Liberia - Institutional Support for the Integrated Public ... · PDF fileafrican development bank african development fund project: institutional support for the integrated public

AFRICAN DEVELOPMENT BANK AFRICAN DEVELOPMENT FUND

PROJECT: INSTITUTIONAL SUPPORT FOR THE INTEGRATED PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT (IPFMRP)

COUNTRY: LIBERIA

PROJECT APPRAISAL REPORT Date: June 2012

Appraisal Team

Team Leader: Kalayu Gebre-selassie, Principal Governance Expert, OSGE.1 Team Members:

Jonathan Nyamukapa, Regional Financial Management Coordinator, ORPF.2/GHFO

Mosetsanagape Mabe-Koofhethile, Principal Procurement Specialist, ORPF.1/LRFO

Brenda Aluoch, Principal Legal Counsel, GECL.1

Sarah Holloway, Consultant Sector Manager: Jean-Luc Bernasconi, OSGE.1 Sector Director: Isaac Lobe Ndoumbe, OSGE Regional Director: Franck Perrault , ORWB Resident Representative: Margaret Kilo, LRFO

Peer Reviewers

Eshetu Legesse, Chief Financial Management Specialist (ORPF.2); Basil Jones, Principal Institutional Development Specialist (OSFU); Adam Amoumoun, Principal Governance Officer (OSGE.2); Achraf Tarsim, Senior Macro Economist (OSGE.1); Wiseman Vwala-Zikhole, Principal Disbursement Officer, (FFCO.3); Alain Pierre Mbonampeka, Country Program Officer (LRFO); Ismaila Ceesay, Lead PFM Specialist and Cluster Leader (World Bank); and Tammy Palmer, Economic Governance Officer (USAID)

Table of Contents

Currency Equivalents .............................................................................................................. ii Fiscal Year ................................................................................................................................ ii

Acronyms and Abbreviations ................................................................................................. ii Loan Information ....................................................................................................................iii Project Summary .................................................................................................................... iv Results Based Logical Framework ......................................................................................... v Project Timeframe ................................................................................................................. vii

I – STRATEGIC THRUST & RATIONALE ....................................................................... 1 1.1. Project linkages with country strategy and objectives ................................................... 1 1.2. Rationale for Bank’s involvement ................................................................................. 1 1.3. Donors coordination........................................................................................................ 4

II – PROJECT DESCRIPTION ............................................................................................. 5

2.1. Project design and components ....................................................................................... 5 2.2. Technical solution retained and other alternatives explored ........................................... 6 2.3. Project type ..................................................................................................................... 7 2.4. Project cost and financing arrangements ........................................................................ 8

2.5. Project’s target area and population .............................................................................. 10 2.6. Participatory process for project identification, design and implementation ............... 10

2.7. Bank Group experience, lessons reflected in project design ........................................ 10 2.8. Key performance indicators .......................................................................................... 12

III – PROJECT FEASIBILITY ........................................................................................... 13 3.1. Economic and financial performance ........................................................................... 13

3.2. Environmental and Social impacts ................................................................................ 13

IV – IMPLEMENTATION ................................................................................................... 14 4.1. Implementation arrangements ....................................................................................... 14 4.2. Monitoring .................................................................................................................... 16

4.3. Governance ................................................................................................................... 16 4.4. Sustainability................................................................................................................. 16

4.5. Risk management .......................................................................................................... 17 4.6. Knowledge building ...................................................................................................... 18

V – LEGAL INSTRUMENTS AND AUTHORITY ........................................................... 19 5.1 Legal instrument........................................................................................................... 19 5.2 Conditions associated with Bank’s intervention .......................................................... 19

5.3. Compliance with Bank Policies .................................................................................... 19

VI – RECOMMENDATION ................................................................................................ 19

Appendix I. Comparative Socio-Economic Indicators

Appendix II. Summary of ADB Portfolio in Liberia Appendix III. Map of Liberia Appendix IV. Summary of Public Expenditure and Financial Accountability (PEFA) 2012

Appendix V. Analytic Work and Underpinnings

i

LIST OF TABLES

Table 1 Donor coordination in Liberia

Table 2.1 Project components

Table 2.2 Comparison of funding modalities

Table 2.3a Project cost estimates by component and subcomponent

Table 2.3b Sources of financing

Table 2.3c Project cost by category of expenditure by component and subcomponent

Table 2.3d Expenditure schedule by year

Table 2.4 Lessons learned from previous operation and other analytical reports

Table 3 Implementation schedule

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Currency Equivalents As of 16th April 2012

UA 1 = 112.824 Liberian Dollars

UA 1 = 1.5333 US Dollars

Fiscal Year

1st July – 30

th June

Acronyms and Abbreviations

ADF African Development Fund

AfDB African Development Bank

ASYCUDA Automated System for Customs Data

CAG Comptroller and Accountant General

CoA Chart of Accounts

CPAR Country Procurement Assessment Review

CPPR Country Portfolio Performance Review

EGCSP

FSF

GAC

Economic Governance and Competitiveness Support Program

Fragile State Facility

General Auditing Commission

GOL Government of Liberia

HRMIS Human Resources Management Information System

IFMIS Integrated Financial Management Information System

IMF International Monetary Fund

IPFMRP Integrated Public Financial Management Reform Project

IPSAS International Public Sector Accounting Standards

ISP Institutional Support Project

JAS Joint Assistance Strategy

LBO Legislative Budget Office

MDAs Ministries, Departments and Agencies

MDTF Multi-Donor Trust Fund

MOF Ministry of Finance

MOU Memorandum of Understanding

MFF Macro Fiscal Framework

MTEF Medium Term Expenditure Framework

NSAs Non State Actors

PCR Project Completion Report

PEFA Public Expenditure and Financial Accountability

PEMFAR Public Expenditure Management and Financial Accountability Review

PFM Public Financial Management

PFMU Public Financial Management Unit

PIU Project Implementation Unit

PRS Poverty Reduction Strategy

RCU Reform Coordination Unit

SIDA Swedish International Development Agency

SIGTAS Standard Integrated Tax Administration System

SOE State Owned Enterprise

TA Technical Assistance

UA Unit of Account

USAID United States Agency for International Development

WB World Bank

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Loan Information

Client’s information

BORROWER: Government of Liberia

EXECUTING AGENCY: Ministry of Finance

Financing plan

Source Amount (UA) Instrument

FSF

3 million

Grant

IDA 3.2 million Credit

MDTF 12.4 million Grant

Government Nil In kind

TOTAL COST 18.6 million Grant and Credit

Timeframe - Main Milestones (expected)

Preparation February 2012

Concept Note approval March 2012

Appraisal April 2012

Project approval July 2012

Effectiveness August 2012

Mid-term Review June 2014

Completion June 2016

Last Disbursement December 2016

iv

Project Summary

Paragraph Topics covered

Project

Overview

Project name: Integrated Public Financial Management Reform Project (IPFMRP)

Expected Outputs: Government public financial management (PFM) capacity

strengthened; capacity of accountability and integrity institutions strengthened; the

quality and effectiveness of internal and external audit strengthened; and revenue

mobilization and administration capacity improved.

Implementation timeframe: 2012-2016

Project cost: UA 3.0 million (this represents the AfDB share of total program costs)

Project direct beneficiaries: The IPFMRP will strengthen the capacity of key

institutions involved in PFM including the Ministry of Finance (MOF), the General

Auditing Commission (GAC), Ministries and Agencies, State-Owned Enterprises

(SOE), the Legislature/Legislative Budget Office (LBO), and non-state actors (NSAs).

Innovation and best practice: This project represents an innovative approach for the

Bank by proposing a pooled funding arrangement to support a comprehensive

government program for PFM reform. This is an important step for the Bank in

embracing its commitment to agreements such as the Paris Declaration and to the

principles of effective engagement in fragile states.

Needs

Assessment

A comprehensive Public Financial Management Reform Strategy anchored in the

country’s Poverty Reduction Strategy (PRS) was formally approved by the

Government, through the PFM Steering Committee in December 2011. The strategy

seeks to widen and strengthen the foundations for PFM through concrete

improvements in selected systems, in a manner that would enable Liberia to gradually

develop its own institutional, organizational, and human resource capacities in the

medium term. The government, in partnership with development partners, has

implemented a wide range of PFM reforms covering aspects of policy, legislation,

institutional arrangements and PFM systems. However, recent assessments including

the 2012 PEFA identified a range of weaknesses. It is essential that the Bank

continues to support and consolidate the gains that have been attained in PFM.

Bank’s

Added Value

The proposed operation will build on the previous Bank supported reform and

capacity building efforts and complement other development partners’ projects. The

Bank added value derives from a number of factors: (i) experience gained in

implementing one Institutional Support Project (ISP) and two policy-based operations

whose lessons have been fed into the design of this project; (ii) the Bank’s experience

in public sector governance in fragile states will serve as a guide for implementation

of this program; and (iii) the Bank’s field presence will contribute to improved policy

dialogue on the ongoing PFM reforms and portfolio management. The Bank also has

the capacity to strengthen its interventions in Liberia through a blend of aid

instruments: budget support, technical assistance and capacity building, economic and

sector work, and leveraging resources from regional operations and initiatives (e.g. the

WAMZ payment system development project).

Knowledge

Management

The proposed operation will contribute to knowledge building in the area of PFM in

fragile states. Knowledge will be acquired through skills and knowledge transfer from

long and short term advisors and training providers to local counterparts and

institutions, supplemented by regional courses and study visits, development of

technical manuals and on the job support. The Bank will capture and disseminate

knowledge and experience through sharing the findings of regular supervision

missions, progress reports, PEFA report and the Project Completion Report. Lessons

learned and experience gained will therefore be available to inform future operations.

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VII. Results Based Logical Framework

Country and Program Name: Liberia: Institutional Support Project for Integrated Public Financial Management Reform Project Purpose of the program: Improved budget coverage, fiscal policy management, financial control, and oversight of government finances

RESULTS CHAIN

PERFORMANCE INDICATORS MEANS OF

VERIFICATI

ON

RISKS/MITIGATION

MEASURES Indicator (including CSI)

Baseline Target

IMP

AC

T

Impact: Improved PFM performance leading to effective and efficient use of public resources as a basis for macroeconomic stability and improved delivery of public services

a. Percentage of government budget spent on priority sectors

1

b. Corruption perception index c. CPIA rating

a. Pro-poor spending 60% (2010) b. CPI score 3.2 (2011) c. CPIA score 3.72 (2011)

a. Pro-poor spending upheld at 65% by 2016 b. 3.7 (2016) c. 4.0 (2016)

PEFA report Transparency International report CPIA- AfDB

Risk # 1: Macroeconomic risk: Liberia’s vulnerability to macroeconomic shocks due to its dependence on imported food and fuel as well as on primary exports and foreign direct investment. Mitigation measures: Continued implementation of fiscal and monetary policy supported by IMF program, AfDB budget support operations and policy dialogue will help to monitor and mitigate risks. Risk # 2: Implementation capacity constraints: Weak institutional and human resources capacity could cause delays or hamper implementation Mitigation measures: This proposed support is based on a recent and realistic assessment of implementation capacity in general and a clearly sequenced PFM Reform Strategy. The program will provide additional project management capacity. Risk #3 Fiduciary Risks: Government has made notable progress in PFM, but there are still weaknesses in the fiduciary control environment. Mitigation measures: Government has put in place a PFM Act, and a PFM Reform Strategy that present a broadly credible program for improvement, supported by technical assistance from the Bank and other donors. Implementation of the Bank’s operation, fiduciary assessments and audit requirements will

OU

TCO

ME

Outcome: Improved fiscal discipline, and efficiency and effectiveness of public expenditure

Aggregate expenditure and revenue outurns compared with original approved budget

Effectiveness in collection of tax

Effectivess of payroll control and internal audit

Quality and timeliness of in-year budget reports and annual financial statements

Effectiveness of external and legislative scrutiny of external audit report

Baseline 2012 PI-1, & PI-3 score D PI-15 score D+ PI-18, & PI-21 score D+ PI-24, & PI-25 score D/D+ PI-27 & PI-28 score D/D+

Target 2016 All the selected PEFA scores improved to B/B+

MOF report

OU

TPU

TS

Output 1: Enhanced Budget Planning, and Credibility

Transition to medium term and policy based budgeting

Single year, line item budgets

MTEF based budget prepared for 2014

MOF reports

Output 2: Improved Budget Execution, Accounting and Reporting

a. IFMIS fully operational b. GOL producing fully IPSAS compliant financial statements (FS)

a. IFMIS rolled out at MOF b. No IPSAS compliant FS

a. IFMIS rolled out to all MDAs by 2015 b. IPSAS compliant Financial statements prepared within 3 months of year end by 2016

PFM progress reports & Supervision Mission reports

Output 3: Improved Revenue administration capacity

a. Coverage of ASYCUDA++ b. Revenue Authority fully established

a. 1 port has ASYCUDA++ b. Draft Revenue Authority bill

b. ASYCUDA ++ operational in all ports by 2015 b. Liberia Revenue Authority established by 2013

PFM progress reports & Supervision mission reports

1The priority sectors for support are health, education, governance and private sector development/economic growth

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Output 4: Improved budget transparency and accountability

a. Number of operational internal audit units and committees b. Scope of External audit coverage across GOL c. Legislative Budget Office effectively supporting oversight

a. 1 Internal Audit Unit in the MOF b. Not all MDAs audited and 2 years of audit backlog c. 3 months delays in budget approval

a. Internal audit Units & Committees established in 50% of Ministries and Agencies by 2015. b. Full external audit reports published, and no audit backlog by 2015 c. Budget approved by July 2014

PFM progress reports, Audit Reports and Supervision mission reports

provide specific safeguards. Risk 4: Corruption: Many aspects of political and governance arrangements undermine good governance. Weak internal controls and limited procurement and PFM capacity increase the risk of conflict of interest, bribery, and patronage. Mitigation measures: include: on-going efforts to strengthen the Liberia Anti-corruption Commission, the Public Procurement and

Concessions Commission, the

deployment of 16 competent auditors to high spending entities, and the enacting of the 2009 PFM Act and the 2010 Freedom of Information Act. Risks in PFM are mitigated by internal controls in IT-based PFM systems, the strengthening of the internal and external audit functions, and undertaking procurement compliance audit.

Output 5: Improved project management and PFM capacity building

Number of staff with recognized PFM qualification.

30 qualified PFM graduates

155 qualified staff (of which 22 female) in procurement, financial management and audit by 2015 90% of women professionals in PFM benefitted from the training and capacity building activities

PFM progress reports and Supervision mission report

KEY

AC

TIV

ITIE

S

ACTIVITIES INPUTS

Technical assistance in all technical areas outlined above

Short term training and professional development programs for PFM staff

Establishment of partnership and service delivery arrangements with local training providers and regional institutions

Purchase of IT equipment & production of technical, guidance and training manuals

Renovation of essential buildings and facilities

ADF/FSF : UA 3 million

Other donors: UA 15.62 million (WB, SIDA and USAID)

Implementation support supervision missions

Note: This logframe is based on the overall IPFMRP. The AfBD project outlined in this document will co-finance the project.

vii

Project Timeframe

YEARS 2012/13 2013/14 2014/15 2015/16 Action by

Quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

ACTVITIES

Project life cycle

Grant approval

AfDB

Effectiveness

GOL

Launching workshop

AfDB & GOL

Joint supervision and monitoring

AfDB

Mid-term review

AfDB

Disbursement of funds

AfDB

Submission of annual audit

reports GOL

AfDB Project completion report

AfDB

All Components

General Procurement Notice

published GOL

Procurement of goods, and

technical assistances GOL

Provision of training GOL

Submission of progress reports GOL

PEFA Updates GOL

GOL

1

REPORT AND RECOMMENDATION OF MANAGEMENT TO THE BOARDS OF DIRECTORS

ON A PROPOSED GRANT TO LIBERIA FOR AN INSTITUTIONAL SUPPORT

FOR THE INTEGRATED PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT

Management submits the following Report and Recommendation on a proposed grant for UA 3.0

million from the Fragile State Facility for ADF-12 to finance the Institutional Support for the

Integrated Public Financial Management Reform Project (IPFMRP).

I – STRATEGIC THRUST & RATIONALE

1.1. Project linkages with country strategy and objectives

1.1.1 The proposed operation is firmly anchored in the objective and structure of the

country’s second Poverty Reduction Strategy (PRS, 2012-2017), known as Agenda for

Transformation through Action, in particular Pillar IV - Governance and Public Institutions,

which recognizes the fact that sound public financial management is crucial to achieve the

overarching goal and long-term national vision, Liberia RISING 2030. The strategy will guide

development activities in Liberia and focuses on key investments in infrastructure, people and

institutions. The rationale for the proposed operation is also aligned to the government led Public

Financial Management Reform Strategy and Action Plan (2011-2014). The Strategy provides a

comprehensive framework on which to base further development assistance to ensure that the

interventions are coordinated, and aligned with Government of Liberia’s (GOL) priorities.

1.1.2 The proposed operation is consistent with the Joint Assistance Strategy (JAS) 2008-

2011 (extended to December 2012) priorities, and contributes towards: Pillar I “Rebuilding

core state functions and institutions” and Outcome – 1 “improving efficiency of budget preparation

and execution and enhanced revenue administration”. It is also consistent with the Bank’s Medium

Term Strategy 2008-2012 and its Governance Strategic Direction and Action Plan (GAP, 2008-

2012) which promotes support to building capable and responsive states by strengthening

transparency and accountability in the management of public resources. The project is in line with

the ADF-12 operational priorities and the Strategy for Enhanced Engagement in Fragile States, all

of which emphasise promoting good financial and economic governance through the deepening of

PFM reform and capacity building. It also proposes an innovative approach to engagement in a

fragile state by supporting a pooled funding arrangement within a comprehensive, government led

reform program, in line with the Bank’s commitment to the Paris Declaration.

1.2. Rationale for Bank’s involvement

1.2.1 Developing and sustaining human capital remains a great challenge. The prolonged

conflict had a devastating effect on the human capital of Liberia, with many of the most qualified

and experienced persons leaving the country. It is evident that the key institutions of government

are critically short of the necessary skilled and qualified professionals to give the basis for strong

and effective government. A human resource training needs analysis funded by the Bank2 under the

first Institutional Support Project (ISP) has identified critical skill gaps in public finance. Much has

been done to support human capacity building efforts under previous reform projects, but this is a

medium term undertaking, and sustained support for this work is still required. A capacity building

implementation framework is developed to support directly Liberia’s PFM reform and capacity

buiding strategy. The program plans to contribute towards developing organizational and human

capacity in Liberia.

2 Training Need Assessment and Staff Training Plan prepared by FJP Development and Management Consultants (2011)

2

1.2.2 Notwithstanding the difficulties mentioned above, the government, in partnership

with multilateral and bilateral development partners, has implemented a wide range of PFM

reforms covering aspects of policy, legislation, and institutional arrangements and systems.

There have been improvements in the quality of Liberia’s fiscal institutions and the GOL has made

steady progress in PFM reforms over the past few years, (including adoption of a PFM Act, launch

of an Integrated Financial Management Information System (IFMIS) in MOF, signficant

organisational restructuring in MOF, adoption of an internal audit strategy and achievement of

HIPC completion point), showing that the government is firmly committed to governance reform

over the medium to long term. These reforms have sought to restore working conditions of PFM

systems and to initiate their modernization to enable Government to better implement its poverty

reduction and development strategies. The proposed operation will enable the Bank to remain

engaged, and consolidate PFM reform in Liberia.

1.2.3 The project will build on the achievement of the Bank’s first ISP3, and consolidate the

Bank’s support to Liberia’s PFM Reform Strategy and Action Plan. Since the launch of the

first ISP, commendable progress has been registered in a number of areas, including: (i) Country

PFM systems have been significantly strengthened; (ii) project management processes are

improving, and (iii) there are plans to use theIFMIS for all government expenditure regardless of

source of funds. However, there is no doubt that many challenges remain, primarily in continuing

the process of capacity development and strengthening PFM on a sustainable basis. The Project

Completion Report (PCR) of the first ISP noted that in order to sustain reform and build on the

gains from the previous projects, Bank support to PFM reform needs to continue its support in line

with Good Practice4 in supporting PFM. The program will provide support in the same technical

areas of PFM reform as the previous operation in order to provide continuity in the reform process

and consolidate earlier gains.

1.2.4 The proposed operation also complements the ongoing policy-based operation, the

Economic Governance and Competitiveness Support Program (EGCSP, 2011-2013)5. The

EGCSP supports institutional reform in the areas of customs administration, business enabling

environment, financial transparency and accountability, and extractive industry governance. The

proposed operation complements the EGCSP through building the capacity of key institutions

including Internal Audit, General Audit Commission (GAC), Legislative Budget Office (LBO) and

Non-State Actors (NSAs) to enhance external oversight and accountability which is critical for the

delivery of the reform program under the EGCSP.

3 Institutional Support Project for Governance, Economic Management, and Poverty Reduction Approved by the Board

of Directors on 27th

October 2006, Ref. ADF/BD/WP/2006/97 4 Includes support to: (i) a country-led PFM reform strategy and action plan; (ii) a more coordinated approach; and (iii)

a shared information pool with a framework for measuring results. 5 Approved by the Board of Directors on 21

st June 2011, Ref: ADF/BD/WP/2011/59.

3

1.2.5 The proposed operation has been guided by various analytical and diagnostic reports

as well as consultations during the project preparation and appraisal missions. The analytical

underpinning for the design of the operation is provided by the 2008 Public Expenditure

Management and Financial Accountability Review (PEMFAR), the draft 2012 Public Expenditure

and Financial Accountability Asssessment (PEFA), the annual PFM reform progress reports, the

IMF technical assessment report, the USAID PFM assessment report, OPEV Evaluation Report

(Joint PFM Evaluation and Bank’s Assistance to Fragile States), OECD Report on International

Engagement in Fragile States (2011), the JAS mid-term Review and Country Portfolio Assessment

(2010), and the PCR for ISP I. The main conclusions and recommendations are summarised in

Technical Annex B1.

4

1.2.6 Recent PFM performance assessments and analytical reports identified a range of

weaknesses in Liberia’s PFM systems, which are the basis to design and prioritise

interventions under this project. The key challenges are summarized in Box. The IPFMRP has

been designed to ensure that all of the key challenges are addressed through the various project

components.

1.2.7 The operation will help intensify and sustain reform efforts in Liberia. To realize the

gains that have occurred and to address the weakness and challenges in PFM, the Liberian

authorities, along with development partners have adopted a comprehensive PFM Reform Strategy.

The strategy seeks to widen and strengthen the foundation of public financial management through

concrete improvements in selected systems, in a manner that would enable Liberia to gradually

develop its own institutional, organizational, and human resource capacities in the medium term.

The proposed operation will contribute to effective implementation of the strategy and addresses the

identified weaknesses in the PFM systems.

1.3. Donors coordination

1.3.1 Donor support to Liberia is coordinated by the Ministry of Finance. A significant

number of development partners currently provide assistance to Liberia. Aid flows to Liberia are

channelled through four modalities: Budget Support, Pooled Funding, Liberia Reconstruction Trust

Fund, and Project Support. GOL is committed to improving the effectiveness of aid, by moving

from project financing to coordinated donor financing through a much clearer institutional

arrangement for aid coordination and integration of donor funds into the GOL budget. In this regard

a draft aid policy was developed in September 2011 with the aim of improving effectiveness of aid

and providing guidance on mobilisation of high quality aid, and mechanisms for dialogue, and

mutual accountability.

1.3.2 There is now a strong basis for improved donor coordination for PFM reform. Support

from development partners to PFM reform process has, until recently, been provided through

bilateral initiatives which resulted in problems with coordination, funding gaps and overlapping of

donor support for certain reform activities. The recent joint evaluation of PFM reform in Africa

(OPEV 2011), identified the urgent need to move to more harmonized and coordinated donor

support to PFM reform. The evaluation of Fragile State Facility (OPEV, 2012) also recommends

investing in existing donor coordination and promote more concerted, harmonised and coordinated

international efforts. GOL has developed the framework for this to happen through the Reform

Coordination Unit (RCU). The adoption of the PFM Reform Strategy, and the associated IPFMRP

as well as the PFM Operational Manual have markedly improved the framework for donor

coordination in Liberia.

1.3.3 The Ministry of Finance requested donors to harmonize and align their support to

IPFMRP. Two key donors (USAID and SIDA) have entered into a World Bank Trust Fund

arrangement to support IPFMRP, and the AfDB is expected to co-finance the program through a

pooled funding arrangement. The contributions of the various partners are shown in Table 2.2b. A

partnership and cooperation agreement is being developed to better coordinate support to the

IPFMRP. Complementarity between the development partners will be achieved through the PFM

Working Group, and common implementation arrangements. This project proposes an innovative

approach for the Bank by using a pooled funding arrangement, whereby individual donor funds are

not specifically ring-fenced to support any particular project component. This is an important step

for the Bank in embracing its commitment to the Paris Declaration and the principles of effective

engagement in fragile states.

5

II – PROJECT DESCRIPTION

2.1. Project design and components

2.1.1 Project objectives: The overarching goal of the project is “Improved budget coverage,

fiscal policy management, financial control, and oversight of government finances in Liberia”.

Through strengthened institutional capacity for the delivery of effective PFM and oversight, the

government will be able to expand and deepen the scope of reforms to reduce corruption, improve

service delivery, and thereby reduce poverty.

2.1.2 Project Components: The project supports has five components which are mutually

reinforcing: (i) enhancing budget planning and credibility, (ii) strengthening budget execution,

accounting and reporting; (iii) strengthening revenue administration; (iv) enhancing transparency

and accountability; and (v) project management and capacity building. The major activities under

each component are summarized in Table 2.1 below.

Table 2.1 : Project components Components Component description

Component 1: Enhancing Budget Planning, and Credibility

Training in macroeconomic modeling, financial programming and revenue forecasting

Technical support to the medium-term expenditure framework (MTEF)

Support for strengthening planning and budget preparation processes

Technical support in establishing a fiscal monitoring framework for SOEs

Provision of computers, and accessories and vehicles.

Component 2: Strengthening Budget Execution, Accounting and Reporting

Technical support to continue strengthening the PFM legal framework

Technical support for the roll-out of the Free Balance-based budget preparation, execution, and fiscal reporting modules of the IFMIS

Support to build capacity in implementing guidelines for producing IPSAS Cash Standard financial statements

Design of the budgeting, accounting, and reporting tools within IFMIS

Training the staff of the Public Financial Management Unit (PFMU) in the CAG Accounting Services Unit on the implementation of project accounting, and establishing County Treasuries

Component 3: Strengthening Revenue Administration

Training on customs administration

Technical Assistance (TA) for implementation of Single Integrated Tax Administration System (SIGTAS) roll-out and training

Establishment of a Revenue Authority

Procurement of hardware and related software

Component 4: Enhancing Transparency and Accountability

TA support, training and provision of essential equipment to strengthen the Public Procurement and Concessions Commission

TA support for establishing the Internal Audit Governance Board and Secretariat, and internal audit operational tools and manuals

Training of internal auditors across MDAs

Short-term training and certification for GAC staff/external auditors

Provision of logistical support to facilitate the work of the LBO and the legislative committees

Training and seminars on budget analysis for LBO

Provision of grants to NSAs to build their capacity in the analysis and monitoring of budget preparation, approval, and execution

Component 5: Project Management and capacity building

In-service and specialized training programs in PFM, and procurement

Hiring an international procurement specialist to build procurement capacity

Design of a career path for PFM staff and associated training

Support to monitor, evaluate, and review progress on all components

2.1.3 The IPFMRP is based directly on the stated objectives and priorities of GOL as

expressed in the medium term PFM Reform Strategy. The approach has been designed to cover

all the main elements of the PFM framework, in some cases, to complete on-going reforms (e.g. the

full implementation and roll out of the IFMIS) and in other cases to build capacity in critical

functions, such as internal and external audit. The main activities of the program are focused on

6

building stronger PFM systems and capacity building and transfer of knowledge through (i)

technical assistance to train staff in their respective areas with key counterpart staff identified; (ii)

on the job training; (iii) local, regional and limited overseas training focused on a few key areas

which are essential for the development of high level technical qualifications and strong analytical

skills; (iv) provision of essential equipment and facilities and (v) professional development

programs in the PFM Training School.

2.1.4 The project directly addresses the identified weaknesses in the PFM systems in a

coordinated and properly phased approach. The project design includes specific activities to

address the problems and challenges identified in the PEMFAR and PEFA reports. Further

consideration of the specific weaknesses being addressed and the challenges in each of the project

components is summarised in Technical Annex B2.

2.2. Technical solution retained and other alternatives explored

2.2.1 During AfDB project preparation and appraisal, several options were explored regarding

the areas of intervention, the number of institutions/beneficiaries to support, and the modality of the

capacity building to be provided. In terms of the project implementation approach and types of

support to be provided, taking into account the lessons learned and recommendations from various

analytical reports as well as the PCR for ISP I, it was agreed that in order to realize the gains that

have occurred from the previous Bank projects, Bank intervention would need to continue to focus

on institutional capacity building with a greater focus on: (a) ensuring sustainability and improved

coordination with other development partners, and (b) strengthening the supply and demand side of

governance. This will require strengthening the PFM institutions (e.g. key departments in the

MOF), and accountability institutions such as external audit, the Legislature, and support to the civil

society and social accountability initiative.

2.2.2 In terms of the funding modality, previous ISP support has been provided through stand-

alone, bi-lateral operations in specific areas of the PFM reform agenda. However, it is clear that

operating in this way, the Bank and other development partners were creating excessive and

distracting burdens on GOL as a direct unintended consequence of increasing levels of donor

assistance. The Project Implementation Unit (PIU) used for the first ISP had only three projects at

the time the ISP was launched but by the end of the project, the Unit was providing administrative

and financial management support to 53 projects with a combined value of over US$ 500 million.

Due to donor requirements, all these projects were being provided with financial management and

procurement support outside government systems. In an environment where capacity is weak, this

was a huge distraction to the efforts of the small numbers of staff with financial management

expertise from the essential function of good PFM. In view of this, the proposed operation has

adopted a common implementation arrangement including use of the existing Reform Coordination

Unit in the MOF as opposed to a parallel PIU to minimise transaction costs and improve

development effectiveness.

2.2.3 To attempt to minimise the burden of having a large number of individual projects, GOL

developed the comprehensive PFM Reform Strategy and requested donors to provide support on a

harmonised basis into a single reform project. The World Bank, USAID, SIDA, and AfDB have led

the way in the development of a multi-donor support program to the IPFMRP, on which this

proposed operation is based. Two key donors (USAID and SIDA) have already entered into a

World Bank Trust Fund arrangement to support IPFMRP. Consistent with the Bank’s commitment

to provide a coordinated and harmonised donor support to PFM reform, the proposed operation will

co-finance the IPFMRP through a pooled funding arrangement. The relative advantages and

disadvantages of different funding modalities are summarised in Table 2.2 below.

7

Table 2.2 Comparison of funding modalities MODALITY ADVANTAGES DISADVANTAGES

Option 1

Stand alone Grant

funds direct to GOL

via a Special Account

High degree of control and

accountability for funds provided

Will use tried and tested disbursement,

supervision, financial management and

procurement processes

Will create significant administrative

burdens for the GOL

May lead to weakened coordination and

synergy within the overall reform

program

Not in line with current good practice in

donor harmonization and maximizing

aid effectiveness in fragile states

Option 2

Pooled funding

arrangement aligned

with Trust Fund

Totally in line with current good donor

practice

Substantially reduced administrative

burden on GOL

Will provide greater assurance to GOL

that key parts of the PFM reform

program will be funded

Supports effective coordination of the

reform program and common

approaches to implementation

Would still provide a high level of

control over the use of project funds

Somewhat reduced level of direct

control over targeting and accountability

for use of funds although AfDB would

be a key player in the joint donor group

2.2.4 The proposed operation adopts a comprehensive approach to capacity building that would

enhance the state building agenda through promoting the use of of country systems and

strengthening state and non-state actors. The project promotes the use of country systems, in

particular migration of donor funded projects into the GOL budget, and a single reform agenda

with clear performance targets to mitigate the risk that external assistance can do harm. As one of

the largest donors in Liberia and a signatory to the Paris Declaration, it is recommended that AfDB

enter into this pooled funding arrangement. Such an arrangement will provide GOL with the

assurance that it has the funds to pursue what is a comprehensive and challenging PFM reform

agenda (thereby maximising the benefit of the AfDB investment). It will also enable GOL to

allocate funds in line with their own needs and priorities, rather than being driven by development

partner priorities. This approach, whilst innovative for the Bank is consistent with the Banks’

endorsement of the Paris Declaration, the recommendations of recent OPEV evaluations and OECD

report on aid effectiveness in fragile states. A Memorandum of Understanding (MOU) is being

developed to coordinate support to PFM reform in Liberia (Technical Annex C2).

2.3. Project type

2.3.1 This is an innovative institutional support project in terms of effectively

implementing the Bank’s commitment to development effectiveness. Innovation comes from the

proposed funding modality, which will provide funds through a pooled funding arrangement. This

approach has not been used by the Bank before, so we have drawn on the extensive experience of

our co-financiers in ensuring that project design, governance and reporting arrangements will

provide sufficient safeguards to support effective use of the Bank’s financial contribution. This type

of operation was selected in order to provide a coordinated support to country-led PFM reform and

capacity building program and consolidate gains from earlier Bank support. The proposed operation

is entirely complementary to, and based upon support being provided by other donors in pursuit of

the objectives set out in the GOL medium term PFM Reform Strategy 2011-15. It will deliver

improved capacity and institutional development through a range of interventions including the

provision of specialist technical assistance, basic and specialised training in PFM and procurement,

support to development of new working systems and procedures, use of Information Technology

(IT) to strengthen public financial governance, and twining arrangements with and experience

8

sharing visits to peer institutions in the region. A capacity building implementation framework has

been developed to guide and coordinate all interventions under this project.

2.4. Project cost and financing arrangements

2.4.1 The total cost of the whole IPFMRP (including taxes and duties) is estimated at UA 18.62

million. A price contingency of 5% and physical contingencies of 3% have been factored into the

project cost. Details of the full project cost are presented in the Technical Annex B2.

2.4.2 The Bank will finance 16.1% or UA 3 million of the project cost using the Fragile State

Facility, and the remaining 84% or UA 15.62 million will be financed by the World Bank, USAID,

and SIDA. The Government will not be required to provide any financial contribution but will be

responsible for the provision of office accommodation and associated utilities. Annex C1 provides

justification of request for waiver of counterpart contribution and finance taxes and duties

associated with the project implementation in line with the Bank’s Policy on Eligible Expenditures .

2.4.3 The estimated project cost by component and subcomponents, source of finance, category

and schedule of expenditures are summarised in Tables 2.3a, b, c, and d below.

Table 2.3a: Project cost estimates by component and subcomponent

Component (US$ ‘000) (UA ‘000)

1. Enhancing Budget Planning, Coverage and Credibility

1.1 Macro-Fiscal Framework 355 232

1.2 Fiscal Reporting and Fiscal Policy Review 292 190

1.3 Enhanced Budget Frameworks 1,191 777

Subtotal Component 1 1,838 1,199

2. Strengthening Budget Execution, Accounting and Reporting

2.1 Revision of PFM Legal Framework 50 33

2.2 IFMIS Roll Out to MDAs 8,220 5,361

2.3 Strengthening Financial Standards, Accounting and Reporting 40 26

2.4 Treasury/Cash, Debt and Aid Management 614 400

2.5 Establishment of County Treasuries 494 322

2.6 Donor Project FM Integration into Country Systems 840 548


3. Strengthening Revenue Administration

3.1 Capacity Building of Customs Operations 200 130

3.2 Tax Automation (SIGTAS) 4,218 2,751

3.3 Establishment of Revenue Authority 960 626


4. Enhancing Transparency and Accountability

4.1 Public Procurement 313 204

4.2 Internal Audit 1,555 1,014

4.3 External Audit 3,235 2,110

4.4 Legislative Oversight 630 411

4.5 Civil Society and Social Accountability 500 326


5. Project Management and capacity building

5.1 Program Coordination 645 421

5.2 Institutional and Capacity Building 3,165 2,064

5.3 Monitoring and Evaluation and Change Management 462 301

5.4 Project Fiduciary/Audit 572 373


TOTAL PROGRAM COSTS 28,550 18,620 Note: Exchange Rates 1UA= 1.533 USD

9

Table 2.3b: Sources of financing

Sources of Financing Total (US$ ‘000) Total (UA ‘000) Percentage

ADF Grant 4,600 3000 16.1%

World Bank 5,000 3261 17.5%

SIDA 15,100 9848 52.9%

USAID 3,850 2511 13.5%

Total 28,550 18620 100%

Table 2.2c: Project cost by category of expenditure

*All figures includes price and physical contingencies

Table 2.3d: Project Expenditure Schedule

Components UA ‘000 US$ ‘000 Total

US$ ‘000 2012/13 2013/14 2014/15 2015/16 Total 2012/13 2013/14 2014/15 2015/16

1. Enhancing Budget Planning, Coverage and Credibility

1.1 Macro-Fiscal Framework 0 130 88 14 232 0 199 135 21 355 1.2 Fiscal Reporting and Fiscal

Policy Review 18 73 50 50 190 28 112 76 76 292

1.3 Enhanced Budget

Frameworks 8 386 370 13 777 12 592 567 20 1191

Subtotal Component 1 26 589 507 76 1199 40 903 778 117 1838

2. Strengthening Budget Execution, Accounting and Reporting 2.1 Revision of PFM Legal

Framework 33 0 0 0 33 50 0 0 0 50

2.2 IFMIS Roll Out to MDA 2255 1400 1049 659 5362 3457 2146 1608 1010 8221 2.3 Strengthening Financial

Standards, Accounting and

Reporting 26 0 0 0 26 40 0 0 0 40

2.4 Treasury/Cash, Debt and Aid

Management 372 29 0 0 400 570 44 0 0 614

2.5 Establishment of County

Treasuries 27 117 100 79 322 41 179 153 121 494

2.6 Donor Project FM

Integration into Country Systems 83 119 181 164 548 128 182 278 252 840


3. Strengthening Revenue Administration

3.1 Customs Operations 42 89 0 0 130 64 136 0 0 200

3.2 Tax Automation 860 871 553 467 2751 1319 1335 848 716 4218

3.3 Revenue Authority 138 398 90 0 626 212 610 138 0 960


4. Enhancing Transparency and Accountability

4.1 Public Procurement 7 93 65 39 204 7 143 100 60 313

4.2 Internal Audit 282 508 97 128 1015 282 779 148 196 1556

4.3 External Audit 238 818 357 697 2110 238 1255 547 1069 3236

4.4 Legislative Oversight 104 126 93 89 412 104 193 143 136 632 4.5 Civil Society and Social

Accountability 6 102 102 117 327 6 156 156 180 501


5. Project Management

5.1 Program Coordination 182 93 78 68 421 279 143 119 104 645 5.2 Institutional Capacity

Building 550 370 553 592 2065 843 568 848 908 3167

5.3 Monitoring & Evaluation and

Change Management 133 56 56 56 301 204 86 86 86 462

5.4 Project Fiduciary/ Audit 115 86 86 86 373 176 132 132 132 572


Total Program Cost 5478 5863 3967 3318 18620 8400 8990 6082 5087 28550 *All figures includes price and physical contingencies

Category of Expenditure Total (US$ ‘000) Total (UA ‘000) Percentage %

A. Works 1,295 845 4.5%

B. Goods 8,564 5585 30%

C. Services 12,764 8324 44.5%

D. Operating cost 5,927 3866 21%

TOTAL PROGRAM COSTS 28,550 18,620 100%

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2.5. Project’s target area and population

2.5.1 The beneficiaries will include: the, Comptroller and Accountant General’s Department,

Revenue Departments, Budget Department, PFM Reform Coordination Unit, Aid Management

Unit, Debt Management Unit, and Macro-Fiscal Unit, the General Auditing Commission, Internal

Audit Secretariat, the Ways and Means Committee, the Legislative Budget Office and the Public

Accounts Committee, State Owned Enterprises, and the Public Procurement and Concessions

Commission. Minstries and Agencies, Non-state Actors and CSOs will also be key stakeholders and

beneficiaries of the reforms supported under the program.

2.6. Participatory process for project identification, design and implementation

2.6.1 The preparation and appraisal missions held discussions with high level officials and

potential beneficiaries. Discussions were also held with other key development partners to ensure

consistency and coordination with other development initiatives. The proposed operation is based

on the Government’s medium term PFM Reform Strategy and action plan which was prepared

through a broad participatory process, which involved consultation with a range of actors including

Ministries and Agencies, civil society organizations, parliamentary committees and development

partners. To contribute to better donor coordination, the Bank’s missions were timed to coincide

with the World Bank appraisal mission in November 2011, and PEFA mission in April 2012.

2.6.2 During implementation, the institutional mechanisms and project activities (such as the

work with non-state actors and the support for the Legislature) provide opportunities to share

progress and lessons with a wider audience and seek feedback on results. The GOL has

demonstrated their high level of support for this project through their commitment to coordinate and

implement a multi-donor support program to the IPFMRP.

2.7. Bank group experience, lessons reflected in project design

2.7.1 The performance of the Bank Group portfolio in Liberia is broadly satisfactory. Currently there are ten (10) on-going operations in the Bank Group portfolio in Liberia (including

the multinational WAMZ project) with a total approved amount of UA 106.3 million6. The average

project size is UA 11.2 million, the average age is two years and three months with a cumulative

average disbursement rate of 29%. The delay between approval and effectiveness of first

disbursement is 11 months and 10 days. In May 2012, the country’s portfolio performance showed

an overall rating of 2.53%, Implementation Progress rating of 2.61 and Development Objective

rating of 2.45. The establishment of the Liberia Field Office continues to enhance dialogue and

improve the quality of portfolio management and donor coordination.

2.7.2 The Bank’s support under the previous ISP was generally regarded as effective. The

Bank has approved one ISP in the area of governance. This project “The Institutional Support

Project for Economic Management and Good Governance” (ISP I) was in response to the urgent

need to rebuild key institutions of governance after the end of the civil war. Despite significant

delays in project implementation, project overall performance was strong. Evidence from thePCR

shows the project made tangible contributions to increasing capacity and developing sustainable

foundations for further strengthening of PFM systems and performance. It has helped to address

critical skill gaps and improve the performance of PFM functions in macroeconomic and fiscal

analysis, revenue administration, and timely budget preparation and execution. A summary of the

major achievements and lessons learned from the previous operation is attached in Technical Annex

B1.

6 Infrastructure (mainly Water and Sanitation) accounts for 25%, Multi-sector (32%), Social Sector (19%), Agriculture

(15%), multinational (5%), and Private Sector (4%).

11

2.7.3 The design of this proposed project has benefitted from the experience and lessons

from the previous operation, review of numerous analytical reports7, and discussions with the

development partners. The lessons learned are summarized in Table 2.3 below. It also takes into

account lessons learned from Bank experience in similar PFM and ISP projects in other countries.

Analysis of Bank experience is outlined in Technical Annex B1 and serves to add strength to the

messages summarised below.

Table 2.4: Lessons learned from previous operation and other analytical reports

Lessons learned Actions taken to integrate lessons into the project Low levels of in-country capacity had a negative

impact on implementation, and serious attention

should be given to the design and staffing of the

structures established to coordinate and manage

PFM reforms

This project will be directly based on the GOL) PFM

reform strategy and action plan which includes detailed

work plans taking account of both technical and human

resource requirements and limitations. New arrangements

have recently been established including a central Reform

Coordination Unit staffed with high level technical

expertise. Project design also provides funding for a

procurement expert.

The importance of strong coordination arrangements

for PFM reform: Fragmented donor interventions and

project management requirements have placed a huge

burden on extremely scarce GOL resources and diverted

very limited PFM expertise to servicing donor

requirements as opposed to leading the reform agenda. It

is widely acknowledged that future support to GOL

should be provided in a way that harmonizes and

coordinates all interventions and allows GOL to focus

PFM resources on reforms and internal needs, rather

than meeting donor requirements.

This ISP will contribute to a multi-donor support program

to the PFM Reform Strategy and action plan. There is

broad consensus on reform priorities as well as

mechanisms to improve donor coordination. A detailed

Operational Manual and cooperation framework has been

developed to improve coherence and coordination among

donors and between the PFM donor group and GOL. This

will greatly reduce the reporting and project management

burden on government. The Liberia Field Office will

enhance further country dialogue and donor coordination.

Scope of Bank supervision and measuring results -

the focus of supervision is compliance with

procurement, disbursement timetables and Bank

conditions. There is a limited focus on the measurement

of results.

The RCU will be providing regular progress reports

against the indicators and targets. A common result

measurement framework and implementation support

supervision mission has been developed to reduce the

administrative burden on GOL and make reporting against

performance and results much more comprehensive and

streamlined.

The current piecemeal approach to capacity

development and separate donor funding and

reporting arrangements creates unacceptable

administrative burdens on limited PFM capacity in

fragile states (OECD, 2011)

This proposed operation will provide joint funding to a

multi-donor, integrated and coordinated PFM reform

program in which every attempt has been made to

minimise the burden of multiple reporting and monitoring

arrangements and reduces the risk of uncoordinated

interventions..

The joint evaluation of African PFM reforms identified

what factors – institutional and contextual – contribute

to successful PFM reform and how donors can best

support PFM reform given the influence of contextual

factors on the process of change. One of the key

messages is that donors should align support as

closely as possible to the Government programme

and avoid pursuing independent initiatives.

Externally financed support to PFM reform was most

efficient and effective, when it directly financed, or

supported through technical assistance, and interventions

identified explicitly within the Government PFM reform

program.

This program is directly aligned with the GOL PRS and

the integrated PFM Reform Strategy. It is designed around

the needs and priorities identified by GOL through an

extensive, review, consultation and planning exercise. As

one of the largest donors in Liberia and a signatory to the

Paris Declaration, the proposed operation will be delivered

through a pooled funding arrangement.

7 This includes: (a) the AfDB Portfolio Performance Review, March 2011, (b) the ISP I project completion report, November 2011,

(c) joint evaluation of PFM reform, 2011, and (d) the OECD report on International Engagement in Fragile States, 2011

12

Evaluation of the Bank’s Assistance to Fragiles

States recommended that the Bank should practice

and promote more concerted, harmonised and

coordinated international efforts. It should also invest

more effort in existing donor coordination framework

(OPEV, 2012)

The proposed operation has adopted a coordinated

approach to support a country-led PFM reform agenda..

The Bank has made efforts to promote a coordinated and

harmonised implementation and management arrangement

building on the existing partnership framework with

development partners in Liberia.

PFM reform programmes should attend to the

basics, build on existing systems, sequence the

approach, and aim for simplicity: Pre-packaged

reform programmes should be avoided as interventions

need to be adapted to existing capacities, however weak

they may be.

The operation builds on reform efforts that have been

achieved so far and on ongoing interventions in a

sequenced and phased manner, consistent with the newly

designed PFM Reform Strategy document, to avoid reform

overload.8 This is necessary particularly in the light of low

capacity within the civil service.

2.8. Key performance indicators

2.8.1 The key performance indicators are set out in the Results based logframe. The achievement

of the program’s overall development objectives will be measured by the following key outcome

indicators, based around the PEFA assessment framework:

(i) Budget, credibility, coverage and policy-based budgeting:

Improved aggregate expenditure outturn compared with approved budget (PEFA PI-

1)

Extent of Unreported Government Operations (PEFA PI-7)

Multi-year perspective in fiscal planning, expenditure policy and budgeting (PEFA

PI-12)

(ii) Predictability and control in budget execution:

Effectiveness in collection of tax payment (PEFA PI-15)

Effectiveness of payroll controls (PEFA PI-18)

Competition, value for money and control in procurement (PEFA PI-19)

Effectiveness of non-salary controls (PEFA PI-20)

Effectiveness of internal audit (PEFA pi-21)

(iii) Accounting, recording and reporting:

Quality and timeliness of annual financial statements (PEFA PI-25).

(iv) External audit and legislative scrutiny:

Scope, nature, and follow-up of external audit (PEFA PI-26)

Extent of legislative scrutiny of annual audit reports (PEFA PI-28)

2.8.2 Progress will be measured on a regular basis through a variety of means including: regular

Bank supervision missions, submission of Quarterly Progress Reports, review of specific outputs

such as audit reports, and Minutes of meetings from theRCU, which will also be an important

vehicle for donor coordination across the whole PFM Reform Strategy. Objectively verifiable

evidence of progress against meeting the higher level targets will be obtained from IMF Mission

Reports, and governance indicators.

2.8.3 Collection and analysis of information to monitor performance will be the responsibility of

the RCU. The RCU is responsible for ensuring that information is collected to assess all targets and

indicators against the logframe and for preparing the comprehensive program performance reports.

8 The strategy has been developed by the MoF in close collaboration with the IMF and the WB, taking into account the

specific circumstances of Liberia and its fragility.

13

The RCU will provide inputs to this process where targets are directly linked to the broader PFM

reform strategy which they are responsible for monitoring.

III – PROJECT FEASIBILITY

3.1. Economic and financial performance

3.1.1 The economic and financial benefits from the project should be significant.

Identifying and quantifying the direct and indirect economic and financial benefits of capacity

building interventions is not straightforward. It is difficult to carry out rigorous cost-benefit and

financial analysis. While the costs are quantifiable (see section 2.4), the benefits are indirect, and

ultimately seen in improved public financial governance, service delivery and better performance of

the public financial management institutions. The economic justification of the proposed operation

is its contribution to a better functioning government through improved PFM and capacity to

implement the national development strategy. The benefits of the program will follow from

improved budget credibility, strengthened budget execution, better internal controls, enhanced

oversight, and increased transparency in the management of public resources. The project will also

support the development of human resource capacity, thereby ensuring that the benefits will be

sustained over time.

3.2. Environmental and social impacts

3.2.1 Environment and climate change. The project will not have a negative impact on the

environment. The proposed project is environmentally classified as Category 3 by ORQR.

3.2.2 Gender. The proposed operation will support government efforts and plans to

enhance gender budgeting and gender mainstreaming into development programs. Specifically, the IPFMRP program will support training in gender budgeting, which Government

has initiated to facilitate a gender analysis in the formulation of government budgets and allocation

of resources. The GOL is committed to gender mainstreaming by promoting adherence to the

United Nations Security Council Resolution 1325 (2000) on rebuilding institutions in post-conflict

societies9. The program will also support implementation of the 2009 National Gender Policy and

the Civil Service Reform Strategy by developing gender budgeting capacity skills and promoting

training and mentoring of female employees. The IPFMRP will ensure that the training program

provided will be made available to all middle to senior level women in beneficiary institutions. It

will promote gender balance in its activities and ensure women’s participation in training sessions

reaches 90% of eligible female employees (i.e. 90% of women professionals in PFM).

3.2.3 Social. The aim of the project is to enhance government capacity to implement reforms

and manage public resources efficiently and effectively. This will strengthen and leverage the

impact of the national budget on delivery of services, and poverty reduction through increasing

efficiency and effectiveness of resource allocation and budget execution in line with the national

economic growth and poverty reduction strategy. A sound PFM system matters to help ensure that

budget planning are compatible with macroeconomic stability, and that there is a firm basis for high

quality services to be provided to the public.

9 In this resolution, the Security Council “urges Member States to ensure increased representation of women at all

decision-making levels in national, regional, and international institutions and mechanisms for the prevention,

management, and resolution of conflict”.

14

3.2.4 Impact on Private Sector Development. The project will contribute positively to private

sector development. Improved macro economic policy and financial governance will improve the

confidence of the private sector in the future of the Liberian economy.

IV – IMPLEMENTATION

4.1. Implementation arrangements

4.1.1 Executing Agency: The Ministry of Finance (MOF) is the executing agency for the

program. The MOF is due to merge with the Ministry of Planning and Economic Affairs probably

before end of 2012, but the existing MOF structures that will support this program will be retained

unchanged, so there will be no impact on IPFMRP implementation. The proposed operation will use

the existing structure and project management units within the MOF. Day to day program

implementation and supervision of activities will be vested in the Reform Coordination Unit (RCU).

A PFM Steering Committee, chaired by the Minister of Finance will be responsible for strategic

oversight and policy guidance. Coordination with development partners will take place through a

joint PFM Working Group which will meet quarterly to review plans, and implementation progress.

A common monitoring and evaluation framework and operational plan have been developed to

guide implementation and coordination of the reform efforts. The RCU has a Coordinator, Resident

IMF Adviser, Capacity Building Officer, Financial Management Specialist, and Monitoring and

Evaluation Specialist. This core team will be supported by additional staff (including a Procurement

Specialist) recruited specifically for this operation. Technical Annex B3 provides details of the

implementation arrangements.

4.1.2 Financial Management: Responsibility for Financial Management will be vested in the

existing Project Financial Management Unit (PFMU) in the MOF. The PFMU already handles the

financial management for most donor financing in the country, including some on-going Bank

financed projects. It is manned by qualified and experienced accounting professionals, who are

familiar with the unit’s current accounting software (Sun Accounting), as well as experienced in

producing financial reports with the form and content expected by development partners. During the

life of the proposed program, the PFMU is expected to be transformed into a constituent part of the

CAG’s Accounting Services Unit, migrating from Sun Accounting to the IFMIS (Free-balance)

software.

4.1.3 The GAC will be responsible for project management of the the sub component for

External Audit, in line with GAC’s objective to maintain and further enhance its institutional

independence from the Executive. The GAC has an established accounting department in which

accounting for the proposed operation will be mainstreamed. The Commission’s accounting is

currently manual, with regular reports generated in Excel. The existing manual system is based on

established procedures and has sufficient controls to provide reasonable assurance on the accuracy

and timeliness of reports generated therefrom. The GAC has a stand-alone finance department

headed by a Chief Financial Officer that currently successfully manages the GAC’s own budget.

4.1.4 The assessment of both the PFMU and the GAC concluded that there is sufficient financial

management (FM) capacity to ensure: (a) that project funds are used only for the intended purposes

in an efficient and economical way; (b) the preparation of accurate, reliable and timely periodic and

annual financial reports; (c) that any assets purchased using project funds are adequately

safeguarded. The residual FM risk is rated as moderate.

4.1.5 Regarding the use of country systems, the project is expected to migrate to the IFMIS

during the course of implementation; the PFMU is expected to be incorporated into the CAG’s

department, while the bulk of the project audit will be conducted by the Auditor General. In

15

championing the use of a common financial management arrangement and the existing PFMU for

financial management, and piloting the use of the GAC for audit, efforts have been made to align

the Bank’s requirements for the proposed operation with those of the co-financing partners.

Technical Annex B4 provides details of the financial management, and the fiduciary risk analysis.

4.1.6 Disbursement: Disbursement will make use of the Special Account modality, with a

segregated USD ‘pooled’ account to be opened in the Central Bank of Liberia for use by the co-

financing partners. The partners will contribute to the ‘pool’ in the agreed proportions of their

contributions. The Special Account will disburse only towards meeting eligible expenditures (as

defined in the appraisal report). The request for disbursement and subsequent replenishment will be

in accordance with the project appraisal report, the applicable Memorandum of Understanding with

the co-financier, and as will be specified in the Disbursement Letter. Replenishments will be based

on interim unaudited financial reports covering the preceding quarter(s), a forecast of project

expenditure for the following six months, and the Aide Memoire following the joint supervision and

evaluation missions (“JSEM”) to be held every six months. Exemption will be sought for the Bank

to pay taxes, in line with the practices of the co-financing partners. Technical Annex B4 and C.2

provide details of the financial management and joint financing arrangements.

4.1.7 Audit: External audit and oversight of all government financing is the responsibility of the

General Auditing Commission of Liberia. The proposed operation will pilot the use of the GAC to

audit project funds, although a private professional firm of auditors will still be required to audit the

GAC component of the project. The private audit firm will be hired on Terms of Reference

approved by the co-financing partners, using selection procedures agreed in the MOU. Both audit

reports, supported by the relevant management letters, will be required to be submitted to the Bank

and the other co-financing partners annually within six months of the end of the year audited. The

details of the audit arrangements are set out in Technical Annex B4.

4.1.8 Procurement: The RCU will have overall responsibility to carry out the procurement

management functions including preparing procurement plans, contract administration and the

procurement monitoring process. In line with the Paris Declaration, Accra Agenda for Action, and

Bussan High Level Forum on Development Effectiveness, the proposed operation will adopt a

common implementation and procurement arrangement with the IDA as the implementing partner

for a Multi Donor Trust Fund (MDTF). The procurement arrangement is proposed to be carried out

using the WB Procurement Guidelines.10

To that end, IDA will serve as primary focal point

regarding procurement matters, in consultation with the Bank. The modalities followed in using the

WB Procurement Guidelines in lieu of the Bank’s are described in Technical Annex B5. In

addition, a Memorandum of Understanding (Technical Annex C2) provides details of the joint

implementation arrangement and Bank’s fiduciary oversight responsibility.

4.1.9 Parallel financing would require the use of two sets of rules (AfDB and World Bank) and

would create significant administrative burden for Government and undermine the limited resources

and capacity in Liberia. Instead, joint financing would facilitate the implementation of the project

from the Borrower’s perspective, and enable the Bank to shift its support to the project to carrying

out regular and targeted capacity building activities. Further, the use of the WB Procurement

Guidelines is acceptable based on the following reasons; (i) Bank and WB have harmonized their

procurement policies, procedures and standard bidding documents; (ii) The WB’s operational

framework for dealing with complaints is reliable and similar to that of the Bank; (iii) The Bank

and IDA are both signatories of the Cross-Debarment Agreement aimed at ensuring, beyond the

mutual recognition of sanctions, the application by each participating institutions of core principles

10 Section 1.17 (b) of the Bank’s Rules and Procedures for Procurement of Goods and Works (May 2000 Edition) provide that:

“where the Bank finances on a Joint basis with financiers, other than the Borrower, the Bank will require as a condition for its

financing that these Rules apply, unless the Board of Directors authorizes a waiver.

16

in its internal mechanism for addressing and sanctioning violations of its anti-corruption policies. In

line with the Bank’s Rules and Procedures (section 1.17 (b)), Management seeks from the Board of

Directors a waiver to use the WB procurement procedures, in lieu of the Bank’s Rules and

Procedures for the procurement of all activities and eligible expenditures under the components

described in the this report.

4.2. Monitoring

4.2.1 MOF will be responsible for the overall monitoring and evaluation activities in

collaboration with the project component managers and/or beneficiary institutions. The Bank will

undertake bi-annual supervision missions as part of the common implementation framework and

joint donor supervision and evaluation missions. Government will submit quarterly progress reports

on the implementation of the program. The reports will review progress made in light of the

Results-Based Logical Framework and include a clear presentation of activities undertaken during

the period under review. The reports will also analyze the extent to which the activities undertaken

have contributed to the realization of the anticipated outputs and outcomes. The Bank will also

prepare a Project Completion Report within three months of the final disbursement to draw lessons

for future interventions. Table 3. Project implementation schedule

Timeframe Milestone Monitoring process

July 2012 Board Approval Board Resolution

August 2012 Effectiveness Bank

September 2012 Project start-up Bank/GOL

September 2012 – December 2015 Procurement of goods & services GOL

Quarter 1 and 3 of each fiscal year Joint supervision mission Bank and GoL

June 2014 Mid-term Review Bank

June 2016 Project Completion Report Bank

4.3. Governance

4.3.1 Robust governance arrangements have been put in place to manage the implementation,

monitoring, review and audit of this project, as outlined in sections 4.1 and 4.2, above. The main

risks to project governance arise in procurement decisions, use of project assets and selection of

persons to attend training and capacity building events. Risks will be mitigated through the

preparation of a detailed procurement plan, robust processes for contractors and participant

selection and application of the agreed procurement rules and procedures. Procurement plans will

be prepared by the RCU on the basis of agreed program plans. Financial management of

procurement related expenditure will be carried out by the PFMU. Further training will be provided

to RCU and PFMU staff to ensure that they are fully aware of all requirements and regulations.

Compliance with these controls will be reviewed during supervision missions. An independent audit

will be undertaken every year. The establishment of a permanent AfDB field presence in Liberia

will also provide a stronger foundation for review of project governanace and performance.

4.4. Sustainability

4.4.1 Sustainability has been an important consideration during appraisal and will be ensured

through a number of factors included in project design. However, achieving an appropriate balance

between delivering tangible project outcomes and establishing sustainable capacity in a low

capacity post-conflict environment like Liberia is nevertheless challenging. The PCR for the

previous ISP identified some very positive examples of sustainable impacts from that operation.

These have included a commitment to ensure that staff trained by the project were incentivised to

17

remain in their roles and clear evidence that GOL were continuing with capacity building and

training programs developed under ISP I. Measures to ensure sustainability are summarised below:

Ensuring that GOL counterparts and component managers are identified and assigned;

Putting in place a performance management frameworks for the project to measure progress

and results across all components;

Focusing on the production of high quality outputs forming the regular program of work of

the beneficiary organisations – such as the MTEF, and internal and external audit reports,

and LBO scrutiny reports. The project will ensure that production of these reports will be

institutionalised into the regular practices of the GOL;

Developing tailor made manuals, working practices and tools for capacity building program

and continued use after the end of the project;

Developing basic financial management capacity through the FM Training School, which

envisages training graduates for the core financial management functions.It is envisaged that

graduates from the training school will be deployed to support the implementation of the

program at the all levels. It is also expected that the training program would ensure that

PFM resource strength remains in place within the civil service after program

implementation by ensuring that the FM Training School has institutionalised capacity to

continue to deliver the traning courses;

On systems maintenance and ICT support for PFM improvement in the country, the

program will put in place a coherent maintenance and support organizational set up. The

capacity building initiatives provide for knowledge transfer between a selected group of

consultants and civil servants to enable retention of skills as consultants move out. To allow

for sustainable maintenance and upkeep of the systems, the program will deploy a functional

support team of FreeBalance and Crystal Reporting experts to ensure that in-house capacity

is developed;

The GOL’s commitment to PFM reforms is affirmed, among other actions taken, by its

financing of the customs automation (ASYCUDA) through the government budget

consistent with the agreement reached under the AfDB’s budget support operation.

4.5. Risk management

4.5.1 Macroeconomic risk: The recent global financial crisis has highlighted Liberia’s

vulnerability to macroeconomic shocks due to its dependence on fuel as well as on primary exports.

The probability of this risk arising is medium, and the impact would be medium. Mitigation

measures include continued implementation of fiscal and monetary policy supported by an IMF

program, continued implementation of budget support operations as well as policy dialogue through

the Field Office which will help to monitor and mitigate the macro-economic risks. The program

will also directly contribute to building macroeconomic management capacity in GOL to support

sustained improvements to economic management.

4.5.2 Implementation capacity constraints: Weak institutional and human resources capacity

could cause delays or hamper implementation. The probability of this risk arising is medium and the

impact would be high. Mitigation measures are the fact that this proposed support is based on a

recent assessment of implementation capacity and a clearly sequenced PFM Reform Strategy. The

program will provide additional project management capacity.

4.5.3 Fiduciary risks: Government has made notable progress in improving PFM, but there are

still weaknesses in the fiduciary control environment. The weaknesses are especially evident in the

area of corruption due to weak prosecution capacity and sanctions regime. The probability of this

risk arising is medium and the impact would be high. Mitigation measures include the PFM Act,

and GOL PFM Reform Strategy which presents a credible program for improvement, supported by

technical assistance from the Bank and other donors. The Government’s commitment to, and

18

ownership of, reforms is high. The project will also directly contribute to building capacity for

improved fiduciary control through support to improved financial management information systems

and internal audit.

4.5.4 Corruption risks:. Weak internal controls and limited procurement and financial

management capacity increase the risk of conflict of interest, bribery, and patronage. This may lead

to the misuse or misappropriation of project funds or assets. The probability of this risk arising is

medium and the impact would be high. Mitigation measures at the GOL level include (a) ongoing

efforts to strengthen the Liberia Anti-corruption Commission (LACC) including the revision a bill

that empower LACC to prosecute corruption cases, (b) the deployment of sixteen

competent auditors to high spending entities, and (c) implementation of the 2009 PFM Act and the

2010 Freedom of Information Act. At the project level, corruption risks will partly mitigated

through; (a) the successful establishment of internal controls embedded in IT-based financial

management systems, (b) support to the legislature, and external audit to improve their scrunity of

PFM, (c) support to civil society organisations to improve accountability to the public, and (d)

robust financial management, publication of procurement plans and contract awards, and post

procurement review.

4.6. Knowledge building

4.6.1 Knowledge will be acquired through skills transfer from technical assistance, as well as

through formal and informal training on the job, locally and regionally. In addition to the specific

technical areas in beneficiary institutions, the capacity building implementation framework has

identified needs across the beneficiaries for improved understanding of PFM in general. The on-

going PFM training program will continue and will significantly increase the numbers of people

with recognized PFM, audit and procurement qualifications.

4.6.2 Knowledge will also be built through direct hands on support from program advisors to

enable beneficiaries to undertake their day to day work. The project will also help to develop

guidance manuals, automated financial management systems and various reporting tools and

models, such as the MTFF and macro economic models, internal audit manuals and IFMIS

reporting tools. It will support knowledge and diagnostic work through training on PEFA self-

assessment and monitor the quality of public financial governance in Liberia.

4.6.3 Specific arrangements to ensure that knowledge is transferred will include; (a) assigning

counterpart staff to work with external consultants, (b) evaluating all technical assistance based on

performance on knowledge transfer and building local capacity, and (c) putting in place an exit

strategy to sustain capacity building efforts in Liberia.

19

V – LEGAL INSTRUMENTS AND AUTHORITY

5.1 Legal instrument

5.1.1 The Protocol of Agreement between the Republic of Liberia and the African Development

Bank for an amount of ADF Grant of UA 3 million from Fragile State Facility.

5.2 Conditions associated with Bank’s intervention

5.2.1 Conditions Precedent to Entry into Force: The Protocol of Agreement shall enter into force

on the date of signature by the Government of the Republic of Liberia and the African Development

Bank.

5.2.2 Conditions Precedent to First Disbursement: The first disbursement of the grant shall be

conditional upon: (a) the entry into force of the Protocol of Agreement; and (b) evidence of having

opened a special account in the Central Bank of Liberia for the deposit of the proceeds of the grant;

and (c) signing of a Memorandum of Understanding between the Government of the Republic of

Liberia and the World Bank, and the African Development Bank, by no later than three (3) months

after the date of entry into force.

5.3. Compliance with Bank policies

5.3.1 In view of the need to adopt a joint financing modality and harmonised implementation

arrangements, it is recommended that the Board of Directors approves a waiver for (a) the program

to apply the World Bank Rules and Procedures for procurement of all eligible expenditure as

specificed in the Appraisal Report; and (b) 100% financing of the total program cost in line with the

Bank Group's Policy on Eligible Expenditures (Technical Annex C1). The project complies with all

other applicable Bank policies.

VI – RECOMMENDATION

6.1 Management recommends that the Boards of Directors approves the proposed grant of UA 3.0

million to the Government of the Republic of Liberia from the Fragile State Facility for the purposes

and subject to the conditions stipulated in this report. Acceptance of this recommendation would

represent adoption of an innovative, pooled funding arrangement in line with the Bank’s

commitment to the Paris Declaration principles

I

Appendix I. Comparative Socio-Economic Indicators

Liberia - Development Indicators

Social Indicators Liberia

Africa Developing countries 1990 2011 *

Area ( '000 Km²) 111 30,323 80,976

Total Population (millions) 2.1 4.1 1,044.3 5,732.2

Population growth (annual %) -1.5 3.3 2.3 1.3

Life expectancy at birth, total (years) 48.5 59.1 56.0 67.1

Mortality rate, infant (per 1,000 live births) 138.4 91.3 78.6 46.9

Physicians per 100,000 People … 1.0 58.3 109.5

Births attended by skilled health staff (% of total) … 46.3 50.2 64.1

Immunization, measles (% of children ages 12-23 months) … 64.0 77.9 80.7

School enrollment, primary (% gross) … 96.0 100.4 107.2

Ratio of girls to boys in primary education (%) … 90.7 90.9 100.0

Literacy rate, adult total (% of people ages 15 and above) … 59.1 65.1 80.3

Access to Safe Water (% of Population) 57.0 68.0 64.5 84.3

Access to Sanitation (% of Population) 40.0 17.0 41.0 53.6

Human Develop. (HDI) Rank (Over 187 Countries) … 182 n.a n.a

Human Poverty Index (% of Population) … 35.2 34.7 …

Liberia

Economy 2000 2009 2010 2011

GNI per capita, Atlas method (current US$) 139 196 205 …

GDP (current Million US$) 661 879 1,300 1,409

GDP growth (annual %) 36.1 4.6 5.7 5.9

Per capita GDP growth (annual %) 29.8 -0.1 1.6 2.6

Gross Domestic Investment (% of GDP) 23.5 66.9 76.0 80.4

Inflation (annual %) 5.3 7.6 7.8 8.5

Budget surplus/deficit (% of GDP) 0.3 -1.6 1.3 -2.0

Trade, External Debt & Financial Flows 2000 2009 2010 2011

Export Growth, volume (%) … … … …

Import Growth, volume (%) … … … …

Terms of Trade (% change from previous year) … … … …

Trade Balance ( mn US$) -2 -410 -652 -717

Trade balance (% of GDP) -0.2 -46.6 -50.2 -50.9

Current Account ( mn US$) -93 -292 -532 -547

Current Account (% of GDP) -14.0 -33.2 -40.9 -38.8

Debt Service (% of Exports) … 352.4 168.8 0.8

External Debt (% of GDP) 625.2 191.1 8.1 8.5

Net Total Inflows ( mn US$) 631.6 1,663.2 … …

Net Total Official Development Assistance (mn US$) 67.4 505.0 … …

Foreign Direct Investment Inflows (mn US$) 20.8 217.8 248.0 …

External reserves (in month of imports)

0.0 1.8 1.8 …

Private Sector Development & Infrastructure 2000 2005 2010 2011

Time required to start a business (days) … … 20 6

Investor Protection Index (0-10) … … 3.7 3.7

Main Telephone Lines (per 1000 people) 2.4 0.6 1.5 …

Mobile Cellular Subscribers (per 1000 people) 0.5 50.3 393.4 …

Internet users (000) 0.2 6.3 0.7 …

Roads, paved (% of total roads) 6.2 … … …

Railways, goods transported (million ton-km) … … … …

Source: ADB Statistics Department, based on various national and international sources * Most recent year

Last Update: Oct. 2011

II

Appendix II. Summary of Bank Portfolio in Liberia as at 31st May 2012

*Amount approved in USD or Euros. Rate used are those at approval date.

Project name approval

date Signature

Date effective-

ness closing

date

Net approved amount (UAm)

amount disbursed

(UAm)

disb.

(%)

Social sector

Labor-based Public Works Project 18.12.2007 29.02.2008 03.04.2009 31.12.2013 15,240,000 10,101,649 66%

Labor-based Public Works Project (suppl) 29.06.2011 11.08.2011 23.01.2012 31.12.2013 5,000.000 0 0%

Water Supply/ Sanitation sector

Urban Water & Sanitation Project 19.05.2010 28.05.2010 26.01.2012 30.06.2015 24,630,000 71,427 0,3%

Water Sector Reform Study*

13.01.2009 28.05.2009 12.08.2009 30.4.2012 1,446,356 550,916 62%

Multisector

Economic Governance and competitiveness 21.06.2011 11.08.2011 12.12.2011 31.12.2013 30,000,000 14,000,000 47%

Support to various Ministries and Public Agencies for Capacity Building - FSF Pillar III

22.04.2009 * * * 3,868,366 1,295,778 34%

Private Sector Liberia Bank for Development & Investment*

10.06.2009

30.12.2011

_

30.06.2012

3,227,035

0

0%

Equity in Access Bank* 05.11.2008 05.11.2008 05.11.2008 n/a 775,391 775,391 100%

Agriculture

Agriculture Sector Rehabilitation Project 29.04.2009 14.05.2009 30.03.2010 30.04.2016 12,500,000 2,007,924 16%

Smallholder Agricultural Productivity and Commercialization

02.05.2012 - - - 4,000,000 0 0%

Multinational WAMZ-Payment System Development Project (The Gambia, Guinea, Sierra-Leone and Liberia)

09.11.2010 09.11.2010 02.02.2011 31.12.2012 5,000,000 0 0%

TOTAL (only national) 101,257,147 31,205,033 30.4%

TOTAL (including multinational) 106,257,147 31,205,033 30.8%

III

Appendix III. Map of Liberia

IV

Appendix IV. Summary of the draft PEFA 2012 Assessment in comparison with PEFA

2007

Indicator Description SCORE

2007

SCORE

2012

(Draft)

CHANGE

PFM OUTTURNS: Credibility of the Budget

PI-1 Aggregate expenditure outturn compared with

original approved budget

B D DOWN

PI-2 Composition of expenditure outturn compared

with original approved budget

D D+ UP

PI-3 Aggregate revenue outturn compared with

original approved budget

A D DOWN

PI-4 Stock and monitoring of expenditure payment

arrears

D+ B UP

KEY CROSS CUTTING ISSUES: Comprehensiveness and Transparency

PI-5 Classification of the budget C C NO CHANGE

PI-6 Comprehensiveness of information included in

budget documentation

C B UP

PI-7 Extent of unreported government operations D+ D+ NO CHANGE

PI-8 Transparency of inter-governmental fiscal

relations

NO

SCORE NO

SCORE

NO CHANGE

PI-9 Oversight of aggregate fiscal risk from other

public sector entities

D D NO CHANGE

PI-10 Public access to key fiscal information C C NO CHANGE

BUDGET CYCLE

C (i) Policy Based Budgeting

PI-11 Orderliness and participation in the annual

budget process

B B NO CHANGE

PI-12 Multi-year perspective in fiscal planning,

expenditure policy, and budgeting

D+ C UP

C (ii) Predictability and Control in Budget Execution

PI-13 Transparency of taxpayer obligations and

liabilities

C B UP

PI-14 Effectiveness of measures for taxpayer

registration and tax assessment

C C+ UP

PI-15 Effectiveness in collection of tax payments D+ D+ NO CHANGE

PI-16 Predictability in the availability of funds for

commitment of expenditures

C+ C DOWN

PI-17 Recording and management of cash balances,

debt, and guarantees

C+ B UP

PI-18 Effectiveness of payroll controls D+ D+ NO CHANGE

PI-19 Competition, value for money, and controls in

procurement

D+ C UP

PI-20 Effectiveness of internal controls for non-salary

expenditure

C+ C+ NO CHANGE

PI-21 Effectiveness of internal audit D+ D+ NO CHANGE

C (iii) Accounting, Recording, and Reporting

PI-22 Timeliness and regularity of accounts

reconciliation

D C UP

V

Indicator Description SCORE

2007

SCORE

2012

(Draft)

CHANGE

PI-23 Availability of information on resources

received by service delivery units

D D NO CHANGE

PI-24 Quality and timeliness of in-year budget reports C D+ DOWN

PI-25 Quality and timeliness of annual financial

statements

D D NO CHANGE

C (iv) External Scrutiny and Audit

PI-26 Scope, nature, and follow up of external audit D D+ UP

PI-27 Legislative scrutiny of the annual budget law C+ C+ NO CHANGE

PI-28 Legislative scrutiny of external audit reports No Score D N/A

DONOR PRACTICES

D-1 Predictability of direct budget support No Score D N/A

D-2 Financial information provided by donors for

budgeting and reporting on project and program

aid

D D+ UP

D-3 Proportion of aid that is managed by use of

national procedures

D D NO CHANGE

VI

Appendix V. Analytic work and underpinnings

Analytical themes Analytical work Institution

Strategy - 2008 -2012 Joint Assistance Strategy

- Medium Term PFM Reform Strategy

- PRSP II- Agenda for Transformation

- Country Strategy mid-term review, and Portfolio

Performance Review (May 2011)

- OECD 2011 Report on International Engagement in

Fragile States – Republic of Liberia

- AfDB & World

Bank

- GOL/MOF

- GOLR

- GOL

- OECD

Macroeconomic

Framework

- 2011, December, Letter of Intent, Memorandum of

Economic and Financial Policies, and Technical

Memorandum of Understanding

- Seventh Review under the Enhanced Credit Facility,

December 2011

- 2012 Debt Management Strategy Progress Report

- Budget Framework Paper, 2010/11-2012/2013

- Economist Intelliogence Unit, Country Report –

Liberia, December 2011

- Enhanced Heavily Indebted Poor Countries (HIPC)

Initiative Completion Point Document and Multilateral

Debt Relief Initiative (MDRI), June 2010

- GOL/IMF

- IMF

- GOL

- GOL

- EIU

- World Bank/IMF

Public Financial

Management

- Public Expenditure and Financial Accountability

(PEFA) assessment (2012)

- ISP I – Project Completion Report, 2011

- Training Need Assessment and Staff Training Plan,

2011

- USAID PFM Assessment Report, 2011

- OPEV Joint PFM Evalution Report, 2012

- OPEV – Bank’s Assistance to Fragile States

- PFM reform implementation reports, 2011 & 2012

- Public Expenditure Management and Financial

Accountability Assessment (PEMFAR, 2009)

- PFM Capacity Building Implementation Framework,

May 2011

- PFM Reform Operational Manual, 2011

- PFM Reform M&E Framework, 2011

- 2010 Corruption Perceptions Index

- GOR/WB/AfDB/

EC

- AfDB

- GOL/AfDB

- USAID

- AfDB

- AfDB

- GOL

- GOL/IMFWB/Af

DB

- GOL

- GOL

- GOL

- Transparency

International

AFRICAN DEVELOPMENT BANK AFRICAN DEVELOPMENT FUND

BOARDS OF DIRECTORS

Resolution N° B/LR/2012/31 - F/LR/2012/43

Adopted by the Boards of the Bank and the Fund on a lapse-of-time basis on 10 September 2012

Grant to the Republic of Liberia to assist in the financing of the Institutional Support

for the Integrated Public Financial Management Reform Project (IPFMRP)

THE BOARDS OF DIRECTORS,

HAVING REGARD to: (i) Articles 1, 2 and 32 of the Agreement establishing the African Development Bank

(the "Bank"); (ii) Articles 1, 2 and 26 of the Agreement Establishing the African Development Fund (the "Fund");

(iii) the Strategy for Enhanced Engagement in Fragile States approved by the Boards of Directors of the Bank

and the Fund on 3 March 2008, in particular the Supplemental Financing Window (SFW) of the Fragile States

Facility (FSF); (iv) Resolution B/BD/2008/05 - F/BD/2008/03 approved by the Boards of Directors of the Bank

and the Fund on 28 March 2008 establishing a Fragile States Facility; (v) the Operations Guidelines of the FSF

approved by the Boards of Directors of the Bank and the Fund on 17 July 2008; and (vi) the Appraisal Report

contained in document ADB/BD/WP/2012/102/Approval - ADF/BD/WP/2012/66/Approval (the "Appraisal

Report");

RECALLING the Document relating to the Country Strategy 2008-2011 Mid-Term Review, Portfolio

Performance Review and Request for Extension approved by the Boards of Directors of the Bank and the

Fund on 31 May 2011 confirming, inter alia, the eligibility of the Republic of Liberia to receive financing

from the SFW of the FSF;

DECIDE as follows:

1. To award to the Republic of Liberia, from the resources of the SFW of the FSF, a grant of an amount

not exceeding the equivalent of Three Million Units of Account (UA 3,000,000) to assist in the

financing of the Institutional Support for the Integrated Public Financial Management Reform Project

(IPFMRP);

2. To authorize the President to conclude with the Republic of Liberia, a Protocol of Agreement on the

terms and conditions specified in the General Conditions Applicable to Protocols of Agreement for

Grants of the Fund and in the Appraisal Report;

3. The President may cancel the Grant if the Protocol of Agreement is not signed within one hundred

and eighty (180) days from the date of approval of the Grant; and

4. This Resolution shall become effective on the date above-mentioned.

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