Public Disclosure Copy The World Bank Implementation Status & Results Report Public Financial Management Reform II (P120427) Public Financial Management Reform II (P120427) SOUTH ASIA | Afghanistan | Governance Global Practice | Recipient Executed Activities | Technical Assistance Loan | FY 2011 | Seq No: 9 | ARCHIVED on 08-Feb-2016 | ISR22606 | Implementing Agencies: Ministry of Finance, Ministry of FInance Key Dates Key Project Dates Bank Approval Date:14-Jun-2011 Effectiveness Date:09-Aug-2011 Planned Mid Term Review Date:01-Nov-2013 Actual Mid-Term Review Date:01-Nov-2013 Original Closing Date:31-Dec-2014 Revised Closing Date:30-Jun-2017 Project Development Objectives Project Development Objective (from Project Appraisal Document) The proposed PDO is to strengthen public financial management through effective procurement, treasury and audit structures and systems in line with sound financial management standards of monitoring, reporting and control. Has the Project Development Objective been changed since Board Approval of the Project Objective? No PHRPDODEL Components Name Reform Management:(Cost $2.95 M) Procurement Reform:(Cost $21.47 M) Audit Reform and Performance:(Cost $24.70 M) Financial Management Reform:(Cost $23.88 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO  Moderately Satisfactory  Moderately Satisfactory Overall Implementation Progress (IP)  Moderately Satisfactory  Moderately Satisfactory Overall Risk Rating  Moderate  Substantial 2/8/2016 Page 1 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Financial Management Reform II (P120427) Implementation Status and Key Decisions An unprecedented political, security, and economic transition since 2012 has led to a marked decline in economic performance and threatens the foundations of stability and progress in Afghanistan. Despite these challenges, the PFM environment is generally portrayed as one in which public finances are, by and large, used for their intended purposes as authorized by the budget which is processed with transparency and where the fiscal aggregates are well controlled. This performance has been sustained in the current fragile and uncertain environment partly through the support of PFMR II. However, there have been some implementation challenges particularly regarding project activities relating to internal and external audit reforms, and the development of the professional accountants’ organization. These challenges are set out below. Overall implementation progress has therefore been maintained as Moderately Satisfactory. 1) The Professional Accountants Organization Development (PAOD) sub-component has faced considerable challenges in achieving its objective of establishing a legal framework and structure for development and regulation of the profession and training of professional accountants. The draft Accountancy Law is still pending with Ministry of Justice (MoJ) for approval and is being discussed with the President’s office. 2) The change of mandate of MOF IAD (as a consequence of the amendment of Article 61) during the project period has adversely affected the prospect of achievement of the Project Development Objective Indicator (PDOI) for internal audit. 3) There has been good progress with regard to the external audit subcomponent, however there were delays at project commencement, in mobilizing technical assistance for the external audits of Line Ministries.. The project results framework and component activities will be amended in the proposed restructuring for Additional Financing to accommodate the above. 2/8/2016 Page 2 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Financial Management Reform II (P120427) 2/8/2016 Page 3 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Financial Management Reform II (P120427) Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance  --  Substantial  Substantial Macroeconomic  --  Substantial  Substantial Sector Strategies and Policies  --  Moderate  Substantial Technical Design of Project or Program  --  Moderate  Moderate Institutional Capacity for Implementation and Sustainability  --  Moderate  Substantial Fiduciary  --  Moderate  Substantial Environment and Social  --  Low  Low Stakeholders  --  Low  Moderate Other  --  Low  High Overall  --  Moderate  Substantial Results Project Development Objective Indicators PHINDPDOTBL  PEFA Ratings for internal audit (P-21) improve to B (3) . (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 2.00 2.00 2.00 3.00 Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 Comments The internal audit PDOI needs to be revised to reflect the new mandate of MOF Internal Audit Department under which it is no longer allowed to audit line ministries.This is due to changes in the legal framework on internal audit (Article 61). Internal Audit currently audit 50% expenditure and 15% of revenue according to new mandate. A restructuring of this PDOI is included in the Additional Financing proposal.. PHINDPDOTBL  Donors shift 20% of off-budget ODA to on-budget (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 57.60 62.00 20.00 Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 2/8/2016 Page 4 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Financial Management Reform II (P120427) PHINDPDOTBL  PEFA ratings for external audit (P26) improve to B (3) (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 2.00 2.50 2.50 3.00 Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 Comments There has been good progress with regard to the external audit PDOI, however extra time is needed to fully meet this indicator due to the delays at project commencement, in mobilizing technical assistance for the external audits of LMs. The wording of this PDOI also needs to be revisited, in order to delink it from the PEFA methodology which is undergoing changes. Current performance is 74% cumulative coverage. SAO. fully applies ISSAI Level 3 and is working on applying ISSAI Level 4. A restructuring of this PDOI is included in the Additional Financing proposal PHINDPDOTBL  % of of procurement done by LM using stand-alone procurment (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 48.00 48.00 50.00 Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 Comments This PDOI, which relates to procurement, has become somewhat irrelevant due to the migration of Procurement Policy Unit (PPU) to the National Procurement Authority (NPA). During this transition there has been an interruption in the implementation of the accreditation of line ministries (LMs). While the NPA review fresh approaches to capacity building and accreditation, this PDOI has become difficult to measure and redundant. A new PDOI for procurment is included in the Additional Financing proposal. For purposes of this ISR the SY 1393 figures have been used. PHINDPDOTBL  Number of functions carried out by regular ministry staff (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 17.00 17.00 20.00 2/8/2016 Page 5 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Financial Management Reform II (P120427) Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 Overall Comments Progress has been reported in previous years with respect to the indicator relating to the increased number of functions carried out by regular ministry staff (as opposed to contracted staff). However RIMU reports that accurate information is hard to derive and has requested that this PDOI be dropped or revised. A replacement for this PDOI is included in the Additional Financing proposal. For purposes of this ISR the SY 1393 figures have been used. Intermediate Results Indicators PHINDIRITBL  No of Procurement units of LMs and provincial offices restructured (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 7.00 47.00 47.00 61.00 Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 Comments Loss of relevance given institutional changes.For purposes of this ISR the SY 1393 figures have been used. Indicator to be reviewed in Additional Financing project paper. PHINDIRITBL  No of staff completing procurement training and accredited. (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 1917.00 711.00 1800.00 Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 Comments 6000 + staff trained during life of project. 711 additional staff trained during the last reporting period 2/8/2016 Page 6 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Financial Management Reform II (P120427) PHINDIRITBL  No of HR staff trained (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 1020.00 1020.00 750.00 Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 Comments 1020 is figure reported in SY 1393. End Target achieved. Indicator to be reviewed in Additional Financing Project Paper. PHINDIRITBL  LM PFM assessment (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 14 Value 2 assessments underway 14 14 assessments completed Date 01-Sep-2011 21-Dec-2014 21-Dec-2014 31-Dec-2015 Comments Achieved in 2014. PHINDIRITBL  Internal audit - no of audits evaluated as done to acceptable std (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 4 15 34 34 Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 Comments Achieved 2/8/2016 Page 7 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Financial Management Reform II (P120427) PHINDIRITBL  External audit - number done to ISA (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target All World Bank Audits. All WB grant Four compliance audits audits and 9 Value Just WB grant audits 7 completed in SY 1393 compliance and five underway this audits year. Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 Comments All World Bank Audits. Four compliance audits completed in SY 1393 and five underway this year. PHINDIRITBL  Timeliness, quality of in-year execution reports (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 30 days from month end 20 days 15 days 14 days Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 Comments Disseminated and posted within 15 days from end of month. PHINDIRITBL  Freebalance V 7 implemented (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Test version of FB V7 Proposal to upgrade now set-up in Kabul implemented Value not implemented currently being and tests to be run in for all sites evaluated Q1 , 2015 Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 Comments AFMIS upgrade to version 7 (browser based) was delayed due to factors outside of the control of MOF.. The issues that caused delay have now been resolved and a proposal to upgrade is currently being evaluated. It is proposed to revise this indicator in Additional Financing Proposal. Assessment of suitability of web-based version of AFMIS underway. 2/8/2016 Page 8 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Financial Management Reform II (P120427) PHINDIRITBL  Legal Framework for Accounting Profession is established (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target NSC has been Legal established and The draft accountancy framework no legal or oversight English version of draft law is pending with Value agreed and framework law prepare. Dari Ministry of Justice for training version to go to NSC in approval underway Q1 of 2015 Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 PHINDIRITBL  Timeliness and quality of audited statements to Parliament (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Annual Qatia statements Sept 22 budget submitted on time. 1392 Qatia send to execution and Sept 22 just budget Cash based financial Value Parliament within limit IPSAS execution statements prepared for set by PEFM Law compliant FY 1393 Financials Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 PHINDIRITBL  Disaster recovery plan and testing (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Revised work plan has temp site in place but been submitted with the plan in place Value no plan in place detailed procedures request for time (no and tested pending cost) extension Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 PHINDIRITBL  Internal Audit - no of staff trained (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 112.00 184.00 512.00 360.00 Date 01-Sep-2011 21-Dec-2014 01-Oct-2015 31-Dec-2015 Overall Comments 2408 Internal Auditors trained thus far in project life. 2/8/2016 Page 9 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Financial Management Reform II (P120427) See Annex 3(b) of ISM aide memoire Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P120427 TF-10024 Effective USD 73.00 73.00 0.00 68.72 4.28 94% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P120427 TF-10024 Effective 09-Aug-2011 09-Aug-2011 09-Aug-2011 31-Dec-2014 30-Jun-2017 Cumulative Disbursements Restructuring History Level 2 Approved on 01-Sep-2014 ,Level 2 Approved on 19-Dec-2015 2/8/2016 Page 10 of 11 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Public Financial Management Reform II (P120427) Related Project(s) P150632-Second Public Financial Management Reform Project (PFMRP II) - Additional Financing 2/8/2016 Page 11 of 11 Public Disclosure Copy