World Bank Document...Task Team Leader Arun Arya Sector Manager/Director Guenter Heidenhof/ Manuela...

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Document of

The World Bank

Report No: 74325-IQ

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING OF

IRAQ: PUBLIC FINANCE MANAGEMENT REFORM PROJECT (P110862)

(GRANT TF094552)

RVP APPROVAL DATE: JUNE 27, 2009

TO THE:

IRAQ- MINISTRY OF PLANNING AND DEVELOPMENT COOPERATION

January 25, 2013

Governance and Public Sector Management Unit,

Poverty Reduction and Economic Management (PREM) Department

Middle East and North Africa

This document has a restricted distribution and may be used by recipients only in the performance of their

official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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2

ABBREVIATIONS AND ACRONYMS

BCC Budget Call Circular

BETF Bank Executed Trust Fund

BORR Borrower

BSA Board of Supreme Audit

COTS Commercial Off-the Shelf

EA Environmental Assessment

GFS Government Financial Statistics

ICT Information and Communications Technologies

IFMIS Integrated Financial Management Information System

IG Inspector General

IPSAS International Public Sector Accounting Standards

ISDS Integrated Safeguard Data Sheet

ITF Iraq Trust Fund

MOF Ministry of Finance

MOFATC Ministry of Finance Accounting Training Center

MOPDC Ministry of Planning and Development Cooperation

PAD Project Appraisal Document

PDO Project Development Objective

PFM Public Financial Management

PMT Project Management Team

PRA Procurement Regulatory Agency

TA Technical Assistance

Regional Vice President: Inger Andersen

Country Director: Ferid Belhaj

Sector Manager:

Sector Director:

Guenter Heidenhof

Manuela Ferro

Task Team Leader: Arun Arya

3

Restructuring

Restructuring Type: Level II

1. Basic Information Project ID & Name P110862: IQ-Public Financial Mgmt Reform

Country Iraq

Task Team Leader Arun Arya

Sector Manager/Director Guenter Heidenhof/ Manuela Ferro

Country Director Ferid Belhaj

Original Board Approval Date 06/26/2009

Original Closing Date: 06/30/2013

Current Closing Date 06/30/2013

Proposed Closing Date [if applicable] 09/30/2013

EA Category C-Not Required

Revised EA Category C-Not Required

EA Completion Date

Revised EA Completion Date

2. Revised Financing Plan (US$m) Source Original Revised

BORR 0.00 0.00

IRTF 18.00 18.00

Total 18.00 18.00

3. Borrower Organization Department Location

Republic of Iraq Baghdad, Iraq

4. Implementing Agency Organization Department Location

Ministry of Finance Baghdad, Iraq

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5. Disbursement Estimates (US$m) Actual amount disbursed as of 12/8/2012 5.60

Fiscal Year Annual US$ Cumulative US$

2010 121,785 121,785

2011 856,738 978,523

2012 3,333,349 4,311,872

2013 1,287,480 5,599,352

Total 5,599,352

6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N

Does the restructured projects trigger any new safeguard policies? If yes, please select

from the checklist below and update ISDS accordingly before submitting the package.

N

7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes

The Project Development Objective is to support the Government of Iraq's efforts to develop a more

effective, accountable and transparent public financial management.

7b. Revised Project Development Objectives/Outcomes Not applicable

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IRAQ IRAQ: PUBLIC FINANCE MANAGEMENT PROJECT

TABLE OF CONTENTS

P110862

A. SUMMARY ........................................................................................................................... 6

B. PROJECT STATUS .............................................................................................................. 6

C. PROPOSED CHANGES ...................................................................................................... 8

D. APPRAISAL SUMMARY – ............................................................................................. 13

ANNEX 1: RESULTS FRAMEWORK AND MONITORING ............................................. 15

ANNEX 2: REALLOCATION OF PROCEEDS .................................................................. D-26

ANNEX 3: EXTENSION OF CLOSING DATE .................................................................. D-27

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RESTRUCTURING PAPER

IRAQ: PUBLIC FINANCE MANAGEMENT PROJECT (P110862):

(GRANT TF094552) (RECIPIENT-EXECUTED)

A. SUMMARY

1. This Restructuring Paper proposes a Level II restructuring to (a) add a new

component, namely the “Integrated Financial Management Information System

(IFMIS)”; (b) re-allocation of Grant proceeds; and, (c) extend the project closing date, at

the request of the Recipient.

2. During the Mid-Term Review of the project in August 2011, it was agreed with the

Government that the Project’s impact would be significantly enhanced if an IFMIS is also

implemented. Component 1 on Budget Preparation and Component 3 on Budget

Execution Controls can deliver better results if implemented together with IFMIS. Under

the new IFMIS Component, the Ministry of Finance (MOF) plans to develop,

commission and test the prototype of IFMIS. Down the road, the Government also plans

to roll-out IFMIS to all public sector entities including all ministries, treasuries, spending

units and governorates at its own cost.

3. The project’s original closing date was June 30, 2013. The Government has

requested for a 3-months extension to the project closing date citing the reason that the

implementation of the Project could not start until mid-2011 due to three terrorist attacks

on the premises of the Ministry of Finance. With regard to the extension, given that the

Iraq Trust Fund is closing on 31 December 2013, we are requesting an extension up to 31

August 2013.

B. PROJECT STATUS

4. The Iraq Public Financial Management (PFM) project was started as an

emergency operation in July 2009 under the Iraq Trust Fund (ITF). The project is to be

completed in June 2013. The total estimated cost of the Project is US$18 million: i)

US$16 million to be Recipient-executed; and ii) US$2 million to be Bank-executed on

behalf of the Recipient. Under the Recipient-executed part, against the project cost of $16

million, $3.6 million (23 %) has been disbursed. Under the Bank-executed part, against

the project cost of $2 million, the entire $2 million (100 %) has been disbursed. Against

the total project cost of $18 million, $5.6 million (31 %) has been disbursed.

5. The progress made under the Recipient-executed part is as follows:

a) Component 1- Strengthening Budget Preparation: The inception reports for

(a) improving the budget strategy, content of and adherence to the Budget Call

Circular (BCC), and, (b) improving the methodology of investment project

preparation and evaluation, have been prepared.

b) Component 2 – Strengthening Public Procurement: Under the assignment on

developing the Standard Bidding Documents (SBDs), National Implementation

7

Manual (NIM), and Training Curriculum, draft outputs have been prepared.

Similarly, a workshop on international arbitration was organized to inform the

national stakeholders about international best practices. A contract for the

Training Needs Assessment has recently been signed and the work is about to

begin.

c) Component 3 – Strengthening Budget Execution: Consultants have submitted

their draft final reports on Cash Management and Commitment Control Systems.

The procurement process for the organization of internal financial controls is

ongoing and a contract for upgrading the MOF website for enhancing citizen’s

access on fiscal data has recently been signed.

d) Component 4 – Capacity Development: Consultants have prepared the Capacity

Development Plan of the Ministry of Finance Accounting Training Center

(MoFATC), which has been recently approved by the government. The actual

capacity building work is expected to start soon.

6. Initially, there were significant delays in procuring goods and signing consultancy

services contracts. The payment approval procedure used was not appropriate and led to

delays in payments. Accordingly, the last ISR rating of the Project in April 2012 was

Moderately Unsatisfactory. However, as per Bank’s task team’s advice, the payment

approval system has now been streamlined. The resignation of Finance Officer from the

project management team had led to a lack of an authorized signatory to issue payments,

which consequently led to payment delays. However, this issue stands resolved now. In

summary, the project has made some good physical progress under all components since

April 2012, but there have been delays in the payments, due to which disbursements have

not kept pace with the physical progress. The project has uncommitted funds of $6.78

million (44%) – but once the Government is able to sign the Integrated Financial

Management Information System (IFMIS) contract, all uncommitted funds would be

committed.

7. The progress under the Bank-executed part has been as follows:

8. Under the Bank-executed trust fund (BETF), US$2 million were allocated for the

technical assistance (TA) to support the implementation of the Grant and had two

components: (1) Strengthening Budget Preparation, and (2) Capacity Development of the

Board of Supreme Audit (BSA). All of the US$2 million allocated funds for the BETF

have been fully utilized and all planned activities completed. At the Government request,

a proposal for Additional Financing of $621,500 has been prepared for the approval of

the management. The component-wise progress is as follows:

a) Component 1 – Strengthening Budget Preparation: A fully functional Medium

Term Expenditure Framework (MTEF) has been developed and has been used for

preparing budget strategies for 2011-13; 2012-14; and 2013-15. The Iraqi

Medium-term Fiscal (IMF) model is also operational and being tested for the

budget strategy for the ‘2012-14’ period. A comprehensive historical database of

fiscal information is in place. The budget preparation process improved with an

increasingly detailed policy focus during strategy discussions. The use of the IMF

Model has delivered MoF the capability to undertake research on policy

8

components of the budget; trend analysis; and to fine-tune the top-down setting of

fiscal envelopes.

b) Component 2 - Capacity Development of the Board of Supreme Audit (BSA): The program aimed at building capacity, improving key audit practices and

methodologies. The BSA staff has enhanced their skills in financial, risk-based,

procurement, and performance audit. In addition, capacity has built around special

subjects such as oil audit, forensic audit, arbitration, contract management,

auditing of World Bank-financed projects, and Monitoring and Evaluation. The

program has trained about 270 auditors, including 10 master trainers investing

about 10,500 training hour. It has developed one audit manual and improved

another. Moreover, it provided the BSA with solid recommendations on how to

proceed at a number of areas from peer SAIs and experts who had experienced a

similar reform process.

Extension of the Project Closing Date:

9. The Government of Iraq, Ministry of Finance, has requested extension of the

project closure date citing that the implementation of the Project could not start until mid-

2011 because the premises of the Iraqi Ministry of Finance were exposed to three terrorist

attacks, which resulted in delaying the project. They have said that continuous fragile

security situation in Iraq posed a challenge for foreign consultants who found it risky to

travel to Iraq. While in Iraq, the security situation restrained their movements and the

time for which they could meet the government counterparts.

10. From the perspective of Bank’s task team, while the security has indeed caused

some implementation delays, there have been several other factors contributing to slow

progress. However, the main reason why the extension is necessary is that as a

restructuring process, a new component IFMIS is being added which requires a minimum

9 months’ time to be completed. At best, the above implementation schedule could be

reduced to 8 months. The task team, therefore, recommends extension of the project

closure date until 31 August 2013. These two extra months would enable the government

to ensure completion of ongoing activities in a timely and orderly manner. If this

extension is not given, the project objectives will be difficult to achieve. This is the first

and last extension of the project. A detailed explanation on the extension of project

closing date is included in Annex 3.

C. PROPOSED CHANGES

11. Results/indicators. See Revised Annex 1 below.

12. Components. It is proposed to introduce a new Component 5 on Integrated

Financial Management Information System (IFMIS) to the Project. Following is the

description of this component.

NEW Component 5 – Integrated Financial Management Information System

(IFMIS) ($6,000,000)

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13. The Ministry of Finance, Government of Iraq, wants to implement IFMIS in two

phases:

a) Phase 1 – Prototype Development and Testing for the Supply and Implementation

of Integrated Financial Management Information System to be conducted in the

period January 2013 to August 31, 2013, and

b) Phase 2 – Pilot Implementation and Government wide Rollout based on the

results of phase 1 comprising:

i. Phase2A – Pilot Implementation – To commence on January 1, 2014 and

conclude on December 31, 2014

ii. Phase 2B – Government wide Rollout – To commence January 1, 2015

and be completed by June 30, 2016.

14. The Project would support only Phase 1 of this plan. Following the evaluation of

Phase 1, the Ministry of Finance, Government of Iraq, will implement the IFMIS

Government wide system in Phase 2 with other resources. The IFMIS would magnify the

impact of other components of the project in the following manner:

a) Provide capability to automate the budget preparation process to ensure complete

and accurate budget formulation and presentation (support Component 1);

b) Increase the ability of the Ministry of Finance to undertake central control and

monitoring of expenditure and receipts in government Ministries, departments and

spending units (support Component 3); and

c) Provide the Ministry of Finance with access to comprehensive and meaningful

information on budgetary, financial and operational performance during the

financial year (support Components 1 and 3).

15. The Bank’s task team has been engaged in a policy dialogue with the government

on IFMIS since August 2011. The IMF too has participated in this dialogue.

Implementation of the IFMIS was part of the Stand-by Arrangement (SBA) of IMF. The

Government has shown commitment to implement IFMIS which was evident from their

participation in a series of workshops organized by the Bank. A 30-member delegation

from the government participated in the Stakeholder’s workshop in Beirut in May, 2012,

wherein after detailed deliberations, the functional and technical specifications of the

IFMIS system were agreed upon. An agreement was signed with the Bank on the

roadmap and detailed technical and functional specifications. The Government has

clearly stated that “the Ministry of Finance is ready to participate in providing funds from

its budget for implementing IFMIS, over and above what can be provided, by the World

Bank, under the Iraq PFM Project.”

16. From a historical perspective, it may be pertinent to note that in 2003, the

Coalition Provisional Authority (CPA) and the International Monetary Fund (IMF) had

conducted assessments that identified a need for improvements in the Government of Iraq’s

(GoI) budget and financial control system. These assessments found that the GoI financial

structure provided limited ability to monitor Iraqi ministerial budgets and expenditures,

leaving the ministries vulnerable to fraud, waste, and misappropriation of funds. The CPA,

which then managed the budget, conceived the Iraqi Financial Management Information

System (IFMIS) as a solution to manage and oversee the GoI budget. The U.S. Agency for

International Development (USAID) was instructed by the CPA to implement an Iraqi

10

financial management information system, which entered into a broad-based contract with

BearingPoint, Inc. for that purpose. IFMIS represented only a small part of the total effort

and estimated cost under the contract. Bearing Point, in turn, provided a sub-contract to

FreeBalance to develop the design of IFMIS. Subsequently, during 2007-2009, Bearing

Point gave 11 Technical Assistance Orders (TAOs) to FreeBalance for maintaining the

ongoing operation of the system, mainly for BearingPoint staff, so that they knew how to

do it and could explain to GoI. In July 2007, the U.S. Embassy in Iraq ordered the

suspension of the IFMIS project because the BearingPoint project leader and his security

detail had been kidnapped and the GoI lacked support for the system.

17. The task under this Project is to build on a system that was implemented under the

USA Department of Treasury financing of about $30 million, where the Free Balance

System was used by the main contractor (Bearing Point). The Ministry of Finance,

Government of Iraq, after having used the FreeBalance system earlier, wants to continue

using it in future, with some upgradation and customization as per their specific

requirements. Considering that the US Department of Treasury had indicated that they

were no more interested in funding the PFM Project, the Government of Iraq has turned

to the Bank as the financier of last resort. The Government is satisfied with the Free

Balance Accountability software for which there is availability of trained Iraqi staff

which is familiar with the system.

18. The Ministry of Finance wants to use the FreeBalance Accountability Suite v7.0

configured in accordance with the Government of Iraq requirements to provide

automated financial management capability in the Budget Preparation and Budget

Execution functions. The proposed IFMIS will be based on implementation of the

required modules of the Commercial Off-the Shelf (COTS) FreeBalance Inc.

Accountability Suite version 7 with minimal customization.

19. The proposed IFMIS will include Common Application requirements across all

modules, including user access and responsibility controls, the General Ledger Module

incorporating a Budget Classification Structure (Chart of Accounts) suitable for Iraq, a

Budget Preparation Module (including provision to upload approved budget for

execution) and a Budget Execution Module which incorporates appropriate business

processes, Commitment Control and Accounting, Expenditure Processing and Payment,

Revenue recording (Tax, Non-Tax, Grant, Loan), and Cash Management, Banking and

Reconciliation functions. Finally, the IFMIS will provide Financial Reporting for

management purposes and to meet GFS and IPSAS reporting requirements by developing

specific reports for Iraq circumstances.

20. The award of contract to FreeBalance for the development and testing of IFMIS

prototype has been approved by the OPRC with the direction that the contract will be

revised based on its comments and will be cleared by the RPM. The contract is currently

undergoing revision by the government and will be submitted to the RPM for clearance

after the directions of the OPRC have been fully complied with. This is expected by

January 31, 2013.

21. In the unlikely event that the Bank does not approves this contract, a System

Requirement Study (SRS) for implementing IFMIS would be conducted as an

11

independent assignment, the outputs of which, could be used by the government for

designing the prototype, piloting and rolling-out of IFMIS, after this project is completed.

Cost of implementing IFMIS:

22. The cost of developing and testing IFMIS prototype will be as follows:

a) Cost for development and testing of prototype: Approximately US$4,900,000 will

be required for the acquisition of the IFMIS, including the initial System

Requirements Studies and subsequent Supply, Installation, and Commissioning of

the FreeBalance Accountability Suite V9.0 at Select Ministries, Treasuries, and

Independent Boards of the Government of Iraq.

b) Acquisition of ICT hardware for the system operation:

i. Establishing the Data Centre for the IFMIS: US$700,000

ii. Establishing the Disaster Recovery Site: US$300,000

c) Consultant’ services:

i. Engaging an international ICT specialist US$60,000

ii. Engaging a local PFM specialist US$40,000.

23. Accordingly, a total funding of US $6,000,000 will be required for this new

component. The Ministry of Finance, Government of Iraq, has agreed to finance

additional requirements for computer hardware, networks and on-site development in the

pilot ministries and agencies.

Financing:

24. Funding for the new component will come from the Project’s Unallocated

Category. The initial large unallocated amount of US$ 2.82 million was appropriate at the

start of the project, as the cost estimates did not include the numerous “downstream”

activities which were likely to arise from the consultant outputs, and, prior to those

outputs, it was not possible to accurately estimate the costs for these activities. However,

a number of the downstream activities did not materialize as expected, and other planned

activities have been modified or cancelled. As a result, this unallocated amount has risen

to US$ 7.00 million, which is sufficient to finance the IFMIS.

25. Project Costs:

12

Project Costs (US$m.)

Components/Activities Current

Proposed

Component 1 - Strengthening Budget Formulation &

Implementation

3.95

1.90

Component 2 - Strengthening Public Sector

Procurement

3.2 1.70

Component 3 - Strengthening Budget Execution &

Implementation

2.33 3.30

Component 4 - Capacity Development

and Project Management & Auditing

3.0

0.7

2.20

0.90

3.7 3.10

NEW Component 5 – Integrated Financial

Management Information System (IFMIS)

n/a 6.00

Unallocated 2.82 0.00

Total 16.00 16.00

Financial Management:

26. Project will continue using the same financial management and disbursement

arrangements, including accounting and reporting, internal controls, auditing and

budgeting. There are no overdue audit reports or overdue financial reports. The audit

report with audited financial statements and management letter for the year ended

December 31, 2011 were submitted to timely to the Bank. The external auditor has issued

unqualified “clean” opinions.

Re-allocation of Proceeds:

27. The proposed restructuring will be accompanied with reallocation of uncommitted

and unallocated funds under the project for the new component 5 of IFMIS. The

proposed re-allocation of proceeds under different categories of consultancy, goods and

incremental operating costs is included in Annex 2.

Procurement Management:

28. Procurement for this project will continue to be carried out in accordance with the

World Bank’s Procurement Guidelines as indicated in the Grant Agreement.

29. Procurement of Goods: Goods procured under the new Component 5 estimated at

$1,000,000 includes ICT hardware, and will be added to the Procurement Plan as ICB

and NCB packages to be completed before closing date.

30. Selection of Consultants: The new component would require initial System

Requirements Studies and subsequent Supply, Installation, and Commissioning of the

FreeBalance Accountability Suite V7.0 estimated at $4,900,000 to be added to the

Procurement Plan as Single Source selection as it is a buildup on previous FreeBalance

system installations, to benefit from the firm’s continued professional liability for the

system, and exceptional qualification for this specific assignment.

13

D. APPRAISAL SUMMARY –

Economic and Financial

31. The project, by introducing a modern PFM platform, will contribute to an

improved and more rigorous budget preparation process, provide a well regulated budget

execution methodology including control of cash resources, implement sounder

procurement and purchasing control and provide comprehensive and timely financial

reporting mechanisms subject to external audit. Improved business processes and

responsibility assignment within the IFMIS will help to minimize resource leakages, and

provide an accountability trail to identify those who indulge in leakages. The overall

fiscal impact of the project is, therefore, likely to be positive. Better overall resource

management, coordination amongst various government entities, and comprehensive and

timely available financial data will help to improve the allocation of public resources to

priority areas. A more efficient PFM system would curb irregularities in budget

execution; and generally improve fiscal transparency and accountability.

Technical

32. FreeBalance is a global provider of software solutions for public financial

management (PFM). The FreeBalance Accountability Suite is a commercial off-the-

shelf, Government Resource Planning (GRP) solution which is implemented globally

within governments across the world. Customers include the governments of

Afghanistan, Antigua and Barbuda, Canada, Guyana, Iraq, Jamaica, Kosovo, Kyrgyzstan,

Mongolia, Namibia, Pakistan, Palestine, Sierra Leone, Southern Sudan, Timor-Leste,

Uganda, and the USA.

33. The FreeBalance Accountability Suite supports good fiscal practice and

internationally recognized standards such as the United Nations Common Functions of

Government (COFOG), the IMF Government Finance Statistics (GFS), the IMF Code of

Good Practices on Fiscal Transparency, Generally Accepted Accounting

Principles (GAAP), International Financial Reporting Standards (IFRS), International

Public Sector Accounting Standards (IPSAS), Millennium Challenge Corporation

(MCC), Medium Term Expenditure Frameworks (MTEF), and, the World Bank Treasury

Reference Model.

Social and Environment

34. The proposed installation of IFMIS does not involve any physical structure or

construction, land acquisition and environmental impacts. IFMIS will be installed in the

existing government buildings. No new buildings are to be constructed. Only up-

gradation of existing computer rooms might be required before installation of IFMIS,

which is not expected to have an environmental impact. The project does not focus on

any particular population group. Therefore, the project will not trigger any environmental

and social safeguard policies. The project restructuring and additional financing is

classified as “Category C”.

http://www.freebalance.com/solutions/default.asp

14

Risks

35. The risks of adding a new component under the project through the proposed

restructuring are as follows:

(a) Considering the Project closing date is June 30, 2013, the remaining time left

under the project is only six months. If there are any delays at any stage of

implementation, there is a risk that the task might not be completed within project

time. As a mitigation measure, project closing date is being requested to be

extended by 2 months.

(b) The Government may not have the capacity to implement IFMIS as it requires an

understanding of public financial management as well as complex and integrated

IT systems. This may pose risk to the operations, management and sustainability

of IFMIS. This risk will be mitigated by establishing a core group of functional

and technical staff that would work with the FreeBalance team right from the first

stage of system study and design. Also, the government project management team

will be strengthened by recruitment of a new international ICT Advisor and Local

PFM consultant.

(c) The Government may not give timely clearances to interim deliverables of

FreeBalance leading to implementation delays. As a mitigation measure, the

Ministry of Finance has constituted an inter-departmental committee to review

and clear the IFMIS software prototype.

(d) There could be delays in procurement of hardware which is the responsibility of

the government. If that happens, it would lead to an overall implementation delay.

As a mitigation measure, the procurement process of hardware would be started

soon after signing the contract with FreeBalance. The compatible technical

specifications of the hardware have already been provided to the Government by

FreeBalance.

15

Annex 1: Results Framework and Monitoring

REPUBLIC OF IRAQ: Public Finance Management Reforms Project – Restructuring

Results Framework

Revisions to the Results Framework Comments/

Rationale for Change

PDO

Current (PAD) Proposed

The Project Development

Objective is to support

the Government of Iraq's

efforts to develop more

effective, accountable

and transparent public

financial management.

Continued

PDO indicators

Current (PAD) Proposed change*

1. Capital budget

execution rate increases

by at least 10 percentage

points

Continued

2. Outstanding balances

in Spending Units decline

by 30 percentage points,

as a share of the budget

Continued

3. At least 50% of

contracts above threshold

awarded competitively

Dropped There was a mistake in

formulating this indicator.

There was no baseline

estimated at the start of the

project. During the mid-term

review, the Ministry of

Planning reported that at the

start of the project, in 2009,

90 % of the contracts above

national threshold, were

being awarded

competitively. If that was the

case, the target of 50 %

should not have been set up

below the baseline. The

baseline of 90 % was

anyway satisfactory as per

international norms.

4. Ministry of Finance

training institute

providing training in all

operational aspects of

Continued

16



PFM project

Intermediate Results indicators

Current (PAD) Proposed change*

Intermediate Results (Component 1): Strengthening Budget Formulation and

Implementation

1. Draft sector strategies

completed and submitted

to all relevant parties for

comment/revision/etc.

Draft sector strategies prepared

Paraphrased to make it more

simplified and specific. The

Unit of Measure revised to a

logical field (Y/N) and the

yearly targets revised

accordingly to reflect the

targets as per the original

PAD.

2. New procedures in

place for project

preparation and appraisal

Continued

The Unit of Measure revised

to a logical field (Y/N) and

the yearly targets revised



PAD.

3. New macro-economic

and fiscal “team‟

established within MoF

Economic Policy

Division

Continued






PAD.

4. New budget

instructions approved and

guidelines ready

Continued






PAD.

5. New Budget Call

Circular (BCC) in use

Continued The Unit of Measure revised





PAD.

Intermediate Results (Component 2): Strengthening Public Sector Procurement

1. Standard Bidding

Documents finalized

Sector specific Standard Bidding

Documents finalized for ministries

of health, education, electricity and

public works.






17





PAD.

2. National Procurement

Manual finalized

Dropped The National Procurement

Manual was to be prepared

in line with the National

Procurement Law. Since the

Government has not yet

passed a National

Procurement Law and it is

not foreseeable in near

future, the National

Procurement Manual cannot

be finalized within the

project time frame.

3. Procurement Bulletin

board being fully

implemented, and housed

within Procurement

Regulatory Agency

Design of single portal website for

public procurement notices

prepared








PAD.

4. Training Needs

Assessment completed,

training curriculum

developed and first round

of „Train-the-trainers‟

completed






PAD.

Intermediate Results (Component 3): Strengthening Budget Execution and

Implementation

1. First round of training

on new cash release

system completed with

selected pilot ministries






PAD.

2. Detailed rules and

regulations for new

commitment control

system developed






18



PAD.

3. New financial/fiscal

performance system

developed, and tested in

three ministries

Dropped A new component 5 on

Integrated Financial

Management Information

System (IFMIS) is being

added to the project which

would develop

financial/fiscal performance

evaluation in three ministries

4. Training materials

developed for

financial/fiscal

performance system, and

training of Master

Trainers carried out






would develop training

materials for the

financial/fiscal performance

evaluation system.

5. Assessment of IG

system completed, and

documentation provided

clarifying mandate of

internal controllers






PAD.

6. Website being

regularly updated

Website of Ministry of Finance

upgraded for enhancing citizen’s

access of fiscal data.

A regular updation of

website would not have

contributed to the PDO

unless the current website

was upgraded to enhancing

citizen’s access of fiscal

data.

7. IT assessment

completed, and functional

requirements for

upgraded system

developed






would conduct IT assessment

and develop functional

requirements for an upgraded

system.

Intermediate Result Component 4: Capacity Development and Project Management

1. Training program fully

in place

Training program fully in place in

MOFATC


specific. The Unit of

Measure revised to a logical

19



field (Y/N) and the yearly

targets revised accordingly to

reflect the targets as per the

original PAD.

Intermediate Result (Component Five): Development and Testing of IFMIS Prototype

1. Prototype for IFMIS

developed

New As per goals and deliverables

of new component

2. Prototype for IFMIS

tested

New As per goals and deliverables

of new component.

20

Revised Results Framework and Monitoring

IRAQ: PUBLIC FINANCE MANAGEMENT REFORMS PROJECT

Project Development Objective (PDO): The Project Development Objective is to support the Government of Iraq's efforts to develop more effective, accountable and transparent public financial

management.

Revised Project Development Objective: n/a

PDO Level Results Indicators*

Co

re

D=Dropped

C=Continue

N= New

R=Revised

Unit of

Measure Baseline

Cumulative Target Values**

Frequency Data Source/

Methodology

Responsibility for

Data Collection YR 1

YR 2

YR 3 YR4

Indicator One:

Capital budget execution rate

increases by at least 10

percentage points

C % 75 82.5 Annual Capital Budget

Execution

Reports of the

MOPDC

MOPDC

Indicator Two:

Outstanding balances in

Spending Units decline by 30

percentage points, as a share of

the budget

C % 38 8 Annual Budget

Execution and

Cash Balance

Reports of the

MOF

MOF

Indicator Three:

At least 50% of contracts above

threshold awarded competitively

D % Not Known 50 Annual Monitoring

Reports of

Procurement

Regulation

Authority

MOPDC,

Procurement

Regulation

Authority

Indicator Four:

Ministry of Finance training

institute providing training in all

operational aspects of PFM

project

C Y/N Y Annual MOFATC

Reports,

Physical

Inspection

MOF, MOFATC

21

INTERMEDIATE RESULTS

Intermediate Result (Component One): Strengthening Budget Formulation and Implementation

Revised Intermediate Result (Component One): Strengthening Budget Formulation

Intermediate Result indicator

One:

Draft sector strategies

prepared

R Y/N N N N N Y Annual Strategy

documents

MoF, MoPDC,

PMT


Two:

New procedures in place

for project preparation

and appraisal

C Y/N N N N N Y Annual GoI revised

regulations on

project

preparation

and appraisal

MoF, MoPDC,

PMT


Three:

New macro-economic

and fiscal „team‟

established within MoF

Economic Policy

Division

C Y/N N N N N Y Annual Consultant

reports

GoI

regulations as

published

MoF, MoPDC,

Ministry of Oil,

IG and other

internal controls


Four:

New budget instructions

approved and guidelines

ready

C Y/N N N N N Y Annual GoI new

budget

instructions

regulations as

MoF, MoPDC,


Five:

New Budget Call Circular

(BCC) in use

C Y/N N N N N Y Annual GoI new

Budget Call

Circular

MoF, PMT

22

Intermediate Result (Component Two): Strengthening Public Sector Procurement

Revised Intermediate Result (Component Two):


One:

Sector specific Standard

Bidding Documents

finalized for ministries of

health, education,

electricity and public

works.

R Y/N N N N N Y Annual Standard

Bidding

Documents

MoF, PRA,

PMT, Ministries

of health,

education,

electricity and

public works.


Two:

National Procurement

Manual finalized

D Dropped


Three:

Design of single portal

website for public

procurement notices

prepared

R Y/N N N N N Y Annual Website PRA, PMT,

MoPDC


Four:

Training Needs

Assessment completed,

training curriculum

developed and first round

of ‘Train-the-trainers’

completed

C Y/N N N N N Y Annual Consultant

reports

Training

evaluations

PRA, MoF,

PMT, MoPDC

23

Intermediate Result (Component Three): Strengthening Budget Execution and Implementation

Revised Intermediate Result (Component Three): Strengthening Budget Execution


One:

First round of training on

new cash release system

completed with selected

pilot ministries

C Y/N N N N Y Y Annual Consultant

reports

Training

evaluations

MoF, PMT, line

ministries

participating in

pilot


Two:

Detailed rules and

regulations for new

commitment control

system developed


reports

GoI regulations

as published

Training reports

MoF, PMT


Three:

New financial/fiscal

performance system

developed, and tested in

three ministries

D Current

reporting

does not

adequately

detail the

outstanding

stock of

advances

End PY1:

New

system for

financial

and fiscal

performan

ce

measurem

ent

developed

and

agreed

New

system

tested in

three

ministries

Training

materials

developed

Training of

“Master

Trainers”

completed

New

system in

place,

leading to

20%

reduction

in unused,

outstandin

g balances

in

Spending

Units

New system being

implemented

throughout GoI

30% reduction in

unused, outstanding

balances in

Spending Units

Semi-

annually

Consultant

reports

GoI regulations

as published

GoI financial

performance

reports

MoF, PMT, line

agencies


Four:

Training materials

developed for

D Training

Needs

Assessme

nt carried

Ongoing

training

Ongoing training Training reports MoF, PMT, line

agencies

24

financial/fiscal

performance system, and

training of Master

Trainers carried out

out


Five:

Assessment of IG system

completed, and

documentation provided

clarifying mandate of

internal controllers


reports

IG evaluation

reports

MoF, MoPDC,

IG, PMT,


Six: Website of Ministry of

Finance upgraded for

enhancing citizen’s

access of fiscal data.

R Y/N N N N Y Y Annual Website MoF, PMT


Seven: IT assessment completed,

and functional

requirements for

upgraded system

developed

D MoF

department

s

fragmented

in their

information

-sharing

ability

End PY1:

Assessme

nt

completed

of current

IT

environme

nt,

Functional

requiremen

ts for

upgraded

system,

including

for links

with FMIS,

developed

Procurem

ent started

for new

software

and

hardware

This

should

occur

regardless

of

whether it

is through

Project

financing,

internal

GoI

resources,

or other

donors

New software and

hardware are in

place and

contributing to

improved efficiency

of MoF operations

Plans in place for

rollout of system in

next phase

Semi-

annually

Consultant

reports

Technical

specifications

MoF, PMT

25

Intermediate Result (Component Four): Capacity Development and Project Management

Revised Intermediate Result (Component Four):


One:

Training program fully in

place in MoFATC

R Y/N N N N Y Y Annual Twinning

institute reports

(particularly

Training Needs

Assessment)

Training

evaluations

MoF (training

institute)

Intermediate Result (Component Five): Development and Testing of IFMIS Prototype

Revised Intermediate Result (Component Five):


One: Prototype for IFMIS

developed

N Y/N The

Government

has agreed on the scope

of IFMIS

design on which,

prototype

needs to be developed.

IFMIS

Prototype is

developed after

conducting a

SRS study involving all

stakeholders

Monthly, after

February 2013

onwards

Approval of the

prototype by the

Ministry of Finance

MOF


Two:

Prototype for IFMIS tested

N Y/N Prototype is

yet to be developed.

Testing will

be done after it is

developed.

IFMIS

Prototype is tested in the

Ministry of

Finance, 3 pilot

Ministries

and the Board of

Supreme

Audit.

Monthly, after April

2013 onwards

Physical

inspection and testing of the

system by running

it on live data of pilot agencies

MOF, BSA, Pilot

Ministries, Bank Consultants

26

ANNEX 2: Reallocation of Proceeds

REPUBLIC OF YEMEN — IRAQ FINANCE MANAGEMENT PROJECT

P110862

{GRANT}

Restructuring Paper

1. Proceeds for REPUBLIC OF IRAQ PUBLIC FINANCE MANAGEMENT

PROJECT, [Trust Fund No. 094552], P110862 will be reallocated as follows:

Category of Expenditure Allocation % of Financing

Current Revised Current Revised Current Revised

(1) Goods (1) Goods 1,250,000 2,050,000 100 100

(2) Consultants’

services, including

audit, and Training

(2) Consultants’

services,

including audit,

and Training

12,850,000 13,600,000 100 100

(3) Incremental

Operating Costs

(3) Incremental

Operating Costs

300,000 350,000 100 100

Unallocated Unallocated 1,600,0001 0.00

TOTAL 16,000,000 16,000,000 100 100

2. The Iraq PFM project was started in July 2009 and has to be completed by June

2013. Under the Recipient-executed part, against the project cost of $16 million, $2.46

million (15 %) has been disbursed. Under the Bank-executed part, against the project cost

of $2 million, $1.99 million (99.9 %) has been disbursed. Against the total project cost of

$18 million, $4.46 million (25 %) has been disbursed.

3. Under the Recipient-executed part, the uncommitted funds are US$ 7.00 million,

which is about 44 % of the project cost. There is no additional requirement of funds

under the existing components and most funds are committed. There is no other purpose

for which the government wants to spend the uncommitted amount. Hence, the proposed

reallocation is necessary to provide funds for the new component 5 (IFMIS). It will be

done by reallocation of the uncommitted and unallocated funds under the project.

Considering the implementation of IFMIS will require additional funds under

consultancy, goods and incremental operating costs, commensurate increases have been

made in those categories as per above table.

1 The US$ 1.6 million cited here is from the Allocation of Proceeds table in the Conformed Copy of the

Grant Agreement, and Annex 4 of the Emergency Project Paper (EPP) which at the time of Negotiations

was taken as 10% of the total Project cost. The larger figure cited earlier – US$ 2.82 million – is the figure

used in the EPP Annex 3 (Summary of Estimated Costs): refer to EPP Annex 3 Note 2, “..the bulk of the

Unallocated has been included in the Consultant Services category, as this category represents the majority

of the downstream activities.”

27

ANNEX 3: Extension of Closing Date

1. The Iraq Public Financial Management (PFM) project was started as an

emergency operation in July 2009 under the Iraq Trust Fund (ITF). The project is to be

completed in June 2013. The total estimated cost of the Project is US$18 million: i)

US$16 million to be Recipient-executed; and ii) US$2 million to be Bank-executed on

behalf of the Recipient. Under the Recipient-executed part, against the project cost of

$16 million, $3.6 million (23 %) has been disbursed. Under the Bank-executed part,

against the project cost of $2 million, the entire $2 million (100 %) has been disbursed.

Against the total project cost of $18 million, $5.6 million (31 %) has been disbursed.


project closure date citing that the implementation of the Project could not start until

mid-2011 because the premises of the Iraqi Ministry of Finance were exposed to three

terrorist attacks, which resulted in delaying the project. The continuous fragile security

situation in Iraq posed a challenge for foreign consultants who found it risky to travel to

Iraq on their respective assignments. While in Iraq, the security situation restrained their

movements and the time for which they could meet the government counterparts.


project closure date citing that the implementation of the Project could not start until

mid-2011 because the premises of the Iraqi Ministry of Finance were exposed to three

terrorist attacks, which resulted in delaying the project. The continuous fragile security

situation in Iraq posed a challenge for foreign consultants who found it risky to travel to

Iraq on their respective assignments. While in Iraq, the security situation restrained their

movements and the time for which they could meet the government counterparts.

4. The task team partly agrees with the justification provided by the Government and

feels that the adverse security situation has been one of the several reasons leading to a

slow pace of project implementation in the initial part of the project leading to less than

3 % disbursement at the time of mid-term review in August 2011. The project involves

inputs from international consultants, who find it extremely difficult to operate in the

prevalent security environment. There are delays in issuing visas and restrictions on

their movements in Iraq. The more substantive reasons for the implementation delays

were as follows:

a) Significant delay in procuring goods and signing consultancy services contracts.

b) The payment approval procedure adopted by the Project Management Team

(PMT) was not appropriate and effectively delayed payment to consultants.

c) High level of uncommitted funds

d) Lack of full time staff

e) Lack of independent office for the PMT

5. Most of above factors have now been rectified and proposed restructuring and

addition of a new component on IFMIS would enable the project to increase its

commitments to 100 %. From thereon, a good contract management and Bank’s

28

supervision could ensure that the project is fully disbursed and the targeted results

achieved.

6. However, the main reason why the extension is necessary is that as a restructuring

process, a new component IFMIS is being added which requires a minimum 9 months’

time to be completed. A Contract is about to be signed under which the 9-month

implementation schedule is as follows.

Activity/Milestone Time-Period

(ii) System Requirement Study January – March 2013

(iii) Preparation of configuration

blue print for the prototype

April – June 2013

(iv) Establishment of ICT

infrastructure

February – April 2013

(v) Testing of Prototype at MoF July - August 2013

(vi) Testing of Prototype at 5

Treasuries, 3 Line Ministries and

Board of Supreme Audit

August - September 2013

7. At best, the above implementation schedule could be reduced to 8 months by

doing activities (v) and (vi) in parallel, during July-August 2013. The task team,

therefore, recommends extension of the project closure date until 31 August 2013. These

two extra months would enable the government to ensure completion of ongoing

activities in a timely and orderly manner. If this extension is not given, the project

objectives will be difficult to achieve. This is the first and last extension of the project.

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