Document of The World Bank FOR OFFICIAL USE ONLY Report No: 64363 - LR PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 3.20 MILLION (US$5 MILLION EQUIVALENT) TO THE REPUBLIC OF LIBERIA FOR AN INTEGRATED PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT November 18, 2011 Financial Management Core Operations services Africa Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be publicly available in accordance with the Bank’s Policy on Access to Information. CURRENCY EQUIVALENTS (Exchange Rate Effective: November 4, 2011) Currency Unit = Liberian Dollars (LR$) LR$ 72 = US$ 1 US$ 1.59 = SDR 1 FISCAL YEAR July 1 – June 30 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank AFTFM Africa Region Financial Management Team AMP Aid Management Platform ASU Accounting Services Unit ASYCUDA Customs Automated System AWPB Annual Work program and Budget CAATS Computer Aided Audit Techniques CAG Comptroller & Accountant General CAGD Comptroller & Accountant General’s Department CDD Community Driven Development CAS Country Assistance Strategy CDF County Development Fund CF Consolidated Fund CoA Chart of Accounts COFOG Classification of Functions of Government Consolidated Fund CS-DRMS Commonwealth Secretariat Debt Recording & Management System CSA Civil Service Agency CSOs Civil Service Organizations CSRS Civil Service Reform Strategy DFID UK Department for International Development DMC Debt Management Committee DPO Development Policy Operation DPs Development Partners E-ISR Electronic Implementation Status Report EA Environmental Assessment EU European Union ECOWAS Economic Community of West African States EGIRP Economic Governance & Institutional Reform Project FAD Fiscal Affairs Department of the International Monetary Fund FM Financial Management FMOs Financial Management Officers FMTP Financial Management Training Program FORs Fiscal Operations Reports FY Fiscal Year GAC General Auditing Commission GDP Gross Domestic Product GEMAP Governance and Economic Management Assistance Program GEMS United States Governance and Economic Management Support Project GFS Government Financial Statistics GFSM Government Financial Statistics Manual HIPC Highly Indebted Poor Countries HRMIS Human Resource Management Information System IAS Internal Audit Service IBRD International Bank for Reconstruction & Development ICB International Competitive Bidding ICT Information and Communications Technology IDA International Development Association IDF Institutional Development Fund IFMIS Integrated Financial Management Information System IFR Interim Financial Report IMF International Monetary Fund IPFMRP Integrated Public Financial Management Reform Project IPSAS Integrated Public Sector Accounting Standards ITAS Integrated Tax Administration System LIPA Liberia Institute of Public Administration M&As Ministries and Agencies MDTF Multi Donor Trust Fund M&E Monitoring and Evaluation MFAU Macro-Fiscal Analysis Unit MoPEA Ministry of Planning & Economic Affairs MTBF Medium Term Budget Framework MTEF Medium Term Expenditure Framework MTFF Medium Term Macro-Fiscal Framework NCB National Competitive Bidding NCBS National Capacity Building Strategy NDI National Democratic Institute ODI Oversees Development Institute ORAF Operational Risk Assessment Framework NSA Non-State Actors PAC Public Accounts Committee PDO Project Development Objective PEFA Public Expenditure and Financial Accountability Assessment PEMFAR Public Expenditure Management and Financial Accountability Review PFMU Project Financial Management Unit PPC Public Procurement and Concessions PPCC Public Procurement and Concessions Commission PSIP Public Sector Investment Program PTC Project Technical Committee RCU Reform Coordination Unit SAI Supreme Audit Institution Sida Swedish International Development Cooperation Agency SIGTAS Integrated Tax Administration System SOE State-owned Enterprise TAL Technical Assistance Loan TSA Treasury Single Account UNDP United Nations Development Program USAID United States Agency for International Development WAN Wide Area Network WAPPAC West African Association of Public Accounts Committee WB World Bank WDR World Development Report Regional Vice President: Obiageli K. Ezekesili Acting Country Director: Sergiy V Kulyk Country Manager: Ohene Owusu Nyanin Sector Director: Edward Olowo-Okere Sector Manager: Renaud Seligmann Task Team Leader: Ismaila B Ceesay REPUBLIC OF LIBERIA INTEGRATED PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT TABLE OF CONTENTS Page I.  STRATEGIC CONTEXT .................................................................................................1  A.  Country Context ............................................................................................................ 1  B  Sectoral and Institutional Context................................................................................. 3  C  Higher Level Objectives to which the Project Contributes .......................................... 6  II.  PROJECT DEVELOPMENT OBJECTIVES ................................................................7  A.  PDO............................................................................................................................... 7  Project Beneficiaries ........................................................................................................... 8  PDO Level Results Indicators ............................................................................................. 8  III.  PROJECT DESCRIPTION ..............................................................................................9  A.  Project Components ...................................................................................................... 9  B.  Project Financing ........................................................................................................ 18  1.  Lending Instrument ..................................................................................................... 18  2.  Project Cost and Financing ......................................................................................... 19  C.  Lessons Learned and Reflected in the Project Design ................................................ 21  D.  Sequencing of PFM Reform Actions .......................................................................... 22  E.  Governance and Anti-Corruption Action Plan ........................................................... 23  IV.  IMPLEMENTATION .....................................................................................................25  A.  Institutional and Implementation Arrangements ........................................................ 25  B.  Results Monitoring and Evaluation ............................................................................ 26  C.  Sustainability............................................................................................................... 27  V.  KEY RISKS AND MITIGATION MEASURES ..........................................................28  VI.  APPRAISAL SUMMARY ..............................................................................................30  A.  Economic and Financial Analyses .............................................................................. 30  B.  Technical ..................................................................................................................... 30  C.  Financial Management ................................................................................................ 31  D.  Procurement ................................................................................................................ 32  E.  Social (including Safeguards) ..................................................................................... 33  F.  Environment (including Safeguards) .......................................................................... 33  Annex 1: Results Framework and Monitoring .........................................................................34  Annex 2: Detailed Project Description .......................................................................................38  Annex 3: Implementation Arrangements ..................................................................................67  Annex 4: Operational Risk Assessment Framework (ORAF) .................................................81  Annex 5: Implementation Support Plan ....................................................................................84  Annex 6: Institutional Framework for Overall PFM Reforms ...............................................86  Annex 7: Statement of Loans and Credits .................................................................................96  Annex 8: Country at a Glance ....................................................................................................97  PAD DATA SHEET Liberia Integrated Public Financial Management Reform Project PROJECT APPRAISAL DOCUMENT . African Region AFTFM . Basic Information Date: November 4, 2011 Sectors: Central Government Administration (80%), Local Government Administration (20%) Country Director: Sergiy Kulyk Themes: Public Expenditure, Financial Management and Sector Manager: Renaud Seligmann Procurement (75%); Other accountability/anti-corruption Sector Director: Edward Olowo-Okere (20%); Tax policy and administration (5%) Project ID: P127319 Lending Instrument: Technical Assistance EA Category: C (Not Required) Loan (TAL) Team Leader(s): Ismaila B. Ceesay Does the project include any CDD component? No Joint IFC: No . Borrower: Republic of Liberia Responsible Agency: Ministry of Finance Contact: Hon. Augustine Ngafuan Title: Minister of Finance Email: ngafuan@yahoo.com Telephone No.: +231 6578921 / 77792622 . Project Implementation Start Date: March 1, End Date: June 30, 2016 Period: 2012 Expected Effectiveness Date: December 15, 2011 Expected Closing Date: June 30, 2016 . Project Financing Data(US$M) [ ] Loan [ ] Grant [ Other : Co-financing (Grant) [ x ] Credit [ ] Guarantee x ] The credit will be provided on standard IDA credit terms - 40 years maturity with a 10-year grace period. i For Loans/Credits/Others Total Project Cost : U$28.55 million Total Bank Financing : U$ 5 million Total Cofinancing : U$23.55 million Financing Gap : Nil . Financing Source Amount(US$M) BORROWER/RECIPIENT 0.00 IBRD IDA: New 5.00 IDA: Recommitted Others : Co-financing – MDTF - Sida 15.10 MDTF - USAID 3.85 AfBD – Pooled 4.60 Financing Gap 0.00 Total 28.55 . Expected Disbursements (in US$ Million) Fiscal Year 2011/12 2012/13 2013/14 2014/15 2015/16 Annual 3.90 10.00 6.34 4.70 3.61 Cumulative 3.90 13.90 20.24 24.94 28.55 . Project Development Objective(s): “Improved budget coverage, fiscal policy management, financial control, and oversight of government finances of Liberia�. . Components The project has five interrelated components as follows: Component Name: Cost (US$ Millions) Component 1: Enhancing Budget Planning Systems, Coverage and Credibility: The 1.84 objective of this component is to establish comprehensive budget coverage and strengthen fiscal policy and budget management at all levels of government. Component 2: Strengthening PFM Legal Framework, Budget Execution, Accounting 10.26 and Reporting: The objective of this component is to strengthen the legal basis for budget management while ensuring that the budget is executed as planned and the quality of information on fiscal operations is improved for more informed government decision ii making. Component 3: Revenue Mobilization and Administration: The objective of this 5.38 component is to complement efforts aimed at improving the efficiency and integrity of revenue administration in order to increase domestic revenue of central government entities, and to integrate revenue systems within overall PFM. Component 4: Enhancing Transparency and Accountability: The objective of this 6.23 component is to improve transparency and accountability in PFM by increasing the Government’s ability to report on and account for public revenues and expenditures and to strengthen the General Auditing Commission and Legislature, enabling them to execute better their oversight function as assigned under the Liberian Constitution and the PFM Act. Component 5: Program Governance and Project Management1: The objective of this 4.84 component is to provide a robust project and program management function that caters to the needs of integrated coordination and monitoring of the implementation of the program, serve as the enabling component for delivery of PFM human resource capacity, and assure the appropriate sequencing of interventions across the various reform fronts consistent with the criteria in the PFM Reform Strategy. Integrated Public Financial Management Reform Project (Total) 28.55 . Compliance Policy Does the project depart from the CAS in content or in other Yes [ ] No [ x ] significant respects? Does the project require any exceptions from Bank policies? Yes [ ] No [ x ] Have these been approved by Bank management? Yes [ x ] No [ ] Is approval for any policy exception sought from the Board? Yes [ ] No [ x ] Does the project meet the Regional criteria for readiness for Yes [x ] No [ ] implementation? Safeguard Policies Triggered by the Project No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X 1 Includes strengthening of PFM Training School iii Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waters OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X Legal Covenants: Name Recurrent Due date Frequency 1. Effectiveness Conditions No At effectiveness N/A Description of Covenant: Section 5.01. of the FA: The Additional Conditions of Effectiveness consist of the following: (a) The Recipient has prepared the Annual Work Program for the first year of Project implementation, in form and substance satisfactory to the Association. (b) The Trust Fund Grant Agreement has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Recipient to make withdrawals under it (other than the effectiveness of this Agreement) have been fulfilled. 2. Suspension Remedies Yes 1 month after As and when effectiveness Description of Covenant: (a) The co-financing made available by the AfDB has failed to become effective by one month after the effective date. (b) The AfDB has exercised any remedies under its co-financing that materially and adversely affects the successful implementation of the Project. 3. Covenants applicable to project Yes Within 3 months Ongoing implementation of effectiveness Description of Covenant: (a) Section I.A.3 of Schedule 2 to the FA: The Recipient shall establish by no later than three (3) months after the Effective Date, and thereafter maintain throughout the period of Project implementation, a Public Financial Management Technical Committee within the MoF, with mandate, composition and resources satisfactory to the Association, which shall be chaired by the Recipient’s Deputy Minister of Finance (Expenditure), and shall be responsible for the oversight of the technical monitoring and coordination of Project activities. (b) Section I.A.4 of Schedule 2 to the FA: The Recipient shall, no later than three (3) months after the Effective Date, employ, in accordance with the provisions of Section III of this Schedule, and appoint to the PFM RCU, a procurement specialist, with qualifications, experience and terms of reference satisfactory to the Association. (c) Section II.B.4 of Schedule 2 to the FA: The Recipient shall, by no later than four (4) months after the Effective Date, select, engage and thereafter maintain throughout the period of Project implementation, an independent firm of professional auditors and accountants, for purposes of auditing Part D(3) of the Project, with qualifications and experience acceptable to the Association, and under terms of reference satisfactory to the Association. iv 4. Disbursement condition on sub-grants to No When condition N/A NSAs: fulfilled Description of Covenant: Section IV.B.1 (b) of Schedule 2 to the FA: Sub-grants under Category (3) unless: (i) the Recipient has contracted the Sub-grants Evaluation Agent in accordance with the provisions of Section III of this Schedule, with qualifications, experience and terms of reference satisfactory to the Association; and (ii) the Recipient has adopted the Sub-grants Manual, in form and substance satisfactory to the Association. 5. Retroactive Financing No By effectiveness N/A Description of Covenant: Section IV.B 1(a) of FA: No withdrawals shall be made for payments made prior to the date of this Agreement, except that withdrawals up to an aggregate amount not to exceed US$200,000 equivalent may be made for eligible expenditures incurred prior to this date but on or after December 1, 2011 for eligible expenditures under Categories (1) and (2). Team Composition Bank Staff Name Title Specialization Unit UPI Ismaila B. Ceesay Lead Financial Task Team Leader AFTFM 245523 Management Specialist Anders Jensen Monitoring & Evaluation M&E AFTDE 342421 Specialist Jariya Hoffman Senior Economist Economic Policy AFTP4 17393 Daniela Anna Braganca D Counsel Legal LEGAF 305867 Junqueira Martin Serrano Senior Counsel Legal LEGES 268569 Daniel Kwabena Boakye Economist Economic Policy AFTP4 242566 Luis M Schwartz Senior Finance Officer Disbursement CTRFC 82802 Khuram Farooq Program Manager IFMIS HRSSY 342060 Winter Chinamale Procurement Specialist Procurement AFTPC 382739 Charles Taylor Procurement Specialist Procurement AFTPC 241749 Maxwell Bruku Dapaah Financial Management Financial Management AFTFM 364680 Specialist Raymond Muhula Public Sector Specialist Public Sector AFTPR 243373 Marie J Bolou Program Assistant Program Assistant AFTFM 76090 Esther Bryant Team Assistant Program Assistant AFTLR 306703 Charlotte Hayfron Program Assistant Program Assistant AFCW1 113196 v Non Bank Staff Name Title Office Phone City Gisela Strand Head of Liberia and Sierra +4686985761 Stockholm, Sweden Leone Unit, Sida Kalayu Gebre-Selassie Principal Financial Governance +21671102527 Tunis, Tunisia Expert, AfDB Tammy Palmer Economic Governance Officer, +23177122084 Monrovia, Liberia USAID Brenda Akinyi Aluoch Principal Legal Counsel, AfDB +21671102404 Tunis, Tunisia Tove Straus Consultant (USAID) +46709514154 Stockholm, Sweden Peter Fairman Consultant (Sida) +12023909334 Washington DC Ali Hashim Consultant (WB) +17032817497 Washington DC William Allan Consultant (WB) +61396637638 Melbourne, Australia Locations Country First Location Planned Actual Comments Administrative Division Liberia MoF Monrovia . vi I. STRATEGIC CONTEXT A. Country Context 1. With a per capita GDP of US$262 in 20102, Liberia is one of the poorest countries in the world. An estimated 64 percent of the population, or more than one and a half million Liberians, live below the national poverty line, with 48 percent of the population living in extreme poverty.3 As a consequence, about one-fifth of children under five are malnourished and almost two-fifths are stunted.4 Gender based violence is Liberia is very high, with 39 percent of girls age 15 to 19 having experienced physical violence.5 The overall literacy rate in Liberia is only 57 percent, but it is substantially higher for males (66 percent) than for females (49 percent).6 However, as the ratio of girls to boys attending schools is rising, the reported levels of literacy are now equal for boys and girls in the youngest group. 2. Many working age persons are still unemployed or underemployed. The 2010 Labor Force Survey conducted with support from the ILO, found that although the unemployment rate was only 3.7 percent, as much as 78 percent of the employed were in vulnerable employment with no guaranteed wages, no work security, and no pension. The rate of vulnerable employment is much higher for the rural labor force (86 percent) and for women (87 percent). As indicated in Liberia’s 2009 National Gender Policy, there are also serious gender imbalances in the representation of women in the public sector, particularly at senior levels of the civil service. Under the Civil Service Reform Strategy (2008-2011) a number of actions to address this situation are being implemented: (i) mainstreaming gender equity; (ii) devising an affirmative action program; (iii) establishing a civil service-wide sexual harassment policy; (iv) deploying gender officers in each ministry, agency, and commission; and (v) providing special attention to women in training and mentoring. 3. Poor governance and fourteen years of brutal conflict, starting in 1989, destroyed lives, key institutions, infrastructure, and brought the Liberian economy to a grinding halt. Major infrastructure including roads, railroads, electricity generation and transmission, potable water and sewage facilities were utterly destroyed. Schools and hospitals were damaged or destroyed and key social services were also severely disrupted. The origin of the conflict is largely blamed on the exclusion and marginalization of a large part of the Liberia population from political power and the economic wealth from the country’s natural resources. Poor economic governance and weak public financial management in particular allowed public resources to be utilized for the benefit of a small group of the political elite which heightened inequality and social instability. The social discontent erupted into a brutal civil war in 1989. A 1995 peace agreement led to the election of Charles Taylor as president in 1997, but did not last long as fighting broke out again in 1999. The 2003 Accra Comprehensive Peace Accords and deployment of a 15,000 strong UN peacekeeping force and the support of the donor community have provided much-needed space to lay a solid foundation for recovery, including 2 IMF estimate. 3 Core Welfare Indicator Questionnaire 2007. 4 Liberia Demographic and Health Survey 2007. 5 Liberia Demographic and Health Survey 2007. 6 2010 Liberia Labor Force Survey. 1 establishing a strong governance framework, rebuilding infrastructure and delivering essential social services. Expectations from the population for concrete peace dividends remain very high, while government faces many challenges in fulfilling these expectations. 4. The strong post-conflict recovery continued into 2008 but the global crisis towards the end of 2008 through most of 2009 created substantial challenges for Liberia’s fledgling economy. At the macro level, the global crisis resulted in a much weaker economy than envisaged under the government’s Poverty Reduction Strategy (PRS) framework. Under the PRS, the growth forecast was 9.6 percent in 2008, increasing to 10.3 percent in 2009 and further to 14.8 percent in 2010 before slowing to 12.3 percent in 2011. The lower exports and investment as well as the lower domestic demand from reduced remittances and credit resulted in growth slowing to 7.1 percent in 2008 and further to 4.6 percent in 2009. The weaker growth resulted in substantial job losses in an economy where unemployment and underemployment is already relatively high. Although exports fell, the impact of the global crisis on the balance of payments was somewhat mitigated by the reduction in imports as well as marginal improvements on the services and income accounts. The net effect was an improvement in the overall balance of payments from a deficit of 57.3 percent of GDP in 2008 to a smaller deficit of 38.3 percent in 20097. The fiscal impact of the crisis has been largely through the slowdown in revenue growth between FY07/08 and FY08/09 (5.2 percent increase compared to the previous fiscal year’s 36.8 percent increase). Total tax revenues for FY09/10 are nearly US$18 million lower than projected under the PRS largely as a result of lower international trade taxes and lower income and profit taxes reflecting the impact of the global crisis. 5. The country is now at an inflection point, moving from the transitional post- conflict recovery phase to laying the foundations for long-term development. The government’s main focus is on sustaining economic growth—developing major transport corridors to open up trade and commerce, revitalizing agriculture, and getting energy infrastructure up and running. Employment generation is also a key priority for the government to ensure that women, men, girls, and boys in Liberia experience the tangible benefits of peace and reform. Moreover, this priority has received heightened consideration in the wake of the negative impact of the recent global crisis on employment in key sectors in Liberia. On the policy side, the government is focusing on consolidating economic governance reforms, moving beyond the transitional Governance and Economic Management Assistance Program (GEMAP), which ended at HIPC completion point in June 2010. 6. Presidential and legislative elections were held in October and November 2011, following the referendum held in August 2011 and the incumbent President, Ellen Johnson Sirleaf has been re-elected as President. Although Liberia has made notable progress on many fronts, the country remains fragile with substantial political and socioeconomic risks. There is also concern that the increase in political patronage, as well as neighboring political instability, could all be substantial risk factors in the country’s drive towards sustained development. 7 IMF and World Bank Staff Estimates 2 B Sectoral and Institutional Context 7. The government, in partnership with multilateral and bilateral development partners, has implemented a wide range of public financial management (PFM) reforms covering aspects of policy, legislation, and institutional arrangements and systems. These reforms have sought to restore working conditions of PFM systems and to initiate their modernization to enable Government to better implement its poverty reduction and development strategies. The most critical of these reforms has been the passing of the PFM Act in August 2009, which has also provided the foundation for other PFM reforms. Several institutional reforms have also been implemented: a macro-fiscal analysis unit has been created; the former Bureau of the Budget has been merged into the Ministry of Finance (MoF), as a department; the Debt Management Unit has been strengthened, and the accounting function has been unified by merging two departments and bringing them under the control of the Comptroller and Accountant General (CAG). Other reform efforts include introducing a new chart of accounts (CoA) and Cash Basis-IPSAS as the standard for government accounting and financial reporting, improving revenue management and administration, automation of tax and customs administration using ASYCUDA and ITAS, implementing IFMIS in a centralized architecture, approving the Internal Audit Strategy, and restoring and strengthening the external audit function. 8. A comprehensive PFM Reform Strategy anchored in the country’s PRS was approved by the Government in July, 2011. The strategy seeks to widen and strengthen the foundation of public financial management laid in the first phase of the PFM reform process. The strategy also emphasizes pursuing concrete improvements in selected systems, procedures, and resources, in a manner that would enable Liberia to gradually develop its own institutional, organizational, and human resource capacities in the next three to four years. Whilst enormous progress has been made in introducing PFM reforms, significant challenges remain in strengthening transparency and accountability mechanisms. In a recent speech, President Ellen Johnson Sirleaf stated that “Perhaps our greatest fiscal challenge lies in focusing the expenditure of cash inflows from domestic revenue and from donors on established priorities. The better we can manage our public finances, the better we can deliver on our poverty reduction and job creation agenda�. 9. Recent assessments performed by or at the request of the authorities identified a range of weaknesses in Liberia’s PFM systems. The 2008 Public Expenditure Management and Financial Accountability Review (PEMFAR), which was the first comprehensive assessment of public expenditure and financial management systems in Liberia, as well as IMF FAD’s Technical Assistance Report from 2009, are the latest analytical underpinnings for the design of PFM elements under the reform umbrella in Liberia. The PEMFAR includes a PEFA PFM Performance Report and reflects the findings of an assessment conducted jointly by the World Bank, AfDB, the IMF, UNDP, DFID, and the Swedish National Auditing Office (SNAO), between September and December 2007, in conjunction with the Government of Liberia. A comparison of 2007/2008 PEFA PFM performance scores between Liberia and Sierra Leone, both being post-conflict countries in Africa, is depicted in Chart 1, Annex 5. 10. Following the recommendations of these assessments, Liberia has adopted a comprehensive approach to PFM reforms. The reform agenda aims at strengthening domestic processes and maps out conditions in all sub-areas of PFM reform, supported by relevant 3 concept papers, manuals, guidelines, and strategies. Nevertheless, significant challenges to the PFM system—in particular due to human and institutional capacity constraints—still remain as described below:  Legal and institutional framework. Implementation of the PFM Act remains to be completed. Multiple sections of the law are yet to be operationalized or, in other cases, are weakly implemented. Crucially, the financial operations of many units, including ministries, agencies, and counties are not fully aligned with the provisions of law. This is despite substantial investments made in PFM laws, institutions, and systems following the civil war. There is still a noticeable gap between the formal laws, rules, and systems and their actual implementation in practice. This compliance gap means that corruption still remains an issue, and the attendant risks thereto have inevitable effects on the sustenance of peace and stability since service delivery may not improve significantly if resources are misdirected. Budget preparation. The current budget calendar allocates about six months (November to April) to budget planning and preparation prior to presentation to the National Legislature. However, budget guidelines are issued late (often in February – i.e. two to three months prior to submitting budget proposals to the Legislature) and ministries and agencies (M&As) are granted insufficient time (about two weeks) to complete their initial proposals. Slippages in issuing the budget guidelines against the calendar are also common, often resulting from delays in confirming policies and revenues. The limited time accorded to budget preparation also means M&As are often unable to undertake sufficient consultations and coordination with others. Their budget proposals are, as a result, often not well aligned to Government policy within this time. The budget needs strengthening to improve delivery of policy commitments. M&As need to improve alignment of their budgets to policy commitments and revenue forecast, and cash management needs to improve to allow for greater predictability during budget execution. Importantly also, the budget needs to be extended to cover donor resources that continue to remain off budget.  Extra-budgetary expenditures and oversight of public institutions/agencies. Except for budget support operations, funds advanced by donors for project implementation are not on budget, as indicated above. Total development assistance was estimated at US$380 million in 2010 – almost as much as the GoL’s annual expenditure budget. Given the magnitude of external assistance compared with domestic resources, it will be difficult for the government to improve allocative efficiency and ensure alignment with the PRS unless improved and disaggregated aid data is collected and analyzed as part of the budgetary process. The oversight role of the Legislature supported by external audit will have to be strengthened significantly. Budget scrutiny remains weak and budget approvals are often late. Audits by the General Auditing Commission (GAC) will need to be extended to M&As and state-owned enterprises (SOEs) that have remained unaudited. The Legislature will be required to examine audit reports effectively and timely and oblige the Executive to act on their recommendations. 4  Public financial management information system. Now that the Integrated Financial Management Information System (IFMIS) go-live has been achieved, the government will have to move expeditiously on its automation program to implement the system across all M&As, along with the human resource management information system (HRMIS) as part of measures to strengthen implementation of the PFM Law and, within the ambit of the civil service pay reforms, improve payment systems and strengthen systems for accounting and reporting. The potential for by-passing the automation system and applying the manual commitment processing remains; however, as part of the design of the IFMIS roll-out, control measures will be put in place whereby no expenditure transactions that have been initiated outside the system can be eligible for payment processing as all cheques will continue to be systems-generated.  Cash management, accounting, and reporting. The treasury management function, consistent with the PFM Law, needs to be fully introduced within the Office of the Comptroller and Accountant General (CAG). Financial reporting is still very weak and will require strengthening. The MoF and M&As are still unable to produce annual statutory financial statements as required by law. As a result, the General Auditing Commission (GAC) is not able to undertake statutory audits that meet the full requirements for Government to account to the Legislature.  Internal audit and controls. Although most M&As have internal audit units, the units are ill-equipped to perform their functions satisfactorily. As the 2008 PEMFAR pointed out, the internal audit function in Liberia is weak. It also pointed out that the role of internal audit in the management control responsibilities should be better defined. In the 2008 PEFA report, Liberia was rated D on the quality and coverage of the internal audit function and this situation has yet to change for the better; a substantial effort will be required to improve capacity and move toward meeting International Standards for the Professional Practice of Internal Auditing. The country was also rated D on the frequency and distribution of reports as audit reports were not regularly produced or submitted to the GAC. The PEMFAR recommended the Government develop an internal audit manual based on the internal audit strategy. The GAC has identified a list of 76 internal control weaknesses that need to be addressed. It is noteworthy, however, that an internal audit strategy has now been approved by Cabinet, the implementation of which will seek to tackle most of these challenges in the area of strengthening internal audit. An Internal Audit Governance Board that has been established by the Government and approved by the President will serve as the regulatory agency for observance of internal audit processes and procedures and will ensure that all key M&As have internal audit functions staffed by qualified internal auditors. The role of the internal auditors will be, inter alia, the maintenance of good practice internal audit practices across M&As, with focus on systemic issues and using risk-based audit internal audit techniques. 11. Support from development partners to the ongoing PFM reform process has, until recently, been provided through individual institutional initiatives, mainly from the World Bank, AfDB, IMF, EU, and Sida. As a result, problems with coordination have occurred, resulting in both funding gaps for the reform agenda as well as overlapping of donor support for certain activities. However, with the adoption of the PFM Reform Strategy and the PFM 5 Operational Manual as well as the establishment of the PFM Reforms Coordination Unit, donor coordination in the area of pubic financial management has markedly improved. This is manifested through the development of this Integrated Public Financial Management Reform Project (IPFMRP) aimed at supporting a comprehensive implementation of the PFM reform agenda by covering outstanding financing gaps for the period between December 15, 2011 and June 30, 2016, as well as improving planning and sequencing of activities and minimizing uncoordinated ad hoc interventions by development partners. 12. More specifically, this project would help improve Liberia’s PFM system by: reinforcing compliance with the PFM rules and systems through a host of intervention models, including strengthened internal and external audits as well as a strengthened oversight capacity of the Legislature and the non-state-actors over the executive management of public finances. Improving the internal management and control of the PFM systems is another cardinal area under the project, which can help reduce corruption and deliver outcomes supportive of enhanced accountability and transparency in the area of PFM. However, sustainability of the reforms will also be conditional upon implementation of the Civil Service Agency (CSA) payroll reform and the ability of the government to retain qualified staff, follow- up on audit recommendations, and respond to corruption allegations.8 While the Project cannot respond to all the political economy concerns in Liberia, some of which are rooted in the historical legacy that characterize the degree of responsiveness to reforms, the Project aims at changing the dynamics of the reform process through demonstrated incentives that can enable the shifting of the balance of power amongst Liberians in the sphere of shared accountability in financial governance. Supporting the influence of non-state actors in the oversight function is a key consideration that the project design considers as fundamental to changing the status quo, and this will also help leverage the efforts of M&As by shifting their focus on managing PFM bottlenecks to delivering services in their respective sectors. C Higher Level Objectives to which the Project Contributes 13. The rationale for the proposed reform project is consistent with, and aligned to, the economic revitalization pillar of Liberia’s current Poverty Reduction Strategy (PRS) and the vision enshrined in ‘Liberia Rising - 2030’ (a precursor to the next PRS). This pillar recognizes the fact that sound public financial management is crucial to achieve the nation’s central economic goal of rapid, inclusive, and sustainable growth and development. In particular—and in line with the arguments of the World Development Report (WDR) 2012 on Gender Equality and Development—the government is committed to generating inclusive economic opportunities for historically marginalized groups, including disenfranchised young men, people living in rural areas, women, and persons with disabilities.9 8 To help speed up the CSA reform, Sida together with the World Bank are currently supporting the CSA in these efforts. 9 The 2012 World Development Report argues that gender inequality—in human and physical capital endowments, in economic opportunities, and in the ability to make choices to achieve desired outcomes—matters instrumentally for development, as greater gender equality contributes to economic efficiency and the achievement of other key development outcomes. 6 14. In this phase of the PFM reform agenda, the government seeks to strengthen the institutional capacity for the delivery of effective public financial management and oversight; expand and deepen the scope of reforms in support of improved service delivery, particularly for the poor; and establish a sustainable foundation for improved financial management across government. The Project therefore seeks to support government’s agenda of increasing transparency and accountability in the budgeting and budget management process. To this end, through improved transparency and accountability, the Project will help reduce corruption and the possible misuse of public funds, which is urgently needed to enhance service delivery and promote the development of physical and social infrastructure. A recent review of the implementation of Liberia’s PRS10, indicates that corruption remains a fundamental challenge for the government of Liberia. What the government has done so far is to strengthen the legal and regulatory framework for controlling financial malfeasance, although a lot remains to be done to concretize the respect for the laws themselves – an activity whose implementation will be supported under this project. 15. Promoting good economic governance through the deepening of PFM reforms is also consistent with the World Bank’s governance and anti-corruption agenda, which forms the foundation for the Renewed Strategy for Africa. In addition, the project, which falls under the governance and public sector capacity theme, fits well under the IDA16 policy framework for fragile states11. The relevance of deepening PFM reforms cannot be overemphasized for a post-conflict fragile state like Liberia, whose current budget size is still less than pre-conflict levels (net of the budget allocations against increased humanitarian and infrastructure needs12). The WDR 2011 also notes, in connection with fragility, that “Weak institutions are a common factor in explaining the recurrence of violence�.13 This is because unemployment, corruption, and exclusion increase the risk of violence. This project aims as one key platform to respond to this concern. 16. The Project will support gender mainstreaming by promoting adherence to the United Nations Security Council Resolution 1325 (2000) on rebuilding institutions in post- conflict societies14. The Project will also support implementation of the 2009 National Gender Policy and the Civil Service Reform Strategy by developing gender budgeting capacity skills and promoting training and mentoring of female employees. II. PROJECT DEVELOPMENT OBJECTIVES A. PDO 17. The project development objective (PDO) is: “Improved budget coverage, fiscal policy management, financial control, and oversight of government finances of Liberia�. Through 10 The Second APR of the PRSP by the IMF. 11 Reference p.9, table 1 - “Africa’s Future and the World Bank’s Support to It�. 12 Pre-crisis budget level was $500m compared the current level of $$450m 13 WDR 2011, page 10 14 In this resolution, the Security Council “urges Member States to ensure increased representation of women at all decision-making levels in national, regional, and international institutions and mechanisms for the prevention, management, and resolution of conflict�. 7 strengthened institutional capacity for the delivery of effective PFM and oversight, the government will be able to expand and deepen the scope of reforms in support of reduced corruption and improved service delivery, particularly to vulnerable groups, thereby reducing poverty. 18. A sound PFM system matters for poverty reduction15 as: (i) it is a prerequisite for long- term and sustainable poverty reduction, enabling the country to manage its own development; (ii) it helps ensure that budget planning and discipline are compatible with macroeconomic stability, resource allocation is in line with poverty reduction strategies, activities are implemented efficiently, and results are followed up; (iii) national policies are transformed into actions through the PFM system, and services are delivered; and (iv) democratic governance entails democratic control over resources. This is achieved through proper public financial management. 19. In order to achieve the PDO, the Project will support implementation of reform actions identified in the GoL approved PFM Reform Strategy under the following key themes: (i) Improving budget credibility; (ii) Expanding budget coverage and strengthening budget execution; (iii) Strengthening revenue mobilization; (iv) Enhancing transparency and accountability in PFM; (v) Enhancing controls and respect of the PFM legal framework; and (vi) Strengthening treasury management. It will establish tangible improvements in transaction processing, reconciliation, and fiscal and financial reporting procedures; and improve budget management and resource allocation and administrative capacity to gradually develop Liberia’s own institutional, organizational, informational, and human resource capacities. The PFM Reform Strategy objectives against each of the themes are addressed in the project components as designed, where one or more objectives have been combined for efficiency and implementation sake. The strategy is anchored on five basic criteria: sequencing of major actions; simplicity and realism; lessons learned in prior reforms; ownership and sustainability; and partnership and collaboration. Project Beneficiaries 20. The beneficiaries of the Project will include: the Ministry of Finance (Comptroller and Accountant General’s Department, Revenue Department, Budget Department, PFM Reforms Coordination Unit, Aid Management Unit, Debt Management Unit, and Macro-Fiscal Analysis Unit), the General Auditing Commission, the Ways and Means Committee and the Public Accounts Committee of the Legislature, the Public Procurement and Concessions Commission. M&As will also be key stakeholders and beneficiaries of the reforms supported under the project. In addition, the Project will benefit the non-state actors in executing their demand-side oversight responsibilities in the area of PFM. PDO Level Results Indicators 15 This paragraph draws on “Public Finance Management in Development Cooperation – A Handbook for Sida Staff�, 2007. 8 21. The achievement of the project’s overall development objectives will be measured by the following key outcome indicators: (i) Budget coverage and policy-based budgeting:  Extent of Unreported Government Operations (PEFA PI-7)  Multi-year perspective in fiscal planning, expenditure policy and budgeting (PEFA PI-12) (ii) Predictability and control in budget execution:  Effectiveness of payroll controls (PEFA PI-18)  Effectiveness of non-salary controls (PEFA PI-20) (iii) Accounting, recording and reporting:  Quality and timeliness of annual financial statements (PEFA PI-25). (iv) External audit and legislative scrutiny:  Scope, nature, and follow-up of external audit (PEFA PI-26)  Extent of legislative scrutiny of annual audit reports (PEFA PI-28) III. PROJECT DESCRIPTION A. Project Components 22. This technical assistance (TA) project was conceptualized to respond to the GoL PFM Reform Strategy that aims at strengthening the foundation of the overall PFM governance, ranging from planning, budgeting, accounting and reporting, internal audit and controls, public procurement, and revenue management, to external audit and legislative and public oversight. A number of these interventions under the Project together constitute the core of the reforms envisaged in the government’s strategy document. In addition to this Project, the AfDB is supporting Liberia in the development and roll-out of the customs automation system (ASYCUDA); the IMF is providing TA for PFM reforms and fiscal decentralization as well as the core areas of reform in revenue mobilization and administration; the EC is supporting strengthening of the external audit oversight function; ODI is supporting the development of an enhanced budget framework through its Budget Strengthening Initiative; and the USAID is supporting the public sector reform measures in some core M&As as well as the Legislative Budget Office. The activities to be supported under the proposed operation in those areas will focus on complementary reforms not catered for in those defined support programs. The Donor Assistance Matrix (Table 5) provides a synopsis of complementary donor support to PFM reform actions already included as part of the overall reform strategy of the GoL. 23. The Project will be implemented through five distinct components and related sub- components as defined below: Component 1: Enhancing Budget Planning Systems, Coverage, and Credibility (US$1.84 million) 24. The objective of this component is to establish comprehensive budget coverage and strengthen fiscal policy and budget management at all levels of government. The component has three sub-components as follows: 9 (a) Sub-Component 1.1: Enhanced Macro-Fiscal Framework (US$0.36 million). 25. The objective of this sub-component is to establish analytical tools and capacity to prepare the medium term fiscal framework (MTFF) and revenue forecasts as a reliable envelope for budget management. 26. The Project will provide financial support to back up AfDB’s and ODI’s support, in the form of funding for: (i) training in macroeconomic modeling, financial programming and revenue forecasting, supported in part by consultancies; and (ii) computers and accessories. Expected outputs in support of the objective are a robust macroeconomic model, trained staff, and a strengthened MTFF. The upgrading of the Aid Management Platform that will be supported under Component 2.4 will also be aligned directly with the support for the strengthening and implementation of the MTFF. (b) Sub-Component 1.2: Fiscal Reporting and Fiscal Policy Review (US$0.29 million) 27. The objective is to establish IFMIS-generated fiscal operations reports (FORs) as a basis for regular fiscal policy review as well as establish a fiscal monitoring framework for SOEs that helps to identify risks with a view to reducing overall fiscal risks to GoL. A basis for producing IFMIS generated reports has been established by mapping the CoA object classification to GFSM 2001. However, as the mapping does not yet cover all financing accounts due to incomplete coverage of IFMIS, FORs will continue to be produced manually for some time. After mapping of the financing accounts, a plan shall be developed to introduce a pilot FOR that will progressively incorporate IFMIS data as coverage is improved. Plans will also be made to incorporate FOR data in mid-term reviews and to publish these reports when data adequacy is established. The reporting arrangements will also include a form of simplified ‘citizens reports’ that would meet the specific requirements of those in the rural areas so as to reinforce transparency. In respect of the monitoring of SOEs, the foreseen benchmark for this sub-component is the regular reporting on SOE financial performance and potential risks to the fiscal position. A statement on fiscal risk, comprising SOEs, should be included in the annual budget papers. (c) Sub-Component 1.3: Enhanced Budget Framework (US$1.19 million). 28. The objective is to build capacity for medium-term budgeting and establish an orderly, realistic budget process that includes all central government M&As and counties. Support from IMF and ODI is mainly in the form of TA and USAID is also in the process of designing complementary support in the area of the public sector investment program (PSIP) and development of costed sector strategies. Given the major institutional and human resource capacity challenges to enhancing the budget framework, the Project will provide financial support for building planning, capital project selection, and budgeting capacity in the Budget Department in MoF and in M&As in due course. 29. Project activities will comprise (i) Support to the medium-term expenditure framework (MTEF) Secretariat in MoF, through production of training documents, delivery of workshops, 10 and supporting the implementation of the road-map for medium term budget framework (MTBF) roll-out that has been developed with IMF and ODI assistance, with the aim of achieving a robust MTBF, and ultimately an MTEF, directly linked to objectives, inclusive of donor-financed projects; and (ii) Support for strengthening planning and budget preparation processes with focus on the preparation of comprehensive forward spending estimates (necessary first step in establishing a MTBF), the development at M&As of costed sector strategies, investment plans, and budget preparation capabilities, and the establishing of public consultations and hearings as a formal feature of the budget preparation process. Inputs will be in the form of consultancies, computers, and accessories and vehicles. 30. In addition, the Project will also support implementation of the 2009 Liberia National Gender Policy through the promotion of gender budgeting. As per this policy, gender budgeting shall be incorporated in the national budget system in order to achieve government commitments on gender equity and equality. Hence, while general budgeting capacity is strengthened, the project will seek to gradually develop gender budgeting capacity skills of policy makers, planners, and budgeting institutions in M&As—particularly in the MoF and MoPEA—in order to facilitate the development and implementation of gender budgeting where women and men will benefit from the national budget equitably. Component 2: Strengthening PFM Legal Framework, Budget Execution, Accounting and Reporting: (US$10.26 million). 31. The objective of this component is to strengthen the legal basis for budget management while ensuring that the budget is executed as planned and the quality of information on fiscal operations is improved for more informed government decision making. It has six sub- components: (a) Sub-Component 2.1: Review of PFM legal framework (US$0.05 million) 32. The 2009 PFM Act is currently undergoing some reviews and updating for eventual approval by the post-election Legislature. The PFM Regulations are also being revised to cater for some salient amendments required to strengthen the subsidiary legislation in a number of areas. This sub-component will extend the work being carried out in those areas and provide the financing needed for building an understanding of the Law and Regulations across government to improve compliance in the management and oversight of public finances. The design recognizes that, beyond an understanding of the PFM regulations, what is needed is a change in the incentive structure for PFM reforms. The Project will work both on building capacity and changing incentives by working with M&As and civil society organizations on service delivery, transparency, and accountability. (b) Sub-Component 2.2: IFMIS Rollout to M&As (US$8.22 million). 33. The objective of this sub-component is to extend IFMIS financial management functionality to M&As and donor funds (also refer to sub-component 2.6). This sub-component will build on the work done under the current IFMIS project and support the roll-out of the FreeBalance-based budget preparation, execution, and fiscal reporting modules of the IFMIS to 11 M&As and, on a phased basis, to donor funded projects. The component will also complete the implementation of the payroll system initiated under the IFMIS project. 34. The main activities to be financed under this sub-component will include: (i) implementation services, software costs, and training related to the roll-out of FreeBalance to M&As; (ii) full implementation of the payroll system initiated under the IFMIS project; and (iii) implementation of requisite e-transcript interfaces with county level systems. (c) Sub-Component 2.3: Strengthening Financial Standards, Accounting and Reporting (US$0.04 million) 35. The objective of this sub-component is to strengthen the application of international standards of accounting and reporting to establish a robust and accountable financial management framework. 36. Under this sub-component, the project will finance TA in M&As to build capacity in implementing guidelines for producing IPSAS Cash Standards financial statements from existing reporting arrangements structured on the GFS-compliant CoA in the FreeBalance. The TA will also review the current accounting and financial processes and recommend improvements in identified areas to bring these processes in line with best practices. (d) Sub-Component 2.4: Treasury, Cash, Debt and Aid Management (US$0.62 million). 37. The sub-component aims to incorporate all funds defined in the 2009 PFM Act in a Treasury Single Account (TSA) held at the Central Bank of Liberia (CBL) to improve the efficiency and effectiveness of GoL’s cash and debt management. The IMF is providing TA in support of key elements of this sub-component. 38. The Project will complement IMF’s support through the provision of financial support for consultancies, software purchase, training, and workshops as inputs for the following activities: (i) establishing a TSA to strengthen fiscal control and GFS reporting; (ii) phased inclusion of donor funds in the TSA as also highlighted in sub-component 2.6; and (iii) improving cash and debt management. The main output, contingent upon activity (i) being accomplished, will be the establishment of cash flow forecasting and cash management mechanism under the auspices of the Treasury Liquidity Committee that will be created, and under which the Cash Management Unit of the Comptroller and Accountant General’s Department (CAGD) will fall. 39. The following additional activities related to debt management will also be financed: (i) training activities beyond those that AfDB and ODI are financing; (ii) purchases of periodic CS- DRMS upgrades; and (iii) development/purchase of a domestic debt management module as an addition to CS-DRMS. Under Sub-component 2.2, the Project will finance the development of an automatic interface between CS-DRMS and IFMIS. The end-point will be an operational comprehensive debt database that can generate comprehensive debt reports and be used as a basis for debt sustainability analysis, and which fully interfaces with the IFMIS. 12 (e) Sub-Component 2.5: Establishment of County Treasuries (US$0.49 million) 40. This sub-component will establish basic financial management and fiduciary control at county level in support of the GoL's gradual decentralization policy. It aims to lay the basic foundation for de-concentrating financial management of service delivery activities in the 15 counties in support of Liberia’s National Policy on Decentralization and Local Governance recently issued by Governance Commission in pursuit of the Government’s commitment to moving towards fiscal decentralization to lower tiers of government. The sub-component will aim to jump-start the gradual and phased implementation of the framework for establishing County Treasuries designed under IMF TA and approved by the GoL. 41. The activities covered under the sub-component include the basic internal renovation of existing county accounting offices, setting up of a county treasury framework including the design and provision of simplified book-keeping and accounting tools, basic furnishing of county treasury offices, and capacity building of county treasury officers through consultancies. The sub-component does not anticipate the roll-out of FreeBalance applications (but e- transcripts) during the life of this project. (f) Sub-Component 2.6: Donor Project Financial Management/Use of Country Systems (US$0.84 million) 42. The objective of the sub-component is to establish a direct linkage between the Project Financial Management Unit (PFMU) and IFMIS to achieve increased use of country financial management systems as well as 'aid on accounting' and 'aid on reporting'. 43. Key activities covered under the sub-component include: consultancy services to design the budgeting, accounting, and reporting tools within IFMIS using the Government’s CoA; training the staff of the PFMU in the CAGD Accounting Services Unit on the implementation of project accounting as part of the overall GoL accounting arrangements; and piloting the transition from stand-alone financial management (FM) arrangements for donor-funded projects to integrated GoL FM arrangements. Component 3: Revenue Mobilization and Administration (US$ 5.38 million) 44. The objective of this component is to complement efforts aimed at improving the efficiency and integrity of revenue administration and increase domestic revenue of central government entities, and to integrate revenue systems with overall PFM. The component has three sub-components: (a) Sub-Component 3.1: Capacity Development of Customs (US$0.20 million) 45. The objective of this sub-component is to complement the activities supported by GoL (customs automation – ASYCUDA) funded through an arrangement under the AfDB budget support operation by providing requisite hardware and operational expenses not currently funded under the UNCTAD/UNOPS contracts. Other activities to be supported under the sub- 13 component include (i) training on customs administration; and (ii) the provision of logistical requirements like vehicles to the rural collectorate teams to better function in their roles. (b) Sub-Component 3.2: Tax Automation (SIGTAS) (US$4.22 million) 46. This sub-component is aimed at strengthening the tax collection system, including the non-tax domestic revenues. 47. Key priority activities supported under the sub-component include (i) the refurbishment of collectorate sites in rural areas (no new construction envisaged); (ii) provision of TA for implementation of SIGTAS roll-out and training; (iii) procurement of hardware and related software, and certain SIGTAS modules; and (iv) operational expenses for effective SIGTAS project management, including technical staffing and change management. (c) Sub-Component 3.3: Establishment of Revenue Authority (US$0.96 million) 48. The objective of this sub-component is to strengthen the tax revenue administrative framework to facilitate policy implementation and improve revenue collection. An independent revenue authority will be created and act as a catalyst to facilitate implementation of key reforms designed to produce a modern efficient tax regime in Liberia and accelerate revenue growth. 49. The activities to be financed under this project include internal renovation of a new revenue authority building, capacity building, equipment, change management, and technical assistance. TA is currently mainly provided to the MoF under the IMF’s Topical Trust Fund for tax policy and administration and it is assumed that this assistance would continue to be provided to the revenue authority as it is established. Component 4: Enhancing Transparency and Accountability (US$6.23 million). 50. The objective of this component is to improve transparency and accountability in PFM by increasing the Government’s ability to report on and account for the revenues it collects and for public expenditures and to strengthen the GAC and Legislature, enabling them to execute better their oversight function as assigned under the Liberian Constitution and the PFM Act. 51. Under this component, there are five sub-components: (a) Sub-Component 4.1: Strengthening Public Procurement Oversight (US$0.31 million) 52. The objective of the sub-component is to strengthen the institutional capacity of the PPCC to deliver on its mandate and support the establishment of transparent, competitive, and efficient public procurement processes in government. 53. The following activities will be financed under the sub-component: (i) TA to support institutional capacity building; (ii) training of PPCC staff; (iii) PPCC outreach to M&As to 14 provide training on procurement guidelines; (iv) support for South-South knowledge exchange activities; and (vi) provision of LAN network to allow for view-only interface with IFMIS procurement module, and to enable the PPCC to publish its review reports as required by the PPC Act. (b) Sub-Component 4.2: Strengthening Internal Audit and Controls (US$1.56). 54. The objective of this sub-component is to develop an effective, independent, and objective internal audit function that ensures adequate M&A management oversight of their internal controls. 55. The activities to be financed under the sub-component include: (i) TA support for establishing the Internal Audit Governance Board and Secretariat; (ii) providing operational tools (e.g. computers hardware) for internal auditors assigned to M&As; (iii) training of internal auditors across M&As on CAATS and specialized certifications; (iv) implementation of internal audit manuals; (v) development and implementation of a risk-based audit methodology; and (vi) facilitation of regulatory oversight and follow-up actions through the Internal Audit Governance Board. (c) Sub-Component 4.3: Strengthening External Audit (US$3.23 million). 56. The objective of this sub-component is to strengthen the financial oversight role of the GAC and improve financial compliance through expanding the scope of external audits and helping to strengthen the follow-up and response to audit findings. 57. The following specific activities shall be financed under this sub-component: (i) TA to train GAC staff on Procurement Audit, Information Systems Audit, Revenue Audit, Public and Environmental Audit, Oil and Gas Audit among others; (ii) relevant professional training and certification for GAC staff; (iii) implementation of risk-based audit methodology; and (iv) logistics support including computers, vehicles, and furniture. Live audit training will be provided as part of the TA delivery, and the training outcomes will be reviewed regularly by the quality assurance unit of the GAC to ensure that the capacity of the GAC staff to conduct the audits independently is achieved. In addition, interface between the GAC and the civil society organizations (CSOs), including the media, will be strengthened through the public relations wing of the GAC to enhance external audit impact. (d) Sub-Component 4.4: Enhancing Legislative Oversight (US$0.63 million). 58. The objective of this sub-component is to enhance the capacity of the Legislature to apply appropriate standards of PFM accountability to the executive branch. The sub-component will focus on the Public Accounts Committee (PAC) and complement other activities under implementation at the Legislature in support of strengthening the capacity of the Legislative Budget Office (LBO) funded through the USAID (NDI). 59. This sub-component will focus on strengthening the outreach program of the PAC as well as the Ways and Means Committee of the Legislature through South-South study tours, 15 and local training by specialist consultants. Other specific activities to also be financed under this sub-component include: (i) provision of logistical support, office equipment and LAN network needed to facilitate the work of the LBO and the legislative committees; and (ii) expertise training and seminars on budget analysis for LBO staff. (f) Sub-Component 4.5: Civil Society and Social Accountability (US$$0.50 million). 60. The objective of this sub-component is to strengthen the capacity of non-state actors (NSAs) as critical watchdogs in ensuring transparency and accountability in the use of public finances. 61. The activities to be financed under the sub-component include: (i) the establishment of a platform for information sharing between the government and the public through engagement with NSAs; (ii) provision of grants to NSAs to help build their capacity in the analysis and monitoring of the national and local government budget preparation, approval, and execution cycles; (iii) advocacy activities and dissemination of information on all aspects of PFM at the national and local government levels; and (iv) media training for journalists on covering government budget and spending matters. Component 5: Program Governance and Project Management (US$4.84 million) 62. The objective of this component is to provide a robust project and program management function that caters to the needs of integrated coordination and monitoring of the implementation of the program, serve as the enabling component for delivery of PFM human resource capacity, and assure the appropriate sequencing of interventions across the various reform fronts. The component has four sub-components: (a) Sub-Component 5.1: Program Coordination (US$0.65 million) 63. This sub-component aims at establishing a coordinated arrangement for supporting and facilitating the delivery of the outcomes under each of the project components and sub- components. It will serve as the domain of the PFM Reform Coordination Unit (RCU) Secretariat for the effective functioning of the institutional arrangements of the Project as well as for PFM reforms generally, and will build the administrative basis for a well-coordinated GoL-development partners’ relationship in the area of PFM support. 64. Coordination will be managed through the RCU that has already been established in the MoF. The RCU is currently staffed by a Coordinator and a number of key professional staff. The staffing will be enhanced to cater to the increasing responsibilities of the Unit and the Project will mainly finance consulting/contract staff whose responsibilities will include knowledge transfer as well as the operational costs of coordination, including logistical support. The IMF has a crucial ongoing role in supporting the strengthening and effective functioning of the Unit, both through the provision of a TA Advisor and short-term expert assignments. (b) Sub-Component 5.2: Institutional and Capacity Building (US$3.16 million) 16 65. The objective of this sub-component is to strengthen PFM and procurement training and HRMIS development to enhance the capacity of the civil service. Under this sub- component, the PFM Capacity Building Implementation Framework developed and approved by the GoL, with TA from the IMF, will serve as the guiding framework for implementing the institutional and capacity building initiatives. This strategy takes a cue from the National Capacity Building Strategy (NCBS) of Liberia and assurances will be made that capacity development interventions are sensitive to gender, ethnicity, and the dynamics of Liberia’s post- conflict society, in line with the NCBS.16 Consistent with the Civil Service Reform Strategy and overseen by the CSA, the project will also ensure that female employees are given special attention in training and mentoring, including in the selection for development and career advancement training. 66. A number of in-service and specialized training programs will be supported by this sub- component, some of which started in 2008 (including the admission of university graduates into a two-year Masters Degree program at the Financial Management Training Program, FMTP). Also, the sub-component will cater to the need for consolidating on the flow of qualified procurement specialists into the civil service through a one-year certification program in public procurement at the FMTP. Strengthening the ability of the Civil Service Agency (CSA), as an institution, to (i) design a career path framework for PFM staff (e.g., accountants, auditors, and other PFM related positions), aligned with the Medium Term Pay Strategy; and (ii) monitor the human resources capacity and strength within the civil service, will also be key areas of focus in institutional capacity building. (c) Sub-Component 5.3: Monitoring and Evaluation and Change Management (US$0.46) 67. The objective of this sub-component is to monitor, evaluate, and review progress on all project components and sub-components; identify issues that may impede progress; develop effective change management strategies; and communicate key aspects of progress to the public. In terms of monitoring and evaluation (M&E) and capacity building, the main interventions relate to ensuring that the annual PEFA self-assessments of key indicators are undertaken and are fed into the PFM reform process and to government functions in planning and budgeting as part of the M&E framework17 (MF) for the overall PFM program. As such, the interventions are means to two ends: meeting the data needs to annually update the PDO level results indicators in the results monitoring of the project (Annex 1), on which the success of the projects eventually will be judged, and more importantly, indications on whether the PFM process is moving in the right directions and thus to highlight the areas for corrective action. What is important is that the key government officials understand the purpose, scope, and potential use of the assessment, have endorsed the implementation process, and have been able to contribute 16 As per the NCBS, the success and effectiveness of each capacity development intervention will be critically measured by its actual contribution and/or its transformative potential for the advancement of gender equality agenda, women’s rights, and leadership. Gender sensitive benchmarks and indicators be developed, used, monitored, and reported. 17 The PFM monitoring framework is designed to support the PFM strategy and will include a PEFA assessment process. 17 to the report through reviewing and commenting on drafts at critical stages. For the self- assessment, it is crucial that a core group of civil servants be trained and guided to undertake a candid, reliable, and valid assessment and analysis. 68. The staffing of the M&E unit is limited to one M&E officer and one capacity building expert (both recently appointed in the PFM RCU), and one change management specialist who is yet to be appointed. It is envisaged that at least one consultant will be appointed under the project to assist in these duties and to build capacity in PEFA self-assessment, in process backstopping for the first two assessments, and ensure harmony in the PFM MF, including with the PEFA process. The M&E officer should also maintain data that will facilitate annual PEFA self-assessments and periodic independent full PEFA assessments. 69. The nature of the tasks and their relative unfamiliarity means that training and, likely, some TA support for these functions are required in the near future. The M&E officer should apply the harmonized M&E framework to monitor and evaluate progress towards the project objectives as laid out in the results monitoring table and identify any factors that may impede progress toward the overarching development objectives of PFM reforms as well as the PDO of this project. 70. The IMF has an ongoing TA support in the design of the M&E framework for the overall PFM reforms as well as the capacity building towards the implementation of the framework. Training and consultancy support is provided within the sub-component to complement ongoing TA activities. (d) Sub-Component 5.4: Project Fiduciary (US$0.57 million) 71. This sub-component will ensure that funds advanced for project execution are used for purposes intended, and with efficiency and economy. 72. Due to the dearth of procurement capacity in government, this sub-component will focus on building procurement capacity within the nascent PFM RCU for the implementation of PFM reforms in general. TA support will be provided under this component to hire an international procurement specialist to help build procurement capacity in the RCU. The Financial Management function of the project will be mainstreamed in the CAGD’s Accounting Operations Unit. B. Project Financing 1. Lending Instrument 73. The project is a US$28.55 million operation to be co-financed by IDA (US$5.00 million), MDTF (US$18.95) - contributed by Sida (US$15.10 million) and USAID (US$3.85 million), and AfDB (US$4.60 million). In addition, the operation has an IDA-executed element as well as corporate IDA administration fees. The partners and the GoL have agreed to adopt the Technical Assistance Lending (TAL) mode as the Investment Lending instrument for this project based on clear evidence that it serves as the appropriate instrument mechanism that responds to the specific needs of the GoL’s approved four-year PFM Reform Strategy. The 18 objective is to ensure that the priority government reforms defined in the PFM Reform Strategy are implemented in a sequenced manner during the life of the project, and complementarily to the other reforms being delivered in the area of PFM by other development partners, particularly those of the EGIRP (World Bank), Tax Policy and Administration Topical Trust Fund (IMF) – supported by EU, USAID, and others –, long-term TA project in support of GAC (EU), and TA support to the Bureau of Customs (EU). Other forms of instruments, including development policy operation, were considered but rejected due to their inappropriateness and inconsistencies with the objectives to be pursued in the PFM reform strategy. 2. Project Cost and Financing 74. Table 1 below provides a breakdown of the project components and their sub- components as well as their attributable estimated costs: 19 Table 1: IPFMR Project Cost Table (Summary) No Component 11/12 12/13 13/14 14/15 15/16 Total IDA MDTF AfDB 1 Enhancing Budget Planning Systems,  40  903  778  107  10  1,838  322  1,220  296  Coverage and Credibility 1.1 Macro�fiscal framework 0  199  135  21  - 355  1.2 Fiscal Reporting and Fiscal Policy Review 28  112  76  76  - 292  1.3 Enhanced Budget Frameworks 12  592  567  10  10  1,191  2   Strengthening PFM Legal Framework &  985  3,301  2,551  2,039  1,383  10,258  1,796  6,808  1,653  2.1 Revision of  PFM legal framework 10  40  - - - 50  2.2 IFMIS Roll out to M&As 665  2,792  2,146  1,608  1,010  8,220  2.3 Strengthening Financial standards,  0  40  - - - 40  2.4 d Treasury/Cash, Debt and Aid Management 310  260  44  - - 614  2.5 Establishment of Country Treasuries 0  41  179  153  121  494  2.6 Donor Project FM � /Use of Country Systems 0  128  182  278  252  840  3 Revenue Mobilization and Adminstration  1,595  2,081  986  468  248  5,378  942  3,569  867  3.1 Capacity Building Customs 64  136  - - - 200  3.2 Tax automation (SIGTAS) 1,319  1,335  848  468  248  4,218  3.3 Establishment � Revenue Authority 212  610  138  0  0  960  4  Enhancing Transparency and  977  2,525  1,093  902  737  6,233  1,092  4,137  1,004  Accountability  4.1 Strenthening Public Procurement (PPCC) 10  143  100  60  0  313  4.2 Internal Audit & controls 433  779  148  128  68  1,555  4.3 External Audit 365  1,255  547  547  522  3,235  4.4 Legislative Oversight 160  193  143  68  68  630  4.5 Civil Society and Social Accountability 9  156  156  100  80  500  5 Program Governance and Project  309  1,193  929  1,185  1,230  4,844  848  3,215  780  Management  5.1 Program Coordination 68  211  143  119  104  645  5.2 Institutional and capacity building 140  703  568  848  908  3,165  5.3 Monitoring & Evaluation/Change  57  147  86  86  86  462  management 5.4 Project fiduciary 44  132  132  132  132  572  Project Totals  >>>   3,905  10,001  6,336  4,700  3,608  28,550  5,000  18,949  4,600  20 C. Lessons Learned and Reflected in the Project Design 75. The ODI Study on PFM Reforms in Fragile States, based on the Liberia specific experience, delineated a number of lessons learned that the design of this project took a cue from to ensure that interventions result to sustainable and viable outcomes. Key among the lessons learned and factored in the design includes the following:  The need to analyse the political economy and the underpinning reasons for the conflict and align interventions within the context: This would require an evaluation of the potential impact of different existing structures, groups and other variables and the attendant legacy systems when designing reform programmes. The IPFMRP has done just that.  Attend to the basics, build on existing systems, sequence the approach, and aim for simplicity: Pre-packaged reform programmes should be avoided as interventions need to be adapted to existing capacities, however weak they may be. The project builds on reform efforts that have been achieved so far and on ongoing interventions in a sequenced and phased manner, consistent with the newly designed PFM Reform Strategy document, to avoid reform overload.18 This is necessary particularly in the light of low capacity within the civil service.  Engage with a long-term perspective, but be flexible: Engagement should not be short term and fragmented. With the complexity of reform challenges, there is need to plan for short, medium and long term goals from the outset, with measurable milestones and indicators. This has been the underpinning characteristic of the design, based on the GoL-led four-year PFM Reform Strategy that the project is designed to respond to. Along with this, the results matrix provides for outcome indicators at the overall project level, at the component and sub-component level, and there are achievable milestones derived in concert with the GoL counterparts.  Invest in donor coordination: A coordinated response with other external players should contribute to more credible commitments about the financial aid and technical assistance that can be delivered. The design of this project was premised on strengthened donor collaboration, anchored against the holistic PFM reform agenda of the GoL. The pooled funding mechanism, agreed within the context of an MDTF that has coherent coordination mechanisms, will strengthen the harmonization arrangements, all aligned to GoL leadership of reforms. Donors have also agreed to have regular working group meetings to further foster coordination.  Reform focus and results: Ambitious programs related to budget formulation/planning that include MTEF and program budgeting are hardly ever achieved, while reforms on budget execution, including advanced reforms, have tended to achieve results. Given the strong commitment from the GoL to introducing a medium-term budget framework and 18  The strategy has been developed by the MoF in close collaboration with the IMF and the WB, taking into account the specific circumstances of Liberia and its fragility. 21 the presence of resident advisors (including from ODI), the Project will support the introduction of an MTEF program, although it is ambitious. However, the Project recognizes the lessons learned in the sequencing of reform actions and does adopt a process that includes a step-by-step approach, building on achievements made with the assistance of previous and ongoing TA provided by IMF, ODI, AfDB, and the World Bank. D. Sequencing of PFM Reform Actions 76. The project design, as articulated in the PAD, has taken cognizance of the need for proper and coherent sequencing of project implementation actions. Sequencing has two perspectives: (i) Broad: the basic nuts and bolts of a PFM system should be the initial focus of a PFM reform program before moving on towards more sophisticated reforms such as introducing outputs-based/program budgeting within a medium term perspective, and introducing full accrual accounting; and (ii) Narrow: within each PFM reform component, some activities should be implemented first as they enable the implementation of other activities. Within the context of the Project, the four broad reform components certainly focus on strengthening the basics of a PFM system. Within each component, all efforts will be made to ensure a logical sequencing of activities in light of the severe capacity constraints, in line with the PFM Reform Strategy Action Plan and with the RCU playing a strong leading role. There will also be some need for adaptation of the sequencing to the pace of reform and evolving local circumstances. 77. For example, the following sequencing framework is planned in the implementation of the Project:  Component 1: (i) Pre-requisites for a robust medium term macro-fiscal framework (MTFF) (sub-component 1.1) are the preparation of a robust macro-economic framework, the strengthening of the Aid Management System (Components 2.4 & 2.6) so that the MTFF aggregate spending ceiling will include donor spending, and the establishment of a framework for monitoring SOEs (sub-component 1.2); (ii) a pre- requisite for a robust MTBF, apart from the MTFF itself, is the preparation of forward spending estimates for each M&A.  Component 2: (i) establishment of a TSA is a pre-requisite for the establishment of a robust cash management mechanism, for which reliable cash flow forecasting is a pre- requisite; (ii) roll-out of IFMIS (component 2.2) arguably is a pre-requisite for component 2.3 (strengthening financial standards, accounting, and reporting).  Component 3: Components 3.1 & 3.2 (automating tax administration and building capacity), if implemented first, would enhance the probability of success of a new Revenue Authority (component 3.3).  Component 4: Training of internal and external auditors is a pre-requisite for successful internal and external audit functions, which themselves are pre-requisites for legislative oversight to function effectively. 22  Component 5: The availability of some funding for change management under this component is a prerequisite to build the consensus and constituencies needed to move reforms forward and actually change financial management practices in Government. E. Governance and Anti-Corruption Action Plan 78. The political economy of Liberia presents a set of issues that undermine the emergence of a culture of good governance. This has implications for both project and sector level performance. First, the nature of the state continues to support centralized bureaucratic functions with little local level involvement. Second, formal systems of public administration continue to suffer from a hierarchical system of capture by elite interests. Third, the creation of a dual political system at the founding of the state—the one providing for the elite settler community that dominated national governance and politics generally, and the other catering to native Liberians in the hinterland—continues to affect delivery of government services. The majority of services are concentrated in Monrovia, and county governments have no control over expenditure. All of the above have contributed to a weak governance environment, undermining efforts to decentralize, and posing significant risks to the emergence of a good governance culture in Liberia. 79. Resultantly, ‘governance and anti-corruption’ issues remain significant in Liberia. At the fiduciary level, this has been mitigated by the establishment of the Project Financial Management Unit in the MoF (and Project Management Units). Nevertheless, weak (or sometimes absent) internal controls as well as weak procurement and financial management capacity increase risk of conflict of interest, bribery, and patronage. 80. The following governance and anti-corruption risks have been identified based on Liberia’s political economy and project level governance assessment. a. Sector governance, policies and institutions: Liberia’s institutional governance and policymaking is still hampered by weak capacity, inadequate coordination, and lacking supervision. The enactment of the 2009 PFM Act, strengthening of the GAC, the establishment of a Governance Commission, and the renewed focus on capacity building in financial management and auditing indicate GoL’s commitment to improving policy coordination and institutional capacity. This project will further support the strengthening of key institutions to develop the ‘supply-side’ of the governance equation. b. Systemic corruption, state capture, and patronage: Liberia has established the Liberia Anti-Corruption Commission and the Public Procurement and Concessions Commission. It also enacted the 2009 PFM Act and the 2010 Freedom of Information Act. The corruption issues that are of a technical nature can be partly mitigated through the successful establishment of internal controls embedded in IT-based financial management systems under the Project and thus reduce the human interface factors impacting financial malpractices. The broader political economy challenge of Liberia can be tackled in part through changes in the incentive structure of PFM reforms. This Project will contribute to strengthening transparency and civil service involvement. 23 c. Weak demand for good governance - voice and accountability: The civil society advocacy continues for transparency, accountability, and participation through emerging coalitions on an array of issues including procurement, budget transparency, and access to information. Nevertheless, demand for good governance is still hampered by weak voice at the local level, and little interaction between the citizens and frontline service providers. The project will seek to increase the influence of non-state actors (as a constituency of change) in the oversight of service delivery activities and, at the same time, strengthen the capacity of the Legislature in oversight of the executive. This project will also aim to create internal pressures for PFM reforms by M&As and thus lift the PFM bottlenecks to service delivery. 81. As highlighted above, the Project will address the identified issues through both demand and supply side measures by incorporating oversight on the Project as well as in public financial management generally. 82. Grants will be provided to non-state actors (NSA) – see sub-component 4.5 - to undertake demand side activities that foster efficient management of public finances. This would enhance closer civil society engagement with the government both at the project level, and also at the broader level of management of public finances. The project will seek to harness and leverage the activities of emerging coalition of NSAs on procurement/contract watch, budget transparency, access to information and related platform issues on transparency and accountability. These civil society groups are expected to use funds for activities such as capacity building for budget and procurement monitoring, citizen report cards/surveys, piloting innovative initiatives such as public expenditure tracking and improved accountability systems by publicizing budget performance, sector allocations, and procurement practices. 83. Secondly, the project will fund a communication and change management plan to engage all key stakeholders such as the civil society, business associations, and the Legislature during implementation stages. In addition to communicating with external publics, the project team will maintain open communication with the client at all stages to ensure uniform understanding of expectations regarding governance and anti-corruption issues in the Project. The views of stakeholders that emerge from these interactions will be periodically incorporated into dialogue with the client and beneficiaries for improved outcomes. 84. Finally, during implementation, the Project will be subjected to third party monitoring by NSAs through the External Implementation Status Reports (E-ISR) alongside other projects in the portfolio. 85. On the supply side, the Project will support improved access to information through, initially, the PFM RCU in the MoF – Component 5. This unit will handle public requests for information on government expenditures, procurement, revenues, donor funding, and other financial management matters related to the Project and also those related to wider government spending. It would be a first step towards incorporating the requirements of the 2010 Freedom of Information Act within the public administration setting. 24 86. This governance and anti-corruption action plan, taking a cue from the Liberia political economy analysis, will be evaluated during the mid-term review, and any emerging lessons integrated into the refinement of interventions under the Project. IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 87. It is the objective of GoL to promote efficiency and minimize the administrative burden in implementing PFM reforms. To the extent possible, implementation of the PFM reform program will be undertaken using government institutions and processes. Operational procedures and practices will be aligned with government processes where this is possible. The MoF under the leadership of the Minister and supported by the PFM RCU will be responsible for the overall coordination and oversight of the project. The already established PFMU hosted in the MoF and which serves as the fiduciary agent (Financial Management) for a large part of the Bank portfolio of projects will be used as the main unit for financial management under the Project. The Unit will be mainstreamed into the CAGD under the Accounting Services Unit. Overall details of the institutional and implementation arrangements are as follows: 88. Project Oversight. Consistent with the PFM Operations Manual, the PFM Steering Committee (SC) shall be the main structure responsible for strategic oversight over the overall reform program. It will provide policy coordination and will be the forum for resolving strategic issues impeding program implementation. The SC shall also be the forum for policy dialogue with development partners on the PFM reform initiatives of the government. Moreover, the SC will be responsible for approving the Annual Work Program and Project Budget (AWPB). It shall meet on a quarterly basis. The SC shall have the following membership: Minister of Finance (Chair), Minister for Planning and Economic Affairs, Minister of State, Minister of Justice, Director General of the Civil Service Agency, Auditor General, Executive Director of the PPCC, Chair of the Project Technical Committee (PTC), and the Head of the RCU (Secretariat). To facilitate information sharing and coordination with other PFM related committees and programs, the Coordinator of RCU shall extract issues arising from the meetings of the SC that are pertinent to their roles and share these with these structures. 89. Operation and Technical Coordination: At the technical and operational level, the existing PFM RCU headed by the PFM Reforms Coordinator and staffed with senior technical personnel will be in charge of the day to day project management and coordination. The RCU shall prepare the annual work-plan, annual budget, mid-term review, and annual assessment reports for consideration of the PFM SC. The RCU is staffed with a Capacity Development Specialist, an M&E Specialist, and a Financial Management Specialist. Under the Project, a Procurement Specialist will be hired through an international recruitment process to strengthen the RCU’s capacity to execute the procurement requirements of the project. 90. Project Technical Committee (PTC), as provided for in the PFM Operations Manual, shall be established for this project. The PTC shall be a forum for all Component Managers to monitor and coordinate implementation of program activities. Theme Leads shall be selected by the respective beneficiary departments or agencies for each of the five components of the Project. The PTC shall meet monthly. Its membership shall be as follows: Deputy Minister of 25 Finance (Administration) - Chair, all Theme/Component Managers and alternate Managers, Leads of cross-cutting activities; IFMIS and Capacity building, Head of the RCU (member and secretary). The Project Coordinator will play a proactive facilitation role by organizing monthly meetings to monitor implementation progress, including procurement plans. 91. Coordination with Development Partners: A joint Government-Donor Steering Committee will meet twice annually to review the progress of implementation of PFM reforms, in general, in Liberia, as well as those supported under the project. Core reform activities financed under the IPFMRP shall be reviewed during these meetings. Also, joint donor partner implementation support missions will be carried out semi-annually to review implementation progress against key milestones and provide technical support to implementing partners. Additional details, including the coordination amongst development partners, are provided in Annex 3. 92. Project Financial Management. The PFMU will continue to be responsible for the day to day management of funds and accounting for the Bank portfolio in Liberia, in accordance with the project financial procedures manual already developed for the ongoing Bank projects. The PFMU will also have responsibility for project financial reporting, using already agreed interim un-audited financial report (IFR) formats in use for the other projects. The PFMU is currently staffed with a team of competent financial professionals with the required experience and qualifications acceptable to the Bank. Consistent with the overall alignment with country systems envisaged under the IPFMRP, the PFMU will be integrated into the Accounting Services Unit (ASU) of the CAGD. The CAG will, therefore, have overall oversight over the Unit in the discharge of its financial management duties. A detail description of the institutional and implementation arrangements is included in Annex 3 B. Results Monitoring and Evaluation 93. Progress towards the PDO will be monitored through the PDO level and intermediate level results indicators in Annex 1 and will be conducted on a continuous basis under the coordination of the PFM RCU. The M&E function under MoF and the designated M&E officer as well as the consultants will be in charge of coordination for soliciting and deriving the primary data and information to report on project progress as outlined in Annex 1. The Annex provides the baselines, annual targets, frequency of data collections, data source and methodology, and responsible institutions for all indicators. The M&E framework for the overall PFM strategy is being designed independently under technical assistance provided by IMF. The project results framework is consistent with this framework. The PEFA annual self- assessment of key indicators, and periodic assessments by independent assessors, inform the project progress and is part and parcel of the reform process itself. The PFM reform is a country-led agenda for which analytical work, reform design, implementation, and monitoring go hand in hand and reflects country priorities and is integrated into government’s institutional structures, especially planning and budgeting. PEFA assessments are also a shared information pool on public financial management - i.e. information on PFM systems and their performance, which is commonly accepted by the stakeholders at country level, thus avoiding duplicative and inconsistent analytical work. 26 94. Reviews of implementation progress will be undertaken annually and used to identify and discuss issues and bottlenecks that may arise and impede achievement of targeted outcomes. The issues raised will be discussed by project management and Bank implementation support missions and resulting recommendations will become action points for implementation follow-up and subsequent implementation support. The Government’s PFM SC will also receive and review strategic information on implementation progress from the RCU, and provide strategic guidance to enable the Project achieves its development objectives. An important aim of the Project is to support the mainstreaming of M&E skills within the relevant government entities implementing the Project. C. Sustainability 95. The underlying rationale deployed in the design of the Project is consistent with the cardinal requirement for an in-built sustainability in its realized outcomes. An equitable balance between delivering tangible project outcomes and establishing sustainable capacity in a low capacity post-conflict environment like Liberia is nevertheless challenging. The Project, however, plans to develop basic capacity in financial management through the FMTP, which envisages training graduates for the core financial management functions within Government. Over 30 graduates recruited from the FMTP have already been inducted into the civil service and assigned as Financial Management Officers (FMOs) and internal auditors in the MoF and various line ministries. Eleven of these graduates are assigned in the IFMIS to manage the functional aspects of the system. The FMOs have also undergone training as Trained Trainers for the Government Accounting Standard—the Cash Basis International Public Sector Accounting Standard (IPSAS)—and on the CoA. It is envisaged that more graduates from the FMTP will be deployed to support the implementation of the project at the M&As and subsequently in the counties. It is also expected that the output from the FMTP (with additional funding from this Project) would ensure that PFM resource strength remains in place within the civil service after project implementation. In addition, complementary capacity building activities supported by a number of development partners including IMF, USAID, AfDB, EU, and ODI are geared to capacity enhancements across all PFM frontiers in government. 96. On systems maintenance and ICT support for the various IT tools supportive of PFM improvement in the country, the Project would put in place a coherent maintenance and support organizational set up as defined in Annex 2. This infrastructure comprises a support team of 20-22 staff, divided into two teams: functional support team (10-11 staff) and technical support team (10-11 staff). Also, the capacity building initiatives designed under the Project across the various components provides for knowledge transfer between a select group of consultants and civil servants to enable retention of skills as consultants move out. Also, to allow for sustainable maintenance and upkeep of the systems, the Project would deploy a functional support team of FreeBalance and Crystal Reporting experts to key client organizations – CAGD, Budget Department of the MoF, and CSA - and have a dotted matrix functional relationship with Director, ICT Unit, MoF. 97. The GoL’s commitment to PFM reforms is affirmed, among other actions taken, by its financing of the customs automation (ASYCUDA) through the government budget consistent with the agreement reached under the AfDB’s budget support operation. 27 98. There will be attendant recurrent costs of the reforms supported under the Project. However, since much of what this Project will finance, apart from the IT systems, is capacity building in the civil service, the design focuses on minimizing long run recurrent costs within GoL absorbable limits. V. KEY RISKS AND MITIGATION MEASURES 99. Influence of political economy, social, and cultural issues: In theory, governments become more efficient as a result of PFM reforms, leading to more effective public services for all segments of society. In practice, vested interests may oppose measures to tighten financial controls, introduce IT-based PFM systems, and strengthen transparency in all areas of PFM and procurement, as such measures reduce the scope for rent-seeking and corruption. Eventually, however, the hope is that the influence of these interests wanes as the benefits of strengthened PFM systems become more apparent to society. 100. Slow progress in reforms in other governance areas: Implementation of PFM reforms requires robust institutions, systems and skilled staff, all eroded during the conflict years. The Civil Service Reform Strategy (CSRS) and Medium Term Pay Strategy (MTPS) are key remedial instruments, but implementation has been slow. Low paid, under-facilitated and inadequately managed civil servants may seek better opportunities elsewhere. The PFM reform process would then slow down, dissatisfaction might increase, and the degree of supportiveness of the political economy environment might start to wane. 101. To mitigate against the risks posed by slow progress in public administration and civil service reform, the Project will actively monitor the progress in implementing the CSRS and MTPS and encourage other donor agencies providing support for PFM reform to do the same.19 Its support for the strengthening of the audit and legislative oversight functions (Subcomponents 4.2, 4.3 and 4.4) indicates its recognition that effectiveness of these functions can lead to improvements in institutions and systems. The effectiveness of the GAC has already improved significantly in recent years. 102. Insufficient coordination with other PFM reforms: The activities under the project complement PFM reform-related activities being implemented by other donors. A harmonized M&E framework will cater to the needs for measuring overall reform progress, including those supported by this project. Such complementarity is well-justified, as PFM reforms tend to contain several different inter-related components, not all of which can be supported by the other donors and GoL. The PFM SC and the donor-government coordination arrangements already acknowledged in the design of this Project, coupled with the establishment of an RCU with mandates defined in the PFM Operational Manual, will mitigate the risks inherent in weak reform coordination. Equally, the Project’s Task Team Leader, resident in Accra, will be in regular communication with both the Head of the RCU and the IMF PFM Resident and Regional Advisors as well as short term IMF advisors assisting the Government. Furthermore, 19 As mentioned earlier, both Sida and the World Bank have ongoing projects that support implementation of the Civil Service Reform Strategy. 28 with the strong in-country donor partnership, USAID, Sida, AfDB, and the EU will take a stronger role in fostering coordination in the implementation of complementary PFM reforms that they are all supporting, along with this project. 103. Direct Project-related risks: The main risks are two-fold: (i) delays in the process of procuring project inputs, such as computers: the Project’s management and monitoring structure as designed under the Project will mitigate against these happening. The Task Team Leader is based in Accra, representing a geographical advantage; and (ii) difficulties in obtaining the cooperation of M&As to enable the proper sequencing of interventions under the project: change management activities designed under the Project will facilitate the removal of resistance to change and the consultants to be recruited under the Project will work directly with M&As to secure their commitment to reforms by also demonstrating derivable benefits. 104. Exchange risks and co-financing risks: The nature of financing of the project involving, IDA, MDTF, and AfDB pooling, would entail both exchange and co-financing risks. Sida contributions to the MDTF will be in Swedish Kroners (convertible to US Dollars as the holding currency) will attract exchange differences. Equally, delays in settlement of pledges by USAID and Sida (contributors to the MDTF) as well as a delay or even non-materialization of AfDB contributions can have implications for project implementation. However, these risks shall be mitigated through (a) government underwriting the exchange losses if any; (b) Administration Agreements will be signed with the MDTF contributors and a MoU will be signed with the AfDB for its contributions; and (c) the use of costed annual work-plans for the project which provide for flexible percentages of contributions by individual donors and thus allow for front-loading and subsequent recovery of contribution disbursements. 105. Overall risks of the Project Implementation are assessed to be rated as “Moderate. The ORAF (Annex 4) provides a detailed assessment and management of risks. A summary Table of ratings is provided below. Rating Stakeholder Risk L Implementing Agency Risk - Capacity S - Governance M Project Risk - Design M - Social and Environmental L - Program and Donor L - Delivery Monitoring and Sustainability S Overall Implementation Risk M 29 VI. APPRAISAL SUMMARY A. Economic and Financial Analyses 106. The quantification of benefits of a PFM TA project is not a straightforward exercise. While the outcomes can be identified, quantification of the direct and indirect financial, economic, and social benefits and attributing outcomes to interventions, is generally not feasible, based on the experiences of the World Bank in supporting a number of such operations. The Bank's recent experience in similar interventions in public financial management reform and institutional and capacity development indicates that benefits come from several sources: (i) efficient, transparent, and accountable fiscal and budget management contribute to economic growth and poverty reduction; (ii) better program implementation and service delivery, and additional benefits such as lower supplier prices and reduced corruption as a result of improved budget credibility and predictability; and (iii) direct pecuniary benefits resulting from improved probity and transparency in the use of public resources. Compared with similar projects in countries at similar development keels, the amount of resources planned to be invested in the reforms under this project are, in nominal terms, and on a like-with-like basis, far lower. The GoL’s own inputs (direct and indirect) by way of provision of Government-paid dedicated counterparts, and financing of the customs ASYCUDA implementation in excess of US$4 million from its own budget, are just examples of the GoL’s commitment and contributions to the project’s objectives. 107. As part of the results framework linked to this Project’s deliverables, the specific areas identified from where expected benefits will accrue include the following: improved macro- fiscal discipline and management; enhancing aid effectiveness through use of country systems; improved sectoral allocation of resources for poverty reduction and effective service delivery; improved financial management and control; improved budget credibility and coverage; improved revenue management and control in support of enhanced resource mobilization for development; improved transparency and accountability in government; and reducing inefficiencies and corruption. All these benefits will be monitored in a harmonized Results Indicator Framework prepared for the Project. 108. Accordingly, through the identified benefits realizable from this project, the overall benefits in terms of annual savings to the government are likely to far outweigh the costs of implementation. In effect, the economic and financial benefits to be derived from the Project should exceed project costs in present value terms. B. Technical 109. The Project responds to the Government-led four-year PFM Reform Strategy that was developed and approved in 2011 to cater to the needs for improving and consolidating the gains realized to date in confronting the reform challenges comprehensively identified in the PFM area. The design of the Project supports its technical viability and soundness, and has its foundation in the PRS, the 2008 PEFA, the IMF technical reviews, and the other development partners’ ongoing support to the latest reform actions started since 2007. Lessons learned in the implementation of a host of PFM reform interventions have been incorporated in the design of activities within each of the various components, and a number of such activities have been 30 included in the Project as complementary, non-funded, reform actions that would engender overall successful outcomes in the reforms supported. 110. The collaboration of the development partners to mapping their interventions, coupled with the multi-donor support to the unfunded activities in the reform strategy means that duplication or overlapping of donor support will be obviated. The Paris Declaration as well as the move to embracing the Accra Accord is being exemplified in Liberia through this Project. Additionally, the focus areas of the Project are well delineated and sequenced, based on the GoL priority reform areas, and the very fact that a PFM RCU now exists in the MoF to regulate the coordination mechanism for reform support has been cardinal to assuring a technical efficiency and effectiveness of reform implementation under the Project. 111. The basic technical architecture for a successful PFM improvement has also been established through, inter alia, the centralized IFMIS at the MoF, customs automation through ASYCUDA, tax administration through ITAS/SIGTAS, and internal audit formation under an independent Governance Board. Strengthening and stabilizing these, along with other reform requisites, and expanding the scope and coverage in a more holistic manner, have been appraised under the Project as technically achievable and viable and in the right direction to enable Liberia to build on and strengthen the foundation for robust PFM system and practices across government. C. Financial Management 112. The financial management arrangements under the Project have been so designed to facilitate project implementation and support both fiduciary and developmental needs using country systems. While the proposed financial management arrangements of the Project satisfy the Bank’s minimum requirements under OP/BP 10.02, the overall financial management risk is assessed as ‘Moderate’. But with the risk mitigation measures in place through the use of PFMU and the GAC, the overall risk will fall residually to ‘Low’. Except for the External Audit sub- component, which the GAC will be directly responsible for executing, the PFMU in the MoF will be responsible for the financial management of the IPFMR project, as it does for most donor financed projects in Liberia. 113. The Project shall operate a US$ denominated designated account that will be opened by the CAG at a Commercial Bank (or the Central Bank of Liberia (CBL) where acceptable to IDA and the AfDB), and the account will be a sub-account of the Consolidated Fund. Funds from IDA/MDTF/AfDB will be pooled and deposited into this account for project execution without earmarking. Except for the external audit sub-component, the processing and approval of eligible expenditures will be initiated in the PFM RCU in accordance with MoF authorization procedures, and supporting documents transferred to PFMU for payment processing. The GAC will initiate and approve eligible expenditures for the external audit sub-component and transfer supporting documents to PFMU for payment processing. The Project will use report-based disbursements method through the use of quarterly un-audited Interim Financial Report on the sources and uses of project funds. The Project will allow for advances, special commitment, and reimbursement methods of disbursement. A forecast of the first six months expenditures will form the basis for the initial withdrawal of funds from the IDA/MDTF/AfDB, and subsequent 31 withdrawals will equally be based on the net cash requirements for subsequent six months. Withdrawal applications shall be submitted to the IDA/AfDB quarterly. 114. The Project will follow a cash basis of accounting and a harmonized financial reporting framework. The funds advanced under the Project shall be incorporated into the GoL budget and hence accounted for as sub-accounts of the Consolidated Fund in GoL’s annual financial statements. A single set of financial statements shall be prepared as an annex to the main GoL financial statement showing: (i) sources of funds/ disbursements from IDA/MDTF/AfDB (in a columnar format) and consolidated statement for uses of funds by component and sub- component activities, (ii) expenditures by disbursement category, and (iii) notes to the statement. Except for the amount allocated to the external audit sub-component, the financial statements contained in the annex shall be audited by the GAC and submitted to the IDA and AfDB within six months of each GoL fiscal year. The GAC shall appoint an independent external auditor to audit its sub-component. The report of the external auditor shall be included in the annual audit report to be submitted to the DPs within six months of each GoL fiscal year. The terms of reference of the auditor to be appointed by the GAC shall be agreed with the World Bank as Administrator of the MDTF and the AfDB. The auditor shall be appointed within four months of effectiveness. Moreover, both the PFMU under the CAGD and the GAC shall submit interim unaudited financial statements (IFRs) to the World Bank (as Administrator) within 45 days of each calendar quarter. At a minimum, the constituents of the IFRs will be: (a) Statement of Sources and Uses of Funds by financier (IDA/MDTF/AfDB), component, sub- component, activity, and object; (b) Actual and Forecast Cash Flow Statement according to components, sub-components and activities; (c) Designated Account Reconciliation Statement; and (d) Disbursement Status Monitoring Report. A detailed description of the FM assessment is included in Annex 3. D. Procurement 115. Procurement under the Project will involve Goods, Consultancy, and Non-Consulting Services (minor works) and will be carried out in accordance with the World Bank’s (i) “Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrower� dated January, 2011 (Procurement Guidelines): and (ii) Guidelines; selection and employment of Consultants by World Bank Borrowers� dated, January 2011 and (iii) “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants� dated October 15, 2006, and revised in January 2011. 116. The PFM RCU in the MoF will be responsible for coordination of the implementation of the Project. The RCU currently relies on the Procurement Unit (PU) of the MoF to handle all administrative aspects of the procurement process. An assessment of the capacity of the RCU and the PU concluded that PU has so far mostly been exposed to national procurement procedures and the overall procurement planning and implementation capacity is still weak. Also the Unit lacks experience in handling complex procurement processes such as those envisaged in this Project. As a result, the current procurement risk is rated ‘Substantial’. However, to mitigate the risks associated with this limited capacity, the international procurement specialist currently working for IFMIS will assist with the initial procurement 32 processes until a substantive international procurement specialist, to be financed under the Project, is recruited. The residual risk is ‘Moderate’. E. Social (including Safeguards) 117. The Project is expected to have positive social impacts through improved public confidence in Government in the management of public finances in a more transparent and accountable manner. F. Environment (including Safeguards) 118. As an Environmental Assessment Category ‘C’ Technical Assistance project which by its nature does not have any environmental safeguard issues, the Bank’s environmental safeguard policies are not triggered. 33 Annex 1: Results Framework and Monitoring Integrated Public Financial Management Reform Project (IPFMRP) – Liberia Project Development Objective (PDO): Improved budget coverage, fiscal policy management, financial control, and oversight in of government finances in Liberia Unit of Measure Baseline Target Values** Frequency Data Source/ Responsi- Description (2007/08) Methodology bility for (indicator Core PDO Level Results Indicators* Year1 Year2 Year3 Year4 Year5 Data definition etc.) Collection Indicator One: PEFA PI-7 PEFA score D+ D+ D+ C C B Annual PEFA Self- MoF Assessment M&E Unit Extent of unreported government operations Indicator Two: PEFA PI-12 PEFA score D+ D+ D+ C C B Annual PEFA Self- MoF Assessment M&E Unit Multi-year perspective in fiscal planning, expenditure policy and budgeting Indicator Three: PEFA PI-18 PEFA score D+ D+ C C C+ B Annual PEFA Self- MoF Assessment M&E Unit Effectiveness of payroll controls Indicator Four: PEFA PI-20 PEFA score C+ C+ C+ C+ C+ B Annual PEFA Self- MoF Assessment M&E Unit Effectiveness of internal controls for non-salary expenditure 34 Indicator Five: PEFA PI-25 PEFA score D D+ D+ C C C+ Annual PEFA Self- MoF Assessment M&E Unit Quality and timeliness of annual financial statements Indicator Six: PEFA PI-26 PEFA score D D+ D+ C C C+ Annual PEFA MoF Assessment M&E Unit Scope, nature and follow- up of external audit Indicator Seven: PEFA PI-28 PEFA score D D+ D+ C C C+ Annual PEFA MoF Assessment M&E Unit Legislative scrutiny of external audit reports INTERMEDIATE RESULTS Intermediate Result (Component One): Enhancing Budget Planning Systems, Coverage, and Credibility Indicator One : Quarterly fiscal operations Yes/No No No No Yes Yes Yes Quarterly Direct MoF Consistent with reports (FORs) generated observation M&E PFM M&E Unit framework B2.4 Indicator Two: Variance between M&As % 10 10 7.5 6 5 5 Annual MOF budget MoF Consistent with appropriations and actual and actual M&E PFM framework figures Unit A1.1 expenditures CAGD Credibility in assessment expenditure budget planning Indicator Three: Variance between revenue % 5 5 5 3 3 3 Annual MTFF MoF Consistent with forecasts and actual Reports M&E PFM framework provided by Unit B1.1 collections DOR and Credibility in IMFt revenue budget planning Intermediate Result (Component Two): Legal Framework, Budget Execution, Accounting and Reporting Indicator One: Proportion of Government % 0 0 0 >30 >60 95 6-monthly CBL, MUC, MoF Consistent with balances in Treasury Single AGD, Debt M&E PFM M&E 35 Account Committee Unit framework B6.4 reports Indicator Two: Donor projects in CAGD- Number 0 3 12 18 24 30 6-monthly Direct MoF Consistent with based IFMIS reports Observation M&E PFM framework of IFMIS Unit B7.5 Budget Mainstreaming Performance donor funded report projects as part of GoL FM activities. Indicator Three: Number 2 3 15 25 37 40 6-monthly CAGD MoF Consistent with assessment M&E PFM framework M&As generating monthly of IFMIS Unit B7.1 expenditure reports through expenditure Decentralization IFMIS reports of IFMIS across M&As Indicator Four: Annual financial statements Month 6 6 4 3 3 3 Annual CAGD MoF Consistent with generated through IFMIS Assessment M&E PFM framework of IFMIS Unit B.4.5 after FY end annual Timeliness of statements preparation of annual GoL financial statements for audit – months after year-end Intermediate Result (Component Three): Revenue mobilization and administration Indicator One: Increase in customs revenue % US$ 23 M 0 15 25 30 40 Annual Annual MoF Increases in collections adjusted for (FY10/11 Report of M&E customs revenue baseline) Customs Unit collection inflation Department Inflation based on CPI Indicator Two: Increase in internal revenues % US$ 263 M 5 15 35 45 50 Annual Annual MoF Increases in tax adjusted for inflation (FY10/11 Report of M&E revenue baseline) Internal Unit collection and Revenue efficiency in Department revenue administration. Inflation based on CPI 36 Intermediate Result (Component Four): Enhancing Transparency and Accountability Indicator One: Qualified procurement staff in Number 0 0 0 0 30 60 Annual PPCC MoF Qualified means M&As Assessment M&E graduated from Unit Financial Management Training Program (one year procurement program) Indicator Two Certifications it Internal Audit staff holding Number 0 8 15 25 40 60 Annual Internal MoF means CA, CPA, professional certifications Audit M&E ACCA, CIA, Governance Unit CISA or CEO qualifications Board Assessment Indicator Three: Comprehensive- Benchmarks in budget Number 3 3 4 5 6 7 Annual PEFA MoF ness of budget information from MoF met Assessment M&E documentation – Unit out of nine as defined by PEFA PI-6 Indicator Four: Qualified means Qualified external audit staff Number 10 30 60 100 150 165 Annual GAC MoF CAAT in GAC Assessment M&E competent Unit Intermediate Result (Component Five): Program Governance and Project Management Indicator One: Coordination Annual PEFA self- Yes/No No Yes Yes Yes Yes Yes Annual PEFA self MoF and monitoring assessments assessment M&E of project report Unit implementation results 37 Annex 2: Detailed Project Description LIBERIA: INTEGRATED PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT 119. Introduction: The IPFMRP project has been designed to support the actions identified in the GoL approved PFM Reform Strategy. This technical assistance project will accordingly respond to strengthening policies, functional processes, procedures and information systems required to support overall PFM governance, ranging from macro economic forecasting, planning, budgeting, accounting and reporting, internal audit and controls, public procurement, and revenue management, to external audit, and legislative and public oversight. 120. At present the GoL has several on-going initiatives supported by various donor partners which provide support to PFM systems in these areas. These are listed below: (a) Budget Planning, Budget Preparation, and Budget Execution 121. The World Bank and Sida, under the current Liberia IFMIS, are providing support to improve the efficiency of the Government’s accounting system through the provision and installation of a computerized financial management information system in the Ministry of Finance and through strengthening manual accounting systems in line ministries and counties. The project is expected to achieve the following outcomes at completion, currently scheduled for February 2012:  Fully operational, modern computerized accounting system in the Ministry of Finance that is capable of producing complete, accurate and reliable financial statements for the Government.  Smooth budget execution through improved systems for budget allotment, commitment control, procurement, cash planning and reporting.  Better management of human resources by implementation of a payroll and human resources management information system (HRMIS). (b) Tax administration 122. The World Bank financed EGIRP and Sida financing under IFMIS provide support to the Revenue Department in the design and implementation of an Integrated Tax Administration System- ITAS/SIGTAS that will interface with IFMIS. The project envisages the configuration and installation of the SIGTAS software for tax administration purposes. The EGIRP closes on December 31, 2013. The IMF and several other development partners are also providing support in revenue administration in a number of key reform areas as identified in the Donor Assistance Matrix (Table 5). (c) Civil Service Administration 123. The World Bank financed EGIRP and IFMIS as well as Sida financing under the IFMIS also provide support to information systems required to support civil service reform and to strengthen human resource management and human capacity. The project is helping in setting up a civil service employee database through the development of a “One Employee, One File, 38 One Salary, One Job� system using Biometric Identification and the development of a comprehensive Human Resource Information Repository. (d) Customs Administration 124. The customs authorities, in consultation with their partners, including the IMF, have adopted a master strategy and action plan to reform and modernize customs administration, thereby improving customs revenue. Specifically, under the master plan, the Government is implementing ASYCUDA to support customs administration with expertise provided through UNCTAD and UNOPS. The AfDB is supporting the development and roll-out of the customs systems (ASYCUDA) through its budget support action arrangements with the GoL. (e) Aid and Debt Management 125. The Government uses the CSDRMS software package for support to debt management and the Aid Management Platform Software for aid management. The installation and use of the latter is supported by ODI (UK), World Bank, and AfDB. (f) Common IT infra-structure and technology platform for Government Financial Management Systems 126. The World Bank’s EGRIP and IFMIS are also providing financing for a common data center and wide area network in the Ministry of Finance that provides a common technology platform for the operation of most of the Information Systems that are currently being set up. 127. The diagram in Figure 1 shows the overall framework of systems - the Information Systems Architecture - required to provide support for the different functional processes associated with Government Financial Management, and how the various GoL initiatives currently underway map to this architecture. Figure 2 depicts the core functional processes and systems modules of Liberia’s treasury system. 128. Since many of the projects that are currently supporting these initiatives are nearing closure and residual work is still required to be completed to complete these systems, or to move them forward to the next stage, this multi-donor supported project, through its different components provides financing to, either complete the implementation of these systems, or scale their impacts consistent with the expected outcomes of the government PFM reforms strategy. The annex describes the various components that the project intends to implement to achieve the overall outcomes consistent with the PDO. 39 Figure 1: Functional Process for Government Fiscal Management and Information System Architecture 40 Figure 2: Liberia Treasury Systems – Core Functional processes and Systems Modules 41 Component 1: Enhancing Budget Planning Systems, Coverage and Credibility (US$1.83 million) 129. This component aims at enhancing budget planning systems, coverage of the budget to include ‘aid on budget’ and overall budget credibility in the GoL. The overall objective of the component is to establish effective systems and procedures for aggregate fiscal policy and budget formulation and management by the MoF, M&As, and a basis for improved county-level management. The component has three sub-components as follows: (a) Sub-Component 1.1: Macro-fiscal framework (US$0.34 million): 130. Objective: To establish analytical tools and capacity to prepare the medium term Macro-Fiscal Framework (MTFF) and revenue forecasts as a reliable envelope for budget management. 131. Technical status: A reliable MTFF is a pre-requisite for the introduction of a medium- term budget framework (MTBF), as it provides the aggregate spending ceiling under which the MTBF must fit. An MTFF has partly been in place for the last two fiscal years. A major constraint has been the lack of a robust underlying macroeconomic framework; due to the absence of meaningful national accounts data, the last comprehensive framework was prepared in 1992. The Statistics Office has been preparing a new set of national accounts, with assistance from the World Bank and IMF, but completion is probably still a few years away, as detailed country-wide real sector data are not yet available. A Household Survey would greatly help in this regard, but this is not scheduled to take place until 2014. In the meantime, however, reasonably reliable trade data (exports and imports) are enabling indirect estimates of annual real GDP growth, which can be used to guide the preparation of revenue forecasts, an essential input to macro-fiscal frameworks. 132. Another major constraint to the meaningfulness of an MTFF is the limited information on the large amounts of public spending financed directly by donors. About 85 percent of donor support (both in loan and grant form) is not incorporated in the GoL budget. The reason for having an aggregate spending ceiling is not just to assure fiscal sustainability, but also to guard against public spending growing too quickly relative to GDP growth, thereby potentially crowding out private sector activity. A meaningful MTFF must therefore include donor- financed public spending. 133. Institutional and human resources capacity status: Preparation of the MFF is the responsibility of the Macro-Fiscal Analysis Unit (MFAU), located in the MoF. It was established in 2010 with a staff establishment list of 14, of which 9 are in post. Out of the 14, ten are designated as professional staff; the MFAU is currently in the process of hiring four more. The staff have benefited from some training but more is required. The MFAU will continue to be funded under a donor project until the end of 2011/12 (to-date, by the Bank, and by AfDB from September to June, 2012), after which GoL expects it to be incorporated into its budget. The MFAU will continue to receive technical assistance from IMF and ODI, but is likely to be under-funded if it is to be funded solely from the GoL budget in the medium term. 42 134. Activities: The Project will provide financial support (to back up the ODI’s and IMF’s support) in the form of funding for: (i) training in macroeconomic modeling, financial programming and revenue forecasting, supported in part by consultancies; and (ii) computers and accessories. Expected outputs in support of the objective are a macroeconomic model and a strengthened MTFF. The strengthening of the Aid Management System that will be supported by the Project under Component 2.4 will also directly support the strengthening of the MTFF, through incorporation of donor-financed projects and programs. (b) Sub-Component 1.2: Fiscal Reporting and Fiscal Policy Review (US$0.29 million) 135. Objective: Establish IFMIS-generated fiscal operations reports (FORs) as a basis for regular fiscal policy review as well as establish a fiscal monitoring framework for SoEs that helps to identify risks with a view to reducing overall fiscal risks to GoL. 136. FORs are currently produced quarterly by the MFAU but are not based on full coverage of data or adequate reconciliation processes. The reports are not currently published. A basis for producing such reports has been established by mapping the COA object classification to GFS 2001. However, the mapping does not yet cover all financing accounts, and for this reason and incomplete coverage of IFMIS, will continue to be produced manually for some time. It is desirable, however, to fully configure IFMIS and the COA to take on this task and establish fully reconciled FORs when data coverage and reconciliation processes are adequate. 137. Current MFAU and CAGD staff are able to implement this task of compiling FORs at a practical level. Consulting services or TA will be necessary, however, to complete mapping of all CoA elements including financing accounts currently used in producing FORs, and technical support is also needed to pilot reconciliation of the fiscal (above-the-line) and monetary (below- the-line) accounts when system coverage is improved. 138. Mapping of the financing accounts to GFS should be done as a first step and a plan developed to introduce a pilot FOR that will progressively incorporate IFMIS data as coverage is improved. Manual adjustments to IFMIS-generated reports will be required for some time. Plans should also be made to incorporate FOR data in mid-term reviews and to publish these reports when data adequacy is established. The reporting arrangements will also include a form of simplified ‘citizens reports’ that would meet the specific requirements of those in the rural areas so as to reinforce transparency. 139. In respect of the monitoring of SOEs, the foreseen benchmark for this sub-component is the regular reporting on SOE financial performance and potential risks to the fiscal position. A statement on fiscal risk, comprising SOEs, should be included in the annual budget paper. 140. The PFM law vests financial oversight responsibility over SOEs with the MoF. This project will seek to assist the MoF, in collaboration with the GAC, with establishing financial management and accounting standards for SOEs. This work will include initiating and implementing a plan to improve capacity of SOEs to meet their statutory fiscal reporting responsibilities as well as the implementation of financial reporting guidelines once a reporting 43 framework has been established under the TA supported by the IMF. The Liberian government maintains a large number of SOEs, some of which receive subsidies or transfers from the national budget while others generate substantial revenues. SOEs are eligible to borrow and are likely to make use of this right following the debt relief Liberia received after reaching the HIPC Completion Point in 2010. However, weaknesses in reporting on SOE financial operations constitute a substantial risk. 141. Current monitoring of the SOEs through the Bureau of State Enterprises is not satisfactory. To address this issue, the government has set up an SOE working group under the Economic Management Team20 and an action plan for strengthening SOE oversight is being prepared. The Minister of State has been assigned the responsibility for defining the boundary between general government entities and SOEs.21 Within the MoF, the PFM Reform Coordination Unit (RCU) has been mandated to follow up, review, and analyse fiscal reports and financial positions of the SOEs. The unit is also responsible for advising the Minister of Finance on the implications of these findings, including on SOE debt contracting and financial guarantees.22 The RCU should also train SOEs in the application of guidelines for the financial reporting framework (to be established), while the Comptroller and Accountant General (CAG) will institute inspections to ensure compliance with the implementation of these guidelines. Finally, the General Auditing Commission (GAC) is currently collaborating with the Ministry of Finance (MoF) and eight leading SOEs to improve their accounting systems. 142. With the assistance of TA from the IMF under the existing funding arrangement with Sida and EU, the MoF will also receive support to (i) establish criteria to determine if an institution should be classified as an SOE—this institutional boundary work is essential to clear up some of the existing SOEs—resulting in a policy note for Cabinet approval; (ii) establish a reporting framework for quarterly and annual financial reporting of SOEs to MoF; and (iii) develop MoF capacity to collect and report SOE data. Continuing the work started in GEMAP, the USAID, through the GEMS, is working with four SOEs to ensure they operate in line with the requirements of the PFM Act of 2009. (c) Sub-component 1.3: Enhanced Budget Frameworks (US$1.91 million) 143. Objective: Build capacity for medium-term budgeting and establish an orderly, realistic budget process that includes all central government M&As and counties. 144. Technical Status: (a) Weak linkages between plans and budgets: The annual budgets have in principle been based on the PRS, but not in practice. M&As have, mainly due to capacity constraints, been unable to prepare multi-year sector strategic plans and the budget estimates have contained references to linkages of expenditures to the PRS, but only 20 Membership of the team includes: Ministry of Finance, Bureau of State Enterprises, Central Bank of Liberia, Ministry of Planning and Economic Affairs, National Investment Commission, and the General Auditing Commission. 21 The Minister of State’s responsibility includes nomination and duties of board members and code of conduct for CEOs. 22 The Debt Management Committee is currently preparing guidelines for government guarantees for the SOEs to formalize the process and improve control over government levels of borrowing and liabilities. 44 in summary narrative form, with no linkage to the detailed economic classification tables. The separation of planning and budgeting functions between the MoF and the Ministry of Planning and Economic Affairs (MoPEA) has further hindered the linking of recurrent expenditure to the planning process and capital expenditure. However, for the LRPS II process, 24 sector plans are being prepared for the first time, although they are not yet costed, thus limiting their usefulness in terms of the MTBF. The costing exercise is expected to start in November or December 2011, with the assistance of ODI through the Budget Support Initiative (BSI). (b) Information available on the spending activities of donor agencies: A robust MTBF/MTEF must reflect donor project spending. Donor agencies fund high proportions of public spending in the infrastructure, education, health, and agriculture sectors. They provide little information on their activities to M&As, which are therefore hampered in their ability to plan for sector development and to estimate the future recurrent costs generated by donor spending. (c) Timetable for introducing MTBF and MTEF: The 2011/12 Budget Framework Paper indicates that an MTBF will be in place in time for the preparation of the 2012/13 budget. The methodology for preparing an MTBF has been developed with technical assistance from the IMF and ODI. Having a full-fledged MTBF/MTEF in place in time may, however, be difficult due to information and capacity constraints. The first step is the preparation of Forward Spending Estimates (FSEs), which show the costs of implementing existing government policies over the medium term, and the second year of which is the starting point for preparation of next year’s budget. Preparation is a detailed exercise and even with strong capacity and information availability can take several months. The MTEF is derived from the MTBF, the difference being the addition of performance elements, so that attainment of objectives can be directly attributed to spending. The methodology for this is more complex, and introduction of a fully-fledged MTEF may be difficult to achieve in time for the 2013/14 budget. (d) Public participation in the budget preparation process: This has been virtually absent. Public participation can strengthen the linkage between spending and objectives through members of the public expressing their opinions on the quality of public services. (e) Institutional and human resource capacity status: 12 sector working groups and an MTBF working group have been established since 2010, under the auspices of MoF, and workshops have been conducted on sector strategic plan and MTBF/MTEF preparation, led by IMF and the ODI on the basis of a methodology prepared by them. The ODI advisors are moving to Monrovia in November 2011 on a long-term basis in order to be in a better position to build capacity. The MoF, together with the MoPEA, is planning to establish an MTEF Secretariat, which would spearhead MTBF/MTEF development. The Secretariat would have about ten staff. Preparation of an MTBF/MTEF is time-intensive and so it is not practical to add this to the day- to-day duties of Budget Department staff. 45 145. The above will not be sufficient to address weak institutional and human resource capacity in M&As. These have yet to establish integrated planning and budgeting departments and planning department staff have limited capability for preparing costed sector plans. Budget estimates are normally being prepared by finance departments. The estimates are prepared with no input from geographically dispersed ministry offices and service delivery units. Capabilities for capital project selection and appraisal are limited. To help address these issues, USAID is considering providing an immediate long-term advisor to strengthen capacity in the M&As to prepare costed sector strategies that will feed into the MTBF/MTEF as well as the Public Sector Investment Program (PSIP). 146. Activities: The support from IMF and ODI is mainly in the form of TA. Given the major institutional and human resource capacity challenges identified above, the Project will provide financial support for building planning, capital project selection, and budgeting capacity in M&As. Inputs will be in the form of consultancies, computers, and accessories and vehicles. Project activities will be:  Activity 1: Support to the MTEF Secretariat. Outputs will include production of training documents, delivery of workshops, and supporting the implementation of the road map for MTBF/MTEF roll-out. The end point will be a robust MTEF, inclusive of donor-financed projects (facilitated by the Aid Management System that the Project will strengthen under Component 2.4).  Activity 2: Support for strengthening planning and budget preparation processes: The focus will be on: (a) supporting the preparation of comprehensive FSEs by the MTEF Secretariat in collaboration with the Budget Department, M&As, and MoPEA; (b) supporting the development at M&A level of costed sector strategies, investment plans, and budget preparation capabilities; and (c) support for establishing public consultations and hearings as a formal feature of the budget preparation process. 147. In addition, the Project will support implementation of the 2009 Liberia National Gender Policy, which recommends that gender mainstreaming and gender budgeting should be adopted as a development approach and inform the economic reform agenda, medium and long- term development planning, value re-orientation, social transformation, and other development initiatives of government. As per the policy, gender budgeting shall be incorporated in the national budget system in order to achieve government commitments on gender equity and equality. More specifically, this project will seek to develop gender budgeting capacity skills of policy makers, planners, and budgeting institutions in M&As—particularly in the MoF and MoPEA—in order to facilitate the development and implementation of gender budgeting where women and men will benefit from the national budget equitably. In particular, the development of the Budget Framework Paper and MTEF process provides opportunities for strengthening monitoring and evaluation of gender equality in line with the National Gender Policy. Finally, the project will help to ensure that a minimum of 30 percent of the national budget for gender mainstreaming by M&As will be allocated for the implementation of the gender equality instruments. 46 Component 2: Strengthening PFM Legal Framework & Budget Execution: (US$10.26 million) 148. This component aims at strengthening the legal basis for budget management while ensuring that the budget is executed as planned and the quality of information on fiscal operations is improved for more informed government decision making. It has 6 sub- components: (a) Sub-Component 2.1: Review of PFM legal framework (US$0.05 million) 149. The objective of this sub-component is to cater to the needs for refining the PFM laws and regulations for greater consistency with international best practice and thus establish an improved enabling legal framework for management and control of public finances. 150. Liberia has developed, through TA support of the IMF, the World Bank and other development partners a strong legal framework for PFM that gave birth to the PFM Act 2009. The Act 2009 is currently undergoing some reviews and updating for eventual approval by the post-election legislature. The PFM Regulations are also being revised to cater for some salient amendments required to strengthen the subsidiary legislation in a few cogent areas. 151. This sub-component will extend the work being carried out in those areas and provide the financing needs for building the understanding of the Law and Regulations across government for improved compliance in the management and oversight of public finances. The reviews will take cognizance of other PFM related laws – revenue administration, audit – to assure consistency where required. (b) Sub-Component 2.2: IFMIS Rollout to M&As (US$8.22 million). 152. Objective of the sub-component: This component will build on the work done under the current IFMIS project and support the rollout of the FreeBalance based, budget preparation, execution and fiscal reporting modules of the IFMIS that have been implemented under the current IFMIS project to Ministries and Agencies. The component will also complete the implementation of the payroll system initiated under the IFMIS project. 153. The Liberia IFMIS, initiated under the ongoing IFMIS project, covers the areas of Budget Preparation, Budget execution, and Fiscal reporting. It also envisages implementation of a payroll system for civil servants. The IFMIS is intended to be a critical element to be used by Government for the management of government finances. It has been designed to enable: (a) better fiscal control by ensuring that expenditures are in accordance with budget appropriations, commitments and cash allocations as well as for close monitoring of outstanding bills, cash in Government bank accounts, arrears and fiscal deficits; (b) better cash management: by bringing all government accounts under the control of Treasury and consolidation in a Treasury Single Account (TSA), and by reducing idle balances in Government Accounts; (c) provision of timely and accurate reporting for economic management, assistance in preparation of financial statements and financial reports and improved quality of baseline data for budget preparation. 47 154. Current Status: IFMIS Implementation: Considerable progress has been made towards the implementation of the current IFMIS project. Significant milestones completed are given below: 155. Policy Aspects and Design Principles: The IFMIS uses the same system for budgeting and accounting. The IFMIS system will utilize a new harmonized chart of accounts for all financial transactions throughout the country. The Government has approved a multi- dimensional chart of accounts/budget classification - compliant with Government Finance Statistic (GFS2001) as well as the Classification of Functions of Government (COFOG) – which has already been configured in the System. 156. At present all Government funds related to the Budget are banked at a Consolidated Fund Account held at the CBL. Spending agencies do not have separate bank accounts. However, donor project funds are banked outside of the Consolidated Fund Account and the transactions related to these funds, which may be significant, are not routed through the IFMIS. This area will need to be addressed by the project. 157. The IFMIS system envisages online real time entry of all government expenditure transactions and recording of receipt transactions and will be the primary source of data for comprehensive fiscal reporting. This has largely been achieved for on-budget funds but gaps remain in terms of processing of transactions related to donor funds which will be addressed as part of the project. The functional processes associated with budget execution will be fully supported by the system as indicated in Figure 2. 158. The Government has implemented a new rationalized structure for the accounting and reporting function of the MoF by merging the offices of the Comptroller General and the Bureau of General Accounting into a single organizational function – Comptroller and Accountant General’s Department (CAGD) who is the primary counterpart for the IFMIS operations. 159. Systems Architecture and Technology Platform: The main nodes of the architecture have been designed in such a way as to (a) provide access to the MoF Budget department and Vote Controllers in the Line Ministries, and (b) all M&As where expenditure and receipts transactions are processed in the country. Currently there are 42 M&As at the Center. In addition 15 county treasuries are being set up. At present these treasuries are responsible for accounting for small amounts allocated to the counties for their operations through, e.g. the County Development Fund (CDF). However the Government is considering the implementation of a plan it has approved, and which was the outcome of a TA supported by the IMF, wherein, at a later stage, these treasuries may become responsible for all accounting and budgeting operations relating to their own and central sector departments operating in these counties. 160. Software Platform: The Government has selected the FreeBalance application software package after a LIB amongst major second tier packages such as EPICOR, Agresso and others, under the IFMIS project, and has acquired the following modules and utilities: Financial Accountability; Performance Budgeting; Purchasing; Civil Service Management; Forms Plug In; Jasper Soft; Paystation; Crystal reports; RDBMS (SQL Server). 90 concurrent user licenses 48 have been acquired for each to support the functional processes related to budget preparation, execution, and payroll and pensions management. 161. Hardware platform: With support provided under the EGIRP and IFMIS project, the Government has established a common data center and wide area network in the Ministry of Finance that provides a common technology platform for the operation of most of the Information Systems that are currently being set up. A modern technical infrastructure has been established to implement the new system. This infrastructure includes electronic data transmission systems (WAN/LAN) as well as environments for servers and desktop PCs and related storage and disaster recovery systems. The IFMIS is hosted on servers located at the Common data center- Common ICT Platform in the MoF. In addition a ‘Back-up and Recovery Data Center’ has been set up at 18th Street, Sinkor. In addition to the main data center, there is MoF mini-data center having a server that hosts a copy of FreeBalance for development, test and training purposes. The technical maintenance and support of the IFMIS technology platform is the responsibility of the Main Data Center. This includes responsibility for the management, control, operation and integrity of the applications and data, namely, system administration, database administration, applications technical support, network administration, operating systems and help desk administration. 162. Wide Area Networking: GoL is currently implementing a WiMAX based WAN to cover an area with a radius of 40 miles around Monrovia. This would cover all Central M&As that need to be connected to the IFMIS. Plans are also under way to extend the laying of a fiber optic network in Monrovia; at present six agencies are connected to this network. The Government plans to shift to this network as the primary base for communications once it is operational, and use the WiMAX network as a backup. 163. Systems Implementation: The implementation status of the IFMIS is detailed below: (a) System Design and Development: Seven (7) core modules within the scope of the first phase of this project have been configured in the IFMIS system. These are the General Ledger, Purchasing, Accounts Payables, Budgeting, Cash Management, Accounts Receivable, Payroll and Human Resource Management Information System. (b) The Chart of Accounts /Budget Classification: The Government’s new multi- dimensional chart of accounts/budget classification - compliant with Government Finance Statistic (GFS2001) as well as the Classification of Functions of Government (COFOG) - has already been configured in FreeBalance, and training of staff of M&As in the use of the new chart for budget preparation, execution, financial reporting has been carried out. The draft budget for 2011/12 was prepared on the new CoA in the legacy-based Sun System and is being loaded into the development and test server of FreeBalance. Upon final approval of the budget by Parliament, execution has commenced on the production mode in FreeBalance. The budget staff of MoF will simulate the budget preparation for this year through input of all budget requests for 2011/12 in an IFMIS test server, produce the budget book and verify it for accuracy against the approved budget book for 2011/12 produced from the legacy system. 49 (c) Go-Live Status: The system has gone live for expenditure processing with effect from July 1, 2011 at the Central MoF. For expenditure processing for all 23 ministries including their agencies, the CAG has arranged for the staff of the M&As to come to the IFMIS site at MoF and enter their vouchers in the system until the IFMIS system is rolled out to their locations. The IFMIS master trainers support this activity. MoF and CAGD staff process their transactions directly on-line. Therefore all payments related to the budget are transacted and paid through the system. (d) Financial reporting: The financial reports (financial statements and budget execution report) reports compliant with standards have been designed and developed. These will be produced from the IFMIS solution, using a combination of FreeBalance Reporting and the Crystal Reporting tool. (e) Check printing: GoL has started using new checks (with Magnetic Ink Character Reader features) effective July 1, 2011. (f) HRMIS: The HRMIS module has been designed and configured based on partial position management. CSA has collected and cleansed the HR data (200+ fields of HR information as opposed to 6 fields in the legacy system) for 5 ministries and has linked them to identity management software (Biometrics) supporting finger printing and face recognition. The plan is to have payroll run on cleansed data for 5 ministries during the period October December 2011 and to complete the transition to the new payroll as of January1, 2012. (g) Interfaces: The Government under the EGIRP and IFMIS project has developed interfaces with three external applications comprising essential and critical components of IFMIS landscape: Central Bank, Tax and Debt Management System. These loose forms of interfaces are batch-upload solutions in which the provider application provides data files in FreeBalance format at a given secure network location from where the CAGD staff will access the file and upload it into the IFMIS solution on a daily basis. (h) Training: GoL has adopted a Train the Trainers approach with FreeBalance and has trained 37 master trainers. The trained trainers are now training users from the MoF, CSA and GAC on FreeBalance. Approximately 275 key users have been trained and ready to use the system. (i) The IFMIS project has put in place a maintenance and support organizational set up. This infrastructure comprises a support team of 20-22 staff, divided into two teams: functional support team (10-11 staff) and technical support team (10-11 staff). The functional support team comprises of FreeBalance and Crystal Reporting Tool experts to support key client organizations – CAGD, Budget Department and CSA- and have a dotted matrix functional relationship with Director, ICT Unit, MoF. The over-riding principle for this support team will be that it will primarily be staffed with civil servants of Liberian nationality, whose salaries will be funded out of the GoL budget for all maintenance related activities, with project finances only used for sponsoring their training and development related expenditures. 50 164. Activities to be financed under this component: Key activities to be financed are given below, and include: (i) Rollout of the FreeBalance based budget preparation, execution and fiscal reporting modules that have been implemented under the current IFMIS project to M&As; (ii) full implementation of the payroll system initiated under the IFMIS project and (iii) establishment of e-transcript utilities to interface with County level systems. The procurement of Additional Licenses for users in the M&As and the product support and maintenance charges as well as the procurement of hardware and implementation services will be key outlets for use of the sub-component’s finances. The additional hardware items for the rollout will include: Desktop Computers & Accessories, Printers & Accessories (Laser printers), and Server Software & UPS. There is funding for internal site renovations and provision of 7 Generators (for key M&As). The sub-component will also provide support to Local and Wide area Networking, including, Switches/Internet Modems & connections Routers, Local Area Networking, Wide Area – WiMAX and fiber connectivity. In addition, the sub-component will finance FreeBalance consultancy services for on-site technical support, implementation services for migration to the new version of the software. The sub-component makes provision for technical project staffing (some of who are already on board) related to the IFMIS and Data Center as well as for training, change management, and acquisition of vehicles. (c) Sub-Component 2.3:Strengthening Financial Standards, Accounting and Reporting (US$0.04 million) 165. Objective of the sub-component: The objective of this sub-component is to support government’s ongoing efforts to strengthen financial, accounting and reporting standards. 166. Current status: The government has adopted IPSAS Cash standards as the reporting standard for Core Government’s consolidated financial statements. The Government has also approved a multi-dimensional chart of accounts/budget classification - compliant with Government Finance Statistic (GFS2001) as well as the Classification of Functions of Government (COFOG) – which has already been configured in the System. The financial reports (financial statements and budget execution reports) have been designed and developed. Consolidated financial statements of the government will be produced from the IFMIS solution, using a combination of FreeBalance and the Crystal Reporting tool. However, the structure of the main report of the IPSAS Cash Standard is different from the structure of the GFS compliant chart of accounts on which the financial transactions of the M&As are being processed. Therefore, detailed guidelines will need to be developed to extract the financial information structured around GFS-compliant COA to produce IPSAS Cash Standards compliant consolidated financial statements. These guidelines will cover both the main IPSAS Cash report and the disclosures. In addition, there is also a need to review accounting, financial and reporting processes in identified areas to make them consistent with best practices. 167. Activities: The project will finance TA to develop these guidelines, train the CAGD’s staff and develop the design specifications to automatically produce the IPSAS Cash compliant reports from FreeBalance and Crystal Reporting tool being currently used by the government. The TA will also review the current accounting and financial processes and recommend improvements in identified areas to bring these processes in line with best practices. 51 (d) Sub-Component 2.4: Treasury, Cash, Debt and Aid Management (US$0.62 million) (i) Treasury & Cash Management (US$0.11m) 168. Objective: Incorporate all funds defined in the PFM Act 2009 in a TSA held in the CBL to improve efficiency and effectiveness of GoL cash and debt management 169. Technical status: Following the end of the years of conflict, the MoF re-established control over day-to-day payments. This allowed the Budget Department to issue monthly allotments to M&As based on the cash flow plans prepared by M&As. Following receipt of goods and services ordered, M&As would bring payments request vouchers to MoF for approval by the Cash Management Committee based on cash availability and subsequent payment. Although this type of cash management system (cash rationing) established financial control, it did not meet the institutional needs of M & A, as reflected in the annual budgets and work-plans, thereby resulting in sub-optimal budget execution. The need for cash rationing was driven not only by unpredictable revenue inflows and low levels of accessible cash reserves, but also by inadequate cash flow forecasting systems and the holding by M&As, county administrations, and extra-budgetary funds (including those of donor –financed projects) of cash in bank accounts that could not be accessed by MoF. Even some bank accounts held by MoF itself could not be accessed by CAGD for the purposes of financing budget execution. Against this background and with the IFMIS shortly to be rolled out, the MoF requested assistance from IMF to rationalize the cash planning and government bank account system within the framework of IFMIS. A specialist visited Liberia in February 2011, and prepared a report on introducing a TSA and a new cash flow planning system, and also prepared guidelines for the preparation of annual cash plans and three month cash flow forecasts. 170. Institutional status: In support of strengthening treasury and cash management, a Cash Management Unit has been established under the Office of Comptroller and Accountant General (CAG). It will not be fully operational until a cash flow forecasting system is in place, a pre-requisite for establishing an efficient cash management mechanism. 171. Activities: The IMF is providing TA in support of this sub-component. An IMF advisor visited Liberia in February 2011 and prepared: (i) an action plan for introducing a new cash flow planning system to replace the current sub-optimal cash rationing system; (ii) a road map for moving towards the establishment of a TSA; and (iii) guidelines for the preparation of annual cash plans and three month cash flow forecasts. The Project will complement IMF’s support through the provision of financial support for consultancies, software purchase, training and workshops as inputs for the following activities: (i) Establishing a TSA to strengthen fiscal control and GFS reporting: The main outputs will be the preparation of a plan to establish the TSA, and provide the banking arrangements and payments processes for TSA sub-accounts through IFMIS. (ii) Including donor funds in the TSA: The main output will be the drafting of principles under which donor project bank accounts would be incorporated under TSA. 52 (iii) Establishing cash and debt management: The main output, contingent upon Activity (i) being accomplished, will be the establishment of cash flow forecasting and cash management mechanism under the auspices of the Treasury Liquidity Committee that will be created, and under which the Cash Management Unit will fall. (ii) Aid Management (US$ 0.35m) 172. Objective: The objectives of this sub-component are to improve predictability and coordination of aid flows and to increase the proportion of total funds incorporated in the national budget. These objectives are aligned with the PFM strategy to increase aid on plan, on budget, and on reporting, and will be achieved through the creation of an all-encompassing aid database, including information about ongoing projects as well as commitment forecasts for the medium-term. The establishment of this database will improve the government’s ability to take into account aid projections in the national budget preparation, particularly with regards to the public sector investment program (PSIP) and to achieving the Poverty Reduction Strategy (PRS) objectives. By subsuming the Project Financial Management Unit (PFMU) under the Comptroller and Accountant General (CAG), execution of aid disbursements will gradually be the responsibility of the CAG, using country systems, and financial reporting of aid will be done through IFMIS, thus incorporating aid in the national budget execution. (See sub-component 5.5.) 173. Current status: The amount of aid flowing into Liberia each year is currently about the same as the amount of total revenue of the central government incorporated in the national budget. However, although budget support is on an upward trend, 85 percent of all aid to Liberia is still not incorporated in the national budget, limiting the degree to which they can be aligned to government policy priorities. An Aid Management Unit (AMU) was established in 2009 with the mandate to (i) maintain a database of aid flows and produce reports on statistical records of aid flow data, including progressively bringing off-budget aid flows onto the budget; and (ii) coordinate plans for all general budget support and targeted budget support financing as part of the national budget process. This mandate is fully in line with the PFM Regulations. 174. The AMU has started establishing an aid database and prepares quarterly and annual reports on aid flows, including detailed information on aid modalities, sector allocations, development partners, and allocations towards the four PRS pillars. The annual aid projection is presented in an annex to the national budget. An Aid Policy has been prepared and will shortly be sent for Cabinet approval. However, no progress has so far been made towards moving project aid and pooled funds on budget. The Overseas Development Institute (ODI) is currently providing technical assistance (TA) to the AMU to assist with finalizing the Aid Policy, preparing an AMU strategy, finalizing the Common Assessment Framework for budget support to Liberia, and harmonizing donor missions. 175. Activities to be financed: The Ministry of Finance has a contract with Development Gateway Foundation for the use of the Aid Management Platform (AMP). A successful piloting of the platform was carried out with funding from UNDP in FY08/09. Further implementation of the AMP aims to strengthen the government’s capacity to manage aid flows, increase donor 53 confidence in government systems, and support government-led coordination.23 AMP will increase transparency and accountability by introducing a web-based repository of aid data and aid funded programs for development partners and government ministries. The AfDB has committed US$110,000 for establishing the AMP, leaving a financing gap of US$252,770 for sustainability of the platform, which will be filled by this intervention, including client connection and integration with other government systems such as IFMIS and the debt management system. The intervention will also contribute to (i) training of AMU staff in aid management and coordination, monitoring and evaluation, and grant negotiation; and (ii) provision of logistics such as computers, photocopiers, printers, and scanners. (iii) Debt Management (US$0.15m) 176. Objective: Improve the efficiency and effectiveness of debt management. 177. Status: The Government has significantly improved the debt management system – eroded during the civil conflict - in line with the requirements of the 2009 PFM Act. A Debt Management Committee (DMC) was established, members of which comprised the Minister of Finance (chair), the Governor of CBL, the Minister of Justice and two other members appointed by the president. The approval of DMC is required for all government borrowing and guarantees as well as for borrowing by SOEs. The Government published a revised post-HIPC debt management strategy in June 2010, with the aim of borrowing to finance the country’s urgent development financing needs, while maintaining a sustainable debt profile. The Government also strengthened the Debt Management Unit (DMU) in MoF through the addition of technical staff and the installation of the London-based Commonwealth Secretariat’s Debt Recording and Management System (CS-DRMS) in 2010. Three staff were trained in its use in London. The DMU now has the capability for monitoring new borrowing and producing timely reports on debt. The system contains records of 60 external loans (post-HIPC). 178. Challenges facing DMU (and CAGD as a whole) include: (i) Incorporating domestic debt into CS-DRMS; GoL intends to borrow domestically in small amounts for financing development expenditure; (ii) providing further training in the use of CS-DRMS for staff and obtaining financing for CS-DRMS upgrades; and (iii) developing an automatic interface with IFMIS. As discussed under Component 2.2 (IFMIS roll-out), FreeBalance has developed a semi-manual interface (batch upload, whereby a debt data file in FB format is manually taken to a secure IFMIS workstation, from where the file can be accessed and uploaded into IFMIS). 179. Activities: The DMU is currently receiving support from ADB and DFID, mainly for training. Under this component, the Project will focus on financing: (i) training requirements beyond the requirements that ADB and DFID are financing; (ii) purchases of periodic CS- DRMS upgrades; and (iii) development/purchase of a domestic debt management module as an addition to CS-DRMS. Under Sub-component 2.2, the Project will finance the development of an automatic interface between CS-DRMS and IFMIS. The end-point will be an operational 23 The AMP will facilitate timely and comprehensive reporting; enable a comprehensive view of all aid resources within a country; help monitor progress toward national development objectives; promote more effective coordination between government and donors; and facilitate monitoring of the Paris Declaration objectives. 54 comprehensive debt database that can generate comprehensive debt reports and be used as a basis for debt sustainability analysis, and which fully interfaces with IFMIS. (e) Sub-Component 2.5: Establishment of County Treasuries (US$0.49 million) 180. This sub-component will establish basic financial management and fiduciary control at county level in support of the GoL's decentralization policy. It aims to lay the basic foundation for de-concentrating financial management of service delivery activities in the 15 counties in support of Liberia’s approved National Policy on Decentralization and Local Governance recently issued by Governance Commission in pursuit of the Government’s commitment to moving towards fiscal decentralization to lower tiers of government. The sub-component will aim to jump-start the gradual and phased implementation of the framework for establishing County Treasuries designed under IMF TA. 181. The activities covered under the sub-component include the basic internal renovation of existing county accounting offices, setting up of a treasury framework including the design and provision of simplified book-keeping and accounting tools, basic furnishing of country treasury offices, and capacity building of country treasury officers through consultancies. The sub- component does not anticipate the roll-out of Freebalance applications during the life of this project. 182. For the present it is envisaged that FreeBalance would be rolled out to the M&As only while a simple spreadsheet, access based, e-transcript system would be implemented at the counties initially since the treasury functions at the counties are still in a nascent stage and only cover local county funds with very few transactions. Data from the county systems would be integrated into the Central system on a periodic basis for reporting purposes. (f) Sub-Component 2.6: Donor Project Financial Management/Use of Country Systems (US$0.84 million) 183. The objective of the sub-component is to establish a direct linkage between PFMU and IFMIS to achieve increased use of country financial management systems and 'aid on accounting' and 'aid on reporting'. The PFMU will, under the project, be mainstreamed into the Accounting Operations Section of the CAGD and will be responsible for implementing the piloting and rolling out of the country’s PFM systems to include donor funded projects. This will involve the mapping of project components, sub-components as well as key activities to the CoA elements of the GoL and enable reporting to be done along the lines of the GoL’s object (economic) and functional classifications – thus meeting the donor reporting requirements as a bi-product of (not parallel to) the GoL reporting requirements. 184. Since, at present, most of the donor funded project funds are held in commercial banks and not considered part of the GoL Consolidated Funds, the design of the sub-component will allow for defining all donor funds’ designated bank accounts as GoL bank accounts that are linked to the Consolidated Fund account held with the CBL as non-lapsing sub-consolidated fund accounts and into which project transactions will be enabled to automatically default. The matter of appropriations/allotments/releases of funds for project accounts will be defined as part 55 of the implementation procedures to be developed upon project effectiveness so as to achieve a 100 per cent alliance with the underlying principles for transition to ‘use of country PFM systems’. The project recognizes that country PFM systems are adequate in terms of underpinning legal framework and practice to support the gradual and phased migration of project FM arrangements to country systems. 185. Key activities covered under the sub-component include: consultancy services to design the budgeting, accounting, and reporting tools within IFMIS using the Government’s chart of accounts; training the staff of the PFMU in the CAGD Accounting Services Unit on the implementation of donor-funded project accounting as part of the overall GoL accounting arrangements; and piloting the transition from stand-alone FM arrangements for donor-funded projects to integrated GoL FM arrangements. Component 3: Revenue Mobilization and Administration (US$ 5.38 million) 186. The objective of this component is to complement efforts aimed at improving the efficiency and integrity of revenue administration and increase domestic revenue of central government entities. The component has 3 sub-components: (a) Sub-Component 3.1: Capacity Development of Customs (US$0.20 million) 187. The objective of this sub-component is to complement the activities supported by GoL (customs automation – ASYCUDA) funded through an arrangement under the AfDB budget support operation by providing requisite hardware and operational expenses not currently funded under the UNCTAD/UNOPS contracts. Other activities to be supported under the sub- component include (i) training on customs administration, and (ii) the provision of logistical requirements such as vehicles to the rural collectorate teams to better function in their roles. 188. The AfDB, under its budget support operations has, as part of its agreement with the GoL, ensured that the design, testing, and implementation of customs automation (ASYCUDA) and its roll-out to key collectorate locations is funded by the GoL from resources supplied through the budget support. The GoL has taken action to comply with the provisions of this agreement and has funded the initial investments in support of this automation and related activities. There are outstanding costs – about $5.65 million – related to key activities germane to completing the full automation and capacity building initiatives under the UNCTAD/UNOPS contracted project, and the GoL will be financing these activities complementarily through the national budget. (b) Sub-Component 3.2: Tax Automation (SIGTAS) (US$4.22 million) 189. This sub-component is aimed at strengthening the tax collection system, including the non-tax domestic revenues. The sub-component will heighten the development of the tax automation system, allowing for a seamless migration from the legacy system, ITAS, to the modern state of the art system, SIGTAS. 56 190. The EGIRP is currently financing the tax automation system and related capacity building activities to strengthen the tax administration and collection system in Liberia. The overall funding gap has been estimated at some $7.4 million but, due to current funding constraints, only about $4.2 million is being earmarked within the IPFMRP during the next four years. The ongoing EGIRP finances: (a) the supply and the installation of an Integrated Tax Administration System (ITAS – that is slated to migrate to SIGTAS) as well as IT support, integration, testing and rolling out, and training of end users and IT staff; (b) consultancy services to manage and supervise the automation process; and (c) logistical support such as office equipment and vehicles. To date, implementation has eased accessibility to some geographical areas of tax collection and improved tax enforcement but a number of important activities still remain as gaps to be implemented. 191. Key priority activities supported under the sub-component of the IPFMRP include (i) the refurbishment of collectorate sites in rural areas (no new construction envisaged); (ii) provision of TA for implementation of SIGTAS roll-out and training; (iii) procurement of hardware and related software, and certain SIGTAS modules; and (iv) operational expenses for effective SIGTAS project management, including technical staffing and change management. This project will coordinate closely the implementation of the sub-component with the related activities funded under EGIRP as well as with the provision of TA by other development partners. (c) Sub-Component 3.3: Establishment of Revenue Authority (US$0.96 million) 192. Objective: The objective of this component is to strengthen tax revenue administrative framework to facilitate policy implementation and improve revenue collection. An independent revenue authority will be created and act as a catalyst to facilitate implementation of key reforms designed to produce a modern efficient tax environment in Liberia and accelerate revenue growth. 193. Current status: With the assistance of the African Development Bank, the Ministry of Finance (MoF) has undertaken a scoping study on establishing a national revenue authority. The study lays out the organizational structure of a semi-autonomous revenue authority and includes a project implementation plan. It also addresses issues related to implementation, human resource management, and public relations. Furthermore, the study stipulates that a project implementation unit (PIU) be established to manage, develop, and coordinate all reforms and modernization initiatives that will permit the creation of the revenue authority. The PIU would report to a project steering committee, which should be set up to guide and manage the successful and speedy establishment of the authority. 194. Based on the conclusions of this study and consistent with the PRS and the PFM Reform Strategy, a semi-autonomous revenue authority is expected to be established in 2012. A management board will be responsible for policy and administration, but be excluded from operational responsibilities. A Commissioner-General will be responsible for the authority, report to the Minister of Finance, and have full powers under the revenue laws to administer and enforce these laws. An Act to establish the Liberia Revenue Authority—to replace the Bureau of Internal Revenue and the Customs & Excise Bureau—for the administration of taxes and to 57 provide for the related purposes will be sent to Cabinet for approval. Independently of this work, the Senate has simultaneously proposed a bill to establish an independent revenue authority, which is currently before the Legislature. 195. Activities. The activities to be financed under this project include development of a Human Resource Performance Management Policy; technical assistance for capacity building, change management, and awareness creation; as well as renovation of new office space, network installation, and purchase of power generators. 196. Technical assistance is currently mainly provided to the MoF under the IMF’s Topical Trust Fund for tax policy and administration and it is assumed that this assistance would continue to be provided to the new revenue authority as it is established. Component 4: Enhancing Transparency and Accountability (US$6.23 million) 197. The objective of the component is to improve transparency and accountability in PFM by increasing the Government’s ability to report on and account for the revenues it collects and for public expenditures and to strengthen the GAC and Legislature, enabling them to execute better their oversight function as assigned under the Liberian Constitution and the PFM Act. It includes 5 interrelated sub-components as follows: (i) strengthening Public Procurement oversight; (ii) strengthening Internal Audit & Controls; (iii) strengthening External Audit; (iv) Enhancing Legislative oversight; and (v) Strengthening Civil Society and Social Accountability. (a) Sub-Component 4.1: Strengthening Public Procurement (US$0.31 million) 198. The objective of the sub-component is to improve the public procurement oversight through strengthening the institutional capacity of the PPCC to deliver on its mandate. 199. Current Status: Public Procurement Oversight: Fourteen years of civil war also contributed to the complete loss of public procurement policies, practices, and procedures, as well as the skills of practitioners and institutions. Under several regimes, the procurement process lost accountability, competitiveness, economy, efficiency and transparency. The reform of the public procurement system began under the transition government in September 2004 with the signing of a World Bank grant of US$1.03 million that both initiated reforms and uncovered detailed evidence of corruption within the government, and culminated in September 21, 2005 with the enactment of the Public Procurement and Concessions Act. This provides for transparent competitive government procurement in what had been an opaque and frequently corrupt process. The Public Procurement and Concession Commission (PPCC) was established in January 2006 to monitor the implementation of the Act and ensure full compliance by all relevant stakeholders. 200. TA to support institutional capacity building: Under the EGIRP, the IDA provided technical assistance to fill critical institutional capacity gaps to implement public procurement reforms, including support for the PPCC and key Ministries and Agencies, local business procurement development and support for the professionalization of the public procurement 58 function. Further progress in the implementation of the PPC Act is slow, however, largely due to the weak capacity of the PPCC in implementing its reform action plan. This activity will provide TA to help fill critical remaining gaps in the technical capacity of the PPCC in order to accelerate the pace of public procurement reforms. 201. Training of PPCC staff and PPCC outreach to government ministries and agencies to provide training on procurement guidelines. PPCC staff and line ministry procurement staff have received some training under EGIRP. The training provided focused on basic procurement principles and the PPCC Act. The PPCC has since conducted a series of compliance reviews which led to the conclusion that procurement knowledge and capacity is still very weak at all levels. Based on the lessons learned from the EGIRP project, this project will provide training to PPCC staff to help improve upon monitoring and compliance with procurement guidelines 202. The following specific activities will be financed under this sub-component: (i) TA to support institutional capacity building; (ii) training of PPCC staff; (iii) PPCC outreach to government ministries and agencies to provide training on procurement guidelines; (iv) support for south to south knowledge exchange activities; and (vi) provision of LAN network to allow for view-only interface with the IFMIS procurement model, and to enable the PPCC to publish its review reports as required by the PPCC Act. (b) Sub-Component 4.2: Internal Audit and Controls (US$1.56 million) 203. The objective of the sub-component is to establish improvements in the internal control environment of M&As to ensure sufficient and timely assurance services on all aspects of the government’s service delivery. 204. Current Status: Legal and Institutional framework: Until the passage of the PFM Law in July 2009, there was no overarching legal or institutional framework governing internal auditing within the Government of Liberia and no regulations governing the conduct of internal auditing functions. The PFM Act now addresses internal audit in Section 38 (“Internal Control and Audit�). Sub-section 38.1(b) calls for the creation of internal audit units to “assess adherence to all financial management procedures and processes prescribed in this Act, its regulations and in instructions issued by the Minister.� 205. As called for by the PFM Act, separate PFM implementing regulations issued by the Minister of Finance in December 2009 now spell out specific requirements for the establishment of internal audit units throughout the Government of Liberia. Among these implementing regulations, Section J.1 requires the establishment of a five-member Internal Audit Governance Board with oversight responsibility for all internal audit activities in Liberia’s public sector. The Governance Board is to report to the President of Liberia. The Governance Board is to consist of the Minister of Finance, the Director General of the Civil Service Agency, the Chairperson of the Public Procurement and Concessions Commission (PPCC) and one additional qualified person to be appointed by the Minister in consultation with the Auditor General and confirmed by the President. 59 206. While the PFM Act itself is silent about how many internal audit units must now be set up in Liberia, Section J.3 of the regulations requires each Liberian “government agency or government organization� to establish its own internal audit unit. Each of these audit units is to be headed by its own Audit Director appointed by the Governance Board. 207. The strengthening of public financial management systems requires an energetic overhaul of internal audit functions. According to an informal assessment taken of internal audit activities ongoing in Government presently, there are perhaps less than a dozen line ministries and agencies in Liberia which employ internal audit personnel. The GAC has identified 76 common internal control weaknesses based on their audit of M&As in the past four years. The findings underscore the current state of the internal audit functions in M&As: ill-trained staff, lacking in motivation, and a lack of independence. As a result, internal audit reports are generally not considered to be credible. Moreover, Audit Committees, in general, do not exist, and there is no overall centralized coordination or systematic monitoring of internal audit activities, apart from the GAC during their normal audits of line ministries and agencies. The government’s internal audit work-plan calls for the implementation of internal audit reforms in two phases: 208. Phase 1 – Consolidation: Consolidate and strengthen internal audit capacity, and adopt a common audit methodology in 8 target institutions including, the Ministries of Finance, Health and Social Welfare, Education, Public Works, Lands, Mines and Energy, Agriculture, Internal Affairs, and Foreign Affairs. Specific actions be taken in implementing this phase are to be sequenced in the following manner: the establishment of an independent Internal Audit Oversight Board, Secretariat and Committees; development of an Internal Audit framework and agenda; consolidation of the Internal Audit Service (IAS); conducting training, audits and awareness; and institutionalization of collaboration of the IAS with GAC and CSA. 209. Phase 2 – Expansion: Consolidate and strengthen internal audit capacity, and replicate the common audit methodology in 32 (or more) target institutions. During phase 1, the 32 (or more) target institutions will be selected based on Institutional Risk Profile (IRP) methodology. 210. The subcomponent will mostly finance activities in Phase 1 through: (i) providing TA support for establishing the Internal Audit Governance Board and Secretariat; (ii) providing logistical support (e.g. computers, a server for storing internal audit reports and follow up actions, etc) to the governance board; (iii) training of internal auditors across M&As; (iv) implementation of Internal Audit manuals; (v) the development and implementation of a risk- based audit methodology; and (vi) specialized audit training (e.g. CAATs), licensing and certifications. (c) Sub-Component 4.3:External Audit (US$3.23 million) 211. Objective of sub-component: The aim under this sub-component is to strengthen the oversight role of the General Audit Commission (GAC) and improve financial compliance through expanding the scope of external audits and helping to strengthen the follow up and response to audit findings. 60 212. Status: The GAC was reconstituted as an independent body in 2005 through European Union Support. Under the EGIRP project, the IDA also provided support for the initial logistical needs of the nascent GAC. The GAC has continued to develop its human capacity and has a competitive incentive structure in place, and has functioned well in its first few years of operations. Moreover, the GAC has put in place an effective capacity building program which allows its staff to benefit from external expertise and advice from a variety of competent sources. The government has also established links with fellow governments to take on GAC auditors for secondments. Notwithstanding, the GAC is still confronted with capacity challenges as it evolves into a more stable and an internationally recognized Supreme Audit Institution (SAI) able to conduct comprehensive post audits of all M&As, special financial investigations, reconciliations and analyses, and perform continuous audits on a routine basis as required by Chapter 53 of the Executive Law of 1972 (amended in 2005). 213. Firstly, several of the M&As have not yet been subjected to GAC audit. While this is partly due to the lack of adequate capacity as well as timely accounts to audit, it would be desirable to avoid the emergence of a significant audit backlog which will undermine the GAC capacity to cope with expanding demands. Secondly, the implementation of Government’s automation program (IFMIS and ITAS/SIGTAS/ASYCUDA) will call for a special set of skills in auditing M&As. Thirdly, there is near total absence of follow up and response to audit findings so far. Although, the responsibility to consider audit findings rests with National Legislature (to which the GAC is responsible) and that of responding to them rests with the Executive Branch, the Auditor General can assist to facilitate National Legislature’s consideration of the audit findings and educate the public at large. 214. Accordingly, the Government considers the following as key priority areas for improving and strengthening GAC’s external audit oversight role under the PFM reform strategy: (a) extending the audits to the M&As not yet audited while ensuring no further build- up of backlog; (b) providing technical GAC support to National Legislature and its Public Accounts Committee for understanding and considering audit reports; (c) developing capacity for specialized audits as well as to audit information systems and in particular the IFMIS and the revenues systems (ASYCUDA and SIGTAS) following their implementation (see sections 4.2.2 and 4.3.2); and (d) following up on implementation of audit recommendations. 215. Activities: The following specific activities shall be financed under this sub- component: (i) TA to train GAC staff on Procurement Audit, Information System Audit, Revenue Audit, Public and Environmental Audit, Oil and Gas Audit; (ii) relevant professional training and certification for GAC staff; (iii) implementation of risk-based audit methodology; and (iv) logistics support including computers, vehicles and furniture. Live audit training will be provided as part of the TA delivery, and the training outcomes will be reviewed regularly by the quality assurance unit of the GAC to ensure that the capacity of the GAC staff to conduct the audits independently is achieved. In addition, interface between the GAC and the CSOs, including the media, will be strengthened through the public relations wing of the GAC to enhance external audit impact. (d) Sub-Component 4.4: Legislative Oversight (US$0.63 million)  61 216. Objective: The objective of this sub-component is to enhance the capacity of the Legislature to apply appropriate standards of PFM accountability to the executive branch. The sub-component will focus on the Public Accounts Committee (PAC) as well as complement other activities under implementation at the Legislature in support of strengthening the capacity of the Legislative Budget Office funded through the USAID (NDI). The sub-component will support the Legislature’s capacity to scrutinize the national budget, fiscal reports, and audit reports as required under the PFM Act. 217. Current Status: Legislative Oversight: During the fourteen years of civil conflict, there was no functioning Legislature in Liberia. As a result, the Legislature is confronted with significant capacity challenges in fulfilling its public finance oversight responsibilities as Liberia moves from the transitional post-conflict recovery phase to laying the foundations for long-term development. This is reflected in the significant delays in budget scrutiny and timely approvals of annual budgets, which together have been affecting the effectiveness of, and predictability in, budget execution, impacting service delivery efficiency. The lack of adequate technical capacity within the Legislature has been a major contributory factor to these delays. In order to address this challenge, the Legislative Budget Office (LBO) was created by an Act of Legislature in September 2010. The LBO was established within the Central Administration of the Legislature to “provide professional technical services, specifically to the Legislative Statutory Committees and generally to members of the Legislature so as to enhance their capacity to enact legislations relative to national budgets and public monies as provided for in Article -34(d) of the Liberia Constitution�. The nascent LBO currently lacks capacity to deliver on its core mandates which include: (i) preparing legislative budget response to the national budget submitted by the executive branch; (ii) preparing mid-year legislative budget review reports; (iii) conducting fiscal impact analysis on legislation; and (iv) performing other socio- economic data gathering and analysis that enhances the approval of the national budget. The NDI is currently engaged in supporting the improvement of some key elements of the capacity deficit. 218. Activities: The sub-component aims at strengthening the LBO through the following activities: (i) expertise training and seminars on budget analysis for LBO staff; (ii) introducing outreach programs for the PAC as well as the Ways and Means Committee of the Legislature through south-south study tours; (iii) local training by specialist consultants; (iv) provision of logistical support, office equipment, and LAN network needed to facilitate the work of the LBO as well as the legislative committees. 219. Although, not funded through this project, support to strengthen the capacity of the Public Accounts Committee will be achieved through a complementary Institutional Development Fund (IDF) proposal funded by the World Bank. The overarching development objective of this IDF grant is to enhance executive accountability in the use of public resources through a methodical process of parliamentary oversight. The specific outcomes of the IDF, which are aligned with the overall objectives of this sub-component are: (i) an enhanced accountability regime through revitalization of the process of legislative oversight; (ii) increased effectiveness of PAC, supported by streamlined processes and adequately resourced Secretariat, and (iii) an established enabling environment for PAC to better understand and interact with its primary stakeholders within Liberia, and outside Liberia such as the West African Association 62 Public Accounts Committee Association (WAPPAC) to better deliver on its accountability oversight role. These outcomes are to be achieved through the following activities: (i) provision of technical guidance and support to the PAC Secretariat Staff; (ii) institutional strengthening of PAC and its Secretariat; and (iii) enhancing PAC visibility and network with national and regional stakeholders or bodies. (e) Sub-Component 4.5: Civil Society and Social Accountability (US$$0.50 million) 220. Sub-component Objective: The objective of this sub-component is to strengthen the capacity of non-state actors (NSAs) as critical watchdogs in ensuring transparency and accountability in the use of public finances. It will support the establishment of a platform for information sharing between the government and the public through engagement with non-state actors. In this regard, it will endeavor to integrate the requirements of the Freedom of Information Act (2010) in the management of public finances. 221. Current Status: Non-state Actors (NSAs) have played an important role ensuring transparency and accountability of public officials in Liberia. A coalition of Non-State Actors (or Civil Society Organizations) has been formed in Liberia to facilitate information sharing and better coordination of CSOs response to issues of transparency and accountability. While this is considered an enormous step in the right direction, Non-State Actors are still ill-equipped to scrutinize public expenditure and engage public officials on PFM matters. As key players in the PFM reform process in Liberia, the PFM reform strategy calls for inclusion of NSAs in the governance arrangements of PFM reforms. 222. Activities: Activities to be financed under this sub-component include; (i) the preparation and dissemination of information on public spending, consistent with the Freedom of Information Act (2010); and (ii) support for the administration and provision of sub-grants to eligible NSAs to support demand side activities related to transparency and accountability in the use of public resources. Funds will be provided for: (i) analysis and monitoring of the national and local government budgets at various stages of the budget preparation, approval and execution cycle; (ii) support for advocacy activities and dissemination of information on all aspects of PFM at the national and local government levels; and (iii) media training for journalists on covering government budget and spending matters. The criteria for providing sub- grants will be defined in a simple manual upon the appointment of a sub-grants agent during project implementation. Component 5: Program Governance and Project Management (US$4.84 million) 223. The objective of this component is to provide a robust project and program management function that caters to the needs of integrated coordination and monitoring of the implementation of the reform program, serve as the enabling component for delivery of PFM human resource capacity, and assure the appropriate sequencing of interventions across the various reform fronts. The component has four sub-components: (a) Sub-Component 5.1: Program Coordination (US$0.65 million) 63 224. Objective: The objective of the sub-component is to provide a strong institutional and functional capacity to coordinate the overall project implementation through respective component managers. 225. Status: The coordination mechanism of the project will be anchored on the prerequisites defined in the PFM Operations Manual that was developed and approved by the GoL. The Manual has clearly identified the specific and general responsibilities of the PFM RCU which was established to steer the overall reforms within a government-led institutional setting. The RCU has a staffing complement that includes a Coordinator, as head, and is supported by a team of professional and administrative staff to oversee overall PFM reforms (whether being supported by government or donors on a parallel basis) and including those to be supported by this project. The aim is to ensure that there is improved coordination in delivery reforms and complementarity, rather than duplication, is fostered in delivering reform actions. Furthermore, the coordination of the project within the overall reform program will lend credence to the necessity for proper sequencing of interventions, and facilitate the change management processes through inter-component dialogue at the level of the Project Technical Committee. The RCU will interface with all component or sub-component managers as well as the CSA, PFM Training School, and PPCC. 226. Activities: The project will finance (i) short term technical assistance consultancies to strengthen the coordination capacity, (ii) local contractual staff to support the administrative functioning of the coordination mechanism, (iii) procurement of hardware, related software, and logistics, and (iv) staff training as well as incremental operational expenditures. (b) Sub-Component 5.2: Institutional and Capacity Building (US$3.17 million) 227. Objective: the objective of this sub-component is to strengthen the institutional basis for PFM reforms and build national capacity for enabling new entrants into the civil service to perform their functions in the areas of PFM and public procurement. 228. Status: Since 2008, a PFM Training Program (PFMTP) has been established by the GoL under World Bank financing to serve as a training ground for graduates in the area of PFM. The program has produced about 50 Masters Degree level graduates so far and 30 students are currently on the program and scheduled to graduate in December 2011. The PFMTP is highly competitive. The program is being supported by the World Bank financed EGIRP and financing will continue up to December 2012 when this IPFMR project will take over the financing of new intakes for a further period of 3-4 years. Along with this, a procurement training wing is also being established under the EGIRP to support a one-year procurement certification course for new entrants into the procurement cadre of the civil service up to 2014. The IPFMR project will assume the continued implementation of the training for this cadre for a further period of two years to 2016. The induction of qualified and competent graduates into the civil service that will be strengthened under this project will create a nucleus 64 of national staff who can provide the human resource base for improved expenditure management and control.24 229. Activities: Activities to be financed under the sub-component include the following: (i) stipends to students in the PFM and Procurement courses; (ii) development of improved curriculum; (iii) compensation to professional lecturers and other academic staff; (iv) establishment of a career path framework for PFM and procurement staff through CSA auspices; (v) further implementation of the employee biometrics under CSA auspices, including validation processes; and (vi) PFM related workshops and knowledge sharing. (c) Sub-Component 5.3: Monitoring and Evaluation and Change Management (US$0.46) 230. Objective: Monitor, evaluate, and review progress on all project components, sub- components, identify issues that may impede progress, develop effective change management strategies, and communicate key aspects of progress to the public. 231. Technical status: M&E for such a comprehensive reform project is quite complex, and the relative roles of the M&E function and Communication and Change Management need to be further refined. In principle, the M&E element of this sub-component should work closely with all of the project components and relevant government agencies to ensure that work-plans are in place. The Change Management and Communications unit should work closely with the M&E unit and make maximum use of the data obtained both to design appropriate change management interventions and to communicate the main features of reform to politicians and the public. Workshops and publicity on reforms should be closely geared to the current program of activities and needs that are identified by M&E as well as feedback received from M&As and the public. 232. Institutional and human resources capacity status: At present the staffing of these functions is limited to one M&E officer, just recently appointed, and one change management specialist. It is envisaged that at least one consultant will be appointed to assist in these duties. The nature of the tasks and their relative unfamiliarity means that training and likely some TA support for these functions is required in the near future. 233. Activities: The M&E unit should apply the harmonized M&E framework developed for this project (see Attachment to Annex 1, Results Framework) to monitor and evaluate progress, and any factors that may impede progress toward the overall PDO. The unit should also maintain data that will facilitate annual PEFA self-assessments of key indicators and periodic independent full PEFA assessments. Links between the M&E framework and PEFA are explained in the Annex 1 attachment. Training in PEFA methodology for the M&E function to undertake the self-assessments will be provided for under the Project. It is understood that the IMF will also be providing TA inputs to help establish the M&E and it is highly desirable that this effort be closely coordinated with the framework developed for the IPFMRP. A team effort 24 All of the PFMTP graduates will sign a bond for service for a period of up to four years on completion of training, as per standard civil service procedures. 65 is essential to establish effective work-plan monitoring and a unified approach to M&E and change management and to ensure effective project implementation. (d) Sub-Component 5.4: Project Fiduciary (US$0.57 million) 234. Objective: To ensure that funds advanced for project execution are used for purposes intended with efficiency and economy. 235. Status: The RCU is the coordinating unit for overall reforms in Liberia. The RCU does not however, have the requisite procurement capacity to undertake large scale procurements such as envisaged under this project and the other PFM reform activities envisioned in the PFM Reform Strategy. 236. Activities: TA support will be provided to hire an international Procurement Specialist to: (i) carry out procurement under the project; (ii) provide technical procurement support to participating Ministries and Agencies including procurement management; and (iii) build procurement capacity to allow RCU to take over procurement responsibilities at the end of the end of his/her contract. 66 Annex 3: Implementation Arrangements Republic of Liberia: Integrated Public Financial Management Reform Project Project Institutional and Implementation Arrangements 237. Project administration mechanisms: It is the objective of GoL to promote efficiency and minimize the administrative burden in implementing PFM reforms. To the extent possible, implementation of the PFM reform program will be undertaken using Government’s institutions and processes. Operational procedures and practices will be aligned with Government processes where this is possible. The Ministry of Finance under the leadership of the Minister and supported by the PFM Reform Coordination Unit (RCU) will be responsible for the overall coordination and oversight of the proposed project. The already established Project Financial Management Unit (PFMU) hosted in the Ministry of Finance which serves as the fiduciary agent (Financial Management) for a large part of the Bank portfolio will be used as the main unit for financial management under the project. Details of the proposed arrangement are as follows: 238. PFM Steering Committee. Consistent with the PFM Operations Manual of April 2011 (acceptable to IDA), the PFM Steering Committee (SC) shall be the main structure responsible for oversight over the overall PFM reform program. It will provide policy coordination and will be the forum for resolving strategic issues impeding program implementation. The SC shall also be the forum for policy dialogue with DPs on the PFM program. Moreover, the SC will be responsible for approving the Annual Work Program and Project Budget (AWPB). It shall meet on a quarterly basis. The SC shall have the following membership: Minister of Finance (Chair), Minister for Planning and Economic Affairs, Minister of State, Minister of Justice, Director General, Civil Service Agency, Auditor General, Executive Director of the PPCC, Chair of the PFM Project Steering Committee (PSC) and the Head of the RCU (Secretariat). To facilitate information sharing and coordination with other PFM related committees and programs, the Coordinator, RCU shall extract issues arising from the meetings of the SC that are pertinent to their roles and share these with these structures. The Coordinator will also access the secretariats of the National Budget Committee (NBC), the Debt Management Committee (DMC) and the Civil Service Reform program to obtain PFM issues that warrant the attention of the PFM SC, PSC and PFM implementing units (Component Chiefs). The Coordinator should establish a working relation with the secretariats to these committees. 239. PFM Technical Committee: As provided for in the PFM Operations Manual, a PFM Technical Committee (PTC) shall be established under the project. The PTC shall be a forum for all Component Chiefs to monitor and coordinate implementation of program activities. Component Leads shall be selected by the respective beneficiary departments or agencies for each of the five components of the project. The PTC shall meet monthly. Its membership shall be as follows: Deputy Minister of Finance (Administration) – Chair; all Component Chiefs and alternate leads; Leads of cross-cutting activities; IFMIS and Capacity building; and Head of the RCU (secretary). The Project Coordinator will play a pro-active facilitation role by organizing monthly meetings to monitor implementation progress, including procurement plans. It shall be established within three months of effectiveness. 67 240. PFM Reform Coordination Unit: At the technical and operational level, the existing PFM RCU headed by the PFM Reform Coordinator and staffed with senior technical personnel will be in charge of the day to day project management and coordination. The RCU shall prepare the annual work-plan, annual budget, mid-term review and annual assessment reports for consideration by the PFM Steering Committee. The RCU is staffed with a Capacity Development Specialist, an M&E Specialist and a Financial Management Specialist. Under the project, a Procurement Specialist will be hired through an international recruitment process to strengthen the RCU’s capacity to execute the procurement requirements of the project. 241. Coordination with Development Partners: A joint Government-Donor Project Steering Committee will meet at least twice annually to review the progress of implementation of PFM Reforms in Liberia. Core reform activities financed under the IPFMR project shall be reviewed during this annual meeting. Moreover, joint donor partner implementation support missions will be carried out semi-annually to review implementation progress against key milestones and provide technical support to implementing partners. 242. Coordination amongst Development Partners: The development partners’ working group for PFM shall meet at least once a quarter (more frequently during the first year of project implementation) to ensure coherence and better coordination of their interventions and to prepare for semi-annual joint Government–Donor Project Steering Committee meetings that will be co-chaired by the Minister of Finance and the World Bank (representing the DPs in the interim until a longer term arrangement is agreed). 243. Financial Management. The PFMU will continue to be responsible for the day to day management of funds and accounting for the Bank portfolio in Liberia, in accordance with the project financial procedures manual already developed for the ongoing Bank projects. The PFMU will also have responsibility for project financial reporting, using already agreed interim un-audited financial statements (IFR) formats in use for the other projects. The PFMU is currently staffed with a team of competent financial professionals with the required experience and qualifications acceptable to the Bank. Consistent with the overall alignment of project implementation arrangements with country systems envisaged under the IPFM project, the PFMU will be integrated into the Accounting Services Unit of the Comptroller and Accountant General’s Department (CAGD). The Comptroller and Accountant General (CAG) will, therefore, have overall oversight over the unit in the discharge of its financial management duties. 68 Figure 3: Main Executing Stakeholders IPFMR Institutional Arrangements Flow Donor - Govt. Governance Layer Govt. Governance Layer PFM Steering Committee • Joint Government- Annual Donor Steering Committee Project Technical Steering Committee • MDTF Administrator RCU Coordinator (WB)/ & DPs Semi- • Joint GoL-DP Steering Committee. Annual • Annual Implementation PFMU Support Component Management Layer MOF Line Ministries MoF Revenue Dept. GAC/MOF/NSA/LEGIS. CAGD/PFMRCU 1. Enhancing 5. Program 2. Strengthening 3. Revenue 4. Enhancing Budget Planning Governance and Legal Framework, Mobilization and Transparency and Systems, Coverage Project Budget execution Administration Accountability and Credibility Management 69 Financial Management, Disbursements and Procurement Financial Management 244. Introduction. In accordance with the Financial Management Manual issued by the Financial Management Sector Board in March 1, 2010, a financial management assessment was carried out to assesses the adequacy or otherwise of the financial management arrangements for managing the Integrated Public Financial Management project. 245. The objective of the assessment was to determine whether MoF has acceptable financial management arrangements, which will ensure: (1) the funds are used only for the intended purposes in an efficient and economical way; (2) the preparation of accurate, reliable and timely periodic financial reports; (3) the safeguarding of the entity’s assets; and (4) adequate fiduciary assurances are provided through an independent audit of the project. The PFMU situated in the Ministry of Finance (MoF) will undertake the financial management functions of the project. The overall FM risk for the project has been assessed as ‘Moderate’. But, with the articulated risk mitigation measures through the use of PFMU and the General Auditing Commission during implementation, this FM risk will residually fall to ‘Low’. 246. Consistent however with the overall alignment of project implementation arrangements with country systems envisaged under the IPFMR project, the PFMU will be integrated into the Accounting Services Unit (ASU) of the CAGD. The CAG will, therefore, have overall oversight over the unit in the discharge of its financial management duties. Created in 2006 (with the assistance of the Bank) as a centralized unit in the MoF, PFMU performs the financial management functions of most donor financed projects in Liberia. The PFMU is headed by a Unit Manager who is responsible for ensuring the overall direction of work at the unit. Under the direction and supervision of the Unit Manager, the entire PFMU accounting team made up of two other professionally qualified accountants, two internal audit staff and a number of technical support staff is responsible for all the day-to-day financial management functions of almost all IDA funded projects in Liberia as well as AfDB funded projects. PFMU has satisfactory budgeting, accounting, internal controls and financial reporting processes in place that will support the effective and efficient utilization of resources for the proposed IPFMR project. 247. While current capacity of the PFMU is adequate to manage the FM arrangements of existing projects in their portfolio, the project will support the unit by contributing toward the staffing cost of one national project accountant already employed at the unit who will be assigned to the project, among others. Moreover, the related incremental operational costs including, setting of the project’s books of accounts in the SUN accounting system, stationery, courier, and printing project FM reports to be incurred by the unit in performing its duties under the project should form part of the costs that the project shall bear under Component 2 managed by the CAGD. 248. Budgeting. The PFMU and RCU will work together to prepare an annual budget for the project based upon the agreed program to be financed. Most of the activities of the key components are already known and these will be included in the project annual budgets. The 70 budget will be based on the annual work-plan to be prepared by the RCU and the Procurement Specialist for the project. The annual project budget will be reviewed and agreed with the World Bank and African Development Bank, and no-objections will be issued by the World Bank task lead for activities agreed upon in the budget. The GAC shall also submit annual budget to the World Bank and the African Development Bank for ‘no-objection’ at the beginning of each fiscal year through the RCU. The Project’s budgets shall be incorporated into the quarterly interim un-audited financial statement for comparison with actual expenditure on a quarterly basis. 249. Internal Controls and Audit. PFMU has laid down internal control procedures and processes that ensure that transactions are approved by appropriate personnel and ensure segregation of duties between approval, execution, accounting and reporting functions. These procedures and processes that are documented in a Financial Management Manual (FM Manual) were assessed as adequate and meet IDA requirements. The Internal Audit unit of PFMU is manned by two qualified staff who perform periodic reviews and report on their findings. The presence of these internal audit functions in PFMU has strengthened its internal management. Currently, the focus of the internal audit functions is split between pre-audit and systemic audits. This greater focus on systemic checks and controls have added greater value to their control functions and engendered greater impact on project implementation. The GAC has satisfactory internal control arrangements that will ensure that funds disbursed are used for purposes intended. These arrangements are expected to be maintained throughout project implementation. 250. Accounting and maintenance of records. Accounting for the use of the project funds, using a cash basis of accounting, will be carried out by the PFMU through a robust accounting system (SUN Accounting system) that provides for adequate segregation of functions and accurate recording of all accounting transactions of the project. The system is also capable of producing accurate periodic financial reports including interim un-audited financial reports (IFR) and annual project financial statements that are considered acceptable to the Bank. The PFMU will transition to using Freebalance as the GoL application in the drive to commence use of country systems for financial management of donor-funded projects. A project Fixed Assets Register will be maintained at all times to correctly reflect assets acquired or created under the project. 251. Financial Reporting and Monitoring. The PFMU will be responsible for preparing the quarterly interim unaudited financial reports. Consistent with the goal of harmonized fiduciary arrangements under the IDA/MDTF/AfDB, one set of financial statements will be prepared showing the sources and uses of funds advanced from IDA, the MDTF, and AfDB. The financial reports will be submitted to the Bank within 45 days of each fiscal quarter after prior review by RCU Coordinator and the CAG. The constituents of the quarterly project IFRs, that will be submitted to IDA and AfDB within 45 days of each calendar quarter, shall be as follows: (a) Sources and Uses of Funds (b) Actual and Forecast Cash Flow Statement according to Components, Sub-components and Activities; (c) Uses of Funds by Activity within Components; (d) Designated Account Reconciliation Statement; and (e) Disbursement Status Monitoring Report. 71 252. The project will follow a cash basis of accounting and a harmonized financial reporting framework. Whereas, the funds advanced under the project shall be incorporated into the GoL budget and hence accounted for as sub-accounts of the Consolidated Fund in GoL’s annual financial statements, a single set of financial statements shall be prepared as an annex to the main GoL financial statement showing: (i) sources of funds/disbursements from IDA, MDTF (Sida/USAID), and AfDB (in a columnar format) and a consolidated statement of uses of funds by component and sub-component activities; and (ii) notes to the financial statements, including background information on the project, the accounting policies, detailed analysis, and relevant explanation of the main accounts/major balances, etc. 253. External Auditing Arrangements. Consistent with its mandate to audit the core consolidated fund and sub-accounts (i.e. donor funds) thereof, the GAC shall carry out an annual audit of the financial statements of all components other than the External Audit Oversight sub-component. The GAC shall share its terms of reference for the project annual audit with the IDA and the AfDB. For the External Audit sub-component, the GAC shall appoint an independent and qualified audit firm, acceptable to the Bank and the African Development Bank, to carry out the audit of the sub-component. The selection of auditors shall be on a competitive basis and in accordance with the Bank's procurement guidelines and would be selected within four months of project effectiveness. The ToR of the auditors will be cleared by the IDA in consultation with AfDB. The auditors’ report and opinion in respect on the financial statements, including the management letter, would be furnished to the World Bank and the African Development Bank within six months of the close of each GoL fiscal year. 254. Funds Flow and Disbursements. A US$ denominated designated account (DA) shall be established at a Commercial Bank (although the GoL and other partners intend to pursue the establishment of the pooled account with the CBL prior to project effectiveness). The account, which ever Bank it is held, will be a sub-account of the GoL Consolidated Fund. The DA shall be set up by the CAG and managed centrally by the PFMU. The PFMU will submit withdrawal applications for the initial deposit and subsequent replenishments as per the Disbursement Letter. Banking and payment processing will be managed centrally by the PFMU in order to ensure adequate control and financial monitoring. Except for the External Audit Oversight sub- component, all expenditure approvals and initiation of processing of payments will be done at RCU and supporting documents transferred to the PFMU for effecting the payments to third parties. The CAG shall be a principal signatory on checks issued for payments and withdrawal applications to draw down from the IDA/MDTF/AfDB pooled financing. The GAC will initiate and approve all eligible expenditures for the external audit sub-component and transfer supporting documents to PFMU for payment processing. The report-based disbursement method (Interim Financial Reports) will be used as a basis for the withdrawal of credit and grant proceeds. The project provides for the use of ‘advances, reimbursements, and special commitments’ as applicable disbursement methods, and these will be specified in the disbursement letter. An initial advance will be provided for the implementing entity, based on a forecast of eligible expenditures against each component, linked to the appropriate disbursement category. These forecasts will be premised on the annual work-plans that will be provided to the IDA and AfDB, and cleared by the World Bank task team leader. Replenishments, through fresh withdrawal applications to the World Bank and the African Development Bank, into the designated accounts will be made subsequently, at quarterly intervals, but such withdrawals will 72 equally be based on the net cash requirements that are linked to approved work-plans and percentage contributions to the pooled fund. Supporting documentation will be retained by the implementing agencies for review by the joint IDA and AfDB missions and external auditors. 255. Disbursement Summary. The project shall have three disbursement categories as defined in the table below. Table 3: Disbursement Summary Category IDA Others Total (US$m) % Financing (US$m) (US$m) 1. Goods, Consulting & Non- Consulting Services, Consultants’ 4.37 20.57 24.94 Services, Stipends, Operating Costs and Stipends except for External Audit and Sub-Grants to NSAs Such percentages as specified in the AWP 2. Goods, Consulting & Non- Consulting Services, Consultants’ 0.56 2.67 3.23 Services, Operating Costs and Training for the External Audit Sub- Component 25 3. Goods and Services financed 0.07 0.31 0.38 by Sub-Grants to NSAs Total 5.00 23.55 28.55 256. This project, upon effectiveness, will be financed by an IDA Credit of SDR equivalent of US$5.00 million, a Multi Donor Trust Fund (MDTF) of US$ 18.58 million (to be contributed to by Sida and USAID) for administration by IDA, and AfDB contribution directly to the pooled account of $4.60 million. The table below summarizes the financial contributions of each of the participating development partners. Donor Partner US$ Equiv. (Millions) 1. MDTF - Sida (Grant) – contributing in SKR 15.10 2. MDTF - USAID (Grant) 3.85 3. AfDB (Grant) – Pooled 4.60 4. IDA (Credit) – pooled 5.00 Total 28.55 257. Two legal agreements will be executed by IDA and the Recipient for this operation: a Financing Agreement for the IDA funds committed to this project; and a Letter Agreement for 25 Audit fees for private sector auditor for the GAC component will be eligible. 73 the grant funds provided by the other participating donor partners (Sida and USAID) under the MDTF. In addition, IDA will execute a Trust Fund Administration Agreement or a Co- financing Agreement with each Donor Partner contributing to the MDTF, providing for the administration of the Fund by IDA. The amounts of contributions by each donor partner will be specified in each administration agreement and in the financing agreement. A Memorandum of Understanding will be signed between IDA and AfDB for their pooled funding of the project. There will be no earmarking of donor funds to particular expenditures under the project. 258. Loan Administration of the World Bank will maintain two grant accounts; one for the MDTF and the other for the IDA grant. Disbursements made for eligible expenditures will be withdrawn from these accounts in proportions relative to the respective contributions as stated in the annual work-plans and budgets. Contributions from donor partners will be made within 21 days of signing of the MDTF Agreement. The MDTF becomes effective when at least one of the contributing donor partners has paid its contribution, but the project becomes effective only when the national legal requirements are satisfied and also when the effectiveness conditions as outline in the financing agreement are met. Procurement A. General 259. Procurement for the proposed Integrated Public Financial Management Reform Project (IPFMRP) would be carried out in accordance with: (i) "Guidelines: Procurement of Goods, Works, and non-Consulting Services Under IBRD Loans and IDA Credits & Grants by World Bank Borrowers" dated January 2011; (ii) "Guidelines: Selection and Employment of Consultants Under IBRD Loans and IDA Credits & Grants by World Bank Borrowers" dated January 2011; and (iii) “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants� dated October 15, 2006; and the provisions stipulated in the Legal Agreements. The general description of various items under different expenditure categories is presented below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame would be agreed between the Borrower and IDA project team in the Procurement Plan. The Procurement Plan would be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. The first procurement plan of the project, dated October 23, 2011, has been reviewed by IDA and is considered acceptable. 260. Procurement of Works: There are no civil works under the project. However, a total of about US$ 1.3 million (in small contract lots) would be procured under this project for minor site preparations, renovations and internal refurbishments. As a result, these will be Non- Consulting Services and not Civil Works per se. The procurement would be done using the Bank’s SBD for ICB/LIB and National SBD agreed with or satisfactory to the Bank. Contracts below USS 3,000,000 but above US$ 100,000 equivalent per contract may be procured under NCB. 261. Procurement of Goods: A total of about US$8.2 million of goods would be procured under this project. These would be vehicles, computers and accessories, printers, furniture and 74 fixtures, software licenses, scanners, photocopiers and generators. The procurement will be done using the Bank’s SBD for all ICB/LIB and National SBD agreed with or satisfactory to the Bank. Contracts below US$500,000 but above US$50,000 equivalent per contract may be procured under NCB. 262. In spite of this, relevant NCB goods contracts, which are deemed complex and subject to significant risks, will be prior-reviewed; such contracts will be identified in the tables and also in the procurement plans. Again, under NCB, it shall be ensured that (a) foreign bidders shall be allowed to participate in National Competitive Bidding procedures; (b) bidders shall be given at least one month to submit bids from the date of the invitation to bid or the date of availability of bidding documents, whichever is later; (c) no domestic preference shall be given for domestic bidders and for domestically manufactured goods; and (d) in accordance with para.1.14 (e) of the Procurement Guidelines, each bidding document and contract financed out of the proceeds of the Financing shall provide that: (i) the bidders, suppliers, contractors and subcontractors shall permit the Association, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract, and to have said accounts and records audited by auditors appointed by the association; and (ii) the deliberate and material violation by the bidder, supplier, contractor or subcontractor of such provision may amount to an obstructive practice as defined in paragraph 1.14(a)(v) of the Procurement Guidelines. Contracts estimated to cost less than US$50,000 equivalent per contract would be procured using shopping procedures based on a model request for quotations satisfactory to the Bank. Direct contracting may be used where necessary, subject to Bank’s No-Objection. 263. Alternatively, goods may be procured from UN Agencies (e.g. United Nation Offices for Project Support) provided such resulting contract does not exceed US$200,000 for each type of contract. 264. Procurement of Non-Consulting Services: All minor renovations (internal) as well as maintenance contracts for generators, equipment, and hardware will form the core of Non- Consulting Services under the project. 265. The procurement procedures and SBDs to be used for each procurement method would be available for IDA review by effectiveness. 266. Selection of Consultants: Consultancy services valued at about US$9.6 million is provided for mainly Technical Assistance, Individual Consultants and implementation services for roll out and upgrade. Contracts for consulting services, each estimated to cost US$300,000 equivalent or more, will be awarded following the procedure of Quality and Cost Based Selection (QCBS). Consulting services estimated to cost US$100,000 but less than US$300,000 per contract under this project would be procured following the procedures of Selection Based on Consultants’ Qualifications (CQS), Fixed Budget Selection (FBS), Quality Based Selection (QBS), and Least Cost Selection (LCS) as will apply to the circumstances as respectively described under paragraphs 3.7, 3.5, 3.2 and 3.6 respectively of the Consultant’s Guidelines. For all contracts to be awarded following QCBS, FBS and LCS, the Bank’s Standard Request for Proposals will be used. Procedures of Selection of Individual Consultants (IC) would be followed for assignments which meet the requirements of paragraph 5.1 up to 5.4 of the 75 Consultant Guidelines. LCS would be used for assignments for selecting the auditors. Procedure of Single-Source Selection (SSS) would be followed for assignments which meet the requirements of paragraphs 3.9-3.13 of the Consultant Guidelines and will always require the World Bank’s prior review regardless of the amount. 267. Short lists of consultants for services estimated to cost less than US$300,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines, if in-country capacity exists. Consultancy services estimated to cost above US$100,000 per contract for firms, and contracts for individuals for assignments estimated to cost above US$50,000 and single source selection of consultants (firms and individuals) will be subject to prior review by the Bank. 268. Training, Workshops. All training programs, seminars, workshops, etc., will be procured based on the annual training plans, part of the annual work-plan and budget (AWPB), subject to the Bank's review. The AWPB will identify the general framework of training and similar activities for the year, including the nature and objectives of training and study tours, conferences, workshops, the number of participants, cost estimates, and the translation of the knowledge gained in the actual implementation of project components. 269. Operating Costs: Incremental recurrent expenditures during project implementation, including maintenance of vehicles, fuel, equipment, office supplies, utilities, consumables, banking charges, advertising expenses, internet service, car insurance, travel, per diems, and accommodations, but excluding salaries of civil and public servants, will be procured using the implementing agency's administrative procedures reviewed and found acceptable by the Bank. 270. Stipends: Stipends for a reasonable amount of approximately one hundred Dollars (US$100) per student, and/or any other amount agreed by the GoL with the Association, may be paid on a monthly basis to students attending the PFM Training School, in order to partially cover the living expenses. Students will be selected by applying the criteria being implemented under the EGIRP through a MoU signed between MoF, CSA, University of Liberia, Liberia Institute of Public Administration, and Public Procurement and Concessions Commission in 2006 and which is currently being updated. Stipends paid will be subject to audit certification to ensure that stipends are paid only to eligible students under the PFM Training School arrangement. B. Assessment of the Agencies’ capacity to implement procurement 271. The PFM Reform Coordination Unit (RCU) in Ministry of Finance (MoF) will be responsible for coordination of the implementation of the Project. The Reform Coordination Unit currently relies on the Procurement Unit (PU) of the MoF to handle all administrative aspects of the procurement process. An assessment of the capacity of the Reform Coordination Unit and the Procurement Unit concluded that Procurement Unit has so far mostly been exposed to national procurement procedures and the overall procurement planning and implementation capacity is still weak. Also the Unit lacks experience in handling complex procurement processes such as those envisaged in this Project. As a result, the current procurement risk is rated ‘Substantial’. However, to mitigate the risks associated with this limited capacity, the international procurement specialist currently working for IFMIS will assist with the initial 76 procurement processes until a substantive procurement specialist with international experience, to be financed under the project, is recruited. The residual risk is ‘Moderate’. 272. The key risk areas and proposed mitigation measures and/or actions are identified in the table below. No Key risks Mitigation Actions By Whom By When 1 Request IFMIS procurement specialist to RCU of Ministry of At the beginning Inadequate capacity to assist until substantive procurement Finance of project and handle the high volume of specialist hired. throughout project procurement actions. life Recruitment of a substantive procurement specialist with international experience Focused capacity building for existing The procurement Throughout project 2 Lack of in-house experience staff specific to the areas of weakness, i.e., specialist with life and familiarity with World capacity building program to be developed international Bank procurement guidelines to respond to specific gaps identified. experience to be and procedures hired. C. Frequency of Procurement Supervision 273. The Bank’s procurement specialists would regularly participate in implementation support missions to assist in monitoring procurement procedures and plans. The procurement plan indicates those contracts which are subject to prior review. All other contracts are subject to post review. The Procurement Plan would be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity, and post procurement reviews would be carried out at a minimum once annually. Thresholds**, Procurement Methods, and Prior Review Expenditure Contract Value Procurement Contracts Subject to No Category Threshold** Method Prior Review /(US$) C>=3,000,000 ICB All contracts Specified contracts, where applicable, would 100,000==500,000 ICB / LIB All contracts Goods and services other NCB Specified contracts as would be identified in 2 than 50,000==300,000 (firms) QCBS and QBS All contracts 77 Services/Non- 100,000==50,000 (individuals) IC All contracts Only TOR (Except for the hiring of Lawyers IC and Procurement Specialists, TTLs have all C<50,000 (individuals) clearance responsibilities) All values SSS All contracts Training, Based on approved Workshops, Annual Work-plan Study Tours & Budgets (AWPB) 4 All Values Approved by TTL when due and ad hoc training/ capacity building needs **These thresholds are for the purposes of the initial procurement plan for the first 18 months. The thresholds will be revised periodically based on re-assessment of risks. 274. Contracts Disbursements Status Reports: As part of the project reports, the agencies will submit contract management and expenditure information in quarterly reports to IDA. The procurement management report will consist of information on procurement of goods, non- consulting and consultants’ services and compliance with agreed procurement methods. The report will compare procurement performance against the plan agreed at negotiations and, as appropriate, update at the end of each quarter. The report will also provide any information on complaints by bidders, unsatisfactory performance by contractors and any information on contractual disputes. 275. Publication of Awards and Debriefing: Publication of results of the bidding process for all ICB goods and works, and also for consultant contracts estimated at US$200,000 and above, in response to paragraphs 2.60 and 2.65 of the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits� dated January 2011; and paragraphs 2.31 and 2.32 of the “Guidelines: Selection and Employment of Consultants by World Bank Borrowers� dated January 2011. Publication of all other procurement activities, including debriefing and review shall be subject to the relevant stipulates in the Liberian Public Procurement and Concessions Law of 2010. 276. Fraud and Corruption: The procuring unit as well as bidders and service providers, i.e. suppliers, contractors and consultants, shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraphs 1.16 of the Procurement Guidelines, January 2011 and paragraphs 1.23 of the Consultants Guidelines. January 2011. Environmental and Social (including safeguards) 277. There are no environmental and social concerns under the project. As an Environmental Assessment Category ‘C’, civil works are not being financed. Monitoring & Evaluation 26 See Para. 256. 78 278. An M&E framework has been designed for this project (Annex 1) which defines the results to be monitored during project implementation. In addition, an overall PFM Reform M&E has been designed to identify all the various reforms supporting the GoL PFM Reform Strategy and including all complementary activities financed by other development partners and the GoL. The objective is to relate the contributions of all reform activities to the overall reform agenda and thus serve as a tool for coherent coordination and reporting on the GoL’s reform program. 279. During each year in the implementation period, detailed quantitative and qualitative reviews of progress will be undertaken to identify and discuss issues and bottlenecks that may arise and impede achievement of targeted outcomes. This work would need to be initiated by the project management in consultation with the key stakeholders who will all be part of the PTCs. The issues raised will be discussed with the project management and implementing entities during each of the twice annual implementation review missions, and recommendations will become action points for implementation follow-up and subsequent reviews. To support the provision of adequate monitoring information, the M&E unit established at the PFM RCU, supplemented by TA consultancies, will be the anchor point for collecting and analyzing the information. Partnership Arrangements 280. As part of the joint donor collaboration in response to the GoL PFM reform agenda, the project will be co-financed by IDA, Sida, AfDB, and USAID. The GoL will assume financing responsibility for the core areas of Customs reforms including customs automation (ASYCUDA) in the estimated sum of US$4.7 million – a cost not included as part of the overall financing plan of the project. These costs will be financed directly from the budget of the government. The GoL contributions to the reforms remain wide ranging and the customs ASYCUDA program (being implemented through UNCTAD and UNOPS) was an activity action defined as part of the earmarked funds provided by the AfDB under its budget support operations. The commitment of the development partners to maximize overall project outcome and impact while strengthening donor harmonization remains a characteristic phenomenon of this project. The agreement of the donors to establish a single pooled fund mechanism whereby respective donor contributions are not earmarked to individual components or activities and are pooled with IDA resources in one designated account to finance the project strengthens the comprehensive development approach to the reform agenda. An IDA-administered MDTF will be established and Sida, being the largest financial contributor to the project, as well as USAID, will channel their finances into the Fund, providing the opportunity for new contributors to join as the project scales up in due course. It is envisaged that Sida, at least, will have signed the Administration Agreement prior to presentation of the project to the Board. AfDB will channel its contributions directly to the pooled account on non-earmarked basis and will sign a Memorandum of Understanding with the IDA and GoL. 281. Implementing the harmonized framework among all development partners, also in support of reduction of transaction costs, would require one set of monitoring and evaluation reporting, FM and disbursement, and procurement requirements. For this reason all financing development partners have jointly undertaken the preparation of the project along with the GoL 79 partners in pursuit of actions geared to supporting GoL’s priority reform strategies. The overall coordination of the reforms, from the development partners’ side, will be carried out by the World Bank (as Administrator) but in partnership with not only Sida, AfDB and USAID, but also with other partners involved in overall PFM reforms like the IMF, ODI, and EU. 282. Financing for activities supported under the project will be derived from IDA Credit (US$5.00 million), Sida grant (US$15.10 million) net of trust fund fees, USAID (US$3.85 million) net of trust fund fees, and AfDB (US$4.60 million) through a pooled account. The overall net financing envelop for the project therefore stands at about US$28.55 million. The details of the pooling and fund flow arrangements are provided in Annex 3. 283. The MDTF financing and the AfDB financing will be co-terminus with the IDA Credit. Although the MDTF (representing 66%) will be funded in tranches by both USAID and Sida, both donors have pledged their co-financing resources in full through either through a comfort letter or by signing the Administration Agreement. The AfDB have also reassured its commitment to the Project in writing to the GoL (copying the Association). Moreover, the legal agreement will incorporate: (a) an effectiveness condition requiring the GoL to sign the MDTF Grant Agreement as a condition prior to effectiveness of the Credit; and (b) a suspension clause in the event that the AfDB funding does not materialize in due course. Any shortfalls due to foreign exchange fluctuations in both the IDA Credit and/or the MDTF funding, will be borne by GoL (as is generally the rule in all IDA financings). 80 Annex 4: Operational Risk Assessment Framework (ORAF) Liberia: Liberia Integrated Public Financial Management Reform Project (P127319) Stage: Appraisal / Negotiation Stakeholder Risk Rating Low Description: Risk Management: The GoL has a very ambitious PFM reform agenda. Government, donors and the citizens The PFM Reform Coordination Unit (RCU) of MoF will have a communications and change management section, staffed by have for many years been expecting a systematic and comprehensive PFM system in professionals that, based on a comprehensive M&E framework, will periodically update the public on implementation actions and Liberia. The only risk is the high expectation that needs to be managed as well as the progress of the program. The government and the donor group will be fully informed using quarterly reports on the progress made on impact of any post-election changes in stakeholder structures. the program. Resp: Client Stage: Implementation Due Date: 01-Mar-2012 Status: In Progress Risk Management: The interfacing of the RCU with the CSOs will cater to the required transparency in the implementation of reforms and involve more stakeholders towards realization of the expectations. Resp: Client Stage: Implementation Due Date: 01-Jul-2012 Status: Not Yet Due Risk Management: Periodic pronouncements shall be made by the Minister of Finance, Auditor General, and the Legislature on benefits being realized in the implementation of project activities towards the public interest. Resp: Client Stage: Implementation Due Date: 01-Mar-2012 Status: In Progress Implementing Agency (IA) Risks (including Fiduciary Risks) Capacity Rating Substantial Description: Risk Management: The capacity of the agencies implementing the various project activities is weak and a As part of this project, capacity building will remain a great focus while TA will be provided to provide direct capacity support to the number of the agencies have had no prior experience in project implementation. Also, implementing units. Under a TA arrangement with the IMF, a full-time Resident Advisor has been recruited and is on post at the MoF. inadequate coordination among the Budget Department, Civil Service Agency, the This will help mitigate the risks associated with capacity and coordination failures in this integrated PFM reform operation. Legislature and the Revenue Department and other departments involved in the Resp: Client Stage: Implementation Due Date: 01-Oct-2012 Status: In Progress implementation of the project could pose risks in sequencing project activities. Risk Management: Training and capacity building is strongly supported under the project across all components. A PFM training school will be one of the outlets from which graduates with good PFM skills will join the civil service. Resp: Bank Stage: Implementation Due Date: 31-Dec-2015 Status: In Progress Risk Management: 81 The established and well functioning PFM Reform Coordination Unit hosted in the MoF will be responsible for overall coordination management of the project. The Unit is staffed with a capable full-time Coordinator and functional specialists paid through the GoL budget. Resp: Client Stage: Implementation Due Date: 29-Feb-2012 Status: In Progress Governance Rating Moderate Description: Risk Management: The legacy of weak governance institutions, accountability and enforcement mechanisms The Government has made notable progress in building the foundation for improving economic governance, including the strengthening as a result of the 14-year civil war pose the risk of weak ownership and accountability for of the General Auditing Commission, improving cash management and controls and establishing the Anti-corruption Commission. results. Resp: Client Stage: Implementation Due Date: 01-Jul-2015 Status: In Progress Risk Management: There is also considerable political will and a firm commitment to reforms by the government. The project also includes a component on strengthening civil society involvement in PFM reforms. These will together help mitigate the risk of weak ownership, lack of transparency and accountability for results. Resp: Client Stage: Implementation Due Date: 30-Jun-2012 Status: Not Yet Due Project Risks Design Rating Moderate Description: Risk Management: Broad reforms coverage of the project in terms of reform areas and implementing The existence of the PFM Reforms Coordination that will be responsible for project management coordination, monitoring and agencies may hinder effective implementation. evaluation across all implementing entities will mitigate the risks in effective implementation. The project will include a component on project management to ensure that the unit is provided the necessary resources to fund the incremental costs of managing the project. Resp: Client Stage: Implementation Due Date: 01-Mar-2012 Status: In Progress Risk Management: A project Steering Committee will be constituted under the Chairmanship of the Minister of Finance with membership from the heads of all beneficiary government agencies. This committee will serve as the governing authority of the project and will meet on a quarterly basis to discuss project implementation issues. Resp: Client Stage: Implementation Due Date: 01-Jul-2011 Status: Completed Risk Management: The project scope will be streamlined, sequenced and focused on key government priorities identified in the PFM reform strategy document to ensure that interventions are aligned. Resp: Bank Stage: Implementation Due Date: 15-Dec-2011 Status: In Progress Social and Environmental Rating Low Description: Risk Management: The proposed project falls into environmental /safeguards Category C and no adverse The project component activities do not trigger any of the Bank’s environmental safeguards. The project does not involve restructuring long-term impacts are anticipated of the public sector, implying no social impacts. Resp: Client Stage: Preparation Due Date: 01-Jul-2011 Status: Completed 82 Program and Donor Rating Low Description: Risk Management: Donor PFM interventions in Liberia, despite GEMAP, have historically been fragmented. The key donor partners in PFM (USAID, DFID, ODI, AfDB, Sida, EU, IMF, and WB) have now agreed to establish a forum to Donors could support parallel PFM projects that duplicate the activities of this project. In reconcile their interventions and thus avoid duplications in financing activities. The existence of the PFM RCU will facilitate improved addition, there is a risk that donors under the MDTF as well as AfDB may delay their coordination through the mechanisms defined in the PFM Operations Manual. The commitment of the donors to the reforms has been agreed contributions or that those contributions may not materialize. exemplified by their full participation in the design of this operation. Resp: Bank Stage: Implementation Due Date: 01-Mar-2012 Status: In Progress Risk Management: With IDA funding as well as establishing co-financing / MDTF arrangements for this project, uncoordinated financing will be minimized. The AfDB, Sida and USAID have issued comfort letters confirming their pledges for the Project. Sida financing will likely materialize before Board consideration. Exchange risk will be borne by GoL as regularly done in all IDA/MDTF operations. Resp: Bank Stage: Preparation Due Date: 15-Dec-2011 Status: In Progress Delivery Monitoring and Sustainability Rating Substantial Description: Risk Management: Weak implementation capacity and limited government resources to support follow on Capacity building of public servants in PFM is a key objective of the project. Continuous training will be imparted to all PFM and activities after the end of the project may impact the sustainability of PFM reforms. related accountability and transparency players to ensure sustainable outcomes. The GoL is committed to provide the recurrent costs associated with the post project implementation. Resp: Client Stage: Implementation Due Date: 30-Jun-2014 Status: In Progress Risk Management: While existing local capacity is inadequate, TA support will be provided to augment these and transfer knowledge and expertise to public servants. Under the project, the PFM Training School will be strengthened to deliver a continuous flow of graduates that will join Resp: Client Stage: Implementation Due Date: 31-Dec-2015 Status: In Progress Risk Management: The recurrent cost implications of the project (post implementation) will be minimized through a process of supporting reforms that can be sustained under country-own long-run implementation capacities. Resp: Client Stage: Preparation Due Date: 15-Dec-2011 Status: Not Yet Due Overall Implementation Risk Rating: Moderate Description: Description: PFM Reforms Coordination Unit responsible for overall project management coordination, coupled with the Linking the project design to the GoL-led PFM reform Strategy and ensuring that the activities to be staffing of the Unit with strong TA, also supported by the IMF, and with the implementing entities each implemented are designed in a way that allows for appropriate sequencing and prioritization will assure the nominating component directors, the implementation risk of the project is expected to be Moderate to risks, post mitigation, are moderate™. The project preparation team will include subject matter experts from the Substantial. The project will be implemented within the framework of an Operations Manual already developed Bank, Sida, and AfDB - all under the task leadership of the Bank. and approved by the GoL for the PFM Reforms. This Manual provides the institutional arrangements that will support an unhindered implementation of the project. 83 Annex 5: Implementation Support Plan COUNTRY: LIBERIA Strategy and Approach for Implementation Support 284. As part of the design, an implementation support (IS) strategy has been developed to enable the Bank and other participating development partners play a crucial facilitation role in the GoL’s implementation of the project. On a semi-annual basis, the partners will, under the Bank’s leadership, conduct thorough implementation review missions whose terms of reference will include the provision of guidance and technical advisory support to the various implementing organs under the project across all components, sub-components and activities. The presence of the task leader in the field and the regular missions (in between the formal semi-annual implementation reviews) will assure the continuous implementation support to the project teams to enable a coherent pursuit of actions geared to delivery on results. 285. The key focus of the donor partnership will be to give cognizance to the measures being implemented by the GoL to mitigating the essential risks arising during implementation and to provide the requisite technical and advisory support to the project implementing agencies during the life of the project. 286. Apart from the Bank’s semi-annual review missions in the field, in concert with other development partners and the regular implementation support visits by the task leader, the following will serve as the basis of the arrangements and approach for supporting the implementation of the project: (i) technical meetings by audio and VC in between formal missions to dilate on matters impacting implementation risks and bottlenecks, enhanced by continuous communications between Bank, other development partners, and government counterparts; (ii) regular interactions between in-country task team members, including the IMF Resident PFM Advisor to GoL, and the implementing agencies to cater for ad hoc support requirements; (iii) synthesis of feedback on the outcome of meetings of the GoL’s PFM steering committee as well as the PTC of the project; (iv) prior reviews of procurement actions falling within the threshold as well as recurring reviews of procurements subject to post-review; and (v) reviews of M&E reports and milestones achieved; and (vi) interim financial and progress reports, and annual audited financial statements of the project. 287. The coordination arrangements designed under the PFM Operations Manual in support of project implementation, and the establishment of a PFM RCU in the MoF, will facilitate the implementation of the project supervision strategy. Prior to each formal mission, the RCU will provide a comprehensive progress report on the project’s activities as well as an updated annual plan and budget, consistent with the project plan and costs. In view of the capacity deficits in the GoL, the first 24 months of project implementation will require intensive supervision and client hand-holding. 288. Sustaining high quality supervision throughout project life will be critical to assure delivery of outcomes within the project’s 4-year implementation period. As a result, the task team, to be led by a seasoned professional in PFM reforms, will have a skills mix that is 84 adequate to cater for a thorough supervision of this technical assistance project. The team will include ICT specialists in IFMIS implementation; PREM economic policy and public sector specialists; fiscal monitoring and M&E specialist; financial management and procurement specialists – all with experience in supporting PFM reform projects in environments similar to Liberia. The AfDB, Sida, USAID and EC will also provide specialists as part of the implementation review team. Where necessary, the mission will also include an IT specialist with adequate knowledge of IFMIS. With most of the Bank’s and other development partners’ teams based in the country office or in the field in the region, implementation support will be timely, efficient and effective. Each bi-annual full implementation review mission will be for two weeks during which there will be a joint DP/PTC meeting to discuss the overall progress of the project’s implementation. A donor/GoL Steering Committee meeting will be held during one of the twice annual implementation review missions to identify any strategic policy and related issues impacting reforms. 289. Coordination amongst the development partners will also be key to achieving results on the ground. The partners have agreed to form a coalition through a PFM Sector Working Group whose role will be, among others, to harmonize and align their reform interventions to avoid duplications, sequence their support (some of which may be parallel) within the overall framework as defined in the holistic PFM Reform Strategy, and share information on all facets of their respective country programs impacting PFM as a whole. 290. The inter-relationship between the donor partners active in Liberia and the MoF (being the center of the implementation platform of the project) has been very productive over the years. A number of World Bank, Sida, AfDB, EU and USAID projects under implementation are centered under the auspices of the MoF and its related agencies, and experience has shown that the implementation support was well received by the GoL as a whole. The IS will therefore consolidate on this good-practice relationship to ensure that, while the GoL will lead the reforms under the project principally through the MoF and the GAC, fine-tuning of the scope, pace, and substance of the reforms in response to changing circumstances will be agreed between the development partners and the GoL counterparts in support of achieving sustainable outcomes. 85 Annex 6: Institutional Framework for Overall PFM Reforms LIBERIA: INTEGRATED PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT 291. Implementing the harmonized framework among all development partners, also in support of reduction of transaction costs, would require one set of monitoring and evaluation reporting, FM and disbursement, and procurement requirements. For this reason all financing development partners have jointly undertaken the preparation of the project along with the GoL partners in pursuit of actions geared to supporting GoL’s priority reform strategies. The overall coordination of the reforms, from the development partners’ side, will be carried out by the World Bank (as Administrator) but in partnership with not only Sida, AfDB and USAID, but also with other partners involved in overall PFM reforms like the IMF, ODI, and EU. 292. The overall PFM reform program is structured around 5 key PFM themes. As the themes cross-cut more than one functional area and for effective coordination and implementation, the identified objectives have been drilled down to specific functional areas which are acknowledged in the strategy and its operational manual as components. Under each component are identified activities with time bound implementation targets. These themes may change, with new ones adopted and old ones dropped as their activities are completed, and as reforms evolve over time. In principle, themes should be identified as broad areas of PFM. To ensure and sustain operational efficiency and financial accountability, the identified activities under each component will be kept to a maximum. 86 Figure 4 below depicts coordination arrangements under the overall PFM Reform Program: PFM Steering Committee PFM Technical Committee RCU Theme 2 Theme 1 Theme 4 Theme 5 Legal Theme 3 Enhancing Credible Framework, Program Enhancing Revenue Governance planning Systems, Budget transparency and Mobilisation and and Project Coverage and Execution and accountability in Administration Management. Credibility Reporting PFM MoPEA Budget IFMIS CAG CSO LBO GAC IAB   MacroFiscal CSA Bureau of Bureau of PPCC Customs and Internal Excise revenue 87 Table 5: Donor Assistance Matrix – PFM Reform Program Development Area(s) of involvement/support Status/Other Remarks/Future Partner involvement Component 1: Enhancing Budget Planning Systems, Coverage and Credibility Sub-Component 1.1: Enhanced Macro-Fiscal Framework ODI Fellowship Sponsorship of resident ODI Fellow to strengthen capacity in the MFAU to assist Ongoing until mid-2012. Another ODI in data analysis, policy formulation, budget process, liaison with international Fellowship may follow. institutions, research on policy impacts, and economic modeling. ODI BSI Limited short term TA for economic policy development. 2011-2014 Around 10 days a year AfDB Sponsorship of four senior economists, two analysts, and one principal economist FY12/13 with long-term experience to strengthen general capacity within the MFAU to provide high quality advice to the MoF and prepare a medium term macro-fiscal framework to underpin the budget process. Support for the purchase of laptops and software. Sub-Component 1.2: Fiscal Reporting and Fiscal Policy Review ODI BSI Resident TA to facilitate dissemination of performance findings for budget November 2011 – March 2012 hearings. IMF Short-term TA to strengthen fiscal reporting and deliver regular and timely data on 2011-2013 budget execution. Sub-Component 1.3: Enhanced Budget Framework USAID Support for long-term technical assistance to (i) assist with establishing (a) October 2011 – September 2014 institutional structures for spearheading medium-term budgeting in M&As; and (b) consultative processes to facilitate determination of medium-term policy and expenditure priorities; (ii) train assigned staff in M&As in performing tasks related to sector planning and the budget process; and (iii) assist with jump-starting the PSIP appraisal process. ODI BSI Support for the preparation of a medium-term expenditure framework. 1. Ongoing until April 2012. 1. Resident TA to provide support for detailed budget estimate preparation 2. March 2012 and provide training for MTEF implementation, including all M&As trained in conducting forward estimates of expenditure. 2. Resident TA to provide support to PSIP, working with MoF and MoPEA. Support to budget M&E. 88 ODI Fellowship Sponsorship of resident ODI Fellow to strengthen capacity in the Department of Nov 2011-Oct 2013 Budget. IMF 1. Regional MTEF advisor in Accra to support the MTEF/budget preparation 2011-2014 process. 2. Resident PFM advisor to help coordinate activities under the MTBF roadmap. Component 2: Strengthening PFM Legal Framework, Budget Execution, Accounting and Reporting Sub-Component 2.1: Review of PFM legal framework IMF Resident PFM advisor to prepare quarterly progress reports on the implementation 2011-2014 of the PFM legal framework. Sub-Component 2.2: IFMIS Rollout to M&As Sub-Component 2.3: Strengthening Financial Standards, Accounting and Reporting USAID Management systems established in four SOEs (National Port Authority (NPA), 2011-2016 Roberts International Airport (RIA), Forestry Development Authority (FDA), and Liberia Petroleum Refining Company (LPRC)) to be monitored and assessed for performance, and identified gaps will be addressed through LIPA training and possibly direct technical assistance. World Bank Support for preparation of an Accounting Manual 2011-14 IDF Grant Sub-Component 2.4: Treasury, Cash, Debt and Aid Management IMF Short term TA to facilitate establishment of a treasury single account, improve cash 2011-2014 management and banking arrangements, and provide strategic guidance. AfDB Sponsorship of six positions to improve the effectiveness the AMU, including the FY2012/13 director, deputy director, senior desk officer, desk officer, database analyst, and an analyst. Support for purchase of stationary, internet modem, and subscription of Aid Management Platform software, Module 1. ODI BSI Short term TA for Aid Management 2011-2014 ODI BSI Demand-led, remote TA for debt management improvement. 2011-2014 Specific activities to be agreed upon. Without additional funding only limited number of days could be supported. Sub-Component 2.5: Establishment of County Treasuries IMF Short-term TA for establishing county treasuries. 2011-2014 89 Sub-Component 2.6: Donor Project Financial Management/Use of Country Systems USAID Strengthening of financial management systems in MoH and MoA for 2011-2016 administration of donor funds. Component 3: Revenue Mobilization and Administration Sub-Component 3.1: Capacity Development of Customs AfDB Support for roll-out of ASYCUDA under the UNCTAD/UNOPS contracts through 2011-2014 AfDB budget support operation. USAID/MCC Provision of TA to increase trade liberalization and facilitation. 2011-2013 Support will include: 1. TA to assist with the rationalization and harmonization of tariff structures with ECOWAS 2. TA to carry out a survey designed to identify non-tariff barriers (NTB) and develop an NTB elimination plan 3. Carry out a cargo time release study 4. Assist in finalizing the new Customs Code 5. Draft implementing regulations for the new code 6. Carry out training in the use of the GATT valuation agreement 7. Design and implement a new broker licensing regime 8. TA to assist with the development of the post clearance audit function 9. Drafting of standard operating procedures, manual for both customs and trade. 10. Introduce automated risk management techniques 11. TA to assist with the necessary impact analysis to facilitate migration to the Common External Tariff (CET) and the ECOWAS trade liberalization. EU Provision of TA to support revenue increase at the Bureau of Customs and improve 2012-2015 accountability, transparency, effectiveness, and efficiency of customs management in Liberia. In the formulation phase, to be finalized Support will include: mid November 2011; project to start 1. Upgrade of infrastructure at two border posts (to be selected, possibly May 2012. Ganta and Yekepa or Bo Waterside), provision of uniforms, hardware, and logistics for improved oversight. 2. Technical advice, intensive mentoring, and on-the-job-training of collectors and their staff, especially in the areas of management control programs/risk profiling in ASYCUDA and business process reengineering for ASYCUDA implementation/introduction of a program for Authorized Economic Operators (AEO) intelligence/staff management/staff reporting; 90 IFC Support for rationalizing documentation and procedures, integrating best practice for risk management procedures in order to facilitate trade, and assist the GoL in finalizing a new customs code. Sub-Component 3.2: Tax Automation (SIGTAS) IMF Capacity development to be provided for: 1. Ongoing until December 2012. 1. Establishing a taxpayer database. 2. April 2014 2. Harmonizing administrative provisions in the LRC to support VAT and the 3. Ongoing until December 2014. existing income tax. 4. December 2012-April 2014 3. Improving filing compliance. 5. 2012-2014 4. Conducting risk-based audit selection using new risk management tools 6. April 2012-April 2013 and methodologies. 7. April 2012 5. Establishing an objections and appeals process that is easily accessible to 8. 2012-2014 taxpayers. 6. Developing and adopting a comprehensive taxpayer service strategy to drive all TPS activities. 7. Developing and adopting an appropriate plan to establish a one-stop TPS customer care center (CCC) by 2014. 8. Identifying a range of performance indicators to measure the impact and effectiveness of taxpayer services and perceptions and delivering against standards are measured with outcomes trending positively. USAID 1. Establishment of Customer Care Center for taxpayers, complementing IMF TA. 2011-2013 Provision of physical structure and educational material. 2. Establishment of Rulings – (TA provided to operationalize unit) World Bank 1. Grant support for the implementation of ITAS US$ 2.2 million. 1. Re-registration process rolled out in (EGIRP) 2. Consideration for providing tangible inputs to enhancing the physical Large Tax Division elements of the Large Taxpayer Division (LTD) through PFM program. Funding Gap still outstanding (about US$ 10 million including the e- modules) 2. September 2011 – June 2012 IFC 1. Support for the Business Process Re-engineering Review process of process maps on 2. Support for in-country tax administration advisor going One year to 2012 AfDB TA to strengthen tax audit and enforcement capacity. Ongoing until October 2012. US Treasury – Capacity Building TA to the Department of Revenue to (i) assist in the Training ongoing and has been Office of development of the newly created Internal Affairs Division; (ii) assist the Public extended to rural staff. Technical Affairs staff to initiate a Communication Strategy for the Bureau of Internal 91 Assistance Revenue (BIR); (iii) increase collection of arrears and improve the return The current program will be evaluated (OTA) delinquency program with special emphasis on development of an effective non- at end-2011 and an extension into 2012 filer program; (iv) assist in the ongoing development of the Internal Control (Office is likely to be requested. of Internal Audit) function under the Deputy Minister of Revenue; (v) provide management training at all levels to enable the BIR to effectively complete the transition phase of the change management process; (vi) identify laws where additional regulations are needed and prepare the regulations. Evaluate the process for issuing tax regulations by the GoL and make improvements; and (vii) identify hindrances in drafting tax laws and make improvements. The TA will focus on: - Basic Management Principles - Performance Evaluation - Enforcement Techniques - Basic Instructors Training - Communications and Public Relations Training - Presentation Skills/Customer Service ECOWAS Support for VAT Development Unit and implementation of VAT in Liberia In progress. Consultant to be provided until at least October 2012. ODI BSI Demand-led, remote TA for VAT implementation. 2011-2014 Without additional funding only limited number of days could be supported. Sub-Component 3.3: Establishment of Revenue Authority ODI BSI Demand-led, remote TA to support establishment of revenue authority. 2011-2014 Without additional funding only limited number of days could be supported. Component 4: Enhancing Transparency and Accountability Sub-Component 4.1: Strengthening Public Procurement Oversight World Bank Provide TA to fill critical institutional capacity gaps to implement public Ongoing until mid-2013/14. (EGIRP) procurement reforms, including support for the PPCC; building procurement capacity of M&As through in-service procurement training provided by LIPA and intensive procurement training services provided by Financial Management Training School; and support for the professionalization of the public procurement function provided by State Peace Building Trust Fund. Sub-Component 4.3: Strengthening External Audit 92 EU Support institutional strengthening and capacity building of GAC through the 2012-2014 provision of TA to: 1. Strengthen the legal and regulatory framework of the GAC in line with international standards. 2. Strengthen GAC's organizational structure and procedures. 3. Support decentralization of GAC offices. 4. Strengthen the linkage between GAC, the National Legislature and other partners through organization of workshops and other outreach activities. 5. Provide support services to auditees. Purchase and maintenance of necessary IT equipment (including software) as well as software packages to analyze large volumes of data to identify anomalies in auditee payroll, vendor, or taxpayer files. In the formulation phase. EU Support/capacity building for CSOs to ensure public awareness on the role and Call for proposals closed, selection mandate of the GAC by putting in place a monitoring system for the audit reports process ongoing, contracts with CSO(s) recommendations alongside with a possible establishment of a public complaint to be signed mid December 2011. mechanism. Contract will run for 12-60 months on a budget of €100,000-300,000. Sub-Component 4.4: Enhancing Legislative Oversight USAID (NDI) Support to strengthen the capacity of the Legislative Budget Office. 2011-2012 ODI BSI Potential limited support to the Legislative Budget Office Not yet agreed. World Bank Support to strengthen the capacity of the Public Accounts and Expenditure 2011-2013 (IDF) Committee to enhance executive accountability in the use of public resources through a methodical process of parliamentary oversight. Sub-Component 4.5: Civil Society and Social Accountability ODI BSI Supporting MoF’s Department of Budget to produce a Citizens’ Guide to the March 2012 Budget; training CSOs on Citizens Guide to the Budget. USAID Training provided to CSOs and Media Organizations on public accountability (18 2010-2015 organization approximately in 7 targeted counties) Component 5: Program Governance and Project Management Sub-Component 5.1: Program Coordination IMF Resident PFM advisor to provide on the job capacity building aimed at 2011-2014 strengthening the operations of the RCU, and supporting the ability of the MoF to effectively steer the PFM reform efforts. AfDB Sponsorship of two staff to improve the effectiveness of the PFM RCU, including 2011/2012 93 the coordinator and financial management specialist. Provision of PFM training. Training needs to be defined (US$ 24,600). Support for the purchase of PFM RCU computers and stationary. Sub-Component 5.2: Institutional and Capacity Building World Bank Support for the PFMTP Ongoing until December 2012. (EGIRP) USAID Support to LIPA addresses the need for flexible, affordable, formal management 2011-2014 training for government employees. The support includes strengthening the institutional capacity of LIPA in providing targeted training and increasing testing and course work for international certifications offered by LIPA, including in accounting, public financial management, auditing, procurement, and other courses as demanded by ministries and agencies utilizing LIPA. Sub-Component 5.3: Monitoring and Evaluation and Change Management IMF 1. Resident PFM advisor to work with component managers to ensure that 1. 2011-2014 each reform activity that is initiated by them has a detailed action plan 2. July 2012 which is consistent with reform strategy and the PFM Operational Manual. 2. Short-term TA to provide support to PFM reform oversight and monitoring Sub-Component 5.4: Project Fiduciary IMF Resident PFM advisor to provide guidance to the RCU in preparing and managing 2011-2014 the proposed IPFMR project, including the design of the multi-donor trust fund. 94 Chart 1: PEFA PFM Performance Scores comparison – 2007/08 7 PEFA Assessment � Comparison of Sierra Leone and Liberia  6 A Baseline Score         Liberia 5 B Baseline Score        Sierra Leone 4 C + 3 C 2 D + 1 D 0 PI�10 PI�11 PI�12 PI�13 PI�14 PI�15 PI�16 PI�17 PI�18 PI�19 PI�20 PI�21 PI�22 PI�23 PI�24 PI�25 PI�26 PI�27 PI�28 D�1 D�2  D�3 PI�1 PI�2 PI�3 PI�4 PI�5 PI�6 PI�7 PI�8 PI�9 95 Annex 7: Statement of Loans and Credits LIBERIA: Liberia Integrated Public Financial Management Reform Project Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d P123196 2012 LR-RRSP4 Budget Support 0.00 5.00 0.00 0.00 0.00 5.03 0.00 0.00 P125574 2011 LR-Road Asset Management FY11) 0.00 67.70 0.00 0.00 0.00 67.96 0.00 0.00 P120660 2011 LR-Electricity System Enhancement 0.00 10.00 0.00 0.00 0.00 10.08 2.37 0.00 (FY11) P121686 2010 LR: Youth, Employment, Skills Project 0.00 6.00 0.00 0.00 0.00 3.83 0.80 0.00 P113099 2009 LR-Urban and Rural Infra. Rehab. Project 0.00 64.00 0.00 0.00 0.00 37.89 8.15 0.00 P107248 2008 LR-Econ. Gov. & Institut. Ref. TAL (FY08 0.00 18.00 0.00 0.00 0.00 8.43 2.03 0.00 P104716 2008 LR-Agric. & Infra. Dev. Proj. ERL (FY08) 0.00 53.00 0.00 0.00 0.00 10.44 -6.76 -1.28 Total: 0.00 223.70 0.00 0.00 0.00 143.66 6.59 - 1.28 LIBERIA STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. Total portfolio: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. Total pending commitment: 0.00 0.00 0.00 0.00 96 Annex 8: Country at a Glance LIBERIA: Liberia Integrated Public Financial Management Reform Project Liberia at a glance 12/9/09 S ub- P O V E R T Y a nd S O C IA L S a ha ra n Lo w- Development diamond* Libe ria A f ric a inc o m e 2008 P o pulatio n, mid-year (millio ns) 3.8 818 973 Life expectancy GNI per capita (A tlas metho d, US$ ) 170 1,082 524 GNI (A tlas metho d, US$ billio ns) 0.64 885 510 A v e ra ge a nnua l gro wt h, 2 0 0 2 - 0 8 P o pulatio n (%) 3.6 2.5 2.1 Labo r fo rce (%) 4.0 2.8 2.7 GNI Gross per primary M o s t re c e nt e s t im a t e ( la t e s t ye a r a v a ila ble , 2 0 0 2 - 0 8 ) capita enrollment P o verty (% o f po pulatio n belo w natio nal po verty line) .. .. .. Urban po pulatio n (% o f to tal po pulatio n) 58 36 29 Life expectancy at birth (years) 58 52 59 Infant mo rtality (per 1,000 live births) 100 89 78 Child malnutritio n (% o f children under 5) 20 27 28 Access to improved water source A ccess to an impro ved water so urce (% o f po pulatio n) 64 58 67 Literacy (% o f po pulatio n age 1 5+) 56 62 64 Gro ss primary enro llment (% o f scho o l-age po pulatio n) 91 98 98 Liberia Low-income group M ale 96 103 102 Female 86 93 95 KE Y E C O N O M IC R A T IO S a nd LO N G - T E R M T R E N D S 19 8 8 19 9 8 2007 2008 Economic ratios* GDP (US$ billio ns) 1.0 0.36 0.73 0.84 Gro ss capital fo rmatio n/GDP .. .. 20.0 20.0 Expo rts o f go o ds and services/GDP .. 10.8 28.3 31 .1 Trade Gro ss do mestic savings/GDP .. .. -142.5 21 -1 .5 Gro ss natio nal savings/GDP .. .. -126.8 .. Current acco unt balance/GDP .. .. 0.0 0.0 Interest payments/GDP 1.2 0.1 50.4 62.3 Domestic Capital savings formation To tal debt/GDP 177.4 715.4 502.3 416.7 To tal debt service/expo rts .. 2.6 256.8 5228.7 P resent value o f debt/GDP .. .. 630.3 227.7 P resent value o f debt/expo rts .. .. 1895.2 10940.8 Indebtedness 19 8 8 - 9 8 19 9 8 - 0 8 2007 2008 2 0 0 8 - 12 (average annual gro wth) GDP -14.3 1.3 9.4 7.1 .. Liberia Low-income group GDP per capita -14.4 -2.6 4.7 2.4 .. Expo rts o f go o ds and services .. .. .. .. .. S T R UC T UR E o f t he E C O N O M Y 19 8 8 19 9 8 2007 2008 Growth of capital and GDP (%) (% o f GDP ) 20 A griculture 38.1 78.6 55.0 61.3 10 Industry 23.9 7.1 18.9 16.8 0 -10 M anufacturing .. 4.8 13.2 12.7 -20 03 04 05 06 07 08 Services 38.0 14.3 26.1 21.9 -30 -40 Ho useho ld final co nsumptio n expenditure .. .. 228.0 202.3 General go v't final co nsumptio n expenditure .. .. 14.6 19.3 GCF GDP Impo rts o f go o ds and services .. 39.3 190.9 172.6 19 8 8 - 9 8 19 9 8 - 0 8 2007 2008 (average annual gro wth) A griculture .. .. .. .. Industry .. .. .. .. M anufacturing .. .. .. .. Services .. .. .. .. Ho useho ld final co nsumptio n expenditure .. .. .. .. General go v't final co nsumptio n expenditure .. .. .. .. Gro ss capital fo rmatio n .. .. .. .. Impo rts o f go o ds and services .. .. .. .. No te: 2008 data are preliminary estimates. This table was pro duced fro m the Develo pment Eco no mics LDB database. * The diamo nds sho w fo ur key indicato rs in the co untry (in bo ld) co mpared with its inco me-gro up average. If data are missing, the diamo nd will be inco mplete. 97 Liberia P R IC E S a nd G O V E R N M E N T F IN A N C E 19 8 8 19 9 8 2007 2008 Inflation (%) D o m e s t ic pric e s 40 (% change) Co nsumer prices 9.6 .. 1 1 .7 .. 30 Implicit GDP deflato r 9.0 3,789.2 16.0 10.4 20 G o v e rnm e nt f ina nc e 10 (% o f GDP , includes current grants) 0 Current revenue .. .. 0.0 0.0 03 04 05 06 07 08 Current budget balance .. .. 0.0 0.0 GDP deflator CPI Overall surplus/deficit .. .. 0.0 0.0 TRADE 19 8 8 19 9 8 2007 2008 Export and import levels (US$ mill.) (US$ millio ns) To tal expo rts (fo b) .. .. 0 0 200 n.a. .. .. 0 0 n.a. .. .. 0 0 150 M anufactures .. .. .. 0 100 To tal impo rts (cif) .. .. 0 0 Fo o d .. .. 0 0 50 Fuel and energy .. .. 0 0 Capital go o ds .. .. 0 0 0 Expo rt price index (2000=100) .. .. .. .. 02 03 04 05 06 07 08 Impo rt price index (2000=100) .. .. .. .. Exports Imports Terms o f trade (2000=1 00) .. .. .. .. B A LA N C E o f P A Y M E N T S 19 8 8 19 9 8 2007 2008 Current account balance to GDP (%) (US$ millio ns) Expo rts o f go o ds and services .. 39 0 0 0 Impo rts o f go o ds and services .. 142 0 0 02 03 04 05 06 07 08 Reso urce balance .. -103 0 0 -3 Net inco me -151 -39 0 0 -6 Net current transfers .. .. .. .. Current acco unt balance .. .. 0 0 -9 Financing items (net) .. .. 0 0 -12 Changes in net reserves 15 0 0 0 M emo : Reserves including go ld (US$ millio ns) .. .. 0 .. Co nversio n rate (DEC, lo cal/US$ ) 1.0 41.5 61.3 63.7 E X T E R N A L D E B T a nd R E S O UR C E F LO WS 19 8 8 19 9 8 2007 2008 Composition of 2008 debt (US$ mill.) (US$ millio ns) To tal debt o utstanding and disbursed 1,842 2,573 3,692 3,484 IB RD 134 143 0 0 B: 72 IDA 102 105 77 72 To tal debt service 24 1 628 910 C: 858 IB RD 0 0 455 0 G: 1,389 IDA 0 0 53 5 Co mpo sitio n o f net reso urce flo ws Official grants 23 60 727 1,245 D: 89 Official credito rs 5 0 -256 -37 P rivate credito rs 0 0 0 0 Fo reign direct investment (net inflo ws) 290 190 132 144 F: 195 E: 881 P o rtfo lio equity (net inflo ws) 0 0 0 0 Wo rld B ank pro gram Co mmitments 0 0 0 0 Disbursements 1 0 0 0 A - IBRD E - Bilateral P rincipal repayments 0 0 198 4 B - IDA D - Other multilateral F - Private C - IMF G - Short-term Net flo ws 1 0 -198 -4 Interest payments 0 0 310 1 Net transfers 0 0 -508 -5 No te: This table was pro duced fro m the Develo pment Eco no mics LDB database. 12/9/09 98 IBRD 33435R2 11°W 10°W 9°W 8°W 9°N 9°N LIBERIA GUINEA SIERRA To Irié LEONE To Voinjama Buedu Kolahun To Mt. Wuteve L O FA . Pendembu (1,380 m) ts M Vahun 8°N i 8°N e iz ng g To Ra i o no Kenema Gelahun g iz W Zorzor To o lo Lola . ya W ts be Yekepa Yekepa M nda G fa Via ba Nia of To im Nzérékoré N L Kongo GBARPOLU Gbalatuah Senniquellie To Danané To Ganta Karnplay Zimmi GRAND Bopolu Bo CAPE Gbarnga 7°N l Palala 7°N P au MOUNT St. Zeansue Zienzu BONG Yopie Sagleipie Tubmanburg Totota Bong Town Robertsport NIMBA CÔTE BOMI n Klay MARGIBI Botata Gloie Nu o D’IVOIRE Careysburg To hn Tapeta Tappita Toulépleu Kakata Jo St. Bensonville Tobli MONROVIA Harbel GRAND BASSA Guata Poabli Kola Town MONTSERRADO Hartford Gaamodebi Zwedru 6°N Babu 6°N RIVER CESS Buchanan Trade GRAND GEDEH Town Gonglee Dube Pyne tos Ce s Bokoa Cestos City SINOE Pelokehn Kopo Juazohn RIVER GEE AT L A N T I C OC EAN Sehnkwehn Kahnwia Kanweaken Fish Town Tawake Tawlokehn 5°N Greenville 5°N M GRAND A Nyaake Nana Kru RY K R U Barclayville LA LA Sasstown N LIBE R I A Grand Cess Plibo D To Tabou SELECTED CITIES AND TOWNS Harper COUNTY CAPITALS NATIONAL CAPITAL 4°N RIVERS MAIN ROADS This map was produced by the Map Design Unit of The World Bank. 0 20 40 60 80 100 Kilometers The boundaries, colors, denominations and any other information RAILROADS shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any COUNTY BOUNDARIES endorsement or acceptance of such boundaries. 0 20 40 60 Miles INTERNATIONAL BOUNDARIES 10°W 9°W 8°W JULY 2007 The original had problem with text extraction. pdftotext Unable to extract text.