I. Introduction

PAKISTAN SOCIAL SAFETY NET PROJECT {Pl03160)

IMPLEMENT ATION SUPPORT MISSION

June 25-28, 2013

AIDE MEMOIRE

1. A joint World Bank and United Kingdom's Department for International Development (DFID) implementation support mission 1 fo r the supervision of Pakistan Social Safety Net (SSN) project, was canied out from June 25-28, 2013. Representatives from the DFID2 joined the mission as part of their supervision of co-financing to the Benazir Income Support Program (BISP), aligned with the World Bank led operation. The mission's objectives were to review: (i) actions agreed during the January 2013 implementation support mission; (ii) progress towards achieving the SSN project DLis; (iii) progress on CCT Pilot Phase and preparedness for launching of CCT extended phase in the remaining districts; (iv) progress on institutional development through placement of appropriate M&E arrangements as well as Human Resources and performance management systems; (v) implementation progress of Component IV (Social Protection Policy and Monitoring) of the project; and (vi) Fiduciary Controls through implementation of procurement and fmancial management action plans.

2. The mission held discussions with the technical team and management of BISP, its implementation partner organizations, and other stakeholders to assess the overall progress of the SSN project and the key challenges going forward. The mission also met the counterparts at the Ministry of Planning and Development (P&D) to discuss the implementation progress of component-IV of the project. Furthermore, the mission got the opportunity to meet the representatives of Ministry of Finance (MoF), and the Economic Affairs Division (EAD) to discuss the preliminary findings of the mission and the next steps. The wrap-up meeting of the mission was held on June 28,2013, chaired by Mr. Muhammad Sher Khan, Secretary BISP, also attended by the P&D. The BISP bas cleared the disclosure of this Aide Memoire to the public in

1 World Bank Team: lftikhar Malik (Senior Social Protection Specialist and Task Team Leader), Amjad Zafar Khan

(Social Protection Specialist and Task Team Leader), Minhaj-ui-Haq (SP Economist), Zulfiqar Ahmed (Social Protection Specialist), Shahzad Sharjeel (Senior Communications Officer), Hassan Saqib (Senior Financial Management Specialist), Khalid Bin Anjum (Procurement Specialist), Anwar Ali Bhatti (Financial Analyst), and Mohammad Aslam Malik (Program Assistant). The World Bank consultants who have joined the mission were: Francisco Ayala (SP Systems), Shirin Gul Sadozai (SP Policy and Monitoring), Sumaira Sagheer Toor (Communications), Aisha Mansur (Cash Transfer Operations), Quanita Ali Khan (Financial Inclusion and Literacy), and Agha Alamdar Hussain (Financial Management).

2 DtlD Team: Alexis Ferrand (Group Head, Economic Growth Group) and Fatima Naqvi (Social Development Advisor), Madiha Ahmed (Economist), Zainab Fazil (Deputy Program Manager), Shumaila Rifaqat (Governance Advisor), Raza Khan (Results Advisor), and Saqib Rehman (Program Officer).

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accordance with the Bank's policy on access to information. The Bank and DFID team would like to thank all representatives of the Government of Pakistan (GoP) for their continued support and commitment to effective implementation of the SSN project.

3. The project's implementation status and the next steps agreed with the Government are summarized as follows:

II. Project Implementation Status3

[" ·- ' . _:-y . ~~· Project Summary . Summary Ratings - - - -Approval date March 6, 2012 Developmeut Objective Satisfactory (Restructuring & Additional Financinf!) Effectiveness Date May28,2012 Implementation PrOJ:!ess Moderately Satisfactory Closinf! Date June 30,20 16 Financial Management Moderately Satisfactory lmplementinf! Al[ency BlSP Procurement Satisfactory Net Commitment US$ IDA: US$ 60 million (original) Project Mauagement Moderately Satisfactory

+ US$ 150 million (AF) = US$ 210 million

Amount Disbursed to US$ 50.84 million (8 1. 75% of Counterpart Funds Highly Satisfactory date original) + US$ 59.38 million M&£ Ratinf! Moderately Satisfactory

(43.57% of AF) Overall Implementation Moderate Risk

Ill. Key Actions 1\grccd with the Mission

4. The table below presents the summary of key actions agreed with the authorities during the mission:

r : . - -~ ~-~·-:;;.,.·· ·-. ~· .. . '. -~·- -.- -., ;· Paragraph .. ~ 't~ ,r- ' -. . ~r ,.._ . ·'1

• - . Reference in esponsible < ' ' ' - ll

r i\"o. _Key ~c~io,n(s) the Aide lnstitution(s) Timclin~(s) j . d r t"" ,. • •• ~!' - ·_. t" ~::. t ... ~ .. ~ Mcmoire :, . L _. . r~, .. '" ' . ·"" - { .• ~>:, •• . ' .. . ,. . ...~

I. Develop ToRs for study on CNIC update 8 BISP July 25, 20 13

2. Submit the revised Operation Manual and 10 BISP August 15, Guidelines for UCT and CCT for World Bank's 2013 review and no objection

...

.). Develop a schedule of provincial engagements II BISP July 31, and a detailed roll-out plan for CCT extended 2013 phase with completion of primary education supply capacity analysis

4. Develop draft methodology for study on 13 BISP July 31, effectiveness of Socail Mobilization structures 2013 along with indicators to _gau.ge their maturity

5. Activate the revamped BISP's website 14 BISP July 25, 2013

3 Detailed status of legal and dated covenants may be seen at Annex A

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6. Finalise disbursement options with commercial 16 BISP July 31, banks and accordingly intimate the World Bank 2013 and DFTD

7. Submit consolidated report with 17 WB Sept 30, recommendations on WeT design adjustments 2013 and the options for piloting of skills and entrepreneursihi p development under the graduation component of the project

8. Full implementation of HRMIS and the 18 B!SP December Performance Management System 31,2013

9. Review Organizational Structure and share 19 BISP August 15, revised Organog~·am with the World Bank and 2013 DFID

10. Submit the revise plan for operationalization of 21 BISP July 31' the Data Cenb·e 2013

II. Finalize and share the draft BISP Impact 23 BlSP October 1, Evaluation report 2013

12. Organize first consultative workshop with 27 P&D and BISP August 31 , Provincial/Regional focal persons and place 2013 dedicated resources in each province/region to take forward the implementation of Component IV

13. Complete reconciliation of payments made 34 BISP December through Pakistan Post 31,2013

IV. Update on Implementation of Project Components

5. The mission fmds the overall progress of the project to achieve the Project Development Objective (PDO) as "satisfactory". The expansion of the coverage of the basic cash transfers is moving steadily and the initial results of CCT pilot in the five pilot phase districts are encouraging. The BISP confirmed that after necessary adjustments of the design vis­a-vis the lessons from the first five districts, the CCT will be expanded in 15 additional districts by September 30, 2013. The mission was pleased to note that a thorough review and feedback mechanism is assisting BISP in continual improvement in the CCT enrolment process. The mission emphasized the need to ensure that all challenges that have been highlighted through the monitoring and review process should be looked into carefully before launching the extended phase. For a thorough review at this critical stage, at the request of BISP, the World Bank through the DFID Trust Fund has engaged an international firm (Gedeso) which has initiated work with the technical team . The BISP's management has committed to provide an independent room with sufficient space, office facilities, and equipment to allow the firm in delivering its responsibilities by working closely with the counterpart team.

6. BISP has already achieved 9 DLis of the World Bank and DFID and received a total disbursement of US$ 117.38 million (59.38 from WB and 58 from DFID). Based on discussions with the tean1, it has been estimated that a combined disbursement of another US$ 118 million seems feasible within FY 2013-14. The detail of the DLis expected to be achieved during the cunent FY is provided at Annex- C.

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Component 1: Establishment of a National Targeting System and Expanding Coverage of the Basic Safetv Net System

7. The mission noted that whereas the Pover ty Scorecard (PSC) census has been completed in 98% of the country-- currently only two agencies of the Federally Administered Tribal Areas (F ATA) remain to be surveyed due to the prevailing security situation in the area. The following table provides the details:

Survey Data Entered by Eligible

Province Status/Project No. of HHs Covered

NADRA Families Completion Districts/ Agencies (Millions) (Millions) (Millions)

Date Punjab Completed 38 14.75 14.1 2.62 Sindh Completed 27 6.48 6.38 2.52 KPK Completed 24 3.61 3.46 1.3 Balochistan Completed 30 0.95 0.76 0.45 AJK Completed 7 0.58 0.56 0.12 G ilgit-Baltistan Completed 7 0.15 0.14 0.05 FATA Partially 7 0.38 0.33 0.19

complete Total 140 26.97 25.74 7.28

8. The mission observed that out of the 7.28 million eligible families, todate, 4.8 million families have been paid the basic cash transfers. Following up on last mission's suggestion, BISP had undertaken an in-house exercise to investigate the reasons as to why the potential beneficiaries arc not updating their CNIC records and use the case management system to change their status from pending to ready to receive the payments. However, due to limited capacity and outreach. the study couldn't derive meaningful outcomes. Based on the request of BISP, it was agreed that a more systematic study needs to be carried out through the SSN Project and the ToRs will be shared with the World Bank by July ?5, 2013 for its review and no objection. A joint meeting will be arranged between NADRA, BISP and the development partners to define the ToRs and agree on the timelines of the study.

Component 2: Strengthening of Safety Net Operations

A. Govemance

9. The mission observed that in light of the recent political transition, which made the office of the BISP Chairperson vacant and given there are new members of the Federal Cabinet, there is a need to reconstitute the BISP Management Board in accordance with the provisions of the BISP Act 2010. The mission reiterated that an independent and functional Management Board was one of the main mechanisms to ensure appropriate governance and accountability of the program through among others, various Board committees. Currently as the program does not have a functional Board and its committees, there is a risk of lack of carrying out the business in accordance with BISP Act 201 0. The Secretary BISP and the officials of MoF and EAD appreciated the mission's concern and agreed to prioritize the activation of the process for reconstitution of BISP Board, including appointment of a suitably qualified new Chairperson of the program. It was agreed that a case will be taken up with the competent authority within

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July 2013 for appointment of the Chairperson and the new Board members in accordance with the BISP Act 2010 under a intimation to the development partners. Once the reconstituted Board is in place, the Board Committees will also be made functional.

B. Operational Manual

10. The mission noted that the BISP Operational Manual (OM) for the unconditional cash transfers has not been revised and formally approved by the Board, which is one of the observations pending from the previous mission. Although the revised Targeting and Payment guidelines were shared with the World Bank and comments were offered, the revised draft OM is yet to be formally shared with the World Bank for its review and no objection. It was agreed that BISP, with the assistance of the Gedeso (consulting firm), will finalise the Operational Manual and Guidelines for both unconditional and conditional cash transfers by August 15, 2013 and submit to both DFID and the Bank for review and no objection. As a next step, both of these OMs will be submitted to BISP Management the Board for final approval.

C. Co-responsibilitv Cash Transfer (CCT) Roll-Out

11 . The mission noted the descent progress being made in implementation of CCT program in the pilot 5 districts. The following table provides an update::

I Children Complying I Families Enrolled in Children Enrolled in

District I Program Program with Admission Co-

I responsibility Malakand Protected Area 16,585 38,399 19,345

Mirpur 2,792 6,453 3,908

Ska rdu 4,505 10,560 0

Nushki 2,627 6,472 0

Karachi South 3,761 8,995 28

Total 30,270 70,879 23,281

However, in view of the operational issues being faced in compliance monitoring of the student attendance during the pilot phase, there was a need to re-engage with all the provinces/regions and reaffirm their commitment towards the CCT program. As there are newly elected governments in each province, the mission suggested BISP to make proactive efforts in reaching out each provincial/regional government, which has signed the MoU with BISP for joint implementation of CCT, and brief them on the program design as well as respective roles and responsibilities. In addition, given Punjab province was yet to sign the MoU with BISP for the CCT, the mission reiterated the need to bring them on board at the earliest. It was agreed that BISP will send a fresh request to GoPunjab within July 2013 for partnership in implementation ofCCT in the province through signing ofMoU. Likewise, an briefmgs will be organized for all other provinces on the results of the pilot as well as areas where concerted efforts are needed to achieve the outcomes of CCTs. As the program will be expanded to additional 15 districts within FY 2013-14, it was agreed that the selection of new districts will be revisited by looking at the supply capacity criteria included in the CCT OM. In addition, it was agreed that a detailed plan for expansion of the program as well as the supply capacity analysis of the selected districts will be shared with the Bank and DFID by July 31,2013.

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12. In order to create a wider ownership of the CCT program and consistent with the recommendations of BISP Management Board in one of its recent meetings also attended by Bank and DFID on special invitation, the mission suggested that the Federal and Provincial Advisory Committees need to be constituted and formalized before going into the CCT extended phase. The formulation of the committees had been delayed pending the political transition. This should now be included as one of the agenda items in the proposed briefings for each province.

13. T he mission noted that the Social Mobilization {SM) component of the program is now being expanded into additional 15 districts and suggested the BISP to evaluate the effectiveness of the SM structures developed in the initial 5 pilot districts. To this end, BISP was requested to develop a draft methodology for this study and share with the Bank and DFID by July 31,2013 . The mission suggested linking up the design of social mobilization activities with BISP operations in order to maximize its contribution to CCT program goals. The mission also emphasized the need to develop a vision on bow the SM process and structures are expected to mature over time. Keeping in view this vision, it was agreed that the Social Mobilization firm needs to develop and get agreement on concrete time bound indicators linked to the lifecycle of the SM process.

D. Communications

14. The mission noted that revamping of BISP website has taken more time than expected and given its importance as an effective tool to inform masses about the program updates and outcomes, the revamped website should be fmalized and uploaded as early as possible. The mission suggested that the BISP's Communications Unit should assume the lead responsibility in delivering a dynamic and user-friendly interface, particularly highlighting results and achievements through simple and eye-catching info graphics. In addition, standard protocols for regular update of the website must be devised and implemented to keep the web content current and relevant. It was agreed that the new web site, with a focus on program results and apolitical content would be put on line by July 30, 2013.

15. The mission observed that the internal coordination between the Communications Unit and Waseela-c-Taleem team must be enhanced to meet the communications requirements of the extended phase, particularly with regard to the public information campaign on enrolment, compliance, payments and case management. The mission also noticed that the process of commissioning the media habits study has been significantly delayed and needs to be followed up as soon as possible. In addition, a Communication Needs Assessment exercise could help to feed into the overall process . . It was agreed that the Media Habits Study should be commissioned by July 31, 2013 and the ToRs for the Communications Needs Assessment would be shared with the Bank and DFID by July 25, 2013.

E. Payments

16. The mission observed that in Light of increase in the UCT amount to Rs. 1200 as announced in the federal budget 2013-14, there is a need to discuss with commercial banks the modalities of disbursing payments to allow withdrawal of cash in denominations less than what are accepted at A TMs. . In this context, it was agreed that BISP will collectively

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explore options and finalize solutions with the commercial banks and update the Bank and DFID by July 31.2013.

F. Graduation Pilots

17. In line with the Results Agreement under the SSN Project, BISP is expected to implement evaluations to test graduation strategies for the program. In this context, the mission recommended that BISP should work to improve the effectiveness of its current Waseela-e-Rozgar (WeR) program, initially through carefully designed and rigorously evaluated experimental pilots. To help this process, at the behest of BISP, the World Bank has already initiated a review of the WeR program and among others, commissioned qualitative and quantitative surveys to assess the supply and demand side performance of the program to identify areas for improvement. The results of the surveys will be shared with BISP by the end of August 2013, and a consolidated report with recommendations on design adjustments and potential pilot experiments will be finalized by end September 2013.

Component 3: Enhance Safetv Net Program Management, Accountability, and Evaluation

A. Human Resource Management

18. The mission noted that a number of initiatives have been taken up by the HR department since the last mission and commendable progress has been achieved. The mission appreciated the BISP management's commitment towards establishing a credible human resource and performance management system within the organization. The mission was informed that a Business Process Review (BPR) of the HR unit was carried out along with the development of a scoping document for the implementation of an automated Human Resource Information System (HRMIS). The new HRMIS is expected to be functional by December 31 , 2013 and the procurement process for the HRMIS system has already been initiated. In addition, the HR manual has been revised after incorporating all changes required for implementing the proposed HRMIS. The mission commended the C'fJorts of the HR unit in completing the Phase 1 including the development of the departmental Key Performance Indicators (KPis). In phase 2, the set of KPis will be aligned with departmental Log Frames already developed by the M&E department and the exercise is expected to be complete by August 15, 2013. A Training Need Assessment (TNA) exercise has also been initiated to develop a training dissemination plan for BISP and is expected to be complete by August 31, 2013. The performance management system will be fully implemented by December 2013.

19. The mission also noted certain anomalies in the organizational structure. Some of the cross support positions that need to be centralized under a unit/department by virtue of their functional linkages are reporting elsewhere for temporary ease of administrative control. The mission suggested that the HR team should review the organizational structure to streamline these anomalies and share a revised organogran1 with the development partners for review by August 15. 2013 before submission to the Board for approval.

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B. Project Reporting

20. The mission noted that BISP monthly reporting to development partners on district wise breakdown and gender segregated information was still missing. Previously DFID and the Bank had requested the BISP management on making available aggregate macro level district data on the BISP website, which is still to materialize. BISP has agreed to have this information available on the new website to be launched and to make sure that the monthly reporting for the month of July 2013 would contain district wise, gender segregated information.

C. Management Information System (MIS)

21 . The mission was pleased with the progress of the MIS unit and commended the effort of the unit in developing aU the CCT modules in bouse and within the agreed deadlines. However, the mission pointed out the delays in processing the procurement for the Data Centre which has been pending since the last two missions. The main reason shared by the BISP management for three inconclusive attempts of procurement is the limited in-house capacity to prepare the technical requirements. It was suggested that BISP should utilize the services of Gedeso (consultant firm) to review the requirement and prepare the RFP. The BISP management was requested to immediately re-initiate the procurement as any further delay could have a strong bearing on the scale up of the CCT in the extended phase districts. It was requested of BISP to share a revised realistic plan for procurement and operationalization of the Data Center by July 31, 2013.

22. The mission also noted that a number of MlS positions are still lying vacant and were assured by the BISP management that they will be filled subject to the lifting of ban on recruitment by the Government.

D. Impact Evaluation and Monitoring and Evaluation (M&E)

23. The mission reviewed the progress of the Impact Evaluation (IE) exercise and noted with satisfaction that 79% of the survey bas been completed. BISP informed the mission that the survey data is expected to be available by July 31, 2013 and the draft repmt will be shared with BISP, Bank and DFID by October 1, 2013.

24. The mission was pleased to note that the BISP M&E team has developed a comprehensive Log Frame for both Waseela-e-Taleem and Waseela-e-Sebat programs. The mission observed that there were still programs that have not been covered and need to be brought into the overall monitoring framework being developed by BISP. It was further stressed that there should be coordination between the M&E and HR units to bring the Key Performance Indicators (KPI) in line with the Log Frame indicators. It was agreed that the first meeting between the two units be held immediately after the mission and an action plan will be prepared and shared with the Bank and DFID by July 31, 2013. The M&E team also presented a comprehensive Dashboard which is expected to be internalized by the respective departments for management reporting. The mission suggested that the Cognos BI software provided to BISP should be used to draw data for the dashboard on a regular basis. M&E unit was also requested to periodically present the outputs to the management to establish the utility of the repmiing

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mechanism and hence create demand. The need for defining a protocol for regular internal data sharing with the M&E unit was also highlighted as it would further improve the periodic reporting and enhance the management's capacity to take informed decisions.

25. The mission was also apprised that the interim report of first Operational Review is scheduled to be completed by July 15, 2013 and will be shared with the Bank and DFID accordingly.

26. DFID informed that they will be commissioning two independent evaluation exercises: (i) UCT Operational Review, (ii) Beneficiary Satisfaction survey, to be initiated in September 2013. The ToRs of the studies have already been shared with the M&E team.

Component 4: Developing the Social Protection Policy and Strategy Monitoring

27. The mission reviewed the progress of component 4 of the project and found that a more realistic revised plan is now in place. Strong ownership and commitment on part of the Federal Secretary P&D was reassuring to the development partners and it is expected that agreed targets in the current work plan will be proactively pursued. So far, MoUs with the provinces have been signed and focal persons and Lead Departments from provinces/regions have been identified. However, going forward it requires prioritization of some activities on part of Planning Commission, such as hiring of provincial coordinators, engagement of firm and convening a meeting of the Technical Advisory Committee (TAC). There will also be a need of an enhanced coordination between BISP and Planning Commission especially on recruitment which is to be completed within the next 2-3 weeks.

28. The following decisions and timelines were agreed upon:

i) First Consultative workshop with Provincial/Regional focal persons to be held on July 1, 2013

ii) PC will coordinate with other international organizations in the provinces where they have an active ongoing engagement in Social Protection policy such as ILO in KP and make sure that the overall framework of SP remains consistent with the vision of the Federal Government.

iii) The Bank's experience in Punjab on SP Public Expenditure Review especially with regard to characterization of various expenditures could be a viable entry point for policy engagement with provinces. The Bank team will work with PC to chalk out work plan for this activity.

iv) PC intends to reconstitute TAC meeting to make membership more manageable. Currently it has more than 45 members.

v) A TAC meeting will be held at the earliest and no later than 3rd week of August. Report on implications of 181

h amendment will be presented in the TAC meeting.

vi) BISP has agreed to support PC in recruitment of Provincial coordinators. The process will be finalized by July 30,2013.

vii) The PC agreed to hire Admin and Accounts support for Component IV project office. BISP will expedite the recruitment process and completed by 2nd week of July.

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viii) BISP has agreed to expedite procurement process for the engagement of Consultancy Firm to support Social Protection Policy work. The recruitment process will be completed by 1st week of August.

V. Fiduciary Revie'"'

A. Procurement Review

29. The mission reviewed the Procurement arrangement and rated it as "satisfactory". The Procurement Plans of the project were reviewed in detail and the progress of work and payments on major consulting contracts as provided by BISP, are given below:

Contract Pr·ogress Payments

PSC Census Cluster A 100% 100%

PSC Census Cluster B 100% 80%

PSC Census Cluster C 100% 100%

PSC Census Cluster D 100% 100%

Process Evaluation 100% 80%

Spot Check 80% 60%

Impact Evaluation 100% 100%

Social Protection Policy In procurement process

HRM In procurement Process

Waseela Taleem (06 Contracts) To be completed by end Jul20!3

30. The mission observed that the PSC Survey work in 3 clusters in FA TA has still not been completed. BISP was recommended to monitor the progress of these contracts closely for timely completion. Over the years, BISP has improved their Procurement capacity and systems by creating a separate Procurement Cell, capacitating the cell with capable staff, and putting appropriate systems in place. Keeping in view the current capacity and systems, the Bank has raised the Bank's prior review threshold from USD 200,000 to USD 300,000. Any procurement below USD 300,000 will be post reviewed by the Bank. All relevant documents for Post Review cases should be kept in proper files and fire proof cabinets.

31. BISP Online Complaint Redressal system is functioning and all summaries of contract award are being posted on BISP website. BISP was requested to include the link of online complaint redressal system while publishing EOis and IFBs. For Procurements through shopping, the requirement of NTN should be mandatory in all Requests for Quotations. NTN verification check from FBR website should be kept in relevant files for record.

32. The mission was informed by BISP Procurement staff that all Individual Consultants are being hired by the BISP Human Resources Department. The Bank team reiterated that while hiring Individual Consultants Bank's Procurement Guidelines should be followed and especially clauses for "Eligibility" and "Conflict of Interest" should be fully complied. The Bank team

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requested BISP to send the BISP internal mechanism for Eligibility and Conflict of Interest check to Bank for review. It was also advised that Procurement staff should be involved while hiring Individual Consultants to ensure that the Bank Guidelines are being properly adhered to. The Bank team also requested BISP to send list of all Individual Consultants hired so far with details of their assignment, remuneration package, and cunent status.

33. The following decisions and timelines were agreed upon:

i) List of all Individual Consultants hired so far to be shared by July 20, 2013. ii) BISP Mechanism for Eligibility and Col check for ICs to be shared by July 20,2013.

iii) Procurement records to be shifted in fire proof cabinets by July 23, 2013.

iv) Revised Procurement Plan incorporating new Bank's prior review threshold with update in Caliper to be done by July 10, 2013.

B. Financial Management & Disbursement Review

34. The Financial Management has been rated as 'Moderately Satisfactory' and the Risk Rating has been rated as 'Moderate' by the mission. Progress against the matters highlighted in the previous mission has been praiseworthy as number of action items were completed4

. However, the mission noted that the submission of the monthly financial progress report, in the agreed fom1at, to the World Bank and DFID has not been done on periodic bases. The DG F&A agreed to ensure its timely periodic submission from the July 2013. A three phased strategy to finalize the Pakistan Post (PP) reconciliation has been developed. This is a long outstanding issue since inception of the project and the DG F&A has agreed to finalize the reconciliation by Dec 31, 2013 .

35. The first FRA monitoring review or the Annual Progress of Statement (ASP) by DFID is due in October 2013. While, the current risk rating is 'high'; the ASP wjJ) provide an opportunity to review BISP's progress against the mitigation measures proposed in the FRA, which was agreed in November 2012. The DAC meeting minutes on the audit reports for FY 2010-11 & 2011-12, have not been signed by the AG office. The open status of the audit reports issued by the AG office for the FY 2010-11 and FY 2011-12 is an issue of high concern for DFID management. It will have a strong bearing on the fiduciary risk rating of the project and subsequently funds release by DFID. It is therefore recommended that this issue is resolved with the AG Office. To this end, BISP management committed to pursue the appropriate mechanism to expedite the official closure on the pending audit reports.

36. Funds Flow and Disbursement Arrangements: The cunent outstanding balance in BISP's Designated Account is US$ 22.84 million. BISP has provided projections for the next two quarters and in accordance with the projections, it anticipates to document the outstanding advance by incuning expenditures during the next two quarters.

37. The mission once again impressed upon BISP to document the outstanding advance as soon as possible. During the discussion, FMS, BISP, requested for SBP"s letter confirming receipt of funds. under their withdrawal application (w/a) No. 3-BISP. The mission assisted in

4 Refer to Annex B"Progress against Actions Agreed during Jan 2013 Supervision Mission".

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obtaining SBP's letter dated June 17, 2013, and shared the same with BISP. It was however, revealed that in the text of the letter, SBP has inadvertently typed IDA Credit No. 4589-PK, instead of IDA Credit No. 5042-PK. Moreover, in the letter, w/a No. 2, has been typed instead ofw/a No. 3-BISP. During our meeting, this mistake was brought into the notice of the Ministry of Finance, who advised that BISP should, in coordination with Ministry of Finance, get this mistake rectified by the SBP.

38. As of June 27, 201.3, sums of US$ 50.83, million, and US$ 59.38 million have been disbursed under IDA Credit No. 4589-PK, and 5042-PK respectively. The undisbursed balances are US$ 11 .07 million and US$ 86.36 million respectively. Due to exchange rate fluctuations between US$ and SDR, the disbursed and undisbursed amounts do not add up.

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Section TV.B.I (b) (i) of Schedule 2 to the FA

Section IY.B.l (c) (i) of Schedule 2 to the FA

Section IV.B.I (b) (ii) and (c) (ii) of Schedule 2oftheFA

Section LA. I of the Schedule to the PA

Status of Legal and Dated Covenants

The BISP management infonnation system for the Basic Cash Transfers has been established and is fully operational, m a manner and substance acceptable to the Association. (Applicable to DLis A. I, A.2, A.3, A.4, C.2, D.l, D.2 and D.3).

The BJSP management information system for the Basic Cash Transfer has been updated with a new module addressing the requirements of the Co-responsibility Payments under the Waseela-e-Taleem program, in a manner and substance acceptable to the Association. (Applicable to DLis B.l, 8.2, 8.3, 8.4, 8.5, C. I, C.3, C.4).

Achievement of the Disbursement Linked Indicators, as verified by the Association and submission of I FRs covering the Basic Cash Transfers made from July I, 20 I I up to the date of the withdrawal application

BISP shall maintain: (i) the BTSP Management Board headed by a Chairperson, with members from governmental and non-governmental entities, including representatives from the MoF, PC, social sectors and others relevant to the purpose of the safety net program; ( ii) a management body; (iii) a PMU headed by a qualified Project Manager; (iv) a M&E Unit headed by a experienced monitoring and evaluation officer; (v) an independent consultant for conducting regular spot-checks (operational audits) on the performance of BISP and all relevant stakeholders; and (vi) contractual arrangements with data processing agencies for the administration and management of the database of beneficiaries, the carrying out targeting surveys for the Basic Cash Transfers and the Co-responsibility Cash Transfer under the Waseela e Taleem program, and the generation of beneficiary lists for the issuance of payments.

Disbursem ent Condition

Disbursem ent Condition

Disbursem ent Condition

Ongoing

ANNEXA

Completed

Completed

Disbursement conditions for DLis AI, A2, 81, Cl, C2, D I, 02, 03 have been achieved and Basic Cash Transfer EEP details provided in the withdrawal applications

Monitored regular missions

through supervtston

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Section LA.2 of the Schedule to (Procurement). thePA

Section LC.2 of BISP shall enter into a Memorandum of Covenant Schedule to the Understanding with each such Province or PA Agency interested in pruticipating in the

Section LD (a) of Schedule to the PA

Section I.D (b) of Schedule to the PA

Waseela e Taleem program.

BISP shall maintain a nationwide easily accessible Update and Grievance Redressal Mechanism.

BISP shall automate the Update and Grievance Redressal Mechanism's filing and processing in at least eighty percent (80%) of the districts of Pakistan.

Covenant

Dated covenant due in 3 months after the Effective Date

Section I.E of BISP shall prepare an annual implementation Dated Schedule to the plan lby July 31, of each year (commencing on covenant PA July31,2012).

Section LF of Schedule to the PA

BTSP shall adopt and thereafter apply a Staff Perfonnance Management System.

Dated covenant 3 months after the Effective Date (for the adoption)

Section I.G of BTSP shall ensure that the fol lowing Ongoing Schedule to the documents, and/or any amendments or PA corrections thereto, are made publicly available

and freely accessibly at BlSP's website (www.bisp.gov.pk), in a timely fashion and manner acceptable to the Association, namely: (i) the BCT Operations Manual and the WeT Operations Manual; (ii) the list of beneficiaries of BISP's Basic Cash Transfer and the Co­responsibility Cash Transfers under the Waseela e Taleem program; (iii) the Memorandum of Understanding entered into between BlSP and each Province or

Completed

MoU signed with all provinces except for Punjab

Completed

65% of the Districts have already been covered and for the remaining districts the redressal mechanism is available at Divisional level till new Tehsil Offices are made functional and MIS is installed.

BISP is presently working on this and shall submit the implementation plan before July 31,2013.

In progress. Phase 1 for the development of the PMS has been completed and it is expected that the complete PMS will be operationalized by Dec, 2013

Monitored through regular supervision missions

14

Section ll.A. I of Schedule to the PA

Section ll.A.3 of Schedule to thePA

Section Il.A.4 of Schedule to the PA

Section Ill.2 (a) of Schedule to thePA

Section lH.2 (b) of Schedule to the PA

interested in participating in the Waseela e Taleem program; (v) the semi-annual Project Reports; (vi) the impact evaluation reports; and (vii) the audited Financial Statements.

BISP shall establish and maintain a fu lly operational Management Information System

BISP shall adopt and implement in form and substance satisfactory to the Association, the program management measures recommended by any spot checks and/or process evaluation carried out on BISP' s implementation of the Basic Cash Transfers and Waseela e Taleem program.

BISP shall prepare several impact evaluation reports, evaluating the effects of the Basic Cash Transfers and the Co-responsibility Cash Transfers on the human development and behaviors ofBISP's beneficiaries

Ongoing

4 months after reaching agreement with the Associatio n on the program manageme nt measures

Dated covenant

BISP shall maintain an operational Ongoing procurement documentation and record keeping system acceptable to the Association, including a publicly accessible website with updated procurement information regarding the Project.

BISP shall maintain a procurement complaints Ongoing hand ling mechanism acceptable to the Association.

Monitored through regular superv1s1on missions

Monitored through regular supervision missions

The first Rapid Jmpact Evaluation report fmalized.

Dec. 31 , 2013 (for the second repo1t)

Dec. 31 , 2015 (for the third report)

Monitored through regular supervision missions

Monitored through regular supervision missions

15

ANNEXB

Financial Management and Disbursements Arrangements Review

Financial management aspects of the Benazir Income Support Program (BISP) were reviewed as part of the project implementation review. The mission reviewed the processes in place, financial transactions on sample basis and progress against agreed actions.

FM Rating: Moderately Satisfactory FM Risk Rating: Moderate

l . Progress against Actions Agreed During .Jan 2013 Supervision M ission:

# Agreed Actions Current Status General Ledger Posting Protocols:

1 BISP has approved and implemented Back up policy, Completed password policy.

2 Acquisition o[.the Backuf2. server:

Completed Server has been acquired. Internal Audit Re72orting to the Board: The Bank has given us in writing that subject to the Completed.

3 new Board constitution, the internal audit department will report directly to the Board. Actual implementation needs to be monitored. Trans(gr o[jjmds from EAD to BISP:

4 All funds transfers are up-to date and the last

Completed disbursement was transferred within the time line of 10 days.

5 Sta(fj_ng: Completed FMS position has been hiTed.

6 Aeeroval Work Flow im12.lementation: Completed It has been adopted across the Board. Budget Control register:

7 Has been developed and in active use. All vouchers Completed are automated and give budget residuals before each payment is made. Fixed Asset Register:

8 Verification completed and reconciled with the Completed general Ledger.

9 Consolidated Budget: Completed The budget has been approved.

10 Utilization o[Fund: Completed. Details received for USD 18Million. Trans(gr o[_accounting data entr}!.: For GoP: Completed.

II. The notification has been done for both IDA and GoP. I Iowever, on the ground implementation is only for For funding agencies:

16

12

13

14

GoP. The IDA data entry will be fully taken over by GoP team. Reconciliation o(Pakistan Post: Three tier reconciliation processes has been adopted. First tier (funds released by BISP and Received by PP) has been reconciled. Tier 2 is reconciled till 20 10-20 II and Tier 3 will start after Tier 2 is complete.

Financial Statements: IPSAS compliant organizational financial statements will be shared fo r the FY 2012-2013/ Automation o(the Purchase Cycle: Quick Books upgrade to enterprise level edition.

Audit Trail: 15 Activation of the audit trail mechanism within the

accountin

by Oct 3 1, 20 13

Tier 1 : Completed

Tier 2 by July 31,2013.

Tier 3 on or before Dec 31 2013

Sept30,2013

System to be procured by July 31 2013 and implemented by Aug

31 2103.

Aug 31, 2013

2. Staffing: Finance & Accounts Department is adequately staffed. The vacant FMS position has been filled . However, position of one Accounts Officer along with a Financial Analyst is still vacant which are expected to be on board by October 31, 2013. 3. Internal control: Regular internal audits are canied out a<> per Annual Internal Audit Plan the Internal Audit deprutment is adequately staffed and is headed by a Director who is on deputation from OAGP reports to Internal Audit Committee of the Board/Secretary, BISP. The IA director is supported by two Audit Officers and four Assistant Audit Officers, and five Senior Auditors and two assistants having relevant experience in government audits. 4. Progress from the last mission has been satisfactory. BISP has notified that subject to the constitution of the new Board, the IA depru·tment will report directly to the Board. However, the Internal Audit (IA) deprutment is yet to adopt a risk based approach in internal auditing while cruTying out internal audit procedures and the following matters were agreed in the last mission, which would now be compl ied within one month of the constitution of the new Boru·d:

a. Budget and work plan of the IA department will be shared and approved by the Audit and Finance Committee of the BISP Management Boru·d.

b. lA to share the audit reports (internal and GoP) with the Audit ru1d Finance Committee for reviewing in the next scheduled Board meeting.

5. The mission observed that the application of internal audit procedures is limited to operational expenses and capital expenditures. The program costs, specially the beneficiaries' payments, are subject to limited scrutiny by the IA department, which accounts for one largest head in the BISP's expenditure mix. The mission is of the view that the internal audit procedures should be geru·ed towards gathering sufficient and appropriate evidence that the beneficiaries' payments have been processed according to the operational frrunework and following the utmost standru·d of transparency, accountability and accuracy. It was agreed that the management would take appropriate measures to develop a risk matrix applicable to BISP and a supportive internal

17

audit framework for auditing beneficiaries' payments, by Aug 31. 2103. It was also agreed that the Secretary would not be a member of the Audit Committee. 6. Budgeting: A budgetary framework for BISP has been developed and automated using the existing system. Due to delay in the constitution of the new Board, BISP has aQTeed that the draft budget for the 2013-2014 will be shared with the World Bank and DFID by July 31.2013. 7. Accounting policies and procedures: The Mission noted that IFRs for the last quarter were not generated through SAP due to lack of support from PIFRA. The mission stressed upon the need to usc SAP for IFR reporting and re-submit the last IFR using SAP module by July 31, 2013. 8. The mission observed that the DG F&A or any of his designate has no real time access to the beneficiaries' payment data before processing a tranche. DG F&A and Director MIS agreed to work together to develop an interface for the A&F wing, for verifying payment data. by Oct 31. 2013. 9. The accounting data entry for GoP and funding agencies transactions was formally transferred to Accounts and Finance (A&F Wing) but, the mission observed that in practice, the data entry of the funding agencies were still recorded by the Financial Management (FM) Wing. The DG F&A agreed that the data entry of funding agencies transactions will also be taken over by the A&F wing by Oct 31, 2013. 10. Data entry protocols for fmancial transaction have been developed. The protocols includes SOP's for assigning user rights for the data entry into the accounting system, a password policy has been notified and a back server for the accounting data has been acquired and configured for use. However, as recommend in the last mission, the audit trail mechanism within the accounting system is still not available. The mission also recommended to handover the backup server to the IT department as the custodian of the BISP's data. DG F&A agreed to implement the Audit Trail mechanism by August 31, 2013 and complete the handing over of the back server and the accounting data by July 31. 20 13. 11. The mission noted that the purchase process has still not been automated5

. The DG F&A has agreed to procure the procurement module by July 31. 2013 and complete its implementation by Aug 31, 2013. 12. Financial reporting: Acceptable IFRs for the quarters up to March 31, 2013 with brief explanatory notes on variances between Planned and Actual activities have been submitted to the Bank. DG F&A also agreed to prepare IPSAS compliant financial statements for the FY 2012-2013 which will be submitted to government auditors for audit purposes by August 31,2013. 13. Audit: Acceptable audited financial statements for FY 2011-2012 have been received before December 31, 2012. However, the auditors have reported ineligible expenditures amounting to Rs 3.822 million and identified internal control weaknesses. BISP has agreed to share the status of actions taken on audit paras and notified to adjust Rs 428,002 on account of ineligible expenses from the next IFR. The management has assured that steps would be taken to prevent ineligible expenditure in future. It was agreed that the Bank would be informed about status of outstanding audit paras as soon as DAC is held.

5 Until the full scale implementation of ERP is complete. Lhe accounts payable cycle of Quick Books will be used to track

procurements for GoP and donor fu nding procurement.

18

14. Other matters: The Mission was informed that as a matter of good corporate practices, terms of reference for the sub-committees of the Board of Management are in the process of development and will be shared with the Bank once finalized.

15. Agreed Actions during the Current Mission

Periodic financial reporting for June 2013 DGF&A 2. on the financial matters as agreed with the

World Bank and DFID.

3

4

7

8

9

10

11

Hiring of the remaining candidates in the DG F&A/Dir A&F HR Development of a comprehensive DG F&A reconciliation and reporting framework for Pakistan Post and other partner's banks to

die reconciliation with PP.

DG F&A and Director MIS

Development of a risk matrix and Director IA assessment frame work for adoption of the risk based audit Sharing of the budget and work plan of the Director IA IA department with the Audit and Finance Committee of the BISP Management Board. IA to share the audit reports (internal and Director lA GoP) with the Audit and Finance Committee for reviewing m the next scheduled Board Develop protocols for auditing Director lA beneficiaries' payments and gather departmental responses within BISP m

manner. Bank would be informed of status of Director IA

12 outstanding audit paras as soon as DAC is held

July 31,2013

Oct 31,2013

Oct 31, 2013

July 31,2013

Oct 31,2013

Oct 31,2013

Within one month ofthe

constitution of the Board. Within one

month of the constitution of

the BISP Board.

Aug 31,2013

19

ANNEX-C Projection on DLis (FY 13-14)

DLis Qtr I (in USD m) Qtr 2 (in USD m) Qtr 3 (in USD m) Qtr 4 (in USD m) Total (in USD m)

WB DFlD Total WB DFTD Total WB DFID Tota l WB DFID Total WB DFID Total

A.4.By June 20 13 FY20 12/ 13, BISP has enrolled and paid the Basic Cash Transfer to at

20 20 0 0 0 0 20 20 least 4.7 million benefi ciaries eligible under the Poverty Scorecard. A.5. At any point in FY2013/ l4, BISP has enrolled and paid the Basic Cash Transfer to at

4 4 20 20 0 0 4 20 24 least 5 million beneficiaries eligible under the Poverty Scorecard. A.6. At any point in FY201 3/ 14, BlSP bas enrolled and paid the Basic Cash Transfer to at

0 0 20 20 0 0 20 20 least 5.3 million beneficiari es elig ible under the Poverty Scorecard.

B .1. At least 50% of CCT eligible beneficiaries 10 10 0 0 0 0 10 10 in 4 districts are enrolled in Waseela-e-Taleem.

B.2. At least 500,000 of existing BISP beneficiar ies are enrolled and paid Ul 0 0 0 8 20 28 8 20 28 accordance with their co-responsibility.

C.3. At any point in FY2013/1 4 after July I, 2013, 50% of BTSP benefici aries understand 0 0 0 L 4 5 I 4 5 the basic program design (CT + CCT)

C.4. At any point FY20 13/ 14, 70% of the grievances and appeals attended and resolved 0 0 I 4 5 0 l 4 5 through technology based systems

D.3. 70% of payments to BISP beneficiaries (basic cash transfers) are made through 6 6 0 0 0 0 6 6 technology based mechan isms[!]

Total 4 36 40 0 20 20 I 24 25 9 24 33 14 104 118

20