Public Disclosure Copy The World Bank Implementation Status & Results Report Public Finance Modernization Project (P090389) Public Finance Modernization Project (P090389) EUROPE AND CENTRAL ASIA | Ukraine | Public Sector Governance Global Practice | IBRD/IDA | Specific Investment Loan | FY 2008 | Seq No: 15 | ARCHIVED on 30-Dec-2014 | ISR17803 | Implementing Agencies: Key Dates Key Project Dates Board Approval date:08-Jan-2008 Effectiveness Date:23-Oct-2008 Planned Mid Term Review Date:19-Mar-2012 Actual Mid-Term Review Date:19-Mar-2012 Original Closing Date:30-Jun-2013 Revised Closing Date:31-Dec-2014 Project Development Objectives Project Development Objective (from Project Appraisal Document) The objective of the Project is to strengthen public financial management by improving operational efficiency and transparency. Has the Project Development Objective been changed since Board Approval of the Project Objective? No PHRPDODEL Components Name Strengthening Institutional Capacity and Operational Effectiveness:(Cost $2.58 M) Development of an Integrated Public Financial Management System:(Cost $61.20 M) Project Management:(Cost $1.22 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO  Moderately Unsatisfactory  Unsatisfactory Overall Implementation Progress (IP)  Unsatisfactory  Unsatisfactory Overall Risk Rating  --  High Implementation Status and Key Decisions 12/30/2014 Page 1 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Finance Modernization Project (P090389) In January 2014, the Ministry of Finance team completed its evaluation of Stage I bids to develop the PFMS and prepared a shortlist for the ICB4 procurement. This was reviewed by the World Bank team and the OPRC and the shortlist was approved in principle, subject to some additional steps to mitigate implementation risks. However, as a consequence of public unrest in January and February 2014, and the resulting change in government, progress on the procurement of the PFMS system was suspended while the Ministry reviewed its needs in the light of changed economic circumstances and the need for fiscal restraint. In April, the Finance Ministry request a restructuring and partial cancellation of the loan. The Ministry and the World Bank Team then explored a number of options for restructuring the project, including continuation of the procurement process already underway for the new PFMS (ICB4) with reduced scope, and varying levels of investment to upgrade the existing Treasury system and the associated IT infrastructure. Discussions took place by video conference and during these discussions the Government explained that substantial investments had already been made to upgrade the Treasury system, reducing the need for the new PFMS. Given the significant new investment in the Treasury system and the lack of consensus to support the PFMS, the Bank and Government concurred that the Government's best course of action would be to close the project early, to cancel the unused portion of the loan and to identify new activities to support improved PFM. On October 3rd, the Ministry wrote to the Bank requesting cancellation of the unused part of the loan and of the ICB4 procurement process, and to bring forward the project closing date to December 31st 2014. An amendment to the Loan agreement was prepared and signed on October 31st 2014. The project reports (IFRs) submitted regularly in 2013 - 2014, were reviewed and found acceptable. Budget allocation for 2014 is available, and even exceeds planned project disbursements. The project Designated and transit accounts are functioning normally, signature cards are available. All project applications have been processed in full during the period under review. Project audit report covering 2012 has been submitted on time before June 30, 2013. Private auditors BDO issued unqualified audit report, and did not note any weaknesses in the internal controls for implementation of the Project. Audit of 2013 project financial statements were carried out by the Accounting Chamber, and were submitted with some delay in September 2014. The audit report was also unqualified. The contract with BDO is being extended to cover the final project audit covering the period from January 1, 2014 until the new application deadline for this project (or until the date of last transaction). The Ministry of Finance requested a partial cancellation of the loan, on the basis that the proposed automated Public Finance Management System could not be successfully implemented. The Ministry requested the Bank to cancel part of the loan in the amount of $46,056,830, and to bring forward the project closing date to December 31st 2014. An amendment to the Loan Agreement, to this effect, was signed on October 31st, 2014. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance  --  --  High Macroeconomic  --  --  High Sector Strategies and Policies  --  --  Substantial Technical Design of Project or Program  --  --  High Institutional Capacity for Implementation and  --  --  High 12/30/2014 Page 2 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Finance Modernization Project (P090389) Sustainability Fiduciary  --  --  Moderate Environment and Social  --  --  Moderate Stakeholders  --  --  High Other  --  --  -- Overall  --  --  High Results Project Development Objective Indicators PHINDPDOTBL  Increased strategic alignment of the budget with the public policy priorities . (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target The Draft 2014 State The Draft 2014 State Fully functional Existing budget formulation Budget was developed Budget was developed PFMS in use methodologies are not and based on and based on during the Value conducive for the use of forecasting and forecasting and program planning budgets as a policy program documents, documents, national execution of instrument. national target target programs 2016 budget. programs Date 25-Mar-2008 03-Nov-2014 03-Nov-2014 30-Jun-2015 PHINDPDOTBL  Reduction of 20% in time required to get necessary information for managerial decisions through the use of an integrated managementand information platform. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Minimum of 20% reduction Decision-making in average time processes are delayed for accessing because information is information by Value Not achieved. Not achieved. fragmented among several key decision- systems and cannot be makers as accessed efficiently. measured by follow-up survey. Date 25-Mar-2008 03-Nov-2014 03-Nov-2014 30-Jun-2015 PHINDPDOTBL  Increased transparency and reliability of public sector financial reporting through compliance with international accounting standards and alignment with EU accession requirements. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 12/30/2014 Page 3 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Finance Modernization Project (P090389) National Public Sector accounting is Although the new unified Unified chart of accounting not compliant with ISA or chart of accounts was Value accounts has been standards are EU accession adopted the PFMS is not adopted. in use (via new requirements. operational. PFMS). Date 25-Mar-2008 03-Nov-2014 03-Nov-2014 30-Jun-2015 Overall Comments Intermediate Results Indicators PHINDIRITBL  The local budgets are based on program-target method (PTM) and all relevant budgetary program passports are managed with the new PFMS. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target ompleted. ompleted. Budget 692 local budgets were 692 local budgets were preparation for involved in the involved in the all 692 local Program budgeting at local experiment related to experiment related to budgets is Value budget level is optional the implementation of the implementation of based on PTM, (pilot impl). PBB at the local level PBB at the local level supported by and nearly 42,500 and nearly 42,500 PFMS (about budget programs were budget programs were 20,000 prog). approved. approved. Date 23-Mar-2012 03-Nov-2014 24-Dec-2014 30-Jun-2015 PHINDIRITBL  Budget data and policy assumptions published in greater detail. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target State budget execution performance is Summary proposed budget Budget module of the published in Value and budget execution -- PFMS is not operational. detail from published on the Internet. PFMS database (monthly). Date 25-Mar-2008 03-Nov-2014 24-Dec-2014 30-Jun-2015 12/30/2014 Page 4 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Finance Modernization Project (P090389) PHINDIRITBL  Budget execution: Improving the system of PFM by means of modernizing accounting system in public administration sector. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target PFMS is operational Accounting and financial PFMS is not operational based on new reports not unified in public Value -- to apply the new Chart national administration sector, not of Accounts accounting and aligned with the IAS. reporting standards. Date 25-Mar-2008 03-Nov-2014 24-Dec-2014 30-Jun-2015 PHINDIRITBL  MoF, STSU and SFIU staff, and spending units (SUs) are trained on new legislation & process changes. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Change management and training component + 14 workshops was not implemented for SUs (1,700 MoF staff are not familiar Value -- due to the decision not participants) with new PFM legislation. to go ahead with the + Training of development of the new 1,400 staff. PFMS. Date 23-Mar-2012 25-Oct-2013 24-Dec-2014 30-Jun-2015 PHINDIRITBL  Public Financial Management System (PFMS) established and functioning. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target PFMS system fully PFM systems are not operational. integrated. Government New budget has decided to continue codes and Current PFM information using the current unified chart of Value -- systems are fragmented. Treasury system, and accounts are not to add the additional used in PFMS. functionality offered by Staff and the PFMS. specialist training completed. Date 25-Mar-2008 25-Oct-2013 24-Dec-2014 30-Jun-2015 12/30/2014 Page 5 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Finance Modernization Project (P090389) PHINDIRITBL  MoF, STU and KRU staff trained in PFMS functionality and operations. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target All staff training Value None currently trained. -- None currently trained. completed. Date 25-Mar-2008 25-Oct-2013 24-Dec-2014 30-Jun-2015 PHINDIRITBL  Timely and comprehensive fiscal management reports produced. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Data warehouse is fully operational as a part of integrated Currently financial reports No progress made Value -- PFMS platform are fragmented. under the project for online queries; and timely, comprehensive reporting. Date 25-Mar-2008 25-Oct-2013 24-Dec-2014 30-Jun-2015 Overall Comments Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P090389 IBRD-48820 Effective USD 50.00 3.94 46.06 3.94 0.00 100% P090389 TF-90722 Closed USD 0.23 0.22 0.01 0.23 0.00 105% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P090389 IBRD-48820 Effective 08-Jan-2008 25-Mar-2008 23-Oct-2008 30-Jun-2013 31-Dec-2014 P090389 TF-90722 Closed 21-Sep-2007 21-Sep-2007 21-Sep-2007 30-Jun-2008 31-Oct-2008 12/30/2014 Page 6 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Finance Modernization Project (P090389) Cumulative Disbursements Restructuring History Level Approved on 26-Apr-2012 ,Level Approved on 04-Apr-2013 ,Level 2 Approved on 21-Oct-2014 Related Project(s) There are no related projects. 12/30/2014 Page 7 of 7 Public Disclosure Copy