing institutions will be responsible for retaining the original documents evidencing eligible expenditures and making them available for audit or inspection. 21. The Designated Account (DA) ceiling will be established by the Project Disbursement Letter assuring enough cash-flow to permit normal Project operation 22. The accounts signatories will be documented in the disbursement letter. Authorized signatories for withdrawal applications will be designated by the M I N E C O F I N in an Authorized Signatory Letter. FLOW FUNDS CHART IDA M I N E C O F I N segregated Designated Account at BNR at's DA denominated in U S $ Public Sector Reform Coordination CONCLUSION OF THE ASSESSMENT 23. The Financial Management arrangement above indicates that they satisfy the Bank's minimum requirements under O P B P 10.02. The implementing institutions will ensure the FM action plan i s implemented by the dates stipulated in this annex as part o f strengthening their financial arrangements to provide reasonable assurance that the funds will be used for the intended purpose. IMPLEMENTATION SUPPORT PLAN 24. Implementation support missions will be conducted every year in line with the risk rating for each implementing institutions and based o n the mitigation factors in the design o f the revised Financial Management Assessment (FMA). The objective o f the Implementation support missions will be to ensure that strong financial management 42 systems are maintained for the Implementing Institutions. Reviews will be carried out regularly to ensure that expenditures incurred by them remain eligible. The Implementation Status and Results Report (ISR) for the implementing Institutions will include a Financial Management rating for the FM component and will be arrived at by the Financial Management Specialist after an appropriate review. 43 Annex 6: Revised Procurement Arrangements PUBLIC SECTOR CAPACITY BUILDING PROJECT Procurement Environment 1. A Country Procurement Issues Paper (CPIP) was prepared for Rwanda in June 2004. The main recommendations made in the CPIP were incorporated in an action plan for procurement reform, which was discussed with and adopted by the Government o f Rwanda (GOR). Although GOR has followed acceptable procurement practices under the National Tender Board (NTB), the legal, regulatory, and institutional frameworks need to be modernized to bring the national procurement system up to international standards as developed by OECD-DAC. Some actions that have already been undertaken to this end include the following: (a) a new procurement code was adopted in April 2007; (b) the legal text establishing the Rwanda Public Procurement Authority (RPPA) has been adopted and was published in March 2008; and (c) templates for standard bidding documents were adopted and published on RPPA website. However, other actions are either ongoing or not yet completed such as: (a) the implementation o f the procurement code which i s not yet complete; (b) some institutions that were created under the procurement code have not yet been established; (c) audit for better control o f the procurement system has not yet been implemented; (d) members o f appeals mechanisms have been appointed but not yet trained in procurement; and (e) procurement guides and manuals have not yet been developed and disseminated. Since there are a number o f outstanding actions to be undertaken, the procurement risk i s rated substantial. Procurement Procedures 2. The restructured project will follow procurement procedures in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" published in May 2004 revised in October 1'` 2006; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" published in M a y 2004 revised in October 1'` 2006, and the provisions stipulated in the Legal Agreement. The general description o f various items under different expenditure categories are described below. The procurement plan will describe the procurement methods or consultant selection methods to be used, the need for prequalification, estimated costs, prior review requirements, and time frame o f the various steps as agreed between GOR and the Bank. The Procurement Plan will be updated at least semi-annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 3. Procurement o Goods: Goods procured under the restructured project would f include office equipment/furniture, computing equipment and software. Goods will be procured using the following procurement methods: (a) international competitive bidding for contracts estimated to cost more than US$300,000 equivalent; (b) national competitive bidding for contracts o f valued at more than US$30,000 equivalent but less than US$300,000 equivalent; and (c) shopping for contracts estimated to cost less than US$30,000 equivalent. In situations and circumstances that are in compliance with the provisions o f paragraph 3.6 o f the Guidelines for procurement, direct contracting may be used with Bank prior review. 44 4. Procurement o non-consulting services. Non-consulting services such as f production and dissemination o f information through radio, print and television will follow procurement procedures acceptable to IDA. These activities will be described in the Operations Manual as reviewed and found acceptable by IDA. 5. Selection o consultants. f Consulting services to be procured under the restructured project include consultancies for: (a) improvement o f the capacity o f budget agencies in managing public finances and reporting; (b) development and establishment o f a national monitoring and evaluation (M&E) system; (c) improvement o f the capacity o f public sector institutions to manage and develop civil servants; and (d) support to the coordination functions o f the Public Sector Capacity Building Secretariat (PSCBS). 6. Contracts for consulting assignments estimated to cost US$200,000 equivalent or more would be procured through Quality and Cost Based Selection (QCBS). However, contracts for services estimated to cost less than US$ 100,000 equivalent per contract may be procured under contracts based on Consultants Qualifications (CQS) in accordance with the provisions o f paragraphs 3.1 and 3.7 o f the Consultant Guidelines. 7. Financial and technical audits estimated to cost less than US$lOO,OOO equivalent may be procured under Least Cost Selection (LCS) in accordance with the provisions o f 3.1 and 3.6 o f the Consultant Guidelines. Consultant for services meeting the requirements o f Section V o f the Consultant Guidelines may be selected under the provisions for the Selection o f Individual Consultants (IC). 8. Single source selection may be used exceptionally in accordance with paragraph 3.9 to 3.12 o f the Consultant Guidelines. 9. To ensure that priority i s given to the identification o f suitable and qualified national consultants, short-lists for contracts estimated under US$ 100,000 equivalent may be comprised entirely o f national consultants (in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines), provided that a sufficient number o f qualified f i r m s (at least six) are available at competitive costs. 10. Training, workshops, conference attendance and study tours would be carried out on the basis o f an approved annual work program that would identify the general framework o f training or similar activities for the year, including the nature o f traininghtudy tours/workshops, number o f participants, and estimated cost. 11. Operating costs. Operating costs to be funded under the restructured project include the non-consulting services plus per diem, implementation support cost, and salaries o f locally recruited consultants. These costs shall exclude salaries, bonuses, and fees for government civil servants. These expenses would be procured using procedures acceptable to IDA and would be described in the Operations Manual. 12. Advertising. Procedures for placing advertisements will follow the Guidelines Selection and Employment o f Consultants by World Bank Borrowers described in paragraph. 2.5 and the Guidelines: Procurement under IBRD Loans and IDA Credits. 45 13. Publication o results and debriejing. On-line publication o f contract awards (for f N example, through dgMarket, U Development Business, and/or Client Connection) will be required for all ICB, NCB, Direct Contracting, and Selection o f Consultants for contracts exceeding US$lOO,OOO or equivalent. With regard to ICB and high-value consulting contracts, GOR will be required to assure publication o f contract awards as soon as the World Bank has issued its "no objection" notice to the recommended award. With regard to Direct Contracting and NCB, publication o f contract awards may be done in aggregate form on a quarterly basis. All consultants competing for the assignment involving the submission o f separate technical and financial proposals, irrespective o f the estimated contract value, should be informed o f the result o f the technical evaluation (number o f points that each firm received) before the opening o f the financial proposals. GOR will be required to offer debriefings to unsuccessful bidders and consultants, should such a debriefing be requested. 14. Fraud and corruption. The procuring entity as well as bidders, suppliers, and contractors shall observe the highest standard o f ethics during the procurement and execution o f contracts financed under the restructured project, in accordance with paragraphs 1.14 and 1.15 o f the Procurement Guidelines; paragraphs 1.22 and 1.23 o f the Consultants' Guidelines and with the Guidelines on Preventing and Combating Fraud and Corruption in,Projects Financed by IBRD loans and IDA credits and Grants dated October 15,2006. 15. Procurement implementation arrangement. The roles and responsibilities for implementation o f procurement activities will be described in detail in the revised procurement annex o f the Program Operations Manual (POM). The roles and responsibilities in the procurement o f the institutions to be involved in coordination and implementation o f the restructured project are described below: 16. The Public Sector Capacity Building Secretariat (PSCBS) will be responsible for: (i)ensuring that the implementation described in the O M are revised and approved by the Public Sector Capacity Building Technical Steering Committee; (ii) ensuring that the implementation guidelines are fully disseminated and understood by ministries, agencies and commissions (MACs) receiving project funds through skills strengthening and acquisition o f required systems; (iii) gathering and consolidating approved annual procurement plans o f approved action plans, (iv) preparing the GPN and its annual updates and (v) ensuring that independent technical audits o f the program, including procurement reviews, are conducted on a regular basis. 17. Implementing entities will be responsible in managing procurement o f contracts for activities in the annual program that have been approved by their respective Steering Committees. Participating MACs will be responsible for: (i) preparing and updating their annual procurement plans and transmitting the same for clearance to IDA; (ii) drafting and publishing Specific Procurement Notices (SPNs); ( i ) i i drafting bidding documents; (iv) issuing and evaluating bids and proposals; (v) requesting RPPA "no objection" when required; (vi) requesting IDA "no objection" when required (PSCBS will review at least during the first year o f implementation); (vii) drafting contracts and ensuring that contracts are managed properly; (viii) keeping proper filing systems; (ix) facilitating the 46 execution o f independent financial and technical audits and post reviews that are conducted by the RPPA, Office o f the Auditor General and IDA. 18. Public Sector Capacity Building Secretariat (PSCBS). The PSCBP will continue to finance one Procurement Management Specialist at the PSCBS - the Specialist who i s currently managing procurement activities at HIDA. She has substantive experience and i s familiar with the agreed procurement procedures to be followed under the restructured project. The Procurement Management Specialist will be charged with handling procurement activities at the PSCBS but more importantly, with coaching and mentoring procurement staff at MIFOTRA and MINECOFIN. 19. A procurement capacity assessment was conducted for MINECOFIN and MIFOTRA. The findings o f the procurement capacity assessment that was conducted around the end o f calendar year 2008 for MINECOFIN are described below: Although the technical secretariat has been established, the existing structure o f MINECOFIN does not allow for an efficient procurement process to evolve particularly with respect to procedures related to selection o f consulting firms. The procurement unit handles many different tasks and the existing staff are not very experienced. The unit handles mostly simple procurement activities such as shopping. Furthermore, according to the letter issued by the Minister o f Public Service and Labor, the post o f procurement officer should be added to the organizational charter o f each Public Service. However, the current assessment revealed that this has not yet been implemented by MINECOFIN. The implication i s that the procurement function experiences a number o f limitations as described above. The procurement officer to be housed at MINECOFIN for the project i s under recruitment. Although existing personnel have attended a logistics course at RIAM, it will take time before they can use the knowledge acquired. As such, it i s important to finalize the recruitment o f the procurement officer as soon as possible; The required record-keeping and filing system and adequate expertise to manage it are not yet in place; The existing capacity to meet the Bank's procurement reporting requirements and adequate procurement planning practices and monitoring control systems are limited; and 20. The procurement capacity o f MINECOFIN will be re-assessed as soon as the additional procurement officer i s o n board and fully functional. 21. The findings o f the procurement capacity assessment that was conducted on November 28,2008 for MIFOTRA are described below: 47 (i) The C i v i l Service Reform Steering Committee i s not yet in place; (ii) The procurement officer at MIFOTRA to be assigned to the restructured project has limited capacity in handling relatively complex procurement packages such as those in the restructured project. The procurement officer handles simple procurement activities (i.e. shopping) such as arranging venues o f workshops and seminars, hiring I T maintenance companies, buying office stationery, arranging transports, etc. Furthermore, the procurement unit undertakes too many ad hoc tasks. The other procurement personnel also lacks the required experience to handle relatively complex procurement such as the selection o f f i r m s or procurement o f large quantities o f goods that require international competition; ( i ) Although existing personnel have attended a logistics course at RIAM, it will ii take time before they can use the knowledge acquired; (iv) The record-keeping and filing system is fairly adequate and could be effectively utilized with some adjustments; (v) The procurement planning and monitoring control systems at M I F O T R A need some improvement. For example, it was noted that the executed contracts were not in accordance with plans. This could affect their ability in managing procurement activities in the restructured project. In addition, administrative and technical staffs are not fully sensitized o n the importance o f acceptable procurement practices especially with respect to understanding the importance o f advance planning and conducting a transparent procurement process. 22. Since the existing structure o f M I F O T R A i s not completely adequate the capacity will be re-assessed after a procurement officer and procurement assistant have been recruited. 23. The overall procurement risk assessment rating i s "substantial". 24. The table below summarizes the actions that need to be taken by GOR: 48 Procurement Action Plan Responsible Action to be undertaken Time-frame body Revise and adopt as such the Procurement Annex o f the Program First draft was Operations Manual, and update the procurement roles and MINECOFIN submitted to responsibilities based on the new institutional set up. The required the Bank by Standard Bidding Documents (SBDs) should also be attached to the PSCBS November 30, manual. 2009 Put in place in each institution a procurement structure headed by an experienced person and supported by a procurement officer and MINECOFIN December a procurement assistant. Provide sufficient autonomy to the MIFOTRA 2009 procurement function. Done for MINECOFIN, Finalize recruitment o f procurement officers and procurement MINECOFIN an in the assistants to be located in MINECOFIN and MIFOTRA MIFOTRA process o f being finalized for MIFOTRA Enforce Article 13 o f the Procurement Law which requires MIFOTRA submission by budget agencies to MINECOFIN o f procurement continuous plans with budget requests. MINECOFIN Contracts related to recurrent activities (Le. hiring venue and seminars facilities, maintenance for I T equipment, office stationery etc.) at MIFOTRA, MINECOFIN and the PSCBS should be MIFOTRA continuous organized as a batch. This would allow effective competition and also reduce transaction costs. Maintain the appropriate procurement capacity o f the implementing MINECOFIN continuous agencies. PSCBS Procurement Plan 25. The agreed procurement plan which provides basis for the procurement methods i s available at the PSCBS in Kigali. It will be available in the project's database and in the Bank's external website. The Procurement Plan will continue to be updated in agreement with the Bank Task Team at least semi-annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Bank Prior Review Threshold 26. Goods. Except for other Procurement Plan provisions, all contracts estimated to cost the equivalent o f US$300,000 or more and all direct contracting will be subject to prior review procedures. In addition, the first three contracts each for goods through national competitive bidding and shopping procured by MIFOTRA and MINECOFIN will be subject to prior review procedures to ensure their consistency with the Bank's Guidelines and the Operations Manual. All other contracts will be subject to post review by IDA during implementation support missions and by auditors. 49 27. Consultant services. Except for other Procurement Plan provisions, all terms o f references (TORS) and all single-source selection, regardless o f contract value, will be subject to prior review. Contracts estimated to cost the equivalent o f US$lOO,OOO or more for individuals and contracts estimated to cost US$200,000 or more for firms will be subject to prior review procedures. All other contracts will be subject to post review by IDA during implementation support missions and by auditors during technical audits. Frequency o f Procurement Implementation Support 28. At least two post procurement review implementation support missions and an annual procurement audit would be carried out. 50 Main Activity Timeline Responsibility Operationalize SmartFMS User Group Jan - March MINECOFIN 2010 Organize exposure visits, strengthen M&E function and enhance skills Jan - Apr MINECOFIN 2010 Validate and disseminate pay and retentionstrategy Jan - Jun MIFOTRA 2010 Amend the Legal Framework Feb - Jul MIFOTRA Support Sectors to develop and operationalize MIS system to regularly March - Oct MINECOFIN ~~~ ~ monitor and evaluate their strategic plans and generate data to report on 20 10 the National targets spelled out in the EDPRS. Support to MINECOFIN to complete the establishment of a National Jan. 2010 - MINECOFIN M&E system that monitors progress in achieving EDPRS indicators. Aug 20 10 Disseminate the policy to stakeholders Jul - Sept MIFOTRA 2010 Complete functional reviews in the remaining 37 public agencies Adjust Aug 2009 - MIFOTRA structures and staffing levels of respective public agencies April 20 10 Develop public service management policy Oct 2009 - MIFOTRA I Jan 2010 Develop Citizens' service delivery directories 1 Sep2009- 1 MIFOTRA, I March2010 1 MINALOC Strengthening internal capacity at MIFOTRA to effectively coordinate I Jul2009 - Jun I MIFOTRA civil service reforms 2010 Develop and deploy the IPPIS Aug 2009 - MIFOTRA Oct 201 1