Document of The World Bank FOR OFFICIAL USE ONLY Report No: 83735 - LR INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 1.4 MILLION (US$2.0 MILLION EQUIVALENT) TO THE REPUBLIC OF LIBERIA FOR A PUBLIC SECTOR MODERNIZATION PROJECT January 15, 2014 Poverty Reduction and Economic Management Unit 3 Country Department AFCW 1 Africa Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information. CURRENCY EQUIVALENTS (Exchange Rate Effective December 30, 2013) Currency Unit = LD LD 80.01 = US$1 US$ 0.651 = SDR 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank AfT Agenda for Transformation AL Agency Level APA Accra Peace Accord AWP Annual Work Program BER Budget Execution Reports CBL Central Bank of Liberia CAGD Controller and Accountant General’s Department CIMP Change Implementation Management Program CISCAB Civil Service Capacity Building CoA Chart of Accounts CPIA Country Policy and Institutional Assessment CPS Country Partnership Strategy CQS Consultants’ Qualifications Selection CSA Civil Service Agency CSOs Civil Society Organizations CSRD Civil Service Reform Directorate CSRS Civil Service Reform Strategy CT Change Team DfID Department for International Development DIME Development Impact Evaluation Initiative DLI Disbursement Linked Indicators ECOWAS Economic Community of West African States EEP Eligible Expenditure Program EGIRP Economic Governance and Institutional Reform Project ESAMI Eastern and Southern Africa Management Institute E-ISR External Implementation Status Reports FM Financial Management FMO Financial Management Officer 1 FMTS Financial Management Training School FOI Freedom of Information GAC General Audit Commission GAP Government Accounting Payroll GC Governance Commission GDP Gross Domestic Product GEMAP Governance and Economic Management Assisted Program GEMS Governance and Economic Management GIMPA Ghana Institute of Public Administration GPN General Procurement Notice GWC Goods, Works, Consulting GoL Government of Liberia HR Human Resources HRMIS Human Resource Management Information System IAS International Accounting Standards ICB International Competitive Bidding ICS Individual Consultants’ Selection IEG Independent Evaluation Group (of the World Bank) IBRD International Bank for Reconstruction & Development IDA International Development Association IFMIS Integrated Financial Management Information System INTOSAI International Organization of Supreme Audit Institutions IFAC International Federation of Accountants ISA International Standards on Auditing IFR Interim Unaudited Financial Report IV Independent Verifier LCS Least Cost Selection LECBS Liberia Emergency Capacity Building Support LICUS Low-Income Countries Under Stress LIPA Liberia Institute of Public Administration M&E Monitoring and Evaluation MAC Agencies and Commissions MDTF Multi Donor Trust Fund MFR Mandates and Functional Reviews MIA Ministry of Internal Affairs MICAT Ministry of Information, Culture and Tourism MOE Ministry of Education MOF Ministry of Finance MOFA Ministry of Foreign Affairs MOHSW Ministry of Health and Social Welfare MOJ Ministry of Justice MTEF Medium Term Expenditure Framework MTPS Medium Term Pay Strategy NCB National Competitive Bidding NTGL National Transitional Government of Liberia OD Organizational Development PAN Personnel Action Notice PAO Principal Administrative Officer PC Project Coordinator PD Development Partner PDO Project Development Objective P&E Professional & Executive PEFA Public Expenditure & Financial Accountability PFM Public Financial Management PFMU Project Financial Management Unit PPCA Public Procurement & Concessions Act PPCC Public Procurement Concessions Commission PRS Poverty Reduction Strategy QBS Quality-Based Selection QCBS Quality-and Cost-based Selection RCT Recognized-Controlled-Trial REOI Request for Expressions of Interests RFTF Result Focused Transition Framework SBD Standard Bidding Document SDR Special Drawing Rights SES Senior Executive Service SIDA Swedish International Development Cooperation Agency SL System Level SMT Senior Management Team SPN Special Procurement Note SPO Senior Procurement Officer SSA Sub-Sahara Africa SSS Single Source Selection TAS Technical and Administrative Staff TOKTEN Transfer of Knowledge from Expatriate Nationals UNDB United Nations Development Business UNDP United Nations Development Program UNMIL United Nations Mission in Liberia USAID United States Agency for International Development US$ United States Dollars VERS Voluntary Early Retirement Scheme WA Withdrawal Applications Regional Vice President: Makhtar Diop Country Director: Yusupha Crookes Country Manager: Inguna Dobraja Sector Director: Marcelo Giugale Sector Manager: Mark Thomas Task Team Leader: Raymond Muhula LIBERIA Public Sector Modernization Project TABLE OF CONTENTS I. STRATEGIC CONTEXT .................................................................................................1 A. Country Context .............................................................................................................1 B. Sectoral and Institutional Context..................................................................................2 C. Higher Level Objectives to which the Project Contributes ...........................................8 II. PROJECT DEVELOPMENT OBJECTIVES ................................................................8 A. PDO................................................................................................................................8 B. Project Beneficiaries ......................................................................................................9 C. PDO Level Results Indicators ........................................................................................9 III. PROJECT DESCRIPTION ..............................................................................................9 A. Project Components .....................................................................................................12 B. Project Financing .........................................................................................................15 C. Lessons Learned and Reflected in the Project Design .................................................15 D. The Governance and Anti-Corruption (GAC) Action Plan .........................................17 IV. IMPLEMENTATION .....................................................................................................18 A. Institutional and Implementation Arrangements .........................................................18 B. Results Monitoring and Evaluation .............................................................................19 C. Sustainability................................................................................................................20 V. KEY RISKS AND MITIGATION MEASURES ..........................................................20 VI. APPRAISAL SUMMARY ..............................................................................................21 A. Economic and Financial Analysis ................................................................................21 B. Technical ......................................................................................................................25 C. Financial Management .................................................................................................25 D. Procurement .................................................................................................................26 E. Social (including Safeguards) ......................................................................................27 F. Environment (including Safeguards) ...........................................................................27 Annex 1: Results Framework and Monitoring .........................................................................28 Annex 2: Detailed Project Description .......................................................................................35 Annex 3: Implementation Arrangements ..................................................................................49 Annex 4: Operational Risk Assessment Framework (ORAF) ................................................72 Annex 5: Implementation Support Plan ....................................................................................76 Annex 6: A Political Economy Driven Implementation Approach in Liberia .......................79 Annex 7: Donor Engagement in Public Sector Reform in Liberia.........................................91 Annex 8: Selection criteria for participating ministries ..........................................................99 . PAD DATA SHEET Liberia Public Sector Modernization Project (P143064) PROJECT APPRAISAL DOCUMENT . AFRICA AFTP3 Report No.: PAD491 . Basic Information Project ID EA Category Team Leader P143064 C - Not Required Raymond Muhula Lending Instrument Fragile and/or Capacity Constraints [ ] Investment Project Financing Financial Intermediaries [ ] Series of Projects [ ] Project Implementation Start Date Project Implementation End Date 10-Feb-2014 15-Apr-2019 Expected Effectiveness Date Expected Closing Date 14-Apr-2014 30-Sep-2019 Joint IFC No Sector Manager Sector Director Country Director Regional Vice President Mark Roland Thomas Marcelo Giugale Yusupha B. Crookes Makhtar Diop . Borrower: Republic of Liberia Responsible Agency: Civil Service Agency Contact: George Werner Title: Director General Telephone 231-886-566-514 Email: wellehsanyon@hotmail.com No.: . Project Financing Data(in USD Million) [ ] Loan [ ] Grant [ ] Guarantee [X] Credit [ ] IDA Grant [ ] Other Total Project Cost: 10.71 Total Bank Financing: 2.00 Financing Gap: 0.00 . i Financing Source Amount BORROWER/RECIPIENT 0.00 International Development Association (IDA) 2.00 US Agency for International Development 5.04 (USAID) SWEDEN Swedish Intl. Dev. Cooperation 3.67 Agency (SIDA) Total 10.71 . Expected Disbursements (in USD Million) Fiscal 2014 2015 2016 2017 2018 2019 2020 Year Annual 1.30 2.00 2.50 2.50 1.50 0.80 0.11 Cumulati 1.30 3.30 5.80 8.30 9.80 10.60 10.71 ve . Proposed Development Objective(s) To improve pay and performance management in participating ministries, and strengthen payroll management in the Civil Service in Liberia. . Components Component Name Cost (USD Millions) Improved Pay Management: Objectives are: (i) facilitate 3.18 improved wage bill management; (ii) provide a clear and fair basis for accountability for results among civil servants. Strengthened Payroll Management: Objectives are (i) 3.05 establish and maintain a clean Civil Service payroll and (b) ensure predictability in the government’s wage bill. Improved Performance: Objectives are (i) support the 3.38 ministries to focus on performing their core functions, and (ii) establish performance and accountability standards among civil servants. Project and Program Coordination: Objective is: support the 1.10 coordination and delivery of project inputs and the overall program implementation. . Institutional Data Sector Board Public Sector Governance . Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) ii Major Sector Sector % Adaptation Mitigation Co-benefits % Co-benefits % Public Administration, Law, and General public 100 Justice administration sector Total 100 I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. . Themes Theme (Maximum 5 and total % must equal 100) Major theme Theme % Public sector governance Administrative and civil service reform 100 Total 100 . Compliance Policy Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? . Does the project require any waivers of Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] . Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X . Legal Covenants Name Recurrent Due Date Frequency iii Appointment of Independent Verifiers 14-Aug-2014 Description of Covenant The Recipient shall, by no later than four months after the Effective Date, appoint external monitoring and evaluation experts (“Independent Verifiers”), in accordance with Section III of this Schedule, to act as third-party verifiers of the proper fulfillment of DLIs as set forth in Annex 4 of this Agreement. Name Recurrent Due Date Frequency Assessment of performance of 30-May-2014 Participating Ministries Description of Covenant The Recipient shall cause the Independent Verifiers, no later than May 30th, 2014, and thereafter no later than one month after each subsequent calendar quarter, or such other date as agreed with the Association to carry out an assessment of the performance of Participating Ministries vis-à-vis the set reforms and performance standards and a verification of the level of fulfillment of DLIs. . Conditions Name Type Adoption of Operational Manual Effectiveness Description of Condition a. The Recipient has adopted the Operational Manual, in form and substance satisfactory to the Association, and in accordance with the provisions of Section 1.B.1. of Schedule 2 to this Agreement. Name Type Preparation of Annual Work Plan Effectiveness Description of Condition b. The Recipient has prepared the Annual Work Program for the first year of Project implementation, in form and substance satisfactory to the Association. Name Type Employment of a Procurement Specialist Effectiveness Description of Condition c. The Recipient has employed, in accordance with the provisions of Section III of Schedule 2 to this Agreement, a procurement specialist for the CSA, with qualifications acceptable to the Association. Team Composition Bank Staff Name Title Specialization Unit Kishor Uprety Senior Counsel Senior Counsel LEGAM Alexandra C. Sperling Legal Analyst Legal Analyst LEGAM Luis M. Schwarz Senior Finance Officer Senior Finance Officer CTRLA Willy McCourt Senior Public Sector Senior Public Sector EASPW Specialist Specialist Anupama Dokeniya Governance Specialist PRMPS iv Smile Kwawukume Senior Public Sector Senior Public Sector AFTP3 Specialist Specialist Gabriel Dedu Governance Specialist Governance Specialist AFTP3 Daniel Kwabena Boakye Economist Economist AFTP3 Raymond Muhula Public Sector Specialist Team Lead AFTP3 Beatrix Allah-Mensah Senior Operations Senior Social AFCW1 Officer Development Specialist Daniela Anna B. D. Senior Counsel Senior Counsel LEGAM Junqueira Jens Kromann Lead Public Sector Lead Public Sector AFTP3 Kristensen Specialist Specialist Collista Jean Harris Program Assistant Executive Assistant AFMLR Anders Jensen Senior Monitoring & Senior Monitoring & AFTDE Evaluation Specialist Evaluation Specialist Evaluation Specialist Saidu Dani Goje Financial Management Financial Management AFTMW Specialist Specialist Maxwell Bruku Dapaah Sr Financial Sr Financial HDNHE Management Specialist Management Specialist Winter M. Chinamale Senior Procurement Procurement Specialist AFTPW Specialist Non Bank Staff Name Title Office Phone City Nina Bowen Team leader, USAID Washington Marja Ruohomaki Counselor, Sida Monrovia John Ellis Program Coordinator, Monrovia USAID Karolyn Kuo Democracy and Monrovia Governance Officer, USAID . Locations Country First Location Planned Actual Comments Administrative Division v I. STRATEGIC CONTEXT A. Country Context 1. Liberia has made progress in post-war reconstruction and recovery after a decade and a half of conflict. Following the signing of the Accra Peace Accords (APA) in 2003, the National Transitional Government of Liberia (NTGL) was formed to manage the affairs of state pending the first post conflict general elections held in 2005. Supported by several donors, the NTGL focused on undertaking post conflict reconstruction based on the Results Focused Transition Framework (RFTF) beginning 2004. Strengthening governance, including efforts to address capacity shortage in the government, was among the nine key areas in the Framework. The Governance Reform Commission (later Governance Commission), one of the four commissions under the Accords, was given the responsibility of managing these reforms. While the Interim Government (2003-2005) focused on short term post crisis measures to consolidate peace and stabilize the country, the 2005 elections and the return to multi-party democracy provided the necessary conditions for long term reconstruction program under President Ellen Johnson-Sirleaf. 2. The newly elected government embarked on instituting measures to improve the overall governance and accountability environment. In 2005 donor partners and the NTGL signed the Governance and Economic Management Program (GEMAP). Its objective was to ensure better fiscal and economic governance. It formed the basis for donor engagement in economic governance over the following five years. In 2009 the Civil Service Reform Strategy was approved to address the decline of the Civil Service during the war, and as a foundation for its modernization. In 2012 the National Policy on Local Governance and Decentralization was launched to provide the foundation for improved presence of the state at the local level. 3. Immediate post conflict interventions were interrupted by declining macroeconomic conditions occasioned by the global financial crisis in 2008-2009. In 2010 the economy picked up making impressive gains in 2011 and 2012. These gains were largely the result of renewed demand for Liberia’s exports and increased foreign direct investment. Output is estimated to grow by 8.8 percent in 2012, up from 6.4 percent in 2011 and 6.1 percent in 2010, bolstered by strong exports (rubber, forestry, and iron ore), increased foreign direct investment related to concessions, and expansion of construction activities. The agriculture and services sectors were the leading growth sectors up to 2010 but with the resumption of iron ore mining in 2011, the mining sector’s contribution to GDP has almost tripled (from 4.5 percent in 2011 to 12 percent in 2012). 4. Liberia’s persistent fragility exposes these gains to potential reversal. 1 With the on- going UNMIL draw down and a fragile peace in the Mano River Union region, improved prospects of natural resource endowments and associated revenues remain matters of concern as 1 Fragile states are those with (i) homicide rates greater than 10 per 100,000 population per year; (2) major civil conflict; (3) UN or regionally mandated peace-building or peacekeeping missions; and (4) low income countries with institutional levels in 2006-2009 ( World Bank CPIA less than 3.2), correlated with high risks of violence and conflict. See: World Bank (2011) World Development Report: Overview, Washington, DC: World Bank. 1 potential conflict drivers. Additionally, the increasing youth bulge and high levels of vulnerability calls for greater attention to governance and institutional reforms to address historical inequalities. In addition to improving state effectiveness in service delivery, there is need to improve citizen satisfaction, voice and accountability. Going forward the government would have to address persistent institutional barriers by taking action to institutionalize meritocratic practices and professionalism: introduce establishment control, wage bill and payroll control, leadership development and performance management; undertake pay reform, and restructure and right size ministries and agencies. 2 These would be important first steps in ensuring that civil servants are not only held accountable for performance and service delivery, but are also properly remunerated and managed in a fair manner. 5. In 2012, the Government of Liberia (GoL) adopted its second full Poverty Reduction Strategy (PRS) -“Agenda for Transformation”- to be implemented over a five year period. Governance is one of the key pillars of the PRS, covering decentralization, public sector reform and modernization, economic governance and capacity building. 3 Under the governance pillar, priority interventions include, among others: “raising the bar for performance standards and building a robust system for managing performance and improving integrity in the public sector”. B. Sectoral and Institutional Context 6. Responsibility for managing the Liberian Civil Service is vested on the Civil Service Agency (CSA), a cabinet level entity created under the CSA Act of 1973. The agency is independent of all other ministries and agencies, and is headed by a Director General appointed by the President. According to the CSA Act the purpose of the CSA is to “increase the efficiency of the Public Service and to secure for deserving employees a responsible tenure of office and an opportunity for advancement according to merit and seniority and to place the personnel employed by government a competitive merit system”. Over the years, this purpose has largely been subverted by a combination of setbacks, prominent among them being the two decade conflict. 7. The decline of the Liberian Civil Service started in the 1980s. This was the result of political turmoil that preceded the full blown conflict that would engulf the West African nation for much of the 1990s and the first years of the 21st Century. Political interference, low wages, poor motivation, weakening capacity and loss of confidence in key institutions responsible for managing the Civil Service e.g. the Civil Service Agency (CSA) and the Liberia Institute of Public Administration (LIPA), tilted the Civil Service towards its inevitable collapse that was only accelerated, and worsened, by the onset of civil war. 8. A decade and a half of civil conflict destroyed the institutional structure of an already poorly managed Civil Service. During the conflict, many experienced and qualified 2 Kithinji Kiragu (2012). “Rebuilding the Liberian Civil Service: Consolidating the Reform Gains”, Draft Consultant’s Report, p. 22. 3 Republic of Liberia (2012) “An Agenda for Transformation: Liberia’s Medium Term Economic Growth and Development Strategy 2012-2017 (Draft Results Matrix for Governance and Public Institutions- updated May 9, 2012). 2 professional staff left because salaries fell to very low levels. The payroll on the other hand, was bloated with excessive numbers of unskilled staff added during successive years of transitional governments. 4 The upper and middle levels of technical staff disappeared, and the few qualified public officers who remained in their posts during the civil war were effectively de-skilled. Moreover, the Civil Service Agency (CSA) lost control of, and has since struggled to regain its statutory role of recruitment. It has, additionally, found it difficult to enforce compliance with personnel management policy across the Civil Service. 5 9. The task of rebuilding the post conflict Liberian Civil Service commenced immediately after the signing of the Accra Peace Accords in 2003 (Annex 7). It was formalized in 2008 with the approval of the Civil Service Reform Strategy (CSRS), 2008-2011. Initially intended for implementation over a three year period, the CSRS was no doubt unrealistic both in its ambition and design. It is therefore, unsurprising that much of what the CSRS envisaged has produced mixed results. 6 This has not been the result of overt resistance to reforms- as is the case in many fragile state contexts 7- but largely the result of a combination of factors including the low capacity, poor funding availability, poor coordination and even more fundamentally, the low starting point post conflict. These problems, to a large extent, persist, and the Civil Service Reform Strategy remains as relevant as it was five years ago. 10. Modest progress has been made in revitalizing key Civil Service management functions. A Pay Reform Strategy developed in 2010 provided the basis for grading civil servants; progress has been made in reconstructing employee records through biometric technology; a Human Resource Information Management System (HRMIS) has recently been launched to manage both the payroll and personnel records; there has been increased collaboration among key stakeholders, namely the Civil Service Agency (CSA), Governance Commission (GC) and Liberia Institute of Public Administration (LIPA), and civil servants are routinely paid better, and on time, relative to 2005 where the monthly salary was as low as US$15, and routinely unpaid. Efforts are also underway to reform Civil Service pension to be able to support retirees, some of whom remain in active service due to lack of pension benefits. 11. But many challenges still remain: The current structure of the Civil Service is plagued by a number of structural and institutional weaknesses including low pay, poor alignment between skills and functions, inadequate human resource management processes, weak payroll controls and political interference. 8 They are also exacerbated by the challenges faced by the CSA to assert itself in the execution of its constitutional mandate, low quality of its own staff, poor 4 Since the end of conflict, minimum civil service salary has been increased from about US$15 per month to US$100 per month. Teachers and doctors with Bachelor degrees get a slightly higher minimum amounts. The salary is however, supplemented by a number of allowances. 5 The Civil Service Act (1973); Article 89 of the 1986 constitution provides for the establishment of a Civil Service Commission. 6 Government of Liberia (2013). “Civil Service Reform Strategy (2008-2011): An Assessment of Implementation” Draft Consultant’s Report ( August 23, 2013). 7 See, for instance, Ben Hilman (2012). “Public Administration in Post-Conflict Countries: Lessons from Aceh, Indonesia” Public Admin. Dev. 33, 1–14 (2013). 8 In her Annual Message to the 53rd Legislature in January 2013, the President identified ‘ghost workers’ and compromised payroll as the reason for not increasing civil service salaries, promising to increase salaries with savings from ongoing work to clean the payroll. 3 remuneration, low budget and lack of essential equipment to perform its function. This has, inevitably led to the emergence of a hybrid Civil Service, with non-civil servants performing line functions in a number of ministries e.g. Ministry of Health and Social Welfare, as shown in table 1 below. Table 1: Typology of staff in Ministry of Health and Social Welfare Type of Contract No. of Staff Presidential Appointees 11 Contractual Employees 55 Civil Servants 4,105 Others 9 5,260 Total 9,431 Source: Min. of Health and Social Welfare (2013) Emerging Reform Agenda 12. The government has shown increased commitment towards Civil Service reforms starting by creating formal processes for entry into the Civil Service and standard personnel management practices. The drive to clean up the payroll, rationalize the wage bill and improve performance management has occupied the attention of the government. They are explicitly stated in the results framework of the PRS (Agenda for Transformation) launched in 2012. Additionally, the launch of the National Policy on Decentralization and Local Governance in early 2012 and ongoing efforts to implement its first phase under the rubric of the National De-concentration Strategy has also accelerated the demand for faster reorganization of the central government in preparation for decentralization. These efforts have led to the finalization of a draft Local Government Act, the reorganization of the Ministry of Planning and Economic Affairs and Ministry of Finance to create a single Ministry of Finance, and the enactment of legislation to create this new ministry, currently awaiting presidential assent. As with previous attempts, the major problem facing reform in the Liberian context is the absence of “finishing power”- the persistence and commitment to transform organizations at the de facto level. 13. Thus the fundamental problem of the Liberian public sector is both that of function and form. The structural problem is discussed above. The Liberian Poverty Reduction Strategy- “Agenda for Transformation(Aft)”- identifies the functional problem as a key constraint to public sector performance: The Aft describes the constraint thus: “Liberia still has a long way to travel along this trajectory. Several of the reform initiatives currently under implementation have neither a comprehensive framework to establish priorities and to achieve synergies and leverage their complementarities, nor planning linkages to assure that the budget as executed reflects AfT priorities, within existing resource limits […] Service delivery systems are vulnerable to corruption, recipients frequently must offer bribes to receive public services, and sanctions against such behavior are ineffective. Finally, performance 9 Employees paid through the incentive scheme either by NGOs, the Pool fund or GoL (supplementary payroll). 4 reforms and efficiency gains achieved under PRS, for the most part, have not yet been extended to state-owned enterprises and autonomous agencies that serve the Liberian public. This is particularly true with respect to public financial management.” 10 14. But, it is also encumbered by political economy setbacks. Poor alignment of the political environment and unrealistic sequencing of reforms have undermined progress. They also remain the key obstacles in the next phase of reforms and have to be tackled through a politically feasible approach that recognizes (and provides incentives for) agency level actors. Allowing for this context driven approach provides opportunities for asymmetric engagement where opportunities exist, as well as offering tangible incentives through results based financing. Lack of coordination, absence of a national consensus on appropriate strategy and implementation modalities, and weak capacity can only be realistically surmounted through selective engagement and incentive structures that rewards results. Even though there are political assurances about commitment to a national reform agenda, there is no coherent “all of government” approach to reform. Consensus among the key institutions and leaders of the Government of Liberia about the strategy and its implementation modalities is now just emerging. The Liberian reform context is complicated by the near autonomous structure of ministries and agencies: there is no reform champion with the appropriate institutional command to spearhead reforms across the entire government. Recent changes in key government agencies with responsibility for coordinating reform are, nevertheless, reassuring. 15. The timing of this project is right: The government has unveiled a new development agenda (Agenda for Transformation, 2012-2017) which places public sector modernization at the heart of its program to achieve middle income status by 2030. There are emerging leaders across several ministries that have demonstrated a strong appetite for reform and will be engaged in this project. Moreover, the president has recently appointed a new Director General of the CSA with a new charge to focus on reforms in the Civil Service. The President, in public pronouncements and in policy decisions, has demonstrated renewed urgency to tackle pay reform, organizational strengthening and de-politicization of the Civil Service. The passage of legislation (in September 2013) authorizing the merger of the Ministries of Planning and Economic Affairs and Finance, and the submission of legislation to reorganize the Executive Branch are indications of this commitment. Moreover, there is increasing attention of major development partners to the issue of public sector performance. This is demonstrated by the support of USAID, SIDA and the World Bank through a Multi-Donor Trust Fund-to support this project. It marks the first ever such initiative to support civil service reforms in post conflict Liberia. At the strategic level, political conditions and the policy environment have sufficiently improved to enable deeper engagement in second generation reforms such as pay and human resource management reform. None of these could have been realistically accomplished during the past five years or at any time in the past two decades. Ongoing Reform Activities 16. The government has undertaken a number of reform related activities as part of the implementation of the Civil Service Reform Strategy. These activities are supported by a 10 Republic of Liberia (2013). Agenda for Transformation: Steps towards Liberia Rising 2030, p. 100 5 number of development partners, including USAID through its Governance and Economic Management (GEMS) project and the World Bank through funding from the State and Peace- building Fund (SPF). The following ongoing work in public sector reform is expected to provide the basis upon which successive efforts will be based: 11 a. Pay and grading: Pay reform has been an ongoing process since the end of the conflict. The government introduced an allowance system to top up very low salaries. Additionally, several contract staff were employed under various donor funded arrangements. This is increasingly unsustainable and the government has embarked on a program to structure the remuneration system. Current efforts are aimed at collapsing the base pay and allowance (now paid in US dollars) and phase out some of the contract workers. This is expected to provide a transparent tool for assessing staff progression through the ranks as well as a basis for projecting the wage bill. It would also address the inequities in the pay system resulting from a salary top up system that gives discretionary allowances. b. Cleaning the payroll: The government has been undertaking a payroll cleaning exercise to eliminate ineligible names from the payroll. Additional efforts that compliment this exercise are also undertaken through USAID support to the Ministry of Education. Payroll cleaning has focused on rebuilding employee records, biometrically identifying civil servants and removing duplicate names from the payroll. The government estimates that since the beginning of the cleaning process, a total of 1,077 names have been removed from the payroll with a combined saving of US$ 1,814,695, per year 12. Even though challenges remain in developing a fully clean payroll, largely because of absence of strict controls, the implementation of the Human Resource Management (HRMIS) is expected to alleviate this problem. c. Mandates and functional review: A process of reviewing the mandates and functions of ministries and agencies has been completed in 14 ministries. 13 The government has prioritized nine ministries for implementation and the President has presented a bill in the legislature requesting authorization to reorganize the executive based on these reviews. The government expects to identify overlaps and redundancies in roles and functions, and the opportunities to right-size the staff establishment, and lay-off redundant workers, including “ghosts”. It would also facilitate more effective supervision and efficient utilization of staff, and evolution of a more performance-enabling organizational culture. A Bill to merge the Ministry of Finance and the Ministry of Planning and Economic Affairs was passed in September 2013. d. Decentralization: Initial steps to de-concentrate the public sector have begun with the formal launch of the Decentralization Policy in January 2012. The government has 11 For a thorough discussion of the challenges, see Annex 2. 12 Republic of Liberia (2012). Civil Service Agency: Annual Report, Monrovia: Civil Service Agency, p.3. 13 The following ministries and agencies have conducted mandates and functional reviews: Education, Justice, Health, Internal Affairs, Office of the President, Gender, Youth, Commerce, Agriculture, Public Works, National Investment Commission, Civil Service Agency, Lands, Mines and Energy, Information and Tourism, Post and Telecommunication. Bill authorizing merger the Ministry of Finance and that of Planning and Economic Affairs was passed by the Legislature in September 2013. 6 developed a 10 year strategic framework for implementing decentralization and is currently focusing on developing the Local Government Bill. A referendum is expected in 2015 to endorse the constitutional changes to authorize full devolution. In the meantime, sector ministries such as Education and Health have de-concentrated management to the local level. The Civil Service Agency is equally strengthening its regional outreach program to provide services to civil servants outside Monrovia. Rationale for Bank/IDA engagement 17. The Bank has been instrumental in Liberia’s recovery, supporting the strengthening of governance and institutional development through a number of projects. This project is thus a continuation of a long standing engagement in this sector. Key projects in this area include Economic Governance and Institutional Reform Project (EGIRP), LICUS Civil Service Reform Project and the Integrated Public Financial Management Reform Project. The Bank seeks to leverage these gains, build on the success of GEMAP, EGIRP, and the Trust funded activities and support the government’s reform agenda, including its policy to decentralize service delivery. The proposed project builds on the current SPF funded Civil Service Reform Project that closes in June 2014 and complements an IDA-financed Economic Governance and Institutional Reform Project (EGIRP) that closes in December 2014. Bank engagement in this project offers an opportunity for dialog with the government on key public sector reform issues which have important implications for the rest of the portfolio. This will add value as the various aspects of the PSM reform agenda are intrinsically linked to sector issues that Bank and other donors support. 18. Bank engagement is also informed by a sound analytical basis. This includes a review of Bank funded governance programs by the Independent Evaluation Group (IEG) of the World Bank in 2012, which called for broader engagement in public sector governance issues. 14 It is also informed by the findings of Public Expenditure Reviews. 15 Various political economy analyses by development partners active in Liberia have also influenced the design. 16 This engagement will therefore respond to the country context by: (i)strengthening systems of accountability particularly in relation to public sector employment and personnel management; (ii) continued efforts to streamline the civil service and improve its efficiency by selective redeployment, targeted training, revisions to the structure of compensation; (iii) support for modest but concrete steps toward the de-concentration of government agencies and services; and (iv) the strengthening of institutional capability to provide ongoing skills upgrading to civil servants. 14 David de. Groot, Antie Talvitie, Uktirjan Umarov (2012). Liberia: World Bank Country Level Engagement on Governance and Anti-Corruption. IEG Working Paper 2011/8, Washington DC: The World Bank. 15 For instance on fiscal space and pay issues: World Bank (2012). “Liberia: Options for Fiscal Space Enlargement”, Washington, DC: World Bank; on general progress of reforms: Kithinji Kiragu (2012). “Rebuilding the Civil Service in Liberia: Consolidating the Gains” World Bank Draft Report. 16 For instance on political economy of payroll reform issues: Chemonics (2013). “Liberia Governance Stakeholder Survey”: Monrovia (USAID). World Bank (2013): Liberia: Political Economy and Governance. Washington DC: World Bank. 7 19. The Bank’s Country Partnership Strategy (CPS), covering 2013-2017 also supports engagement in public sector governance to compliment the government’s identical PRS pillars. 17 The project objective is aligned with the CPS which aims to address some of the key constraints to growth, as well as enhance the policy and institutional framework to ensure that growth is increasingly pro-poor. The CPS is focused on three strategic themes: (i) reducing constraints to rapid, broad-based and sustained economic growth to create employment; (ii) increasing access and quality of basic social services and reducing vulnerability; and (iii) improving public sector and natural resource governance. This project aligns with the last of the three key themes and is positioned to address the crosscutting CPS objective of capacity development. C. Higher Level Objectives to which the Project Contributes 20. The current Poverty Reduction Strategy (2012-2017) identifies governance and institutional reform as a key pillar of the PRS, also known as the “Agenda for Transformation.” The Agenda for Transformation outlines four broad areas of focus within the broader emphasis on governance. These are: political governance, justice, public sector modernization and reform and economic governance. The goal of the governance pillar is “In partnership with our citizens, to create transparent, accountable and responsive public institutions that contribute to economic and social development as well as inclusive and participatory governance systems. 18 With regards to public sector modernization specifically, the government aims to create “independent, accountable, merit-based and performance oriented, well-structured public sector with improved service delivery.” Key elements in the government’s program outlined in the Civil Service Reform Strategy (2008-2011) and reiterated in the PRS include: (i) Restructuring and Right Sizing; (ii) Pay and Pension Reform; ( iii) Managing Human Resources; (iv) Developing Leadership; and (v) Gender Equity in the Civil Service. In its Annual Report (2012) the Civil Service Agency reiterated that the Civil Service Reform Strategy (2008-2011) remained the “primary instrument for guiding the reforms.” 19 II. PROJECT DEVELOPMENT OBJECTIVES A. PDO 21. The Project Development Objective (PDO) is “to improve pay and performance management in participating ministries, and strengthen payroll management in the Civil Service in Liberia”. A participating ministry is defined as a ministry selected by the government to undertake pilot reforms under this project. The following ministries (Ministry of Finance, Health and Social Welfare, Education, Internal Affairs, Foreign Affairs, Information,Culture and Tourism, Justice) have been selected. 17 World Bank (2013). Liberia: Country Partnership Strategy, FY13-FY17 ( Report No. 74618-LR), Washington, DC: World Bank ( discussed July 30, 2013). 18 Republic of Liberia (2012). “Agenda for Transformation: Steps Toward Liberia Rising , 2030” Monrovia: Ministry of Finance. 19 Republic of Liberia (2012). Civil Service Agency: Annual Report, Monrovia: Civil Service Agency, p.ii. 8 B. Project Beneficiaries 22. The project will benefit Liberian civil servants by improving transparency and predictability of salaries and human resource related issues such as career tracks, grade, recruitment and promotion. The government of Liberia will also benefit directly through improved management of the wage bill arising from a well-structured compensation regime. Additional beneficiaries include institutions such as the CSA, LIPA and the GC which will benefit from technical assistance to build their capacity to support implementation of project activities and oversight of the reform agenda proper. The broader population of Liberia will also benefit from improvements in both efficiency and accountability of a functioning Civil Service. C. PDO Level Results Indicators Table 2: PDO Level Result Indicators Type Objective Indicator Definition/description PDO Indicator 1 Improve pay P1-4 and E1-3 civil servants in Pay grades defined in management in the participating ministries paid Pay Strategy participating ministries according to approved pay grades ( Target: 90%) PDO indicator 2 Improve payroll Discrepancy between current Discrepancy defined in management in the civil payroll (salary) and Personnel terms of number of service Listing ( Target: 0%) staff (and not salaries) PDO Indicator 3 Improve performance in Participating ministries have Grade P: Professional, participating ministries instituted a system of non-Director positions, performance appraisal for P1- grades are 1-3 4 and E1-3 grade civil Grade E: Executive, servants( Target 7) Director level, grades are 1-4. Quality criteria are outlined in the Civil Service Performance Management System: A Guide to Performance Management (CSA: March 2013) PDO Indicator 4 Improve opportunities Direct project beneficiaries for participation of femal (Target: 500), of which female civil servants in decision (25 %) making positions in the civil service III. PROJECT DESCRIPTION Project Approach 23. The proposed project is an Investment Project Financing (IPF) that combines IPF characteristics with aspects of result based financing. A portion of the funds will be disbursed based on achievement of selected disbursement linked indicators (DLIs). The 9 project would be financed by a US$10.71 million funding envelope comprising IDA contribution of US$2.0 million and a Multi-Donor Trust Fund with contributions from USAID (US$5.04 million) and SIDA (US$3.67million) over a five year period. The project has four components: component 1 (approx. of 28 percent of total cost) on pay management, component 2 (approx. 27 percent of total cost) on payroll management and component 3 (approx. 31 percent of total cost) on performance. Component 4 is on project and program management (approx. 10 percent of total cost). Component allocations include cost of DLI disbursements per component which account for approximately 53 percent of total project cost. Details of allocation are contained in the Project Implementation Manual, and will be reviewed during Mid-Term Review to reflect exisiting circumstances. Both USAID and SIDA have committed to providing the funds as soon as Board clearance is obtained, and in any case, no later than December 31, 2014, and have endorsed the use of Disbursement Linked Indicators in the project. 24. This project comprises nine DLIs to be monitored during the four of the five years of the project as shown in table 2 below. There are no DLIs for the last year of the operation, i.e. year 5. 20 Table 3: Disbursement Linked Indicators by year and with targets Year Disbursement Linked Indicators (DLIs) Year 0 • Civil Service Agency has prepared and submitted for Cabinet approval a Pay Strategy by June 30, 2014 (DLI#4) Year 1 • All participating ministries have issued employment appointment letters to all their staff on personel listing by June 30, 2015 (DLI #7) Year 2 • Participating ministries have assigned at least 30 percent P1-4 and E1-3 grade level civil servants into approved pay grades by June 30, 2016 (DLI#5) • Participating ministries have assigned at least 30 percent of TAS1-3 grade civil servants into relevant pay grades by June 30, 2016 (DLI#6) • Participating ministries have completed one annual cycle of the performance appraisal process 21 for P & E grade civil servants by June 30 2016 (DLI#3) Year 3 • All P1-4 and E1-3 grade civil servants in participating ministries paid according to approved grades for at least six consecutive months (DLI#1) • None of the participating ministry has supplementary payrolls by June 30, 2017 (DLI#8) Year 4 • Discrepancy between current payroll (salary) and Personnel Listing at no more than 5 percent 22 by June 30, 2018 (DLI#2) • Participating ministries have completed three annual cycles of the performance appraisal process 23 for P & E grade civil servants by June 30, 2018 (DLI#9) 20 See table 1.2 in annex 1 for DLIs per component. 21 Completed annual cycle of the performance appraisal process includes the performance plan, progress review, employee self-assessment, pre-appraisal meeting and annual appraisal meetings; appraisal reviewed and finalized appraisal appeals process, finalization and decision made. 22 Discrepancy is mentioned in terms of number of staff (and not salary). 23 Completed annual cycle of the performance appraisal process includes the performance plan, progress review, employee self-assessment, pre-appraisal meeting and annual appraisal meetings; appraisal reviewed and finalized appraisal appeals process, finalization and decision made. 10 25. The government has identified the participating ministries as follows: Ministries of Education (MoE), Finance (MoF), Health and Social Welfare (MoSW), Internal Affairs (MIA), Justice (MoJ), Information and Tourism (MICAT), and Foreign Affairs (MoF) and any other ministries as the Recipient and the Association may agree on. Together, these ministries account for about 26,000 civil servants; nearly 75 percent of the entire civil service. The selection is based on a composite score with the following variables: (i) size of ministry and (ii) willingness to reform (see Annex 8 for full list and description). 24Each participating ministry will be rewarded financially for contributing to the achievement of the overall PDO. Each of the participating ministries under the project qualifies for US$40,000 whenever it achieves a single DLI target (Ministry Level DLI). When 100 percent of the participating ministries achieve their DLI targets (System Level DLI), a disbursement of US$ 400,000 is triggered into the consolidated fund. The funds would be spent by the Ministry of Finance based on the Eligible Expenditure Framework detailed in Annex 3. Three key institutions responsible for coordinating the reforms namely LIPA, CSA and GC will not be eligible for DLI payments but will receive technical assistance support to be able to support the reform program. Participating ministries will benefit from TA support provided by project funds. Where ministries have undertaken the desired reforms either on their own or through support of other partners (e.g. Ministry of Education or Ministry of Health and Social Welfare with which USAID GEMS project is already supporting), verification of these results and confirmation by the Strategic Oversight Team would adequately qualify them for rewards under the DLI arrangement. 26. The rationale for a results based approach is based on the need to ensure collective action among the diverse number of ministries involved in public sector reform. It also aims at rewarding those participating ministries that manage to deliver the desidered results. This approach is consistent with the focus on “mutual accountability” espoused by the ‘New Deal’. It is also informed by the political economy of the Liberian executive structure in which ministers enjoy decision making autonomy at the ministry level, and do not take directives from any other government official, except the President. The absence of a single controlling ministry at the center of government means that success of the proposed reforms depends on the implicit bargains that must be struck, a priori, with ministry level actors. The design takes advantage of the relative structural autonomy of ministries in Liberia, and introduces a results based focus and a system of rewards to promote collective action and support committed reformers. Recent evidence from a similar project in Sierra Leone suggests that results based approaches facilitate coalition building around a range of reform issues, and promote collective action among key reform actors (Srivastava and Roseth, 2013). 25 It is also consistent with the emerging evidence that asymmetrical reforms- targeting fewer ministries on a narrow range of reform issues- have 24 The will to reform criterion is set on a scoring scale of 0 to 36 points to determine rank, with 36 points being the maximum achievable points, and is derived from combining the scores of two integral activities for civil service reform: (1) the quality and timely submission of the Cabinet assignment, and (2) the timely submission of personnel listings for CSA analysis. The size of ministry is set based on the number of civil servants in a ministry. The derived total score is used to rank and select participating ministries. 25 Vivek Srivastava and Ben Roseth ( 2013). “ Engaging for Results in Civil Service Reforms: Early Lessons from a Problem Driven Engagement in Sierra Leone”, Policy Research Working Paper No. 6458. . Washington, DC; World Bank. 11 a better chance of success. 26 This approach ensures that project funds only reward ‘winners’, that demonstrate commitment (McCourt, 2003), while also enabling ministries to individually manage their own reform path based on practical and implementable options (Andrews, 2012). 27 A. Project Components 28 Component 1: Improve Pay Management 27. This component addresses two key functional problems relating to salary levels: (i) the challenge of the Civil Service to attract and retain competent managerial and professional staffs; and (ii) low levels of motivation and engagement among existing civil servants which undermines individual work effort. 28. This component aims at carrying out a program aimed at enabling the civil service to attract and retain competent managerial and professional staff and to boost motivation and engagement among civil servants, including: (i) to facilitate improved wage bill management, and (ii) provide a clear and fair basis for accountability for results among civil servants. 29. The project will support the following activities: (i) Support the ongoing mapping of civil servants into appropriate grades; (ii) conduct a comparative remuneration survey; (iii) revise HR policy manual to include pay administration and grading procedures; (iv) train CSA staff in key HR functions; (v) the development of a pay strategy; and (vi) conduct information awareness campaign. 30. The results to be achieved through this component are: (i) improved alignment of grades to jobs performed by civil servants (ii) improved fairness in the remuneration structure by eliminating discretionary allowances enjoyed by some civil servants;(iii) improved awareness of civil servants regarding salaries, allowances and benefits, specifying eligibility for any allowances which cannot be consolidated with salaries. 31. The disbursement linked indicators (DLIs) to support progress in this area are: 26 Barbara Nunberg and Robert Taliercio (2012). “ Sabotaging Civil Service Reform in Aid Dependent Countries: Are Donors to Blame?” World Development, Vol. 40,No. 10. Available on the internet at: http://dx.doi.org/10.1016/j.worlddev.2012.05.002 27 See Willy McCourt (2003). “Political Commitment to Reform: Civil Service Reform in Swaziland”, World Development Vol. 31, No. 6, pp. 1015–1031, 2003. Available on the web at: http:// http://www.sciencedirect.com/science/article/pii/S0305750X03000445# and Matt Andrews (2012) “Building State Capability through Problem Driven Iterative Adaptability”, UNU- WIDER. Available on the web at: http://www.wider.unu.edu/research/current-programme/en_GB/ReCom-PDIA/. 28 Details of activities for each component are found in Annex 2 12 • Civil Service Agency has prepared and submitted for Cabinet approval a Pay Strategy by June 30, 2014 (DLI#4) • Participating ministries have assigned at least 30 percent of P1-4 and E1-3 grade civil servants into approved pay grades by June 30, 2016 (DLI#5) • Participating ministries have assigned at least 30 percent of TAS1-3 grade civil servants into relevant pay grades by June 30, 2016 (DLI#6) • All P1-4 and E1-3 grade civil servants in participating ministries paid according to approved grades for at least six consecutive months by June 30, 2017 (DLI#1) Component 2: Strengthened Payroll Management 32. This component will address two functional problems: (i) the lack of effective payroll discipline that has facilitated entries into the payroll without due process and (ii) weak establishment control leading to escalating wage bill. 33. This component aims at carrying out a program aimed at establishing accurate civil service payroll and at ensuring predictability in the wage bill, including: (a) to establish and maintain a clean, accurate and complete Civil Service payroll and (b) to ensure predictability in the government’s wage bill through the frequent monitoring of payroll exits and entries. 34. The project will support the following activities: (i) preparation and dissemination of HR planning procedures; (ii) identification of staffing requirements; (iii) strengthening of personnel records and issuance of biometric cards; (iv) decentralization of HRMIS in at least four CSA outreach centers; (v) independent payroll and HR systems audit by General Auditing Commission; (vi) train ministry staff in payroll management functions; (vii) complete cleaning and updating of personnel files for all employees so that all civil servants will have complete electronic files. 29 35. The results to be achieved through this component are: (i) parity between the personnel listing and the payroll based on authorized positions in the budget (establishment posts); (ii) payroll integrity as a result of the strengthening of the CSA’s capacity to control and oversee payroll entries. 36. The disbursement linked indicators (DLIs) to support progress in this area are: • Discrepancy between current payroll (salary) and Personnel Listing at no more than 5 percent by June 30, 2018 (DLI#2) • Participating ministries have issued employment appointment letters to all their staff on personel listing by June 30, 2015 (DLI #7) • None of the participating ministries has a supplementary payroll by June 30, 2017 (DLI#8) 29 Complete electronic personal files include (1) PAN processed with (a) pay and grade, (b) payroll number assigned, (c) employment record form completed, (2) biometric enrollment face and finger print (3) biometric ID card printed) 13 Component 3: Improved Performance 37. This component will address one functional problem. That is, the challenge of management to hold staff accountable for their performance in ensuring service delivery. It will also address an important structural problem namely, overlapping mandates and (ii) weak management structures for the Civil Service. 38. This component aims at carrying out a program aimed at enabling selected ministries, agencies and commissions (MACs) to focus on performing their core functions and establishing performance and accountability standards among civil servants, including (i) supporting the ministries to focus on performing their core functions, and (ii) establishing performance and accountability standards among civil servants. 39. The project will support the following activities: (a) Subcomponent 3.1 (Organizational Development): (i) mapping of existing organization structures and revision of current organizational re-design model; (ii) conducting mandates, function and organization review of participating ministries; (iii) undertaking organizational diagnosis of each ministry (including staffing and skills gaps); and (iv) preparation of legislation to amend structure and functions of ministries. (b) Subcomponent 3.2 (Human Resource Management): (i) supporting the implementation of performance management in the Civil Service; (ii) supporting the implementation of a policy framework for Civil Service management in Participating Ministries; (iii) supporting training and career development; (iv) developing a policy framework for establishing a civil service commission; and (v) developing a policy framework for the appointment of principal administrative officers. 40. The results to be achieved through this component are: (i) appropriate mandates defined for each of the ministries; (ii) organizational structure aligned with that mandate; (iii) participating ministries have instituted a system for measuring the performance of their staff and (iv) gender issues are mainstreamed into the mandates and functions of participating ministries. 41. The disbursement linked indicators (DLIs) to support progress in this area are: • Participating ministries have completed three annual cycles of the performance appraisal process 30 for P & E grade civil servants by June 30, 2018 (DLI #9) • Participating ministries have completed one annual cycle of the performance appraisal process for P1-4 and E1-3 grade civil servants by June 30 2016 (DLI#3) 30 Completed annual cycle of the performance appraisal process includes the performance plan, progress review, employee self-assessment, pre-appraisal meeting and annual appraisal meetings; appraisal reviewed and finalized appraisal appeals process, finalization and decision made. 14 Component 4: Project and Program Management 42. The objective of this component is to support the coordination and delivery of project inputs and overall implementation program. In addition to general project management, the component will support monitoring and evaluations including surveys and third party verification, procurement and financial management as well as institutional capacity building of three key implementing agencies. Key activities include (i) project coordination (ii) communication and change management (iii) monitoring and evaluation; and (iv) fiduciary compliance and management. B. Project Financing 43. The total cost of this project is estimated at US$10.71 million over a five year period. This is financed by contribution as follows: IDA: US$2.0 million, USAID: US$5.04 million and SIDA: US$3.67 million. Both USAID and SIDA have committed to providing their funds as soon as Board approval for this project is obtained. These funds will be part of a Multi- Donor Trust Fund (MDTF) established for the project. Table 4: Project financing by component and source of funds IBRD or IDA Others Total Project Components Financing (US$million) (US$millions) (US$ Millions) 1.Pay Management 0.59 2.58 3.18 2.Payroll Management 0.57 2.48 3.05 3.Performance 0.63 2.75 3.38 4. Project Management 0.21 0.89 1.1 Total Costs 2.0 8.71 10.71 C. Lessons Learned and Reflected in the Project Design 44. The design of this project is guided by global lessons as well as those from Bank and donor engagement in post conflict Liberia. These lessons include : 45. Client participation in design and implementation is crucial: it is crucial that client staff is engaged in identifying project priorities and in implementation. At the design stage, they should be apprised of the efficacy of the chosen implementation modalities. To ensure meaningful staff participation, at the minimum, a project support team, however lean, should be established within the beneficiary organization(s). The preparation of this project has been thoroughly consultative where all key stakeholders have been engaged in discussions about the scope, components, and costs. There have been three preparation missions, two consultation forums, a stakeholder analysis, and numerous meetings with technical staff as well as with key policy leaders. 15 46. Interventions should target specific organization(s): In post conflict settings the tendency is to approach reform in a general way, without a sharp focus on management and performance at the organizational level. A whole sector focus tends to spread out resources, and given weak capacity, tends to produce few results. Emerging literature on public sector reforms has also pointed to “asymmetric reform” as useful approach to tackling the problem of spreading reform efforts. In this project, focus is on a few key ministries at the operational level, on the one hand, and intensive support of three agencies which are critical for managing the country’s public sector reform agenda. 47. Short and medium term interventions should be anchored in a comprehensive strategic framework: In order to ensure strategic prioritization of the interventions, and thereby maximize prospects for impact and sustainability, it is important that the short and medium term interventions are anchored in a comprehensive strategic framework. This should be supplemented by a strong leadership and prioritization- breaking the strategic priorities into short and medium term goals. Over the past few years, the reform agenda has tended to cover everything at the same time, making it difficult to quantify progress and outcomes. The design of the project has been tailored to address this problem through the development of an action plan based on milestones sequenced in order to outline specific prerequisite actions attached to disbursement. This allows for experimentation and mid-course correction. 48. Target outcomes should be ambitious but realistic: Previous projects have tended to include unrealistic results that did not seem to take into consideration the context of reform. Additionally, the interventions of the project were for comparatively short periods and often, end outcomes and impact were only discernible in a medium to long term time horizon. This project has focused on modest results-sequenced in a way that each builds on the next. Monitoring and Evaluation staff will be trained to collect data and progressively measure outcomes in the course of project implementation at both the component and project level. 49. The importance of understanding the reform context: Specifically, project design should be based on the realism about what is relevant, necessary, and second, what could be accomplished in the current setting, given the capacity and political economy constraint. Similarly, design should focus on dealing with “basics first”. 31 The design of this project has been influenced by a number of political economy analyses by SIDA, USAID and the World Bank on the overall country context as well as sector level stakeholder issues. 32 For instance one key lesson emerging from all the analyses, and which has influenced project design and content, is that the formal state apparatus (including the civil service) has been used to exploit and promote personal interest. 33 It has also benefitted from emerging lessons learned in the implementation of the ongoing public sector reform projects in Liberia. Sierra Leone, also a fragile state, that is currently implementing a results based project offers lessons that are relevant to the design of this project, especially with regards to the need to work with “the grain”, identifying, in incremental fashion, areas of reform that have a higher chance of 31 International Evaluation Group (2008). Public Sector Reform: What Works and Why? Washington DC: The World Bank. 32 Chemonics (2013) Liberia Governance Stakeholder Survey: Key Study Report Task Order 13 (Draft). 33 See for instance: SIDA Help Desk (2012). Desk Study- Political Economy Analysis of Liberia ( Draft) 16 success. 34 Finally, and more generally, the importance of tailoring project design to match the capacity of the borrower and implementing agency, i.e. “don’t outpace the client”. 35 D. The Governance and Anti-Corruption (GAC) Action Plan 50. Despite its bold initiatives in recent years to improve transparency and accountability in the public sector, Liberia continues to face significant governance and anti-corruption challenges. The 2013 Transparency International Corruption Perception Index (CPI) indicated that Liberia’s ranking deteriorated. In 2012, Liberia’s CPI ranking was 73 of 176 countries, an improvement by 16 places over 2011, but in 2013, Liberia ranked 83 of 176 countries, suggesting that outcomes of the anti-corruption reforms have been severely constrained. 51. Liberia’s specific governance challenges derived from a combination of factors. These include: limited political will, including vested interest and opposition to reforms, lack of transparency and weak accountability, resulting in ineffective control of corruption and weaknesses in public service delivery. The following GAC risks have been identified: a. Limited institutional and policy capacity. Liberia’s institutional governance and policymaking capacity is less developed. Weak capacity, inadequate coordination, and poor supervision have characterized the public policy process. The enactment of the Public Financial Management Act and implementation of initiatives to strengthen the General Auditing Commission and improve the capacity in financial management and auditing, demonstrate the Government’s commitment to removing the bottlenecks to public sector governance. However, institutional strengthening for improved accountability remains Liberia’s crucial challenge. b. Systemic corruption, state capture, and patronage. While key enabling factors exist, including functional accountability institutions, such as the Anti-Corruption Commission, the Public Procurement and Concessions Commission, and the adoption of Public Financial Management Act, and the Freedom of Information Act, corruption remains endemic in the Liberian social fabric. High levels of political patronage, limited transparency and lack of capacity and political will to enforce rules and regulations undermine the rule of law, while perpetuating systematic corruption in the country. c. Weak demand for good governance- voice and accountability. The civil society advocacy continues for transparency, accountability and participation through of emerging coalitions on an array of issues including procurement, budget transparency, and access to information. Nevertheless, demand for good governance is still hampered by weak voice at the local level, and little interaction between the citizens and frontline service providers. The GAC Action Plan 34 Vivek Srivastava and M. Larizza (2012). “Working with the Grain for Reforming the Public Service: A live Example from Sierra Leonne”, World Bank Policy Research Paper No. 6152. Washington DC: World Bank. 35 World Bank (2013). Implementation Completion Results Report (ICR). Performance Results and Accountability Project (P092898). Washington DC: the World Bank, p.36. 17 52. This GAC Action Plan is not intended to address the systemic governance and accountability problems of the Liberia’s public sector. The action plan’s purpose is to help mitigate specific governance risks to improve the prospects of achieving the project development objectives. The action plan will support processes to enhance inclusiveness and accountability. Using GAC instruments, the project will promote multi-stakeholder engagement around implementation of key project activities, with the view to improving transparency, stakeholder capacity and responsibility for greater project outcomes. The following three activities will be implemented: (a) Communication Strategy: The project will fund a communication strategy, to create awareness of key stakeholders, generate demand for accountability around implementation of reform activities from citizens and civil society organizations, and improve public and stakeholder support for the reform process. (b) Third Party Monitoring: The project will fund a third-party monitoring and evaluation of key performance indicators using a third party verification protocol. The outcomes will be reported and discussed at the Quarterly Forum and publicly disseminated, based on the approval of the Strategic Oversight Team. The scorecard will provide both periodic comparative rating and incentives for ministries’ support for key reform activities. The Disubrsement Linked Indicators have been developed through a participatory process, involving heads of participating ministries and key stakeholders, and reflecting the project development outcomes (see Annex 1). (c) Quarterly Forums: There will be implementation of Quarterly Forums, a multi-stakeholder platform for participating ministries, policy think tanks and civil society, with the media participating as observers. The forum will provide a platform for stakeholder discussion of project implementation progress, including the third-party monitoring reports. The ultimate goal is to improve accountability and responsibility of participating ministries for effective delivery of project targets. IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 53. The project will be implemented by the Civil Service Agency, a cabinet level agency the equivalent of a ministry. The Director-General of the Civil Service Agency will provide overall leadership for project implementation. The Director-General of the CSA will provide the overall strategic (and political) leadership for the implementation of this project. He will coordinate all the reform initiatives covered by this project in conjunction with the other key players such as the Liberia Institute of Public Administration and the Governance Commission. A Strategic Oversight Team (SOT) chaired by the Director-General of CSA and comprising the Director General of LIPA, the Chairman of the Governance Commission, Minister of Finance and all the heads of the participating ministries will be constituted to provide guidance and 18 strategic input to the implementation process. 36 It will meet quarterly to review progress towards achievement of Disbursement Linked Indicators and implementation progress, including on reform areas covered under the EEP. It will make quarterly reports to the President of Liberia as part of the Poverty Reduction Strategy (Agenda for Transformation) Pillar IV reporting process. The Project Coordinator will be located in the Directorate of Civil Service Reform which will be the Secretariat of the project. The Project Coordinator will manage the day-to-day aspects of project implementation and will be supported by a Procurement Specialist, M&E Specialist and other technical staff funded by project. Support to project activities at the participating ministry level will be provided by Change Teams (Internal Reform Committees) under the direction of Deputy Ministers for Administration (Details in Annex 2).Technical Assistance will be provided to participating ministries through the Civil Service Agency. B. Results Monitoring and Evaluation 54. The reform objectives in each reform area will be achieved through an inter-linked set of steps called the reform path. These reform paths will contribute to the higher level goals in the government’s Civil Service Reform Strategy and the Agenda for Transformation and to the narrower project objectives. The reform path is laid out through the PDO level results indicators and the intermediate indicators. Progress towards the achievement of the PDO will be undertaken through intermediate indicators and PDO level results indicators. The Project Results Framework is in Annex 1; the Result Chain in table 1.1 (Annex 1); summary of DLIs in tables 2 by year and in table 1.2 in Annex 2 by component, and the DLI verification protocols is found in table 1.3 in Annex 2. The project will not use a dedicated/stand-alone M&E system as it is closely aligned with the government’s program. It will use existing M&E arrangements within CSA. In addition, independent verification and validation will be undertaken through a consulting firm hired for that purpose. Results will be validated by the Strategic Oversight Team. 55. The M&E Unit of the CSA will coordinate monitoring and evaluation of project activities. Given weak technical capacity at the moment, the unit will need some additional staff and resources (through Component 4) to be fully staffed and equipped and as well as improve its procedures in M&E. A coordination plan will be drawn up which outlines timing and responsibility in reporting requirements against the indicators and milestones. It is assessed that the proposed M&E arrangements as outlined in the results framework will require capacity-building and further systems strengthening. 56. Results monitoring at the PDO level will track four indicators. There will be one indicator for each for pay management, payroll management, performance and the core indicator on direct beneficiaries. Progress towards the achievement of the PDO will be measured through intermediate indicators and PDO level results indicators. 36 This committee comprise: Director General of CSA and LIPA; 7 participating ministries and development partners. The ministries are: Finance, Justice, Education, Information, Culture and Tourism, Health and Social Welfare, Foreign Affairs and Internal Affairs. 19 C. Sustainability 57. This project is designed to ensure long term strengthening of the Liberian public sector. The design aims to reverse the short term approach that has characterized the sector in the years after the conflict. All the four components are designed to ensure that government agencies have only the required structures and staff necessary to deliver on their mandates, the payroll contains only employees who have been ascertained as eligible civil servants and that movement between and within grades is transparent and based on a clear structure. 58. In order to ensure sustainability and enhance knowledge transfer, civil servants will be incorporated into project implementation activities. While it will be necessary in the short to medium term to employ short term consultants, the project management will be designed in such a way as to ensure ‘on the job learning’ rather than traditional out of site training. Technical Assistance consultants will be matched with civil servants for knowledge transfer and their Terms of Reference and contracts designed to facilitate knowledge transfer. This will ensure that consultants deliver relevant training to staff and coach them within the environment of their duties. 59. Components on pay management and organizational development have been designed to facilitate implementation. The government would have a clear lead time for implementation to reduce the possibility of unplanned shocks to the wage bill. The project will support the development of a new pay structure whose implementation is expected to rationalize the civil servant’s salaries, merge allowances with pay, and ensure predictability of the wage bill. Similarly, the project will support the strengthening of payroll controls to ensure that only legitimate employees are included in the payroll, and that retirement administration is strengthened. In this sense, the project will help reduce the government’s recurrent cost and ensure sustainability of a professionally managed Civil Service. V. KEY RISKS AND MITIGATION MEASURES 60. The design of this project has been chosen to focus on a result orientation as one way of dealing with the associated implementation risks. However, in spite of the proposed mitigation measures, the following risks will remain critical during implementation, and may undermine results: (i) poor alignment of political environment and sequencing of reforms could potentially derail the reform momentum. Both the Civil Service Reform Strategy (CSRS) and the AfT (2012-2017) envisage a comprehensive approach to reform; ii) absence of a national consensus on strategy and implementation modalities has complicated previous efforts at reforms and remains a significant risk; (iii) Low implementation capacity remains a major constraint to achieving reform objectives in the Civil Service; (iv) Resistance by powerful constituencies is likely to slow down some aspects of reform; and (v) Asymmetric activities to improve pay management might set precedents that would end up affecting similar reforms downstream. 61. A number of risk mitigation measures have been identified to address the risks above including: (i) enhancing incentives through disbursement linked indicators in order to improve 20 opportunities for collective action. DLI have been decentralized to ministry level to ensure broader participation of key stakeholders involved in the reform; (ii) incporating strategic communication and stakeholder engagement during preparation and implementation to provide opportunities for detailed consultations and concensus building; (iii) increased enagement with the Office of the President for political support of reforms by aligning progress reporting with the quarterly reporting requirements for Pillar 4 (Governance and Public Institutions) of the Poverty Reduction Strategy; and (iv) enhance implementation support by Bank team through frequent supervision and rereporting. 62. In spite of these mitigation measures, the overall risk to implementation is assessed to be “High”. A summary table of the risk is provided below, while a detailed description can be found in the ORAF (Annex 4). RISK RATINGS SUMMARY TABLE Table 9: Project Risk Ratings Risk Category Rating Stakeholder Risk High Implementing Agency Risk - Capacity High - Governance Substantial Project Risk - Design High - Social and Environmental Low - Program and Donor Substantial - Delivery Monitoring and Sustainability Substantial Overall Implementation Risk High VI. APPRAISAL SUMMARY A. Economic and Financial Analysis 63. The effectiveness and efficiency of a country’s public sector is vital to the success of the national development agenda. The size, composition and compensation for civil service employees, which represent the core of public administration, need to be aligned with government’s development objectives in order to ensure efficient services delivery. In this respect, pay policies need to be fiscally responsible but also attractive enough to draw the best talent into the civil service. The Liberia Civil Service pay reform agenda focuses on achieving two main objectives: (i) rightsizing the public sector and (ii) providing rewarding – but 21 affordable – remuneration to civil servants. This section seeks to analyze the cost and benefits of undertaking such reforms in Liberia. 64. Providing rewarding remuneration to civil servants may result in increased wage bill and may in turn have a negative effect on the fiscal space needed to support public investment. Once a wage bill is approved it becomes a quasi– non-discretionary expenditure. It is therefore important to weigh the trade-offs between paying fair wages-compared to market- based compensation- and government’s ability to sustain such wage increases. The cost of wages may also rise as a result of harmonization of wages among workers of the same job classification. The benefits of such reforms however, are: (i) the government will be able to attract the right caliber of personnel and thereby enhance the delivery capacity of the civil service; (ii) Civil Service may be more loyal and committed to the achievement institutional goals due to improved transparency and predictability of compensation package and thereby improve service delivery;and (iii) career progression in the civil service will promote long tenure and thereby produce experienced and capable civil servants who will help implement the country’s development program. 65. The focus of this project is not on severance, but on supporting efforts to: (i) clean the payroll so that government pays only legitimate civil servants and (ii) ensuring that civil servants grades are mapped according to the functions they perform. Since such an exercise might result in an increase in salaries for some civil servants, this section attempts to present a rough costing of harmonizing the grades of professional and executive civil servants of approximately 4000 civil servants in participating ministries. The mapping of the rest of the civil service will continue under a USAID project, after which a costing exercise for the rest of the civil service will be conducted to determine the potential impact on the wage bill. 66. The actual cost-benefit analysis would be based on the Liberia payroll data and the use of Civil Service Pay and Employment Model. The various reform scenarios will be calibrated to ascertain the economic impact of improving civil service pay management. The rest of this section reviews the economic impact of civil service payroll reforms based on; (i) macro-fiscal perspectives, (ii) microeconomic perspectives and the (iii) cost effectiveness of the reforms. Macro-fiscal Perspective 67. The level of Liberia’s public sector wages and salaries is considered high compared to the average for ECOWAS countries (PER, 2013) 37. In 2011, public sector wages as a share of total expenditure was 37 percent compared to the average 27 percent for the sub region. GoL’s policy objective is to cap the share of wages and salaries at 34 percent of total expenditure for the period FY13-FY16. However this objective may not be achievable without 37 World Bank ( 2013). Public Expenditure Review: Options for Fiscal Space Enlargement, Washington, DC: World Bank. 22 structural reforms in pay and payroll management; FY13 budget is already showing a rise to 40 percent of total expenditure. 38 68. Based on the recent historical performance 39, the share of payroll to total expenditure is likely to increase from 40 percent in FY13 to 53 percent by FY16. The opportunity cost of a relatively high wage bill is the forgone investment spending in infrastructure or human capacity development that could have boosted the implementation of the Agenda for Transformation (AfT). The economic benefit of pay reforms is therefore measured foremost by the fiscal space created to boost investment spending as a result of the improved management of civil service and tighter control of the payroll. This represents a savings of US$202 million over the period of (FY14-16). Since civil services wages form about 75 percent of public sector wages, structural reforms in civil service wages will help contribute to this gain. In particular since the education sector contributes about 50 percent of total civil service wages, ongoing efforts to clean the education payroll will impact significantly on the targeted savings of US$ 206 million. It is however important to assess the implication of the payroll reforms at the micro level. Micro Perspectives 69. At the micro level, the project envisages contributing toward minimizing the trade – off between achieving macro-economic targets and negative impact it could have on development objectives. It therefore focuses on the right sizing of the civil service and identifying the appropriate compensation for the appropriate skills-mix needed to implement GoL’s development agenda. Measures to be taken to right size the civil service are: (i) Clean the payroll system (ii) Provide a package for those who have tenure beyond 25 years or have reached retirement age, to proceed on retirement; (iii) Map the job categories to appropriate salary grades so as to provide predictable transparent compensation for workers in the civil service, (iv) Provide severance package for staff who would want to go on voluntary retirement and (v) Redeploy staff to sectors where they would be most needed, such as the security sector and county level administration. The next section provides a preliminary assessment of cost effectiveness of the different options above (subject to the improvement in the quality of payroll data). 70. The pay reform component of the project will focus on (iii) above; mapping of job categories to appropriate salary grades for the professional and executive job grades, in seven selected Ministries 40. The project is expected to complement Government’s own HR reform agenda which covers; (i), (ii), (iv) and (v). Thus even though, policy action (ii) is expected to result in an increase in cost to the wage bill, this is expected to be offset by the 38 Fiscal rules established in FY 2012/13 call for wages and salaries of no more than 34 percent of total budgeted expenditure (IMF Country Report No. 12/340, Appendix III, Annex I). Wages and salaries amount to 40 percent of total spending in the draft FY 13/14 budget. 39 The is based on growth in wages and salaries by 4 percentage points annually consistent with from FY13 onwards. 40 These seven Ministries comprise; Ministries of Finance, Information, Internal Affairs, Education, Health, Justice and Foreign Affairs. 23 savings made from the pursuit of government’s HR reforms.The next section provides a preliminary assessment of cost effectiveness of the different options above (subject to the improvement in the quality of payroll data). Cost-effectiveness of Payroll Reforms (i) Efforts at cleaning the payroll comprise conducting a physical count of Civil Service Agency (CSA) employees, introducing a biometric identification program and linking the CSA payroll database to the Integrated Financial Management Information System (IFMIS). Anecdotal evidence suggests that such reforms are likely to results in significant savings for the government. Cleaning the payroll would bring order to the civil service, save the government money and facilitate pay and pension reforms 41. (ii) Payroll data shows that about 488 out 848 employees of Civil Service who are have tenure of 25 years or more belong to the selected Ministries. These employees are eligible for retirement. Based on the official retirement benefits package, if these employees are assisted to proceed to retirement, it will save the Government about US$300,000. In addition, 108 out 133 employees who have reached retirement age of 65 years or more but less than 25 years of tenure are eligible for retirement are from the selected Ministries. If this category of employees is assisted to go on retirement, savings accrued to the selected Ministries would be US$268,000. (iii) Mapping of job grades to appropriate salary grades, across sectors will enable Government to hire the right caliber of skills for civil services. An estimated cost of reforms based on available payroll database, indicates that the mapping exercise will result in an increase in the wage bill by about $320,000 (see table below). Table 10: Cost of Mapping Exercise for the Professionals and Executives Sum of Sum of Adjusted ANNUAL_GROSS_SA Proposed Salary Difference in Wage LARY plus plus Allowances Bill due to Pay MINISTRIES Allowances (US$) (US$) Reforms (US$) MINISTRY OF EDUCATION 1,587,777.08 1,604,233.58 16,456.50 MINISTRY OF FINANCE 2,839,014.23 2,938,687.35 99,673.13 MINISTRY OF FOREIGN AFFAIRS 365,331.60 375,805.05 10,473.45 MINISTRY OF HEALTH & SOCIAL W 692,415.00 712,610.40 20,195.40 MINISTRY OF INFORMATION, CU 205,403.18 215,624.10 10,220.93 MINISTRY OF INTERNAL AFFAIRS 1,986,037.20 2,097,123.75 111,086.55 MINISTRY OF JUSTICE 3,831,586.65 3,883,402.13 51,815.47 Grand Total 11,507,564.93 11,827,486.35 319,921.43 This increase in cost could be offset by the other components of governments of the HR reforms, assumption government does not recruit directly to replace those who voluntarily retire from the Civil Service. 41 Jonathan Friedman, Cleaning the Civil Service payroll ; Post-Conflict Liberia , 2008-2011, p.9. 24 (iv) Staff redeployment to other sectors where they are mostly needed could strengthen the civil services’ capacity to deliver the government development agenda without necessarily raising the payroll size. This will however depend on the extent to which staff are trainable and can adapt to different working situations. A functional review of the civil services will help determine the extent to which redeployment could be carried out. Conclusion 71. Given the potential benefits of the different options for pay reforms above, it can be concluded that the economic benefits of the payroll reforms outweigh the cost and therefore it is worth supporting the Government of Liberia to undertake these reforms. B. Technical 72. The project is technically viable and sound. It combines the Government of Liberia and the Civil Service Agency priorities and ownership with sound technical analysis and international experience. It builds on the achievements in the implementation of various public sector reform initiatives to date in Liberia. The technical merits of the project design have been examined by World Bank Staff over the course of project preparation and are considered sound and in line with international standards. The design has been developed by the CSA based on the government's PRS - the Agenda for Transformation (2012- 2017). It is also based on analytical work undertaken over the past three years. These include a review of Bank funded governance programs by IEG in 2012, Joint UNDP/WB State Building Initiative in Liberia and Sierra Leone, the New Deal for Engagement in Fragile States and the mandates and functional reviews of ministries and agencies conducted by the Governance Commission. In addition, it incorporates a number of lessons from World Bank experience around the world in governance and public sector management. C. Financial Management 73. The project will open a US$ denominated designated account (DA) at a commercial Bank approved by the Bank. Funds from IDA and MDTF will be deposited into this account for project execution. The processing of eligible expenditure payments will be managed by the authorized signatories of the project and supporting documents transferred to Project Financial Management Unit (PFMU) for payment. The project will use report-based disbursements through the use of quarterly Interim Unaudited Financial Report (IFR) on the sources and uses of project funds. A forecast of the first 6 months expenditures will form the basis for the initial withdrawal of funds. Subsequent withdrawals will equally be based on the net cash requirements for subsequent 6 months. Withdrawal applications shall be submitted to the Bank quarterly. The project will follow a cash basis of accounting and financial reporting and will submit, within 45 days of each GoL calendar semester, bi-annual IFR of the project activities. At a minimum, the constituents of the IFRs will be: (a) Actual and Forecast Cash Flow Statement according to Components, Sub-components and Activities; (b) Summary Statement of Expenditures according to Categories; and (c) Designated Account Reconciliation StatementThe annual audited financial statements of the project shall be submitted to IDA within 6 months of the end of the GoL’s fiscal year (i.e. to be submitted on or before December 31 each year). In addition, a quarterly review of Eligble Expenditure Program (EEPs) will be 25 carried out. The General Auditing Commission(GAC) will provide external auditing services for the project using the International Organization for Supreme Audit Institutions (INTOSAI) guidelines.The audited financial statements of the project will be submitted to IDA within 6 months of the end of each GoL fiscal year. A detailed description of the Financial Management (FM) Assessment is included in Annex 3. D. Procurement 74. Procurement under the Project will involve Goods, Consultancy, and Non-Consulting Services (minor works) and will be carried out in accordance with the World Bank’s: (i) “Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrower” dated January, 2011 (Procurement Guidelines): and (ii) Guidelines; selection and employment of Consultants by World Bank Borrowers” dated, January 2011 and (iii) “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants” dated October 15, 2006 and updated in January 2011; and the provisions stipulated in the Legal Agreements. 75. The Civil Service Reform Directorate (CSRD) will be responsible for coordination of the implementation of the Project. The CSRD currently relies on the Procurement Unit (PU) of the CSA to handle all administrative aspects of the procurement process. An assessment of procurement risks was carried out in May 2013 for CSA. CSA is a procurement entity like other ministries and agencies in Liberia and, therefore, has an established Procurement Unit and a Procurement Committee in response to the Public Procurement and Concessions Act (PPCA), amended and restated in September 2010. With respect to the PPCA, the Procurement Unit is currently not headed by a director of procurement as the Act requires. However there is a Senior Procurement Officer (SPO), heading the Procurement Unit, supported by a Supply/Stores Officer and a newly placed graduate from the Intensive Procurement Training Program. The SPO has some experience with procurement using the Liberia PPCA but none of the staff have experience with procurement using World Bank Procedures. 76. In line with the PPCA requirements, the unit also prepares procurement plans using a template provided by the Public Procurement and Concessions Commission (PPCC). The procurement management system being put in place will follow a clear and defined cycle of procurement planning, preparation of bidding documents, management of bidding process from advertisement to bid opening, bid evaluation, contract award, and preparation and signing of contract as part of the procurement cycle. There are notable challenges in the preparation of bidding documents and evaluation reports. However, the Procurement Unit has been procuring goods and minor works, through shopping and NCB under the National Budget. The unit has not been involved in the selection processes for the hiring of consultants; neither has it been involved in contract management and administration. Record keeping at the time of the review was also found to be unsatisfactory. As a result, risk for procurement is considered “High”. 77. However, there is a need to mitigate the risks associated with this limited capacity. The international procurement specialist currently working for Education Fast-track Initiative Project will assist with the initial procurement processes until a substantive international procurement specialist, to be financed under the Project, is recruited. Additionally, the newly placed graduate from the Procurement School will be supported by the project to gain additional 26 technical knowledge on procurement through scheduled training to empower him to widen his knowledge base in procurement of goods, works and consultancy services (GWC). His has completed the first such courses during Bank funded training at the Ghana Institute of Public Administration (GIMPA). Following this, the other two procurement officers should also attend the relevant courses in GWC, alternating in turn in order not to disrupt CSA plans. In view of these proposed mitigation measures, the residual risk is ‘Moderate’. E. Social (including Safeguards) 78. The Project is not expected to have any social impacts, and thus the Bank’s social safeguards are not triggered. However, the project will incorporate elements of social accountability to (i) hold participating ministries accountable in delivering on agreed program in exchange for disbursement of resources with third party verification, and (ii) support the strengthening of access to information in participating ministries both about the program and about other functions. 79. A third party verification consultant will be recruited to verify achievement of targets outlined in the verification protocol. The verification team will periodically (potentially twice a year, to align with a project ISR) assess the performance of the ministries vis a vis the reforms and performance standards set in place through extensive interviews and review of performance data. The feedback and assessment of the verification team will be integrated through the E-ISR process, and fed into recalibrating further implementation efforts, including necessary mid- course corrections and project enhancements to improve results. 80. Efforts will be made to ensure that information is available to the monitoring team, in accordance with project guidelines, as well as the country’s Freedom of Information Act. Since the availability of information is so crucial for such efforts to succeed, and since Liberia has a strong foundation for transparency through the FOI law, the project will include an assessment of the strengths and weaknesses of the targeted ministries in implementing the FOI law, and providing information access more broadly. The law provides for the proactive disclosure of information in several areas, and mandates disclosure of all categories of information, not in the list of exemptions to be made available upon request. Based on the assessment, possible activities to support an information-sharing culture in the ministries will be considered, such as training and awareness-raising efforts for public officials to strengthen their understanding of their obligations under the law and setting up a monitoring mechanism for periodic collection of data on the implementation of the law, including data on proactive disclosure, requests and responsiveness, and various implementation measures being taken by the line ministries. F. Environment (including Safeguards) 81. The Project is not expected to have any environmental impacts, as thus the Bank’s environmental safeguard policies are not triggered. 27 Annex 1: Results Framework and Monitoring COUNTRY: LIBERIA Public Sector Modernization Project (P143064) Project Development Objective (PDO): To improve pay and performance management in participating ministries, and strengthen payroll management in the Civil Service in Liberia. Target Values Responsibilit Description (indicator CORE Frequenc Data Source/ definition etc.) PDO Level Results Indicators* UoM Baseline YR1 YR4 YR5 y for Data YR0 42 YR2 44 YR3 45 y Methodology 43 46 47 Collection Indicator One: P1-4 and E1-3 grade % 25 25 40 60 70 80 90 Monthly Analysis and CSA M&E DLI#1 - year 3 with target 70% civil servants in participating verification of Unit ministries paid according to approved payment to civil grades servants according to their grade based on the CSA payroll and the job evaluation Indicator Two: Discrepancy between % 25 25 20 15 10 5 0 Monthly Verification of CSA M&E DLI#2 – year 4 with target 5 % current payroll (salary) and Personnel discrepancy through Unit Listing comparison of CSA Discrepancy is mentioned in payroll against terms of number of staff (and not Personnel Listing salary). Indicator Three: Participating Number 0 0 7 7 7 7 7 Annual Verification of a Third party and DLI#3 &9 – years 2 &4 with ministries have instituted a system of sample of GAC target 7 performance appraisal for P1-4 and performance E1-3 grade civil servants( number) appraisal form Quality criteria are outlined in against quality the Civil Service Performance criteria and account Management System: A Guide to and summary of Performance Management (CSA: ratings March 2013) Indicator Four: Direct Project Number (%) 0 0 100 200 300 400 500 Annual Project records of CSA M&E beneficiaries, (of which female) training Unit INTERMEDIATE RESULTS Intermediate Result (Component One): Improved Pay management Intermediate Result indicator One: Yes/No No Yes Annual Verification that the CSA M&E DLI# 4- year 0 with target Yes Civil Service Agency has prepared revised strategy has Unit and submitted a Pay Strategy for been submitted to Cabinet approval. Cabinet by Submission 42 Period before 1 July 2014 43 1 July 2014 – 30 June 2015 44 1 July 2015 – 30 June 2016 45 1 July 2016 – 30 June 2017 46 1 July 2017- 30 June 2018 47 1 July 2018 – 30 June 2019 28 Letter sent by CSA Director-General Intermediate Result indicator Yes/No No No Yes Annual Evaluation of survey CSA M&E Two: Remuneration survey report against TOR Unit completed Intermediate Result indicator Three: % 0 0 20 30 40 60 80 Annual Verification that civil CSA M&E DLI#5 - year 2 with target 30% P1-4 and E1-3 grade civil servants in servants in P and E Unit participating ministries assigned into grades have been approved pay grades assigned to new grades as documented in PANs and compared to Personnel Listing Intermediate Result indicator Four: % 0 0 20 30 40 60 80 Annual Verification that civil CSA M&E DLI#6 - year 2 with target 30% TAS1-3 civil servants in participating servants in TAS grades Unit ministries assigned into approved pay have been assigned to grades new grades as documented in PANs and compared to Personnel Listing Intermediate Result indicator Five: % 0 20 20 40 60 80 90 Annual Analysis of results from CAS M&E Civil servants aware of pay reforms survey on awareness Unit led by CSA and implications Intermediate Result (Component Two):Strengthened Payroll management Yes/No No No No Yes Annual Analysis of HR Policy CSA M&E and Manual and HRMIS Unit Manual Intermediate Result indicator One Number 22 22 25 27 29 29 29 Annual Analysis of HRMIS on- CSA M&E Ministries with establishment demand report Unit posts defined and updated in HRMIS Intermediate Result indicator Two: Number 0 0 7 7 7 7 7 Annual Verification by third Third party DLI#7 - year 1 with target 100% Participating ministries have issued party of samples of employment appointment letters to civil servants electronic all staff on personel listing personnel files and biometric ID cards Intermediate Result indicator % 20 30 50 80 100 100 100 Annual Analysis of HRMIS on- CSA M&E Three: Civil servants with demand report on civil Unit biometric ID cards servants’ biometric ID cards Intermediate Result indicator Yes/No No No No Yes Yes Yes Yes Annual Analysis of audit report CSA M&E Four: Manual and automated HR against TOR for the Unit and payroll systems in CSA assignment audited by GAC Intermediate Result indicator Five: Number 2 2 1 1 0 0 0 Annual Verification by custom CSA M&E DLI#8 - year 3 with target 0 Participating ministries with report from IFMIS Unit supplementary payrolls Intermediate Result (Component Three): Improved Performance Intermediate Result indicator One: Number 0 0 2 4 6 7 7 Participating ministries with completed functional reviews Intermediate Result indicator Two: Yes/No No No No No Yes Annual Analysis of report of CSA M&E Staffing skills in participating skills audit against TOR Unit ministries assessed by individual for the audit ministries and CSA 29 Intermediate Result indicator Three : Yes/No No No No Yes Annual Analysis of report CSA M&E Policy framework for selection, against TOR for the Unit appointment, promotion and skills, selection, retirement completed and approved appointment, promotion by Cabinet and retirement policy framework development Intermediate Result indicator Four: Number 0 0 100 200 300 400 500 Annual Project records on CSA M&E Person trained - disaggregated by % training Unit females and number of participants in - % female 25 25 25 25 25 Female Leadership Training Program - number 15 30 50 70 90 Female Leadership Intermediate Result indicator Five: Number 0 0 0 0 0 7 Annual Verification of the CSA M&E DLI#9-year 4 with target 7 Participating ministries have number of P and E Unit completed three annual cycles of the grade civil servants in performance appraisal process for P1- 7 participating ministry 4 and E1-3 civil servants that have completed the performance appraisal against Personnel Listing and CSA payroll . 30 Table 1.1: Public Sector Modernization Project: Result Chain Activities Outputs Short-term outcomes Intermediate outcomes AFT Indicators Component 1: Improve management of pay and compensation ( pay management) Support the the mapping of P1-4 Grade and job functions of P and E grade Quantitative data drive Civil servants in P and E Civil service pay scale and E1-3 grade civil servants in civil servants matched proposed changes grades paid according to has been rationalized and participating ministries into approved pay structure(s) is published. appropriate grades Conduct comparative remuneration Survey report on salaries in the Liberian Remuneration survey survey labor market produced completed; informs civil service salary decisions Support the the mapping of TAS1-3 Updated (and completed) listing of civil Ministries with civil grade civil servants in participating servants in HRMIS servants assigned to ministries into appropriate grades relevant grades (all grade levels) Conduct information awareness Communication Strategy; Communication Civil servants aware of campaign material developed pay reforms led by CSA and implications Component 2: Improved payroll management Develop personnel planning Personnel planning tools/ manual developed HR planning, Discrepancy between procedures establishment control and current payroll (salary) personnel transactions and personnel listing procedures developed Train ministry staff in payroll Staff trained in payroll management Staff in professional management functions grades in participating ministries attending project sponsored training (by gender) Allocate establishment posts for Establishment Register covering all posts in Discrepancy between each ministry in HRMIS for the civil service published for ministries and establishment posts in ministries and agencies agencies annual budget and payroll (%) Complete cleaning and updating of HRMIS listing of accurate personnel data for MACs with accurate and personnel files for all employees all MACs comprehensive electronic (complete biometric data; personnel files for all qualifications; location and “one employees (number) employee; one file”) Produce biometric ID cards for all Identity cards issued to all civil servants civil servants with civil servants biometric identity cards (percent) Issue Letters of Employment Conduct auditing of manual and Report of third party auditor Manual and automated HR automated HR systems systems audited by third party (yes/no) 31 Component 3: Improved Performance 3.1: Organizational Development Conduct functional review for Revised organizational structures for Participating MACs All ministries, public selected ministries and agencies participating ministries whose functional review is agencies and SOEs will completed (number) have published their Revised vision and mission statement strategies and reflecting relevant gender equality issues Participating ministries organizational charts and whose mission and vision adopted measurable and statements reflect gender transparent indicators of equality issues. operational performance Undertake organizational diagnosis Restructuring plan developed for Participating for each ministry (including staffing participating ministries ministrieswith and skills) restructuring plans (number) Prepare legislative bill to amend Implement restructuring in participating Participating MACs structure and function of MAC whose common functions are organized according to agreed standards (number) Strengthen management of (i) Legislation establishing (i) No. of ministries with participating ministries Principal Administrative Principal Administrative Officers developed Officers (ii) Civil Service (ii) Legislation establishing Civil Commission established Service Commission developed 3.2: Human Resource Management Training and Career Development Policy for aligning training to strategic Ministrystaff in skills and employee training needs professional grades in updated and validated project supported training programs (%) Support the implementation of the (i) Personnel performance Participating performance management system assessment policies and ministries/agencies with practices in place measurable and (ii) Results-oriented Performance transparent indicators of Evaluation System developed. operational performance (number) • Skill gaps analysis conducted and • HR management staff Build capacity of CSA and training plan developed. with professional participating ministries for HR • Mainstream of gender sensitive qualifications (number) management (where GEMS is not policies in the policy document of • Gender policy active) participating ministries undertaken influencing recruitment and promotions decision 32 Table 1.2: Disbursement Linked Indicators by component with targets Component Disbursement Linked Indicator 1 Pay management • Civil Service Agency has prepared and submitted for Cabinet approval a Pay Strategy by June 30, 2014 (DLI#4) • Participating ministries have assigned at least 30 percent of P1-4 and E1-3 grade civil servants into approved pay grades by June 30, 2016 (DLI#5) • Participating ministries have assigned at least 30 percent of TAS1-3 grade civil servants into relevant pay grades by June 30, 2016 (DLI#6) • P1-4 and E1-3 grade civil servants in participating ministries paid according to approved grades for at least six consecutive months (DLI#1) 2 Payroll • Discrepancy between current payroll (salary) and Personnel Listing at no more than 5 management percent by June 30, 2018 (DLI#2) • All participating ministries have issued employment appointment letters to all their staff on personel listing by June 30, 2015 (DLI #7) • None of the participating ministries has supplementary payrolls by June 30, 2017 (DLI#8) 3 Performance • Participating ministries have completed one annual cycles of the performance appraisal process 48 for P & E grade civil servants by June 30, 2016 (DLI#3)(DLI #3) • Participating ministries have completed three annual cycles of the performance appraisal process 49 for P & E grade civil servants by June 30, 2018 (DLI#9) Table 1.3: Verification Protocols for Disbursement Linked Indicators DLI DLIs Outcome area Draft Protocol to Evaluate Compliance of the DLI and Data/Result Year (and # Verification target for that Data source Procedures year) #1 P1-4 and E1-3 civil servants Pay management • CSA payroll (monthly payment Monthly analysis and verification by CSA DLI year 3 in participating ministries PDO indicator one and grade) M&E Unit of payment to civil servants (100%) paid according to approved • Job evaluation and approved pay based on their grade based on the CSA grades (%) grades payroll and the job evaluation #2 Discrepancy between Payroll • CSA payroll Monthly verification by CSA M&E DLI for year 4 current payroll (salary) and management • CSA approved Personnel Listing function of discrepancy through (5%) Personnel Listing (%) PDO indicator two comparison of CSA payroll against Personnel Listing 48 Completed annual cycle of the performance appraisal process includes the performance plan, progress review, employee self-assessment, pre-appraisal meeting and annual appraisal meetings; appraisal reviewed and finalized appraisal appeals process, finalization and decision made. 49 Completed annual cycle of the performance appraisal process includes the performance plan, progress review, employee self-assessment, pre-appraisal meeting and annual appraisal meetings; appraisal reviewed and finalized appraisal appeals process, finalization and decision made. 33 #3 Participating ministries Performance • Third party audit and GAC audit Verification by third party of a sample of DLI year 2(7) have completed one annual PDO Indicator of completed performance performance appraisal forms against the cycle of the performance Three appraisals for quality against criteria outlined in the Civil Service appraisal process 50 for P & established quality criteria and Performance Management System: A E grade civil servants by account of ratings in quality- Guide to Performance Management June 30, 2016 ensured appraisal forms (CSA: March 2013) and account and summary of ratings #4 Civil Service Agency has Pay management • Submission Letter of Pay Verification by CSA M&E Unit that the DLI year 0 prepared and submitted a Intermediate Strategy by CSA Director- revised strategy has been submitted to (Yes) Pay Strategy for Cabinet Results indicator General to Cabinet Cabinet by Submission Letter sent by approval (Yes/No) CSA Director-General #5 P1-4 and E1-3 grade civil Pay management • PAN for civil servants in P and E Verification by CSA M&E function that DLI year 2 servants in participating Intermediate Result grades civil servants in P and E grades have been (30%) ministries assigned into indicator assigned to new grades as documented in • Personnel Listing approved pay grades (%) PANs and compared to Personnel Listing #6 TAS1-3 civil servants in Pay management • PAN for civil servants in TAS 1 - Verification by CSA M&E function that DLI year 2 participating ministries Intermediate Result 3 grades civil servants in TAS 1 -3 grades have (30%) assigned into approved pay indicator • CSA approved Personnel Listing been assigned to new grades documented grades (%) in PANs through analysis of CSA Personnel Listing, Appointment Letters and grade and CSA payroll against PANs #7 All participating ministries Payroll • HRMIS on-demand report Verification by third party of samples of DLI year 1 have issued employment Management • Personel Action Notice (PANs) personel files with employment letters (100%) appointment letters to all Intermediate Result their staff on personel indicator listing by June 30, 2015 #8 Participating ministries Payroll • Custom report on supplementary Verification by CSA M&E function by DLI year 3 (0) with supplementary management payroll run from IFMIS custom report from IFMIS payrolls (number) Intermediate Result indicator #9 Participating ministries Performance • Annual performance appraisal Verification by CSA M&E function of DLI year 4(7) have completed three Intermediate Result forms for P and E grade civil the number of P and E grade civil annual cycles of the Indicator servants servants in participating ministry that performance appraisal • CSA approved Personnel Listing have completed the performance process for P and E grade CSA payroll appraisal against the total number of civil civil servants (number) servants in these grades as verified by Personnel Listing and CSA payroll 50 Completed annual cycle of the performance appraisal process includes the performance plan, progress review, employee self-assessment, pre-appraisal meeting and annual appraisal meetings; appraisal reviewed and finalized appraisal appeals process, finalization and decision made. 34 Annex 2: Detailed Project Description LIBERIA: Public Sector Modernization Project Introduction 82. This project supports the government’s Civil Service Reform Strategy- “Smaller Government, Better Services” launched in 2008, and which has continued to guide the government’s civil service reform agenda. Even at its inception, it was clear that the CSRS was too ambitious for a fragile country emerging from nearly two decades of conflict. The CSRS remains ambitious given the country context and capacity, and has been unable to fulfill all its objectives in the 3 year timeframe proposed. The Government has re-affirmed the relevance of the strategy and has confirmed that it will remain the blueprint for civil service reform within the new PRS program through 2017.The Key elements in the government’s program outlined in the Civil Service Reform Strategy ( 2008-2011) and reiterated in the PRS (2012-2017) include: i. Restructuring and Right Sizing: For instance by realigning ministry portfolio with core government functions, implementing restructuring, and de-politicizing the Civil Service through the appointment of Principal Administrative Officers and implementing the Redirected Workers’ Program; ii. Pay and Pension Reform: For instance by undertaking pay reform, developing job classification system, and reviewing and reassigning pension administration; iii. Managing Human Resources: For instance by establishing discipline and control, adopting progressive HR policies, building HR institutional capacity and strengthening capacity building within the Civil Service; iv. Developing Leadership: For instance by increasing opportunities for leadership training and integrating the short term capacity building programs such as the Senior Executive Service; v. Gender Equity in Civil Service. For instance by mainstreaming gender equity, devise an affirmative action program, provide special attention for women in training, establish a civil service-wide sexual harassment policy, and deploy gender officers in MACs. 35 Fig. 1: Alignment with the PRS-Agenda for Transformation (2012-2017) PRS Goal: Achieving midddle income status by 2030 PRS Pillar 4 Goal (Governance and Public Institutions): In partnership with our citizens, to create transparent, accountable and responsive public institutions that contribute to economic and social development as well as inclusive and participatory governance systems Public Sector modernization Goal: Independent, accountable, merit-based and performance oriented, well structured public sector with improved service delivery Project Development Objective: To improve the performance of civil servants in participating ministries, and strengthen pay and payroll management in the Civil Service in Liberia Opportunities and Challenges in public sector management 83. Supported by a number of development partners including DFID, World Bank, USAID, SIDA and UNDP, the government has made progress in stabilizing the Civil Service. Much needs to be done to transform it into an “independent, accountable, merit-based, and performance oriented, well- structured public sector with improved service delivery” as envisaged in the Poverty Reduction Strategy (Agenda for Transformation) for 2012-2017. At present, the Civil Service Agency is implementing a US$2.0 million State and Peacebuilding Fund (SPF) grant to strengthen records management, testing, and its rural outreach efforts. Additional areas include building human resource management capacity across ministries and agencies as well as strengthening the institutional capacity of the Liberia Institute of Public Administration. Similarly, with support from the USAID, the CSA has revised a number of policy documents such as the Standing Orders for the Civil Service, Human Resource Policy, and developed a Performance Management System. Finally, under the multi-donor funded Integrated Public Financial Management Project, the CSA is continuing with strengthening the Human Resources Information Management System. Key remaining challenges relate to improving performance for service delivery, strengthen pay and payroll management, strengthening leadership, and improving gender balance. The following section discusses some of these issues. Performance Management 84. The majority of ministries have no clear means of measuring staff performance. Unclear mandates, overlapping functions and inefficient management practices continue to be a 36 feature of ministries and agencies. Several ministries still perform overlapping functions, while others are too unwieldy to be effective. 51 In such an environment, the performance of frontline workers is impossible to measure and institutional effectiveness and service delivery is inevitably undermined. There are no clear criteria for performance, merit based appointment or promotion. Ministries lack a stable senior professional civil servant, with long term institutional memory and long term experience and technical capacity for public sector management. Senior officials are routinely moved when ministers change, thus causing disruptions in the efficiency of government agencies. Some ministries have more people than they need, while others have the right numbers but the wrong skill mix. Task allocation is not uniform and only a small number of ministry personnel are engaged in meaningful work. Ministerial functions are complicated by the fact that they sometimes overlap making it difficult to ensure accountability for service delivery. Finally, as shown below, the majority of civil servants do not have the professional competency to undertake their jobs. Technical and Administrative Staff (TAS) grades 1 and 2, the lowest grades in the Civil Service (Table 3), accounts for nearly one third of the Civil Service. This is the consequence of weak payroll controls, poor remuneration and lack of adequate pension benefits which has kept potential retirees on the active payroll. Table 3: Civil Servants in grades TAS1-3 Grade: Total Of which TAS share of Civil Service (%) TAS 52 are Step 1&2 (n=34,755) 1 7,337 6,216 18 2 2,164 1,962 6 3 2,529 2,412 7 Total 12,030 10,590 35 Source: HRMIS Directorate, Civil Service Agency, August 2013. Pay and Compensation 85. The Civil Service remuneration structure is less competitive and comprises disparate allowances and wages. There are several categories of contractual staff under different programs introduced to address capacity shortages after the end of conflict. These categories are remunerated at levels above that of regular civil servants, although their remuneration, on average, falls around that of Director level civil servant with general allowance. Those on Senior Executive Service (SES) program, for instance earn in the range of US$1,000-US $3,000. There are about 100 contractors funded under the SES program. Staff participating in the Transfer of Knowledge from Expatriate Nationals (TOKTEN) program earn in the range of US$2, 500-US$3,500. Others are President’s Young Professionals (PYP), graduates of the Financial Management Training School (FMTS) and, health workers paid from a Health Pool Fund. While critical to public sector performance, they nonetheless remain outside the government’s payroll and have largely been donor funded. Donor funding is ending for most of 51 For instance, in spite of the vastly different mandates, one ministry is responsible for Lands, Mines, Energy; Water and sanitation straddles about three different ministries and agencies; responsibility for youth and children is spread among three different ministries: Education, Health and Social Welfare, and Youth and Sports. 52 Excludes teachers and health workers 37 these post conflict capacity building programs, and government would have to determine how to address the consequences of this impending exit. Table 4: Types of compensation arrangements in the Civil Service Program Core areas Salary Range Total No. SES All 1,1000-3000 100 TOKTEN All 2,500-3,500 3 PYP All 750 21 Donors Health 5,000 FMTS Financial Management 800-1,000 90 Source: Employment Services Department, Civil Service Agency, August, 2013 86. The compensations structure also comprises discretionary allowances designed to reward performance, but essentially serving as salary “top-ups”. Selected senior officials are entitled to a discretionary allowance (general allowance) covered by a budgetary allocation to ministers. 53A corresponding “special allowance” category comprises mainly political appointees including Assistant Ministers, Deputy Ministers and Ministers. Both types of allowances are generally salary top-ups on the meager Liberian dollar salary and are paid in US dollars. While some ministries have clear criteria for allocating general allowances, across the Civil Service ministerial discretion has led to a lack of uniformity in their allocation. For instance, similar positions across ministries are likely to attract different amounts. Salary raises are not based on performance and are not predictable. Since there are no clear procedures for manpower planning, hiring decisions are driven by available budget rather than staffing need. The personnel budget provided by the Ministry of Finance (MoF) is occasionally insufficient to cover the entire staff compliment in ministries, since the MoF sometimes overrules listings provided by ministries and agencies. In such cases, ministries inevitably have to use non-payroll resources to finance wages. The consequences are alarming: measured by all ratios during the years 2009-2011, Liberia’s wages and salaries are among the highest for 13 ECOWAS countries. 54 For instance, at 10 percent of the GDP in 2011, it was second only to Cape Verde with 12 percent. Similarly, wages and salaries accounted for 36 percent of total expenditure in 2011, the highest in the sub-region, ahead of Ghana (35 percent) and Benin (34 percent). 55 Payroll Management 87. There are serious challenges in payroll management. Efforts to clean the payroll have been progressing slowly with some positive results. Persistent challenges include fraudulent and unauthorized addition of personnel into the payroll and transfer of salary to accounts of ghost employees. A 2012 PEFA assessment documented a number of weaknesses in payroll control including poor reconciliation of the payroll and personnel databases, incomplete personnel database and personnel records and a lack of periodic reconciliation between payroll 53 In 2007 the government introduced a mandatory monetary allowance of US$200 per month for Director (and equivalent) level civil servants. This is in addition to a performance allowance, which remains largely at the discretion of Ministers and heads of agencies. See: Republic of Liberia (2010). “GOL Policy Regarding General Allowances for Civil Servants”, p.1. 54 World Bank (2012). Public Expenditure Review: Options for Fiscal Space Enlargement (Draft), p.10. 55 World Bank (2013). Options for Fiscal Space. 38 and the personnel database. 56 The government has been undertaking a payroll cleaning, including through the establishment of a Biometric Identification System, over the past five years. While progress has been made in identifying and properly documenting civil servants, improving payroll integrity, and managing the increasingly ballooning civil service wage bill are enduring critical challenges (Table 5). With no establishment controls in place, ministries and agencies have continued to add employees into the payroll, in some cases, ignoring the Civil Service Agency’s requirements for Personnel Action Notices (PAN). The wage bill (including salaries, general and special allowances), has thus risen from a modest US$21 million in 2003 to US$212 million in 2013.57 With the launch of the HRMIS in July 2013, the Civil Service Agency now has greater control over the payroll, including entries and exits. The Ministry of Finance (MoF) retains its traditional role of issuing payroll checks, with no direct control over payroll entries. Table 5: Payroll and personnel records Indicator Baseline ( November 2013) n=33,147 Civil servants with complete records (%) 77 Civil Servants with biometric IDs (%) 20 Civil Servants past retirement age (number) 525 Source: HRMIS Directorate, Civil Service Agency, November 2013 Gender Imbalance 88. While the Civil Service Reform Strategy prioritizes gender equity, only one in five civil servants is female, and more likely to be found in the lower grades. The National Gender Policy has highlighted the gender disparity in the public sector, including in presidential appointments. 58 The policy calls for efforts to develop policies to address this disparity, including through instruments such as codes of conduct, sexual harassment, and human resource policies. The majority of the ministries are still behind, while a few, including Ministry of Gender Development, have made some progress in improving the size of their female workforce and representation in management positions as shown in table 6 below: Table 6: Share of female civil servants in the Civil Service Ministry/Agency Share of Share of payroll Share of Executive female staff burden (%) level grades (E) (%) Health and Social 48 50 33 Welfare Gender 44 47 40 56 IMF et al. (2012). “Liberia: Public Expenditure and Financial Accountability”, p.56-7. 57 General allowances were initially intended to reward performance at the discretion of Ministers, but have now become a de facto salary budget as many ministries use the vote to pay non-payroll staff. Special allowances are top- ups for political appointees and Director level appointments. These appointees are also eligible for fuel and telephone allowance, and are entitled to a government owned chauffer driven vehicle. 58 Republic of Liberia (2009). National Gender Policy (Abridged Version). Monrovia, Ministry of Gender Development. On the web: http://www.mogd.gov.lr/images/stories/pdf/national_gender_policy_abridged.pdf 39 Civil Service Agency 39 40 44 Information & Tourism 33 33 0 Foreign Affairs 30 30 27 Source: HRMIS Directorate, Civil Service Agency, September 2013 89. These challenges have persisted in spite numerous efforts to address them. Current projects are either nearing completion or have largely focused on foundational elements. They have not gone deep enough to cause the kind of transformation necessary to transform the management of the Liberian public sector. This project intends to complete some of these activities started under the previous project as well as deepen and scale up promising ones to realize the ambition of the Civil Service Reform Strategy. The proposed project consists of four components: (i) pay management; (ii) payroll management; (iii) performance; and (iv) project management. The following section describes in detail, the main components and activities that this project will support. Component 1: Improved Pay management 90. The Civil Service remuneration structure is inequitable and comprises disparate and highly opaque wages. This has been worsened by the absence of a performance management system and a basis for career progression within the Civil Service. The compensations structure comprises discretionary allowances that have been a source of tension in the Civil Service. Selected senior officials are entitled to a discretionary allowance that is susceptible to abuse by senior managers. In 2010 the government approved a Medium Term Pay Reform Strategy. The strategy proposed the collapsing of the old 15 grades into a 10 grade structure with appropriate compression ratios. This would provide a transparent tool for assessing staff progression through the ranks as well as a basis for projecting the wage bill. The MTPS has not been fully implemented, as a result there are still glaring inequities in the pay system resulting from a salary top up system that gives discretionary allowances. More importantly, there is no clear career ladder linked to pay and grading and salary increases do not take performance into consideration. In recent years there has been increased urgency in revisiting the strategy. There is a need to revise the MTPS as well as a job classification and grading structure. 91. Achieving fair and more competitive pay would impose significant incremental costs on the GoL budget, which would have to be financed from a very tight civil service wage bill. The project will support an incremental approach, by only targeting a small number of civil servants (about 4000) in Professional and Executive grades in participating ministries.59 These civil servants will be mapped to their appropriate grades- matching the functions they perform with their salary grades. For this portion of civil servants, it is expected that mapping and paying them according to their relevant and approved grades would increase the current wage bill for this category of civil servants by approximately 3 percent per year ( see table 10). This approach while incremental and strategic has the danger of setting a precedent for downstream pay reform activities covering the rest of the civil service. 59 This constitutes about 70 percent of professional and Executive grade staff in the civil service. 40 92. This component aims at carrying out a program aimed at enabling the civil service to attract and retain competent managerial and professional staff and to boost motivation and engagement among civil servants, including: (i) to facilitate improved wage bill management, and (ii) provide a clear and fair basis for accountability for results among civil servants. 93. The project will support the following activities: (a) Mapping of grades P (professional) and E (Executive) civil servants in participating ministries into relevant grades (b) conducting comparative remuneration survey; (b) revising HR policy manual to include pay administration and grading procedures; (c) training CSA staff in key HR functions; (d) revising the pay strategy; (e) conducting information awareness campaign targeting civil servants. These activities will compliment job evaluation and grading work undertaken under the USAID- GEMS project. 94. The results which are sought under this component are to: (a) pay civil servants fairly based on the jobs they perform; (b) pay civil servants competitively in relation to the Liberian labor market for those jobs where there are particular difficulties in attracting and retaining qualified personnel. This will include front-line service providers in disadvantaged areas; and (c) provide all civil servants with complete and accurate information on civil service salaries, allowances and benefits, specifying eligibility for any allowances which cannot be consolidated with salaries. 95. To deliver these results, the project will build on the 2010 Medium Term Pay Reform Strategy. The strategy will outline options for managing the expansion of the wage bill with a view to ensuring that it does not exceed the current level of 40 percent of total expenditure. 60 96. The following activities are envisaged under this component: i. Revision of the Civil Service Pay Strategy. The project will support the development of a civil service pay strategy. The strategy will set out the medium-term policy objectives (for the next five years) for civil service pay, outline the specific schemes and processes required, and construct pay scenarios which show how the objectives can be achieved in a phased manner consistent with the projected budgetary resources available. ii. Remuneration survey. The comparative remuneration survey will update the survey which was conducted in 2009 as part of the Civil Service Pay Strategy. It will compare total remuneration (salaries, allowances, benefits) for a select number of benchmark jobs in the civil service with remuneration for the same jobs in a sample of non-government organizations and public corporations. iii. Revised pay structure. The results of the job evaluation supported under the USAID- GEMS project and the findings of the remuneration survey will be used to design a revised pay structure for the civil service. Civil servants would be mapped into appropriate grades relevant to the functions they perform to be able undertake a 60 Fiscal rules established in FY 2012/13 call for wages and salaries of no more than 34 percent of total budgeted expenditure (IMF Country Report No. 12/340, Appendix III, Annex I). Wages and salaries amount to 40 percent of total spending in the draft FY 13/14 budget. 41 through costing of the likely impact of the grading and mapping on the wage bill. The pay structure will need to strike a balance between the need for internal equity (based on job evaluation), affordability and the demands of external competitiveness (based on the remuneration survey.) Implementation of this new pay structure will only be undertaken after sufficient costing has been undertaken and adequate fiscal space created to absorb the likely increase in wage bill. The project will not cover the implementation of the new pay structure for the whole civil service. iv. Additional activities will include the following: (a) revision of the HR policy manual to include pay administration and grading procedures; (b) training of CSA staff in key HR functions; and (c) information awareness campaign targeting civil servants. 97. Disbursement Linked Indicators (DLIs) will be introduced to encourage collective action on the issue of pay reform. The following DLIs have been suggested for this component • Civil Service Agency has prepared and submitted a Pay Strategy for cabinet approval by June 30 2014 (DLI#4) • Participating ministries have assigned at least 30 percent of P1-4 and E1-3 grade civil servants into approved pay grades by June 30 2016 (DLI#5) • Participating ministries have assigned at least 30 percent of TAS1-3 grade civil servants into relevant pay grades by June 30 2016 (DLI#6) • All P1-4 and E1-3 grade civil servants in participating ministries paid according to approved grades for at least six consecutive months (DLI#1) Component 2: Strengthened Payroll Management 98. Payroll controls are ineffective and pose significant risk of fraud. The 2012 PEFA Assessment concluded that there is no improvement in the effectiveness of payroll controls. 61 It found several inherent weaknesses in the payroll control system. An incomplete personnel database and personnel records and a lack of periodic reconciliation between payroll and the personnel database undermine payroll integrity. Further, the CSA personal database and the MOF government accounting payroll (GAP) are not linked. The risk of payroll abuse and fraud are high because: (a) top-up allowances as well as the salaries of certain government agencies, both of which are paid in US dollars, are processed outside the Government Accounting Payroll (GAP) system, thus making it difficult to apply standard controls and audit trails to all government payroll processing; (b) direct manipulation of payroll lists is done outside the rudimentary GAP and without subsequent reconciliation to the GAP system and the CSA; (c) control of changes to records outside the GAP system are deficient and facilitate payment errors and/or fraud; and (d) payroll audit undertaken by GAC is partial and the national biometric registration of civil servants has not yet been completed. The result has been a systemic problem of a largely uncontrolled and potentially unsustainable civil service wage bill, which reduces the 61 Africa Development Bank, International Monetary Fund, European Commission, Swedish International Development Agency (), and World Bank (April 2012), Liberia - Public Expenditure and Financial Accountability (PEFA) SIDA Assessment. 42 fiscal space available to recruit qualified personnel. It also undermines the prospects for any significant pay enhancement. 99. This component will address two key functional problems: (a) lack of effective payroll discipline that has facilitated unauthorized entries into the payroll and, (ii) the challenge faced by both the Civil Service Agency and the Ministry of Finance to control the wage bill 100. This component aims at carrying out a program aimed at establishing accurate civil service payroll and at ensuring predictability in the wage bill, including (a) to establish and maintain a clean, accurate and complete civil service payroll and (b) to ensure predictability in the government’s wage bill through the frequent monitoring of payroll exits and entries. A clean payroll will only capture civil servants who have been legitimately employed as a result of an open, competitive and merit based recruitment and selection process managed by the Civil Service Agency. An accurate payroll will pay civil servants the correct salary based on the job to which they have been appointed. It will clarify the specific categories of employees on the payroll (including political appointees and contractors) to ensure proper accounting of regular civil servants. A complete payroll means that allowances as well as salaries should be paid through the payroll, and not through the operating budgets of individual MACs. 101. The results to be achieved through this component are: (i) parity between the personnel listing and the payroll (clean payroll), and (ii) enhanced payroll control introduced through the strengthening of the CSA’s capacity to control removal and additions from and into the payroll (accurate payroll); and (iii) salaries and allowances are paid through the payroll and not through the operating budgets of MACs. 102. The CSA has made significant progress towards the accomplishment of these results and the project support is intended to deepen these efforts. An accurate system of personnel records (HRMIS) is under creation, which is based on issuing employees with biometric identity cards. Approximately two-thirds of civil servants have now been captured within the system. These records will be automatically linked to the payroll so that only employees who have been properly engaged will be able to access to the payroll. The integrated computer-based Human Resource Management Information System was deployed in July 2013. This component aims to provide support to enable all civil servants to be placed on the HRMIS by the end of 2014. It will also support the decentralization of the system to county level. 103. The following activities are envisaged under this component i. Preparation and dissemination of HR planning policies and procedures: A Civil Service Human Resource Policy Manual has been developed for CSA with the support of the GEMS project. However, the manual does not include all the necessary HR processes for effective payroll management. Therefore, the project will support the development and documentation of procedures for HR planning and establishments control, as well as the manual and automated processes for relevant personnel transactions (e.g. recruitment, promotions, transfers, retirement). These procedures will be incorporated into the Human Resource Policy Manual. Relevant training (e.g. payroll management, manpower planning, grading and classification) will be provided 43 to all HR officers in CSA and MACs who have responsibility for these processes and transactions. ii. Strengthening management of Personnel records and biometric identity cards. The HRMIS now incorporates the personal files of employees in 24 out of 29 MAC (the remaining five accounting for the larger portion of civil servants). The records include data such as the employee’s job title, age, date of appointment and gender, but are at various levels of accuracy. 62 The creation of personnel records depends on the validation of the individual as a legitimate employee with the help of biometric technology. The project will provide funding for equipment to enable biometric identity cards to be issued to civil servants in the remaining 25 MACs (including in county offices). Project will support the strengthening of administrative processes for dealing with civil servants who meet the two conditions for retirement, namely tenure and mandatory retirement age. 63 iii. Decentralization of HRMIS. Starting in the second year of the project, the HRMIS will be decentralized in phases to the county level CSA outreach centers. The project will provide operating costs, training, and equipment to support the county administrations in capturing data in the HRMIS (based on local personnel transactions). iv. Independent systems audit (of automated and manual HR systems and procedures). Beginning Year 1, the project will finance an audit of the automated and manual systems which have been introduced. The audit will verify whether the systems are working as intended, and identify actions necessary to strengthen internal controls. Specifically, the audit will ascertain whether key personnel transactions (such as recruitment, retirements, and deletions of Personnel Action Notices) are being properly authorized by CSA. It will also confirm that all personal emoluments (allowances as well as salaries) are being paid through the payroll rather than the operating budget. 104. Disbursement Linked Indicators (DLIs) will be introduced to encourage collective action on the issue of payroll management. The following DLIs have been suggested for this component: • Discrepancy between current payroll (salary) and Personnel Listing at no more than 5 percent by June 30 2018 (DLI#2) • All participating ministries have issued employment appointment letters to all their staff on their CSA approved personel listing by June 30, (DLI #7) • None of the participating ministries has supplementary payrolls by June 30 2017 (DLI#8) Component 3: Improved Performance 62 Accurate record has the following: biometric data, qualifications, location of employee, and “one employee; one file”. 63 The Pension Act (1973) provides that civil servants are eligible for retired upon meeting any of the following conditions (i) over 65 years of age; (ii) minimum tenure of 25 years and; (iii) ill health. 44 105. Unclear mandates, overlapping functions and inefficient management practices continue to be a feature of ministries and agencies and undermine institutional effectiveness and service delivery. There are no clear criteria for performance and merit based appointments and promotions; ministries do not have stable senior professional civil servant as top level is dominated by political appointees. Senior officials are routinely moved when ministers change, thus causing disruptions in the efficiency of government agencies. Some ministries have more staff than they need, while others have the right numbers but the wrong skill mix. 106. Important elements of institutional reforms have not been tackled, including those relating to: (i) realigning ministries' portfolios: clarifying the mandates of ministries, removing overlaps, and establishing new strategic directions and (ii) implementing the framework for depoliticizing the Civil Service: for instance, establishing non-political leadership at top levels through the introduction of Principal Administrative Officer, and the establishment of an independent Civil Service Commission. Furthermore, there is the critical issue of ensuring that the functional reviews lead to meaningful organizational and staffing changes, and are accompanied by stronger staffing controls than have existed in the past to reduce unauthorized employment. 107. This component aims at carrying out a program aimed at enabling selected ministries, agencies and commissions (MACs) to focus on performing their core functions and establishing performance and accountability standards among civil servants, including (i) organizational development and (ii) Human Resource Management. The component will thus support the reorganization and, strengthening of managerial, professional and technical capacity in selected ministries. 108. The results to be achieved through this component are: (a) appropriate mandates defined for each of the ministries; (b) development and implementation of a system for reviewing the performance of staff in P1-4 and E1-3 grades; ((c) a policy framework for integrating gender equality measures into the mandates and functions of participating ministries. 109. This component will aim to complete the functional review (MFR) process in a select number of ministries identified above. This will provide the foundation for a broader process of organization development supported by the project, since structures alone will not guarantee an effective civil service organization. This new process will encompass the identification of staffing requirements anticipated in the second stage of MFRs, which will be layered to the county and district level in anticipation of planned decentralization process. 64 Organization development will be underpinned by robust human resource management processes for recruitment, promotions and transfers to ensure that MACs are able to obtain the right numbers of staff with the right skills to fulfill their mandates. A program of action to attract and train women in male dominated professions and managerial professions will be supported. 110. Activities under this component are divided into two subcomponents: 64 UNDPis collaborating with SIDA and EU on a multi-donor funded decentralization program. 45 a. Sub-component 3.1: Organizational Development. The following activities are envisaged under this component: i. Carrying out a mapping of existing organization structures and revising current organizational re-design model. The project will support the mapping of current organizational structure of MACs. Existing organization design model (developed by the GC) will be revised to inform and guide the organization development work in the selected MACs. This will be done in collaboration with key stakeholders, including civil servants and researchers. Based on the chosen design, a methodology and approach will be developed for the diagnosis, action planning and intervention phases of the organization development process. This activity will be undertaken in collaboration with the Crisis Management Initiative under with which the Civil Service Agency, LIPA and GC have been working to develop a Governance Architecture for Liberia. ii. Conducting mandates, function and organization review of Participating Ministries. 65 This activity will conclude the MFR work in the selected MACs. Consultancy support will be provided to conduct the MFR work in the three agencies (CSA, GC, and LIPA) and to complete the ongoing work in the participating ministries. The consultants will adopt the GC’s guidance for the MFRs and they will consult extensively with the management and staffs of the respective MACs. iii. Preparing legislation to amend structure and functions of Participating Ministries. Once the MFR reports have been approved by Cabinet, the project will support the preparation of the bills for legislative enactment to amend the mandates, functions and structures of individual MACs. The project will also finance policy dialogue and essential meetings with legislators to obtain support before the bills are tabled. iv. Undertaking organizational diagnosis of each Participating Ministry (including staffing and skills gaps). The agreed organization design model, together with the documented methodology, will form the basis for carrying out organization diagnoses in the participating ministries At this stage, it is envisaged that the diagnosis will embrace staffing and skills, core management processes (to be determined), management capability and incentives. Based on the diagnoses, action plans will be developed for each ministry describing improvement interventions. b. Sub-component 3.2: Human Resource Management. The following activities are envisaged under this sub-component: v. Supporting the implementation of performance management in the Civil Service. The project will support the Civil Service Agency and participating ministries to roll out performance management in participating ministries. 65 The project will draw on the experience of the GoL’s collaboration with the African Center for Economic Transformation in preparing the restructuring of the Ministry of Finance. The GoL has also benefitted from the support of the Crisis Management Institute with support from the Finnish Ministry of Foreign Affairs to develop a ‘Governance Architecture” for Liberia. These efforts will be incorporated in the design and implementation of this component. 46 vi. Supporting the implementation of a policy framework for Civil Service management in Participating Ministries. The project will support the Civil Service Agency to revise and implement transparent policies and procedures for recruitment, promotions, training, transfers and retirement; support the preparation of manpower (staffing) plans; performance management, and establish procedures for meritocratic appointments in participating ministries. vii. Supporting training and career development. The project will finance the training and career development, of civil servants. This will be undertaken in conjunction with the Liberia Institute of Public Administration. Specific emphasis will be given to improving the capacity of women in the Civil Service to prepare them for management level jobs. This will be undertaken through the Female Leadership Program. viii. Develop policy framework for establishment of Civil Service Commission. The Commission will provide oversight and complement (rather than replace) the CSA, since the latter will continue to have an HR policy function. The project will provide support (consultancy, international benchmarking, policy dialog) to enable the government to examine the options for the CSC; to define its mandate and its relationships with the CSA and MACs; to draft legislation; and to develop an implementation plan. ix. Develop policy framework for appointment of Principal Administrative Officers. The GoL is considering the introduction of the Principal Administrative Officer (PAO) to perform technical coordination roles in individual ministries. The project will provide financial support (consultancy, policy dialogue) to define the precise responsibilities of a PAO and its relationship with the Minister; draft legislation requiring the appointment of a PAO in every Ministry, and support the appointment, induction and placement across government ministries. 111. The following DLIs have been suggested for this component: • Participating ministries have completed one annual cycle of the performance appraisal process for P and E grade civil servants by June 30 2016 (DLI #3) • Participating ministries have completed three annual cycles of the performance appraisal process for P and E grade civil servants by June 30 2016 (DLI#9) Component 4: Project and Program Management 112. This objective of this component is to support the coordination and delivery of project inputs and overall implementation program. In addition to general project management, the component will support monitoring and evaluations including surveys and third party audit as DLI verification, procurement and financial management as well as institutional capacity building of three key implementing agencies. Key activities include (a) project coordination (b) institutional capacity building (c) communication and change management (d) monitoring and evaluation and (e) fiduciary compliance and management. i. Project coordination: The objective of the activity is to provide a strong institutional and functional capacity to coordinate the overall project implementation through respective component managers. The project will finance (i) short term technical 47 assistance consultancies to strengthen the coordination capacity, (ii) local contractual staff to support the administrative functioning of the coordination mechanism, (iii) procurement of hardware, related software, and logistics, and (iv) staff training as well as incremental operational expenditures. ii. Communication and Change management: The objective of this activity is to gather and disseminate all information related to reforms generally, and to the activities supported by the project in particular, to all key constituencies. The project will support the design (and piloting) of a communication and change management strategy, billboards, newsletters and other media to communicate project activities and reform milestones. Activities will be coordinated with the M&E unit and make maximum use of the data obtained both to design appropriate change management interventions and to communicate the main features of reform to politicians and the public. Workshops and publicity on reforms should be closely geared to the current program of activities and needs that are identified by M&E as well as feedback received from MACs and the public. iii. Monitoring and Evaluation: The objective of this activity is to monitor, evaluate, and review progress on all project components, sub-components, identify issues that may impede progress, develop effective change management strategies, and communicate key aspects of progress to the public. The project will finance the development of a robust M& E platform for the project; training of at least 10 staff drawn from CSA and participating ministriesto be able to support the M&E functions of the project, and stakeholder surveys. iv. Fiduciary arrangements. The objective of this activity is to ensure that funds advanced for project execution are used for purposes intended with efficiency and economy. Project funds will be used to hire an international Procurement Specialist and Financial Management Specialist to: (i) carry out procurement and FM activities under the project; (ii) provide technical procurement and FM support to participating Ministries and Agencies including procurement management; and (iii) build procurement and FM capacity at the CSA. 48 Annex 3: Implementation Arrangements LIBERIA: Public Sector Modernization Project 113. The project implementation arrangements will adapt the model outlined in the Civil Service Reform Strategy. The key implementing agencies are the Civil Service Agency, Governance Commission and LIPA. The Director- General of the CSA will be responsible for overall project implementation. The Director General will coordinate all the reform initiatives in conjunction with the other key players. Project implementation arrangements will be undertaken collaboratively through the: (i) Strategic Oversight Team led by the Director General, Civil Service Agency; (ii) Coordination Team led by the Civil Service Reform Directorate; and (iii) Change Teams in participating ministries led by individual Ministers. These structures are described below (fig.1). Fig. 3.1: Implementation Arrangements Strategic Oversight Team Project Coordination Change Teams (IRCs) Pay management Procurement Specialist Payroll Management M & E Specialist Performance Management 114. Strategic Oversight Team. The Strategic Oversight Team (SOT) will provide overall policy coordination with respect to implementation of the reform program. The team will also review implementation bottlenecks and ensure alignment of reforms with overall government program as outlined in the Agenda for Transformation. The SOT will comprise Director General of the Civil Service Agency (Chair), Director General of Liberia Institute of Public Administration (LIPA), and the Chairman of the Governance Commission, the Minister of Finance, and the Ministers of the participating ministries with Change Teams. The team will meet quarterly and submit progress report to the President and participating development 49 partners. The Project Coordinator will provide secretariat support to the Strategic Oversight Committee. 115. Change Teams: At the ministerial level “change teams” (CT) headed by a coordinator (preferably the Deputy Minister for Administration) will be established to lead reforms related to that implementing institution under the guidance of the head of the ministry. The CT will be provided with the technical staff and funding to be able to implement key activities. The CT’s main function will include: providing overall leadership, planning, management and control of the change implementation management services in the ministry; preparing the Change Implementation Management Program (CIMP) and its component plans; implementation of work program with guidance from senior management of the ministry; tracking the implementation of proposed reforms within the ministry mandate and reporting on achievement of ministry level DLIs to the Leadership Team 66 116. Project Coordination: The Director of Civil Service Reform Directorate will be the Project Coordinator, in charge of day to day operations of the project. The Project Coordinator will be supported by senior technical personnel drawn from the Civil Service Agency responsible for each of the three components with occasional Technical Assistance supported by the project. Additional staff will include a Procurement Specialist, and M&E Specialist. The coordinator will be responsible for consolidating the annual work plans and budgets, mid-term review, and assessment reports for the three components, ensuring the work is properly scheduled across components, and convene project team meetings to review progress towards the agreed milestones (intermediate results indicators). The project coordinator will have a key role to play in ensuring that the support of stakeholders is secured, and will be the secretary to the Strategic Oversight Team. A stakeholder mapping exercise will be conducted before project effectiveness in order to: (a) identify the key stakeholders who will be affected positively or negatively by the reforms under the project; (b) assesses their levels of power and interest; and (c) propose strategies for managing stakeholder relationships. This analysis will be used by the Civil Service Agency and the leadership team to decide upon specific actions which need to be carried out (e.g. education, communication, participation) to remove blockages and accelerate progress. The Project Coordinator will monitor stakeholder risks on a regular basis as part of the overall project management, bringing substantial risks to the attention of the Director- General and the Leadership Team for action. 117. Coordination with Development Partners: A joint Government-Donor Steering Committee will meet quarterly to review the progress of implementation of civil service reforms, in general, in Liberia, as well as those supported under the project. Core reform activities financed under the project shall be reviewed during these meetings. Also, joint donor partner implementation support missions will be carried out semi-annually to review implementation progress against key milestones and provide technical support to implementing partners. 118. Communications. Communications is an essential ingredient of successful reform management. At minimum communications will convey essential information to relevant 66 See: Governance Commission (2011). Implementation Roadmap for the Mandates and Functional Reviews (Consultant’s Report), Unpublished. 50 stakeholders in a timely fashion, but it should also engage senior managers and civil servants to encourage their participation in reform. Communications will therefore be two-way, involving consultation and dialogue. For this project, the Civil Service Agency will develop a communications strategy and plan based on the information needs of different stakeholder groups. The messages will be tailored to the information needs of particular stakeholder groups and they will be delivered by their preferred “messengers” using appropriate media. Different tools will be considered including press releases, the internet, newsletters, workshops, discussion groups, radio and television. 119. Project Financial Management. The PFMU will continue to be responsible for the day to day management of funds and accounting for the Bank portfolio in Liberia, in accordance with the project financial procedures manual already developed for ongoing Bank projects. The PFMU will also have responsibility for project financial reporting, using already agreed interim unaudited financial report (IFR) formats in use for the other projects. The PFMU is currently staffed with a team of competent financial professionals with the required experience and qualifications acceptable to the Bank. Financial Management, Disbursements and Procurement Financial Management 120. Introduction and summary of FM assessment: In accordance with the Financial Management Practices Manual issued by the Financial Management Sector Board on March, 2010, a financial management assessment was carried out to assesses the adequacy or otherwise of the financial management arrangements of the Civil Service Agency for managing the Liberia Public Sector Modernization Project. 121. The objective of the assessment was to determine whether Civil Service Agency (CSA) has acceptable financial management arrangements, which will ensure: (1) the funds are used only for the intended purposes in an efficient and economical way; (2) the preparation of accurate, reliable and timely periodic financial reports; (3) safeguard the entity's assets; and (4) adequate fiduciary assurances are provided through an independent audit of the project. The overall FM risk for the project has been assessed as Substantial in respect of CSA. In view of the lack of satisfactory financial management arrangements at the CSA, the PFMU situated in the Ministry of Finance (MoF) will undertake the financial management functions of the project. With the risk mitigation measures to be achieved through the use of PFMU during implementation, this FM risk will residually fall to Moderate. However, with the roll out of IFMIS to M&As in the in the future, financial management responsibilities may be transferred to CSA after the second year of implementation subject to a satisfactory assessment of FM arrangements thereon. 122. Country and Sector Issues: A PEFA was conducted in 2012 that included an analysis of Liberia's Public Financial Management (PFM) strengths and weaknesses. The findings from the PEFA showed that the government has taken considerable actions to improve public financial management since 2012. 51 123. In partnership with multilateral and bilateral development partners, the government has implemented a wide range of public financial management reforms covering aspects of policy, legislation and institutional arrangements and systems. These reforms have sought to restore working conditions of the PFM systems and to modernize them to enable Government respond better to implementing its poverty reduction and development strategies. The most critical of these reforms has been the passing of the PFM Act in August 2009 which has also provided the foundation of other PFM reforms. 124. Several institutional reforms have also been implemented; a macro fiscal analysis unit has been created; the former Bureau of the Budget has been merged into the Ministry of Finance (MoF), as a department; a Debt Management unit has been strengthened and the accounting function has been unified by merging two department and bringing them under the control of the Comptroller General. Moreover, the Cabinet approved the Internal Audit strategy in June 2008 that will see the establishment of an internal audit cadre and a charter clarifying the roles and responsibilities for internal controls. The government has also adopted Cash Basis IPSAS as the standard for government accounting. The implementation of the IFMIS has automated government accounting and preparation of budget and fiscal outturn reports in the MoF. 125. Government revenues have increased several folds since 2002/03, and expenditure controls have been strengthened through the establishment of the cash management committee and the interim commitment control system. The government's developmental and poverty reduction priorities are anchored in the PRSP which is generally aligned with the budget although there is no formal poverty reducing expenditure tracking systems. The budget cycle is coordinated by an inter-ministerial Budget Committee and spending ministries are consulted early in the budgeting process. All revenues are by law deposited into a revenue bank account at the Central Bank and expenditure from this account is strictly in accordance with annual cash plans and allotments. Notwithstanding these improvements, many challenges remain. There is the critical need to expand and deepen the implementation of the PFM law and to have its full effect on all aspects of Government PFM systems. Improving budget credibility will be key particularly as Government implements its second generation PRS over 2012/13-15/16; it will be critical to strengthen alignment of the budget during its formulation and execution with its policy commitments and extend its coverage to more aspects of aid resources and other areas that have hitherto not been well captured. In the same vein, improving accounting and reporting and the oversight functions of the General Audit Commission and the Legislature will need to be addressed. Importantly, attention will need to be paid to strengthen roles of key PFM units (Ministry of Finance and individual ministries) to provide requisite leadership in the implementation of the reforms. Moreover, majority of donor expenditure is project based and not executed through the government budget. This is critical and needs to be addressed in accordance with the aspirations of the Paris Declaration and Accra Agenda for Action on aid effectiveness and use of country systems. Furthermore, the country lacks a sufficient number of qualified accountants to serve the public and private sector. A Project Financial Management Unit (PFMU) hosted in the MoF provides centralized project financial management for donor projects as capacity augmentation arrangement in the short to medium term. The lack of qualified PFM personnel is a major constraint to the implementation of PFM reforms to address the weaknesses identified in the PEFA. This weakness is however being addressed through the establishment of the Financial Management Training School (FMTS) that trains middle level Financial Management Officer (FMOs) for the public sector. 52 126. The PFMU capacity augmentation arrangement, the training of FMOs to increase national FM capacity, IFMIS implementation as well as overall PFM improvements noted in the 2012 PEFA have ensured that appropriate structures and processes that promote transparency and accountability and mitigate the fiduciary risk are in place to support both the economical and efficient utilization of public funds both at the country and project level. 127. Financial Management Risk and Mitigation Measures: The ORAF - Annex 4 - summarizes the risks and risk mitigating measures for the FM aspects of the Project. The Inherent and Control risks are both rated as 'Moderate' and therefore the overall project risk is considered 'Moderate'. The risk to Funds Flow (included in Control Risk) is rated 'Substantial' as the use of funds for the project, upon disbursement of project funds, is contingent on the GoL funds release pattern which could vary, based on the overall government liquidity position. This is however being mitigated through the inclusion of a legal covenant that provides for "timely (at least quarterly frontloading) releases of budgeted expenditures for implementation of program related expenditures covered under the EEPs. Similarly Internal Controls (included in Control Risk) are also rated 'moderate' as there is a strong presence of internal auditors in the strengthening of systemic controls on all expenditures from the consolidated fund. 128. Strengths and Weaknesses: The key strengths in the GoL's financial management lie with the use of IFMIS for overall budget execution and fiscal reporting. Equally the fact that all transactions under the project will be centrally processed through the Project Financial Management Unit (PFMU) that staffed with competent and well qualified professional accounts with vast experience in World Bank financial management procedures will assure timeliness, accuracy, and reliability of financial reports for monitoring. Nevertheless, the potential weakness that may impact the pace of implementing the project, arising from the potential risk of delayed releases of funds through the budget process to cater to the project needs that form the basis of the Disbursement Linked Indicator reimbursements on timely basis, is one area to be closely managed during implementation. 129. Overview of Project and Institutional Arrangements: The project will be implemented by a partnership involving a number of government agencies, under the leadership of the Director General of the Civil Service Agency. However, the organization of the financial management arrangements will be centered around: (a) the budget department, ensuring that the budget outlays are included under the appropriate government budget heads and the funds are released on front-loaded basis to allow for better predictability of commitment expenditures; (b) the PFMU and Comptroller and Accountant General's Department, ensuring that the expenditures from the funds released are transacted timely and comprehensively, and are accounted for and reported through the use of the government IFMIS. The project will contribute towards the incremental operating cost of the PFMU. This cost will be included in the operating cost of the project; (c) the IAS will be involved in the verification of expenses to be reimbursed upon DLI accomplishment (d) the CSA will have overall project coordination responsibilities and will ensure that all components 1, 2, 3 and 4 (TA and Project Management) expenditures are validated before payment; and (e) the General Auditing Commission (GAC), to provide the requisite assurance on the EEP spending (and consistency with the achievement of the DLIs) as well as the TA expenditures. An Independent Verifier (VI) will be constituted that will verify together with the World Bank the accomplishment of DLIs on ex-ante basis before payments are made to beneficiary Ministries, Agencies and Commissions (MACs) . 53 130. Budgeting: Since this is a results-based investment lending type of operation that focuses on results rather than just inputs, the budgeting of all program expenditures will constitute part of the government budgeting process under the PRSP. The program expenditures will be captured in the GoL budget according to organization (function) and object classification codes to capture expenditures for the EEPs and the TA consistent with the government Chart of Accounts (CoA). These will form the basis of financial reporting and monitoring of budget appropriations, revisions, releases and expenditures. These codes are already applicable and will continue to be used in the budget planning and release management process of the budget department to facilitate the budget execution and reporting process for the Project. The very fact that the budgets are prepared on the MTEF, at least for Public Sector Reform (PSR) areas is indicative that the budget allocations under the program and for those expenditures covered by the EEPs will be captured as part of the medium term expenditure outlook within the overall GoL fiscal envelope. 131. The PFMU and CSA will work together to prepare an annual budget for the project that will be included in overall GoL budget. The project budget will be shared with the World Bank Task team Leader. The budget shall be incorporated into the quarterly interim un-audited financial reports of the project for monitoring against actual expenditures of the various project categories and activities under the categories. 132. Internal Control & Internal Auditing: Liberia has a strong team of internal auditors assigned, through the Internal Audit Secretariat (IAS) to strengthening the systemic controls in the Ministries and Agencies (M&As) across government. The internal auditors have, increasing, also been engaged in supporting vote controllers in the exercise of internal controls in expenditure management. With IT-based budget execution in place using the IFMIS, starting from budget releases to expenditure commitments, payment processing, accounting, and reporting, there are systems-based in-built controls designed to ensure that budget checks are made before any expenditures are committed. Also, the financial management system provides for segregation of duties in the expenditure processing cycle, while ensuring the monitoring of cash availability at any given time. 133. The strengthened internal audit functions in M&As as well as at the PFMU Internal Audit team provide a reliable basis to conclude that internal controls will remain embedded under the program and for the project expenditures. Adequacy of internal controls in government has never been questioned except that the internal auditors have traditionally been focusing on pre- audits and compliance rather than on systemic issues. Now that the function is reorienting itself to fully transition to focusing on systemic issues, the control ingredients to satisfying the presence of internal controls in expenditure management are expected to be present. A critical need for increased focus of internal auditors is in the area of payroll controls, rather than non- salary expenditure controls. As a pay and performance related project, there is an increasing demand to further strengthen the role of internal auditors on ex-post review of personnel data files vis-à-vis payroll to confirm the integrity of the payroll, using the cleansed payroll data. 134. The internal control features within the GoL, as well as PFMU, also provide for pre- auditing of government expenditure transactions. This form of expenditure validation, as part of the payment processing arrangements, will continue and will cover all expenditures, prior to their approval, including those under the project. As the CSA has overall responsibility for 54 enforcement of controls in all components, all expenditures under the components will be ex- ante reviewed and validated by that Unit before submission of the payment request to the PFMU. 135. Accounting and Maintenance of Records: As highlighted above, accounting for government finances is managed under the auspices of the PFMU/CAGD. The maintenance of the accounting records will be exercised through the government IFMIS that is currently in the process being configured to account for donor financed projects. This is expected to be completed before project effectiveness. Should not be completed the project will be accounted for using the PFMU legacy Sun Accounting system which is considered very adequate for the accounting and financial reporting purposes. Since the CAGD has configured the GFS 2001 CoA in the IFMIS, the reliability as well as the segregation and aggregation of accounting transactions is further enhanced. The IFMIS will be the primary basis for transaction recording to enable the timely preparation of monthly budget execution reports related to the overall program expenditures, the EEPs, and the TA expenditures. 136. Financial Reporting Arrangements: As part of the reporting requirements under the project, quarterly financial statements (in the form of Budget Execution Reports BERs) will be prepared by the PFMU/CAGD showing the uses of funds according to the pre-defined eligible expenditure elements financed by the Bank as well as by the Government (components 1, 2 and 3), and operating costs (component 4) financed by the Bank. For the purpose of this project, the quarterly budget execution reports (unaudited) of the GoL shall include an annex showing the EEP budget, total program expenditures (actual and committed) according to program object classifications and sources, and budget balances. For Components 1, 2 and 3(EEPs), the IFR submission dates are: on or before August 14, 2014; on or before February14 during the years 2015 to 2017. As regards Components 4, the IFR submission dates have been defined as 'within 45 days of the end of each fiscal quarter'. The format for the IFRs has been agreed at appraisal and will be documented at negotiations. In addition, BERs for the entire government program, along with a cover note summarizing the budget allocations and expenditures on the EEPs and the TA component will be provided to the Bank half-yearly to enable continuous monitoring of expenditures and the progress of program implementation during implementation review missions. 137. The annual audited financial statements, prepared in accordance with IPSAS Cash Basis, shall provide the requisite assurance of expenditures made against the EEPs and TA that are financed by the Bank. To this end, the PFMU/CAGD shall prepare and submit for audit, within 3 months of the end of the fiscal year, an abridged statement of sources and uses of funds under the project, with attendant notes on fulfillment of the DLIs provided with assistance of the CSA. The financial statements shall show the budgets against each of the components (detailed to the level of expenditure lines as defined for the EEPs, as well as the object lines defined for project management component), the total actual expenditures against the components and expenditure lines, commitments outstanding if any, balances against each budget line, and tacit allocation of total expenditures for each component according to source of financing. The audited accounts shall be submitted to the Bank within six months of the end of each fiscal year. 138. External Auditing Arrangements: The capacity as well as the professional competencies of the General Auditing Commission (GAC) is considered adequate for the purpose of conducting 55 the annual audits of the project. In general, the GAC conducts its audit using INTOSAI /IFAC (ISA) standards that are acceptable to the Bank. The annual audited project financial statements and the audit report thereon shall be submitted to the Bank not later than December 31, each year. Also, since the use of country systems is envisaged under the project, and noting that the overall government financial statements are audited and delivered by the GAC within 4 months of the end of the fiscal year, a copy of such statements (showing by way of notes, the activities financed under the project) will be submitted to the Bank, during the life of the project, within one month of such statements and reports having been laid in Parliament, as a measure of further assurance. 139. Continuous audit of EEPs: In addition to the annual financial audits, the GAC shall carry out quarterly review of EEPs and provide assurance that expenditures are eligible. A full audit opinion is not required as part of this review. Only a review report with specific issues identified will be submitted to the project team for inwards submission to the World Bank. 140. The Bank will monitor compliance with the audit requirements as per the table given below: Table 3.1: Audit Compliance Audit Report Due Date Project Annual Financial Statements for the December 31 (the same year) year ending June 30 GoL Annual Financial Statements and Audit Within one month of Statements and Reports having been laid in the Legislature Report for year ended June 30 141. Funds Flow and Disbursement Arrangements: There will be two disbursement categories - one each for each of the project components. Bank disbursements for Program EEPs (Component 1, 2 and 3) and Project Management (Components 4) will be made from the Credit proceeds to two separate and respective designated sub-accounts of the GoL Consolidated Fund Account held with the Central of Bank Liberia (CBL), based on Withdrawal Applications (WAs) duly signed by the Ministry of Finance (MoF) and the CSA. The withdrawal applications will be based on the IFRs (report-based) that include Budget Execution Reports (BERs) and 6-month forecast expenditures against potential net achievements of DLIs for component 1, 2 and 3; and quarterly forecast of net expenditures for six-months in respect of component 4. Disbursements for Components 1, 2 and 3 will be provided for the following half year (based on the value of 50 percent of the year’s DLIs) to cater to the projected expenditures, and subsequent IFRs will record expenditures against the initial payments received and provide forecast expenditures for the further next half-year (representing the remaining DLI values for that particular year), and on the basis of which the net amount of funds to be disbursed will be determined. The format and content of IFRs have been agreed at appraisal and will be documented as such during negotiations. Disbursement from the IDA Credit and MDTF proceeds will be in US Dollars. 142. In respect of the eligible program expenditures (i.e. EEPs) to be funded from the IDA Credit and MDTF disbursements against these (as depicted in the indicative disbursement 56 schedule and EEP pricing table – Table 3.4) will be contingent on the achievement of DLIs at each verification. Initial payments made against prospects of future achievement of DLIs will be recovered in subsequent disbursement cycles should the DLIs at verification remain unmet. Any balances of disbursements carried forward at any disbursement cycle shall not lapse, but shall become eligible for disbursement, at the discretion of the task team, when the related DLIs are met at a later date during project life. During the project’s mid-term review, unspent funds for DLIs within a category could be reallocated to other DLIs within the same category. 143. Although, banking and payment processing will be managed centrally by the PFMU/CAGD in order to ensure adequate control and financial monitoring, all expenditure approvals and initiation of processing of payments will be done at CSA and supporting documents transferred to the PFMU for payment processing to the GoL consolidated accounts at the CBL and to third parties. 144. The table below presents the allocated IDA financing of the two disbursement categories, and the allocated amounts represent the 100 percent capped expenditure limits from IDA: Table 3.2: Allocation of Credit and MDTF proceeds Category Amount of Amount of the Total Amount of Percentage of the IDA MDTF Credit (expressed Expenditures to Credit Allocated in US$) be Financed Allocated (expressed in (expressed US$) in US$) 1. Eligible Expenditure 1.14 4.98 6.12 Such percentages Programs as specified in the AWP and Budget for the respective Fiscal Year 2. Technical Assistance (Goods, Consultants’ Services, Non- Consulting Services, 0.86 3.73 4.59 100% Monitoring & Evaluation costs, and operating costs) TOTAL AMOUNT 2.00 8.71 10.71 145. For a period of four (4) months after the closing date of the project, disbursements for expenditures incurred prior to the closing date will be allowed. 146. Disbursement Summary: The disbursement summary by component is shown in the table below: 57 Table 3.3: Allocation of Credit and MDTF Proceeds Category Amount of Amount of Total Amount of Percentage of the IDA the MDTF the Allocated Expenditures Credit Allocated (expressed in to be Allocated (expressed US$) Financed (expressed in US$) (inclusive of in US$) Taxes) (1) Goods, 0.86 3.73 4.59 100% Training, Operating costs, non- consulting services, consultants’ services, Operating Costs, Training, Workshops and Study Tours under Part D of the Project (2) Eligible 1.14 4.98 6.12 Such Expenditures percentage as Program under shall be Parts A, B, and C specified in the of the Project: Annual Workplan and Budget for the respective Fiscal Year (a) First 0.23 1.00 1.22 withdrawal (b) Second 0.46 1.99 2.45 withdrawal (c) Third 0.23 1.00 1.22 withdrawal (d) Fourth 0.11 0.50 0.61 withdrawal (e) Fifth 0.11 0.50 0.61 withdrawal TOTAL 2.00 8.71 10.71 AMOUNT 58 147. Designated Account: There will be two designated accounts (sub-accounts of the consolidated fund of GoL held with the Central Bank of Liberia (CBL)) for the project into which will be received the disbursements under components 1, 2 and 3 (EEPs) and component 4 ( Project Management), respectively. The sources and uses of the funds will be accounted in sub-ledgers to be maintained by the PFMU/CAGD as part of its IFMIS-based accounting and reporting. On a half-yearly basis, and in respect of Components 1, 2 and 3 IDA will front-load funds into the designated account based on the forecast net cash requirements for the following six months, linked to DLI achievements as specified in the annual disbursement schedule - Table 3.4. On quarterly basis however, and in respect of component 4 (Project Management) IDA would disburse the net half-year forecast expenditures subject to receipt of quarterly IFRs against these components. The funds disbursed would be used to finance IDA’s eligible share of financing of expenditures (EEPs) as well as eligible expenditures for TA. 148. Although the disbursements by IDA will flow into the GoL consolidated fund account for both project components/disbursement categories, there will not be a request for Bank statements as part of the reporting requirements in respect of component 1, 2 and 3 as IDA funds will constitute just a minor proportion of overall GoL balances on pooling basis. As regards components Project Management – however, this will be held in a non-pooled and earmarked sub-account of the consolidated fund and the bank statements thereto will form part of the reporting requirements to the Bank. 149. DLI Zero Disbursement: At year zero, the project provides, financing of one DLI. This amount will be disbursed to the GoL consolidated fund account against verification of achievement of the Year 0 DLIs (June 2014 delivery cut-off) by July 2014, and presentation of EEP expenditure statements by the AGD for the period January – June 2014, subject to project effectiveness. 150. Arrangements for DLIs: A reward of US$40, 000 will be paid to the Central Bank of Liberia account of each participating ministry for the achievement of each DLI target. The central government (through Ministry of Finance) will be paid US$400, 000 for each DLI if 90 percent of the participating ministries achieve the DLI targets. At the end of each fiscal quarter, each ministry will prepare a report to be submitted to the CSA and the Bank justifying the disbursement of amounts corresponding to the value of each DLI that the ministry has complied with. A quarterly review of DLIs will be undertaken by an Independent Verifier (IV) competitively recruited for this role to assess each report, verify the accomplishments of DLIs and make necessary proposals for disbursements. Payment is made for compliance with DLIs at the end of each fiscal quarter (which also corresponds to the GoL fiscal quarter). 151. The CSA will prepare a report on overall ministry DLI accomplishment for each quarter. The report will be reviewed by the Independent Verifiers and the Bank as part of the Strategic Oversight Team for verification. As DLIs represent legitimate performance targets, it is to be expected that there will be cases of non-compliance. In order to not lose the incentive to achieve the unmet DLI, a protocol has been agreed that would allow payment, at the Bank's discretion, for partial or late compliance. According to the protocol the ministry will notify the Bank of the reasons for non-compliance and the work program for achieving the DLI. The Bank, in such cases, will retain full discretion to determine the amount and timing of payments. The Bank could also cancel the payment and possibly reallocate the amount or parcel out 59 payments, for instance, paying an amount when the data is first presented and again when the indicator is complied with. 60 Table 3.4: ANNUAL ALLOCATION OF EEP DISBURSEMENTS 67 AND DLI PRICING System-Level: US$400,000; Participating ministry: Average DLI Price = US$40,000 (in US$) Fiscal Year 2014 # of DLIs Disbursement DLI Year Description of disbursement attributes (elements) Disbursement Disbursement Evaluation Protocol Date Meeting (prior to Jan 2014) DLIs for Year 0 Yr. 0 DLIs - as certified by Bank, and a statement of actual (Yr. 1 Year Zero finance - 6 months to Jun 2014 (DLIs for 1 AL EEPs supplied by PFMU/CAGD, equal to or retroactive) Year 0) DLI 68 680,000 more than the DLI values. Jul-14 Advance based on expectations for achievement of the DLIs in Year 1 (being 6 Yr. 1 DLIs 6 months Forecast EEP expenditures (Advance) to Dec. 50% of 1 months) by Jun 2014 at final evaluation to be (6 months) 2014 year 1 DLIs 340,000 carried out in Jul 2014. Jul-14 Total 0.5 1,020,000 Total Fiscal Year 2015 Balance of Advance based on (a) actual achievement of Year 1 all prior year DLIs; and (b) expectations for (i) Remaining Balance of Yr. 1 DLIs as at Jan. 2015; (ii) DLI+ 50% achievement of the DLIs in Year 2 by 6 months Forecast Advance EEP expenditures (advance of 3 year 2 December 2013 at final evaluation to be Yr. 2 DLIs equivalent to 50% of year 2 DLIs) DLIs 1,360,000 carried out in January 2014. Jan-15 Total 2 1,360,000 Total Fiscal Year 2016 Balance of Advance based on (a) actual achievement of year 2 DLIs all prior year DLIs; and (b) expectations for (i)Remaining Balance of Yr. 2 DLIs as at Jan. 2016; (ii) + 50% of achievement of the DLIs in Year 3 by 6 months Forecast Advance EEP expenditures (advance 2 year 3 December 2014 at final evaluation to be Yr. 3 DLIs equivalent to 50% of year 3 DLIs) DLIs 1,700,000 carried out in January 2015. Jan-16 Total 2.5 1,700,000 Total Fiscal Year 2017 67 **TA disbursements will be based on forecast expenditures for six months, and replenished quarterly for a further period of six months’ expenditures. Implementation and related expenditures under the TA component will continue up to project closure. 68 DLI achievement is compensated at MAC and System Level as described in p.99. Full list of DLIs can be found in table 1.2 61 Advance based on (a) actual achievement of Balance of all prior year DLIs; and (b) expectations for (i) Remaining Balance of Year 3 DLIs as at Jan. 2017; (ii) 3 DLIs + achievement of the DLIs in Year 4 by 6 months Forecast Advance EEP expenditures (advance 50% of 2 December 2015 at final evaluation to be Yr. 4 DLIs equivalent to 50% of year 4 DLIs) year 4 DLIs 1,360,000 carried out in January 2016. Jan-17 Balance of Remaining Balance of Year 4 DLIs as at Jan. 2018, Yr. 5 supported with actual EEP expenditures equivalent to or 50% of DLIs more than aggregate IDA financed amount. year 4 DLIs 680,000 Based on results of the final evaluation - determination of recoveries / extensions to be made by task team, as the project closure date is June 2016 since the TA component will Total 3 2,040,000 continue implementation to that date. Jun-17 TOTAL DISBURSEMENTS (PROJECT LIFE) 9 6,120,000 62 152. Eligible Expenditure Program (EEP): The DLI payments are intended to support ministry staff capacity development. The Project will support the Government and ministries to ensure that the IFMIS system, or any other interim system used, adequately captures actual expenditure in a credible and timely manner. The EEPs should also contribute to meeting DLI and advancing loan objectives. Following results-based investment lending principles, the Bank funds would not be separately tracked and the Bank will accommodate withdrawal applications from the Credit as long as the overall actual expenditures eligible under the EEPs are more than or equal to the amount to be withdrawn from the Credit at any one time, and cumulatively. 153. The expenditure mechanism applicable under the EEPs satisfies Bank policy and, in particular, the three pillars in OP 6.00, namely: (a) the expenditures are productive; (b) they contribute to solutions within a fiscally sustainable framework; and (c) acceptable oversight arrangements are in place. 154. Below is a brief description of EEPs and indicative TA expenditures agreed under the Project, as well as their respective minimum applicable oversight controls. Table 3.5: Ministry Level – EEPs to be financed No. CoA Object Description of CoA Element Oversight arrangements Code 1. 211101 Remuneration for SES or TOKTEN Verification scholarship awards and related staff absorbed into Civil Service expense payments by CSA, IAS, PFMU and Payroll (20%) CAGD. 2. 221605 Equipment (15%) CSA, VI and PFMU/CAGD validation expenditures ascribed to equipment of MACS 3. 222107 Staff Recruitment and Induction MAC related expenditures scrutinized by the costs (5%) CSA, IAS and PFMU/CAGD prior to payment approval. 4. 221903/221904 Training (local and Regional) CSA, VI and PFMU/CAGD validation for (60%) expenditures ascribed to the program. Table 3.6: System Level – EEPs to be financed No. CoA Object Description of CoA Element Oversight Arrangements Code CSA, VI and PFMU/CAGD validation for expenditures ascribed to the program. 1. 212102/212103 Pension payments (40%) Scholarships for Terminal Degrees and Verification scholarship awards and related 2. Certifications for Public University expense payments by CSA, IAS, PFMU and Faculty in the following areas divided CAGD. equally among the disciplines: Economics, Mathematics, Statistics, Engineering and Public Administration 221908/221907 (20%). Remuneration for SES absorbed into CSA, VI and PFMU/CAGD validation for Civil Service Payroll of Non- expenditures ascribed to the program. 3. 211101 Participating MACs (40%) 63 155. FM Supervision plan: Consistent with the risk rating a semi- annual FM implementation support mission will be carried at the PFMU and CSA. The FM supervision missions’ objectives will include ensuring that strong financial management systems are maintained for the project at the PFMU and providing adequate FM implementation guidance provided to PFMU and CSA throughout the project’s life. The supervision will include desk reviews of IFRs, testing of expenditures, review of audit reports, and evaluation of the efficiency of the payment processing, internal control processes, and funds flow arrangements. A major focus of supervision will be to review the implementation progress in the setting up and strengthening of the financial management of CSA as a key project component. Procurement A. Procurement Assessment 156. An assessment of procurement risks was carried out in May 2013 for CSA. CSA is a procurement entity like other ministries and agencies in Liberia and, therefore, has an established Procurement Unit and a Procurement Committee in response to the Public Procurement and Concessions Act (PPCA), amended and restated in September 2010. With respect to the PPCA, the Procurement Unit is currently not headed by a director of procurement as the Act requires. However there is a Senior Procurement Officer (SPO), heading the Procurement Unit, supported by a Supply/Stores Officer and a newly placed graduate from the Intensive Procurement Training Program. The SPO has some experience with procurement using the Liberia PPCA but none of the staff have experience with procurement using World Bank Procedures. It is also clear that the new graduate is more knowledgeable and is instrumental in putting up some of the systems in the past 6 months. However, he needs practical mentoring and coaching. In line with the PPCA requirements, the unit also prepares procurement plans using a template provided by the Public Procurement and Concessions Commission (PPCC). 157. The procurement management system being put in place will follow a clear and defined cycle of procurement planning, preparation of bidding documents, management of bidding process from advertisement to bid opening, bid evaluation, contract award, and preparation and signing of contract as part of the procurement cycle. It is clear that before the new graduate, there was proper procurement management system in place for CSA. There are notable challenges in the preparation of bidding documents and evaluation reports. However, the Procurement Unit has been procuring goods and minor works, through shopping and NCB under the National Budget. The unit has not been involved in the selection processes for the hiring of consultants; neither has it been involved in contract management and administration. Record keeping at the time of the review was also found to be unsatisfactory. 158. The risk for procurement was considered ‘High’. The risk is reduced to a residual rating of ‘Moderate’ in view of the mitigation measures proposed in table 3.7 below. 64 Table 3.7: Procurement Risks and Proposed Mitigation Measures No Key Risks Risk Mitigation Measures By Whom By When Recruit a procurement specialist CSA Within 3 Inadequate capacity with international experience months after 1 to handle the high (consultant) for at least 12 to 18 project volume of months to assist with handling effectiveness procurement actions large packages and provide mentoring and coaching for the Procurement Unit staff. The lack of adequate For sustainability reasons, send CSA to examine During the professional training the current staff, beginning with training life of the opportunities for the SPO, for scheduled training schedules at project staff to train and, to empower him to widen his GIMPA in Accra subsequently, to knowledge base in procurement or ESAMI in 2 have the capacity to of goods, works and consultancy Tanzania manage procurement services (GWC). Following this, using donor the other two procurement guidelines, in officers should also attend the addition to the use relevant courses in GWC, PPCC guidelines for alternating in turn in order not to public procurement. disrupt CSA plans. Lack of a Identify the internationally hired CSA Within 3 procurement procurement specialist months after champion within the (consultant) in CSA as the the system to provide logical champion within the procurement support in guidance, agency to play this role, and consultant 3 mentoring and expand the TORs to include has been coaching to providing these services. recruited procurement staff to promote confidence, and efficiency in their procurement deliveries B. Input Based Procurement Guidelines and Methods 159. Input based procurement (not based on achievement of selected disbursement linked indicators (DLIs) under the Project will involve Goods, Consultancy, and Non-Consulting Services (minor works). This will be carried out in accordance with the World Bank’s (i) “Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrower” dated January, 2011 (Procurement 65 Guidelines): and (ii) Guidelines; selection and employment of Consultants by World Bank Borrowers” dated, January 2011 and (iii) “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants” dated October 15, 2006 and revised in January 2011; and the provisions stipulated in the Legal Agreements; and the provisions stipulated in the Legal Agreements. The general description of various items under different expenditure categories is presented below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame would be agreed between the Borrower and IDA project team in the Procurement Plan. 160. National Competitive Bidding (NCB) Procedures may be used provided that: (a) foreign bidders shall be allowed to participate in National Competitive Bidding procedures; (b) bidders shall be given at least one month to submit bids from the date of the invitation to bid or the date of availability of bidding documents, whichever is later; (c) no domestic preference shall be given for domestic bidders and for domestically manufactured goods; and (d) in accordance with paragraph 1.16 (e) of the Procurement Guidelines, each bidding document and contract financed out of the proceeds of the credit shall provide that: (i) the bidders, suppliers, contractors and subcontractors shall permit the World Bank, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract, and to have said accounts and records audited by auditors appointed by the World Bank; and (ii) the deliberate and material violation by the bidder, supplier, contractor or subcontractor of such provision may amount to an obstructive practice as defined in paragraph 1.16(a)(v) of the Procurement Guidelines. 161. A General Procurement Notice (GPN) will be prepared and published in United Nations Development Business (UNDB) online, on the Bank’s external website and in at least one national newspaper after the project is approved by the Bank Board, and/or before Project effectiveness. Specific Procurement Notices for all goods and works to be procured under International Competitive Bidding (ICB) and Requests for Expressions of Interest (REOIs) for all consulting services to cost the equivalent of US$300,000 and above would also be published in the United Nations Development Business (UNDB) online, Bank’s external website and the national press. For works and goods using NCB procedures, the Specific Procurement Notice (SPN) will only be published nationally. 162. Procurement of Works: There are no known Works contracts to be financed under this project. Should they be identified later, they are expected to be minor works which will be procured using shopping procedures based on a model request for quotations satisfactory to the Bank. 163. Procurement of Goods and Non-Consulting Services: The total cost of Goods to be financed by IDA is approximately US$0.85 million. These will include Equipment for Biometrics Operations, Biometric System, IT Infrastructure upgrade, vehicles, printing services and various office equipment. The procurement will be done using the Bank’s Standard Bidding Documents (SBDs) for all procurement under International Competitive Bidding (ICB). Bidding documents to be used under NCB procedures will be with prior agreement or satisfactory to the Bank. Contracts below US$500, 000 but above US$50, 000 equivalents per contract may be procured using NCB procedures. Contracts estimated to cost less than US$50,000 equivalent 66 per contract would be procured using shopping procedures based on a model request for quotations satisfactory to the Bank. Direct contracting may be used where necessary, subject to Bank’s No-Objection. 164. Selection of Consultants: The project will finance consultancy services such as technical assistance, trainers, surveys and evaluations, assessments, policy development and updates, audits, supervision and project implementation services, estimated to cost approximately US$1.8m. Consultancy firms will be selected using the following methods: (a) Quality-and Cost-based Selection (QCBS); (b) Quality Based Selection (QBS); (c) Fixed Budget Selection (FBS); (d) Least Cost Selection (LCS) and (e) Selection based on Consultants’ Qualifications (CQS) for services estimated to cost less than US$300,000 per contract. Selection of Individual Consultants (ICS) would be followed for assignments which meet the requirements of paragraphs 5.1 to 5.5 of the Consultant Guidelines. Single Source Selection (SSS) of Consultants would be followed for assignments which meet the requirements of paragraphs 3.8 to 3.11 of the Consultant Guidelines for firms, paragraph 5.6 of the Guidelines for individuals and will always require the World Bank’s prior review regardless of the amount. Furthermore, all Terms of Reference, irrespective of whether the contract is under prior or post review procedures, will require the World Bank’s prior review regardless of the amount. 165. Short lists of consultants for services estimated to cost less than US$100,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines if a sufficient number of qualified firms are available. However, if foreign firms have expressed interest, they would not be excluded from consideration. 166. Training, Workshops, Study Tours, and Conferences: Training workshops (including training material and support), conference attendance and study tours (estimated to cost approximately US$0.95 million), will be carried out based on approved annual training and similar activities plan. A detailed training and workshops’ plan giving nature of training/workshop, number of trainees/participants, duration, staff months, timing and estimated cost will be submitted to IDA for review and approval prior to initiating the process. The selection methods will derive from the activity requirement, schedule and circumstance. After the training, the beneficiaries will be requested to submit a brief report indicating what skill have been acquired and how these skills will contribute to enhance their performance and contribute to the attainment of the project objective. 167. Operational Costs: Operational costs financed by the project would be incremental expenses, including office supplies, vehicles operation and maintenance, maintenance of equipment, communication costs, rental expenses, utilities expenses, consumables, transport and accommodation, per diem, supervision costs, and salaries of locally contracted support staff. Such services’ needs will be procured using the procurement procedures accepted and approved by the Bank. D. Other Implementation Arrangements 168. Procurement Plan: The recipient will prepare a detailed 18-month procurement plan for project implementation which provides the basis for the procurement methods. This plan will be 67 concluded and agreed on by the Government and the Bank Project team at negotiations. It will also be available in the projects database and in the Bank's external website. The procurement plan will indicate those contracts which are subject to prior review. All other contracts will be subject to post review. The Procurement Plan will be updated in agreement with the Bank Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 169. Frequency of Procurement Supervision: In addition to the prior review supervision to be carried out from Bank offices, two supervision missions (field visits) will be conducted each year, during other project supervisions, to carry out post-review of procurement actions. The procurement post-reviews will be done annually and will cover the management of procurement including staffing, filing, record keeping and contract management. The post reviews will be carried out on a sample basis and the sample size will depend on the Project procurement risk at the time of the review. In addition, post reviews of training activities (Workshops, Conferences, and Study Tours) will be conducted from time to time to review the selection of institutions/ facilitators/ course contents of training, and justifications thereof, and costs incurred. 170. Publication of Awards and Debriefing: The results of the bidding process for all ICB/LIB, Direct contracts and also for consultant contracts estimated at US$300, 000 and above, shall be published in the UNDB online in line with relevant paragraphs of the World Bank's Guidelines: Procurement under IBRD Loans and IDA Credits dated January 2011; and Selection and Employment of Consultants by World Bank Borrowers dated January, 2011. In addition, all NCB contracts shall be published in the national Press. Publication of all other procurement activities, including debriefing and review shall be subject to the relevant stipulates in the Liberian Public Procurement and Concessions Law of 2005, amended and restated in 2010. 171. Fraud and Corruption: All procuring entities as well as bidders and service providers, i.e. suppliers, contractors and consultants shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraphs 1.16 of the Procurement Guidelines and paragraphs 1.23 of the Consultants Guidelines, in addition to articles 132.2 of the Public Procurement and Concessions Act which refer to corrupt practices. Environmental and Social (including safeguards) 172. This is a category C project, and thus environment and social safeguard are not triggered Monitoring & Evaluation 173. The sector goal for public sector and governance pillar in the AfT is: “Independent, accountable, merit-based and performance oriented, well-structured public sector with improved service delivery”. The project objective is aligned to the AfT sector goal. The sub-set of the government’s program supported by IDA (the Project) focuses on the specific outcomes for which the Project can reasonably be held accountable, and which can be expected to be achieved over the implementation period of the proposed operation. The project development objective (PDO) is” improve pay and performance management of civil servants in 68 participating ministries and strengthen payroll management in the Civil Service in Liberia’. 174. The project thus corresponds to a sub-set of identified objectives and outcomes in the AfT: Objective 1.1: Advance reforms in the public sector based on a comprehensive strategy that includes vision, mandates and functions of ministries, agencies, and state-owned enterprises; Outcome: All ministries, public agencies and state-owned enterprises have published their strategies and organizational charts and adopted measurable and transparent indicators of operational performance Objective 1.2: Improve the operational performance and effectiveness of the autonomous agencies and SOEs Outcomes: Improved operational performance and effectiveness of the ministries, autonomous agencies, and state-owned enterprises, as reflected by their adopted published indicators; Merit-based recruitment and promotion instituted by all ministries, agencies and SOEs; Objective 1.3: Ensure a modern, professional, motivated and productive public sector workforce Outcome: Civil service pay scale rationalized and published and all appointments publically advertised. Ensure consistent application of modernized civil service policies and practices for the recruitment, development and utilization of skilled civil servants. 175. The reform path is set out through the PDO level results indicators and the intermediate indicators. The set of the PDO level results indicators were defined to be SMART (specific, measurable, attributable, realistic and time-bound) and selected to measure all dimensions of the PDO as follows: 69 Table 3.8: PDO Level Result Indicators Type Objective Indicator Definition/description PDO Indicator 1 Improve pay P1-4 and E1-3 grade civil Pay grades defined in management in the servants in participating Pay Strategy participating ministries ministries paid according to approved pay grades (Target: 90%) PDO indicator 2 Improve payroll Discrepancy between current Discrepancy defined in management in the civil payroll (salary) and nominal terms of number of service payroll (personnel) based on staff (and not salaries) establishment posts (Target: 0%) PDO Indicator 3 Improve performance in Participating ministries have Grade P: Professional, participating ministries instituted a system of non-Director positions, performance appraisal for P1- grades are 1-3 4 and E1-3 grade civil Grade E: Executive, servants( Target: 7) Director level, grades are 1-4. Quality criteria are outlined in the Civil Service Performance Management System: A Guide to Performance Management (CSA: March 2013) PDO Indicator 4 Core indicator Direct project beneficiaries (500), of which female (25%) 176. A number of intermediate indicators were defined and selected to signal critical steps to be taken along the results chain without which the PDO cannot be achieved. The results framework (Annex 1) lists a total of 16 such indicators. The results framework consists of the objective statement, results indicators related directly to that objective, intermediate indicators, baselines and targets, frequency, data source/methodology, responsibilities for data collections and definitions/remarks. Disbursement-Linked Indicators (DLIs) are also identified in the matrix. The project will have a dedicated M &E system managed by the Civil Service Agency. This will be supplemented by the M& E arrangements of the ‘Agenda for Transformation’ (AfT) given the close linkages between this project and the AfT. The PDO level outcome indicators and intermediate indicators are aligned to the strategy and will adhere to the same M&E arrangements. There will be quarterly reporting to the PRS Pillar IV (Governance and Public Sector Institutions) meetings. 177. In addition, independent verifications and validations for some of the DLIs will be undertaken. Documentation includes a DLI matrix and verification protocols for each DLI.. The verification protocol (table 1.3) is designed to ensure that a credible mechanism is in place for monitoring, reporting and verifying the achievement of individual DLIs. The DLI verification protocol is an integral part of the monitoring and reporting arrangements discussed above and amongst others agreed data sources and the frequency of reporting, and spells mechanisms and responsibilities of verification of DLIs including third party monitoring. The 70 achievement of the DLI is the basis for disbursement and therefore the verification evidence will constitute the supporting documentation for the Bank’s disbursement and financial management purposes. These records are subject to audit by the Bank’s external and internal auditors. Role of Partners 178. Upon effectiveness the project will be financed by an IDA Credit of SDR equivalent of US$2.00 million and a Multi Donor Trust Fund (MDTF) of US$8.71million (contributed by SIDA and USAID). Financial contributions of each of the participating development partners are summarized in the table below. Table 3.9: Donor Financing Donor Partner US$ Equiv.(Millions) MDTF- SIDA(Grant) – in SKR 3.67 MDTF-USAID( Grant)- 5.04 IDA (credit) -pooled 2.00 Total 10.71 71 Annex 4: Operational Risk Assessment Framework (ORAF) Liberia: Liberia: Public Sector Modernization Project (P143064) . Project Stakeholder Risks Stakeholder Risk Rating High Risk Description: Risk Management: Project involves activities that might lead to changes in the (i) Phased implementation accompanied by stakeholder consultation through the structures of ministries and agencies, including Strategic Oversight Team introduction of new structures. Some resistance is (ii)The Civil Service Agency (CSA) will proactively engage the Cabinet and other expected from individuals and agencies accustomed to political actors to mobilize political-level commitment and support for the project their organizational structures and ways of operation. This across the government. includes: (i) political actors who might exploit reforms for (iii) Public communications and outreach: Reform actions taken by the GOL will be political advantage (ii) officials who derive authority from discussed in popular media and other social communications networks, whether or not discretion and (iii) civil servants who are benefit from the the GOL conducts an active communications and outreach agenda of its own. The PSM discretion who fear possible loss of favors. project will help the CSA build the capacity to effectively implement this strategy. (iv) Project will incorporate “disbursement linked indicators” (DLIs) that will verify when performance targets have been met and trigger the disbursement of funds for assistance to support the subsequent stages of modernization of payroll and personnel management systems. If the performance targets for specific elements of the PSM 72 project are not met, the funds will not be disbursed. Resp: Status: Stage: Recurrent: Due Date: Frequency: Both In Progress Both Quarterly Implementing Agency (IA) Risks (including Fiduciary Risks) Capacity Rating High Risk Description: Risk Management: Weak Capacity: At the institutional level, there are still The project will fund the hiring of key project implementation team especially those capacity weaknesses that pose moderate risk to responsible for financial management and procurement. These professionals will be implementation. Weak technical capacity to support required to work closely with counterparts in the implementing agency and transfer project implementation will be a key constraint during technical expertise during the duration of the project. implementation. Procurement and financial management Resp: Status: Stage: Recurrent: Due Date: Frequency: skills are likely to impede quick implementation and will depend on availability of internationally recruited staff. Client Not Yet Due Implementation Governance Rating Substantial Risk Description: Risk Management: Coordination: There are a number of actors envisaged under this Clear implementation responsibility with all implementing entities as well as strengthened project. The key stakeholders namely the Governance strategic leadership of the project by the Director General (CSA). There will also be a Strategic Commission, Civil Service Agency, the Liberia Institute of Oversight Committee (SOT) comprising key component stakeholders and participating Public Administration have worked well in the past, but there ministries. The SOT will be in charge of the overall project implementation and the reform have been challenges. Poor coordination might affect the ability program that supports it. The project implementation manual will clearly spell out the role and to delay commencement of project activities, and momentum. function of every participating agency. Resp: Status: Stage: Recurrent: Due Date: Frequency: Client Not Yet Due Implementation Quarterly Risk Management: As implementation of the fiduciary management arrangements under the project will be catered for under the direct control of the strong and independent PFMU, the otherwise resource constraints at the project implementation unit will be obviated by the recruitment of an incremental FM staff to the PFMU. In addition to financial and procurement oversight outlined above, periodic audits will be carried out. It will also be required that financial statement is presented during the Steering Committee as well as the Inter-ministerial Meetings to identify specific issues of mismanagement of project funds. In the initial phase of the project, all 73 procurement activities will be subjected to prior reviews by Bank procurement specialist. Resp: Status: Stage: Recurrent: Due Date: Frequency: Client Not Yet Due Preparation Quarterly Project Risks Design Rating High Risk Description: Risk Management: The project design is slightly complex and might pose Project design will be appropriately sequenced to take advantage of previous reforms as implementation challenges. well as reflected the inter-relationships among the various components. A project implementation manual will be prepared to outline the linkages of every component to the overall project goals, and presented at an orientation workshop as part of project preparation. Additionally, implementation will be supported by the Country Office based TTL. Resp: Status: Stage: Recurrent: Due Date: Frequency: Client In Progress Both Social and Environmental Rating Low Risk Description: Risk Management: Project falls into environmental category C. N/A Resp: Status: Stage: Recurrent: Due Date: Frequency: Program and Donor Rating Substantial Risk Description: Risk Management: USAID and SIDA have expressed their interest to finance The effectiveness of the Financing Agreement is subject to the execution, effectiveness the Project but have not received final approval to do so. and right to make withdrawals under the relevant co-financing agreement and, if the co- There is a risk that the co-financing may not materialize. financing does not materialize the Bank could restructure the Project. Resp: Status: Stage: Recurrent: Due Date: Frequency: Both Not Yet Due Implementation CONTINUO US 74 Delivery Monitoring and Sustainability Rating Substantial Risk Description: Risk Management: Contracted implementation activities may not be delivered Sufficient lead time will be allowed during contracting time to make up for lost time on time due to pressure of work or weak skills, especially during delivery. Additionally, project management team will benefit from ongoing among local suppliers. Additionally, similar projects have training in project management to support skill building and rapid execution of project found it difficult to find project management team with activities. Country office based TTL will also support the project implementation team. sufficient skills. Specifically, there will be at least two formal missions per year; close participation of agency heads; regular meetings with Task Team and dedicated project M&E personnel. Sustainability issues will be reiterated with client at every step of the preparation. Resp: Status: Stage: Recurrent: Due Date: Frequency: Both Not Yet Due Implementation Other (Optional) Rating Risk Description: Risk Management: Resp: Status: Stage: Recurrent: Due Date: Frequency: Other (Optional) Rating Risk Description: Risk Management: Resp: Status: Stage: Recurrent: Due Date: Frequency: Overall Risk Overall Implementation Risk: Rating High Risk Description: The lack of coordination of the reform agenda and the potential for blockages of proposed reforms is a major risk. There are capacity shortages at all level of government that further complicate the reform context. 75 Annex 5: Implementation Support Plan LIBERIA: Public Sector Modernization Project 179. This project is built on the fundamental principle that human resources are key drivers of any reform to happen. The focus of change management is how to create the culture of reform in the ministry’s human resources and allow them to accept and bring to useful practice those means and tools to reform in order to achieve intended results. A basic step is putting orderly arrangements of functions and assigning responsibilities under clearly defined accountabilities. Making organizational performance indicators clear is key element. Fundamental to this step is a definition of measurable and time bounded performance levels of human resources assigned to production or delivery processing organizational units. 180. With this in view, the priority task is the strengthening of human resource management to serve as a domain of change in the capability of agencies. Using its functions and responsibilities (human resource management), appropriate change management processes and procedures shall be designed, carried out and assessed for continuous improvement. With the Change Teams as the propeller for those intended changes to occur, the change management process is expected to gradually install in the ministries and agencies the: • right organization structure and right function; • recruit and appoint the right personnel to the right staffing levels and right position or job structures; • appraise individual performance to encourage personal growth and development of those staff selected to continue to do the work in the new organization (as well as retrenchment, re-skilling or retirement or lay-off for non-performers); • establish a mechanism for grievance and appeals; • monitor performance to establish database and information system that shall allow effective planning and continuous performance improvement; and • Improve performance using strategic planning and results-focused implementation program. 181. Establishing the basic building blocks of the reform and change management in the ministries and agencies is a crucial task. It is geared towards opening-up an enabling environment for further reforms and continuous operational services (e.g. education, infrastructure and other services) improvement. The processes involved are multi-faceted, and how these are integrated into a coherent and synchronized way using a human resource management system approach is critical to project success. 182. The Strategic Oversight (SOT) and the Leadership Teams comprise key project stakeholders. These are the Governance Commission, Civil Service Agency and the Liberia Institute of Public Administration (and participating ministries). The SOT gives the direction and outlines for the reform process. The change management at each ministry will be driven by 76 a reform-focused team called the Change Team (CT). It will be appropriately staffed and resourced to serve as a central coordination and reform and restructuring management unit at the ministry level. This unit will support the ministry in its overall implementation of the ministry level project component. The Change Team shall be headed by a Coordinator. He/she shall perform as the overall project leader at the MAC with assistance from the technical specialists. 183. In this exercise, the Change Team (CT) is considered as the tool to operationalize those processes and procedures. The CT shall be created at the ministry level in key specialized areas in human resource management, change management, planning, job classification and pay and compensation, quality assurance, and information and communication. The CT will drive the “On-their-own Approach” supported by technical assistance provided through project funds. All participating agencies are encouraged to take active participation in this process of reform. Change Teams in ministries/ agencies will be responsible for managing the individual organization’s reform agenda and reporting on the progress of the results targets. This approach is a better approach since it is a “bottom up” instead of the traditional “top down” approach and will yield stronger “ownership.” Implementation Support Plan 184. This project will require intensive supervision at the throughout its implementation to ensure sufficient attention to each of the components. Regular implementation support will be provided by the resident Task Manager based in Monrovia. This will be complimented by USAID and SIDA staffs that will be included in support missions. As such, two standard missions will be undertaken during the first year of implementation in addition to ongoing support by Monrovia based TTL. In the second and third year, it is anticipated that the implementing agency will have strengthened internal capacity to support implementation and project implementation would have taken off. Again, two implementation support mission are expected for each year. It is also expected that an impact evaluation will be carried out at various as part of the mid-term review stage of the project. 185. In order to ensure sufficient up take of project activities, it is envisaged that specialized technical expertise will be embedded within the implementing agency to provide support in strategic areas such as human resource management, payroll management, and communications. As part of project management, each of the three components will be assigned an experienced internationally recruited technical lead to work alongside civil servants who would shadow them and benefit from their expertise. Table 5.1: Implementation Support Time Focus Skills Needed Resource Estimate 0-12 months  i. Launch • Task Management mission • HR Specialist • ii.Monthly • Payroll Specialist 77 project team • Communication meetings Specialist • Monitoring and Evaluation Specialist • Procurement Specialist • Gender Specialist 12-48 months  i. Mid-term • Task Management review • HR Specialist • ii. Two full • Payroll Specialist missions • Communication annually Specialist • Monitoring and Evaluation Specialist • Procurement Specialist • Gender Specialist Skills Mix Required Skills Needed Number of Staff Weeks Number of Trips Task Manager 36 Field-based HR Specialist 12 6 FM 12 Field based M&E 12 6 Procurement 8 Field based Communications 6 3 78 Annex 6: A Political Economy Driven Implementation Approach in Liberia 69 LIBERIA: Public Sector Modernization Project I. Introduction 186. The rebuilding of post conflict Liberian Civil Service commenced immediately after the cessation of hostilities and the signing of the Accra Peace Accords in August, 2003. The launch of the Civil Service Reform Strategy, an ambitious but technically sound plan of action to strengthen public sector management, in 2009 set the stage for broader engagement and deepening of initial efforts. Since then a number of actions have been undertaken. Nevertheless, the main issues and challenges facing the Civil Service remain prominent. In addition to largely structural issues related to institutional capacity e.g. resource constraints and implementation capacity, there are political economy dynamics that have caused blockages, slowed down reforms, or subverted them altogether. These include: poor alignment between strategy and the political environment, absence of a national consensus on the strategy and implementation process, the potentially significant socio-economic impacts of “right-sizing” government, weak strategic leadership and coordination, and a high number of political appointees occupying largely technical positions. 187. The challenges have crowded out the reform space, and undermined the emergence and successful completion of the foundational processes required for the strengthening of the Civil Service. These challenges are deeply embedded in the structure of the Liberian state. Ministries and agencies remain semi-autonomous, and have no reporting relationship to the Head of the Civil Service, in this case, the Director General of the Civil Service Agency. They have consequently challenged the authority of the CSA to provide directives, or simply ignored its pronouncements on key civil service management issues. 188. This note proposes a politically feasible approach to civil service reform that focuses on the individual ministry as the center of reform. Such an approach would allow ministers to exercise their functional authority in managing the reforms in respective ministries, while also allowing the Civil Service Agency to manage the reform process and the Civil Service generally, consistent with its mandate. The Civil Service thus enforces the structure, while the ministries focus on the functions, yet within a politically acceptable space that allows ministries to innovate while retaining their political and executive independence. It would be consistent with recent thinking on public sector reforms e.g. “Going with the grain” (Booth, 2011; Srivastava & Larriza, 2012); ‘distributed agency” (Andrews, 2011); “Problem Drive Iterative Adaptability” (Andrews et al. 2012); and “program for results” (World Bank, 2012; Strivastava & Roseth 2013). 189. Following this introduction, the next section will focus on a brief appreciation of the literature on form, function, context and state capacity. Section three and four will respectively discuss the problems of form and function. Section five will identify and discuss 69 This note builds on background work by Quan Dihn (2011) and Kithinji Kiragu (2012). 79 the reform blockages and their causes. The next section discusses the political economy context of Liberia the while section seven will propose a political economy approach to managing the reform context. Section eight will discuss how to align the incentive structure, particularly focusing on the ministry as the reform entry point. A final section offers the conclusion. II. On form, function, context and rebuilding state capacity 190. The debate on why reform fails remains alive with a number of explanations. A popular reason has been “ownership or political will” which, it has been argued, is critical for reforms (Nunberg 1997). Nevertheless, the key problem with the “will” argument was the lack of a clear definition of what it actually meant, or how much of this was necessary for reforms to succeed or how to know it when we see it (McCourt, 1998). Where it was seen to be present, it led to the transplantation of practices that were ill-suited to developing country contexts, all subsumed under the banner of best practice. This reform menu was fed even to countries that “were otherwise not suited to reform” 70, leading to their failure, and a direct repudiation of adherence to best practice. More importantly, such reform ended up focusing on ensuring that the client government then ended up implementing programs (projects) of reform that mimicked what has worked elsewhere, and which do not have relevance to its own context. Cautioning against this “isomorphic mimicry” recent research has called for appreciation of context as a basis for crafting an “authorizing environment” where relevant, politically feasible reforms can actually take place (Pritchet et. al., 2011; Andrews et. al., 2012). 191. But, there is no shortage of explanations as why public sector reforms fail. These arguments build on continuing work in this area that seek to move from “best practice” or “best fit” to “conscious experimentation and innovation”- recognizing not only the political economy context, but also the problem context and the nature of the tools and particular skills available within the ecosystem of the proposed reform. More fundamentally, it negates approaches based on “strong priors”, about what will work in a given reform space. Indeed, applications of this process in World Bank projects seem to suggest that engaging “a broad set of agents” in arriving at a “particular problem” in a local context seems to be a viable option (Strivastava & Larizza, 2012; Srivastava & Roseth 2013). These new approaches are moving the discipline closer to answering the question: what types of reforms are most likely to “work in the average country or the education sector” (World Bank, 2012). This therefore suggests that context also remains an important aspect of the reform environment, hence the importance of appreciating the political economy of the reform context. Brinkerhoff and Crosby (2002) appreciate the interactive and complex nature of the reform process, which they see as both technical and political process requiring consensus building and participation of key stakeholders. In other words, reforms entail disrupting the existing order and ideologies. In the case of Liberia, as in many countries undergoing radical institutional reforms, professionalization of the public service and introducing meritocratic principles in appointments and promotions would most likely encounter resistance. 70 See: World Bank ( 1998), quoted in Willy McCourt ( 2003). “Political Commitment to Reform: Civil Service Reform in Swaziland”, World Development, Vol. 31, No. 6, pp. 1015–1031, 2003. 80 192. While agnosticism about strong priors is encouraged (e.g. Rodrik 2008; World Bank 2012) consensus on what works remains elusive. Recent contributions to the debate with a focus on ‘functions’ as opposed to ‘form’ (Andrews 2012) have moved closer to providing a template of how this could be approached in real life. Andrews (2012) has advised that in order to enhance the capability of the state, public sector reform engagement should focus on improving the functionality of government (p. 6). He offers four ideas that could help direct this kind of engagement namely (i) a problem orientation (ii) creation of an authorizing environment (iii) active learning, and (iv) engaging key agents broadly. This body of literature suggests that “form” as opposed to “function” should drive reform decisions. 193. Yet with respect to Liberia, as with countries that have been destroyed by conflict, a focus on both function and form is inevitable. We argue that Liberia faces both a (i) function and form (structural) problem; and that (ii) through a reinforcing feedback loop, aspects of its structure (form), affects it performance (function) and that (iii) these prejudicing features of the Civil Service are deeply rooted in its political economy, wherein lies the answer to addressing the larger and enduring questions of public sector performance in post conflict Liberia. The note further suggests that the two extremes of purely “formal” processes of reform as advanced by Andrews et al, ( 2012) or “isomorphic mimicry” as derided by Pritchett et al (2011) are not sufficiently capable of reversing the ‘capability traps’ of countries emerging from conflict. A hybrid approach that addresses both form and function, but which also accounts for political economy constraints offers better potential for success in these kinds of contexts. III. Explaining the problems of ‘form’ and ‘function’ in Liberia 194. Recent engagement in public sector reform in Liberia has focused on solving both the structural and functional problem of rebuilding the civil service in a fragile state. This has mainly been through the efforts of development partners since the end of conflict (DfiD 2004; DfiD 2005; World Bank 2007; World Bank 2011; USAID, 2012). This focus has not been accidental as it arises out of the necessity of reversing the effects of Liberia’s destruction during the more than a decade and half of conflict. Structural rebuilding has been accompanied by near simultaneous effort to strengthen the service delivery- functional – aspects of the Civil Service to get it to perform its core functions. These efforts have focused on addressing important structural and functional bottlenecks namely: (i) the lack of clear mandates and institutional structures within ministries and agencies; (ii) low capacity among technical personnel in the Civil Service (iii) poor service delivery at the county level, and even at the national level (iii) high level of political appointees in the Civil Service (iv) weak human resource management systems, including pay and pension administration and (v) weak institutional structures to support professionalization of the Civil Service. These problem, have consistently been identified as being at the center of rebuilding the post conflict civil service in Liberia. 195. The residual effects of a recovering post conflict country are demonstrated in the weak institutional quality and poor performance of the Civil Service. This is perhaps the clearest indicator of a civil service that is unable to provide quality services to its citizens. Liberia lags behind Sub-Sahara (SSA) average on the quality of public administration, scoring 2.5 compared to 2.9 SSA average in the CPIA for 2011. Notably, over the past two years, Liberia has not recorded any improvements in this indicator, in spite of an upward trend on the 81 CPIA scores generally. Cumulatively, the score for public sector management and institutions is 2.8 compared to 3.0 for SSA. Similarly dour conditions are reflected in the World Wide Governance Indicators for 2011 where Liberia scores in the lowest percentile ranking (0-8th) in the Government Effectiveness indicator. These aggregated scores nevertheless mask important improvements in public sector performance over the past five years of measurement, and do not reflect the very dismal starting point for a country that has only been out of conflict for less than ten years. But, they also signal the enormity of the challenge of reconstructing the Liberian Civil Service and deepening the largely unfinished work of regenerating the capability of the Liberian state, currently underway. a. The structural problem- form 196. Unclear mandates and overlapping functions continue to be a feature of ministries and agencies and undermine institutional effectiveness: Several ministries still perform overlapping functions, while others are too unwieldy to be effective. 71 While initial work to define the structure of about 14 ministries has been completed, implementation remains a challenge. Important elements of the component yet to be tackled, including those relating to: (i) realigning ministries' portfolios: clarifying the mandates of ministries, removing overlaps, and establishing new strategic directions and (ii) developing a framework for depoliticizing the service: reduce the layers and the number of political appointments in ministries and agencies. Furthermore, there is the critical issue of ensuring that the functional reviews lead to meaningful organizational and staffing changes, and would be accompanied by stronger staffing controls than have existed in the past to reduce unauthorized employment that continues to crowd the wage bill. 197. The Civil Service remuneration structure is inequitable and comprises disparate and highly opaque wages. The compensations structure comprises discretionary allowances that have been a source of tension in the Civil Service. Selected senior officials are entitled to a discretionary allowance (general allowance) covered by a budgetary allocation to respective ministers. 72 A corresponding “special allowance” category comprises mainly political appointees including Assistant Ministers, Deputy Ministers and Ministers. Both types of allowances are generally salary top-ups on the meager Liberian dollar salary and are paid in US dollars. A medium term pay and grading system was approved in 2010, but has not been implemented. The consequences are alarming: measured by all ratios during the years 2009- 2011, Liberia’s wages and salaries are among the highest for 13 ECOWAS countries. 73 For instance, at 10 percent of the GDP in 2011, it was second only to Cape Verde with 12 percent. 74 71 For instance, in spite of the vastly different mandates, one ministry is responsible for Lands, Mines, Energy; Water and sanitation straddles about three different ministries and agencies; responsibility for youth and children is spread among three different ministries: Education, Health and Social Welfare, and Youth and Sports. 72 In 2007 the government introduced a mandatory monetary allowance of US$200 per month for Director (and equivalent) level civil servants. This is in addition to a performance allowance, which remains largely at the discretion of Ministers and heads of agencies. See: Republic of Liberia (2010). “GOL Policy Regarding General Allowances for Civil Servants”, p.1. 73 World Bank (2012). Public Expenditure Review: Options for Fiscal Space Enlargement ( Draft), p.10. 74 World Bank (2013). Options for Fiscal Space. 82 198. The management of the payroll, including entry and exit, has not been rationalized in spite of numerous efforts. This includes fraudulent and unauthorized addition of personnel into the payroll and transfer of salary to accounts of ghost employees. A 2012 PEFA assessment documented a number of weaknesses in payroll control including poor reconciliation of the payroll and personnel databases, incomplete personnel database and personnel records and a lack of periodic reconciliation between payroll and the personnel database. 75 The government has been undertaking a payroll cleaning, including through the establishment of a Biometric Identification System, over the past three years, but there has been little success in improving payroll integrity, and managing the increasingly ballooning civil service wage bill. With no establishment controls in place, ministries and agencies have continued to add employees into the payroll, in some cases, by-passing the Civil Service Agency’s requirements for Personnel Action Notices. The wage bill (including salaries, general and special allowances), has thus risen from a modest US$21 million in 2003 to US$212 million in 2013.76 199. The civil service pension regime is governed by a confusing legal environment that incorporates about seven to nine laws. These provisions are incomplete and do not provide adequate protection for pensioners. The pensions cover only retirement and survivors, but not those who are disabled or die during active service. Moreover, the pension does not cover full compensation and thus do not reflect the pre-retirement wages they are intended to replace. More importantly, current pensions are based on the value of the Liberian dollar when it was at par with the US dollar several years ago. This has not only devalued the already meager pensions, but continues to impoverish pensioners. The government has recently developed a pension reform strategy that includes the introduction of a contributory pension scheme. b. The performance problem – function 200. Capacity remains a challenge in the public service. Low technical capacity in the government has undermined efficiency in the public sector and hindered service delivery. Interim capacity surge arrangements such as the Senior Executive Service (SES) and the Transfer of Knowledge through Expatriate Nationals (TOKTEN) have provides much needed relief but have not succeeded in providing lasting solutions to capacity gaps in the Civil Service. There is still a gap in the “big middle’’ between the top level where decisions are made and the lowest level of the Civil Service where implementation happens. Additional short term solutions such as the Financial Management Training School and In-service training intervention such as the Procurement program at the Liberia Institute of Public Administration would have to be expanded and graduates mainstreamed into the Civil Service career track. 201. There is no performance management system at the institutional level. The division of labor (task allocation) in public institutions is not always clear and performance requirements in a particular job are never executed, thus undermining staff ability to achieve acceptable 75 IMF et al. (2012). “Liberia: Public Expenditure and Financial Accountability”, p.56-7. 76 General allowances were initially intended to reward performance at the discretion of Ministers, but have now become a de facto salary budget as many ministries use the vote to pay non-payroll staff. Special allowances are top- ups for political appointees and Director level appointments. These appointees are also eligible for fuel and telephone allowance, and are entitled to a government owned chauffer driven vehicle. 83 performance in their respective functional areas. Additionally, identifying, measuring, managing, and developing the performance of the staff in a public agency to figure out how well they are performing and then to ultimately improve that performance level, has never been mainstreamed. No systematic analysis and measurement of staff performance, including communication of that assessment to the staff to use to improve performance over time have been executed. In public service, the civil servant builds value. Consequently, performance management at the individual staff level is essential and the case for implementing a performance management system in post conflict Liberia to measure and improve employee performance is growing stronger every day. Therefore, establishing a performance management system to increase performance not only meets this goal; it will also decrease turnover rates, aid public institutions achieve their goals and peak their service delivery capacity. 202. There are no performance indicators at the organizational level, and thus no service delivery standards (benchmarks). There is no systematic way of measuring value addition by civil servants: no goals set, no systematic feedback on performance, and documentation of outcomes. Public institutions do not conduct job analysis to determine what a job entails. As a result civil servants are never evaluated for their performance. To be sure, there is over display of vision and missions statements, but these are not accompanied with a commensurate service delivery that could demonstrate an appreciation of the mission. There are efforts by the CSA to introduce performance appraisal following the development of a policy and instruments. But, HR managers in MACs are not sufficiently trained to implement it, nor can civil servants be engaged in performance appraisal given the uncertainties around task and tenure. Similarly, there are not clear sanctions for non-performance and, as a result any attempts at disciplining staff, is almost always, routinely interpreted as biased. IV. Explaining the context problem: political economy and reform space 203. In addition to the largely structural (form) and performance (function) problems, the political economy of Liberia has also undermined the emergence of an effective post conflict Civil Service. Deep divides continue to exist in the Liberian society and are reflected in the structure of the Civil Service, its employment practices, remuneration, and career progression. Divisions that emerged during the founding of the nation and inflamed by decades of conflict have created a complex socio-political environment that challenges extant notions of a value-driven, “accountable and merit-based Civil Service”. The Liberian state is still largely centralized and its 15 county superintendents are appointed by the president and operate with minimal statutory powers. Ministers also appointed by the president, are by definition only accountable to the president. The Civil Service Agency, cannot, therefore, give directives or sanction ministries that do not comply with Civil Service rules. A “joined-up, all of government” approach to reform has, therefore, not emerged. Ministers tend to focus on their individual organizational mandate, and with only minimal attention to reforms with government-wide appeal. A viable reform program would have to be centered on important power nodes and strategic, non-traditional entry points at the Ministry level asymmetrically. 84 204. Power and interests have combined to either promote or hinder reforms. The President and the Minister of Finance have the most power and influence on the proposed reform objectives and have publicly stated their commitment. 77 Nearly all government officials claim commitment to support reforms, yet progress has been slow. This could be attributed to resource and technical capacity challenges, but also to the absence of clear decisions and support for far reaching reforms. For example, with respect to pay reform, while the issue of merging the base pay and allowance seems to have been agreed, the decision on the currency of payment has stalled progress in this area (Liberia is a dual currency economy- a significant portion of civil service pay is in US dollars). Similarly, professionalizing the civil service with the introduction of Principal Administrative Officer is widely accepted; however, opposition to it has emerged from ministers who fear losing executive power. Finally, civil servants are divided in their support for reforms. Predictably, those that occupy their positions through patronage have no interest in the reforms and are against it, while those recruited on merit see reforms as an opportunity for transparency and security in the civil service. Important reforms that would affect decision makers’ power and authority, and those likely to affect political support, have largely been sidelined. Significantly, those with interest to make the reforms happen have lacked the power to enact them (e.g. Civil Service Agency and Governance Commission). These interests are grounded in the structural foundations of the Liberian state and constitute the enduring bottlenecks and the greatest hindrances on the path toward the emergence of an independent, merit based and accountable public sector. 205. The nature of the state and the attendant intra-societal arrangements continues to support a centralized bureaucratic state with little local level involvement. The 1986 constitution grants the president of Liberia enormous appointment and dismissal powers that inevitably undermines the emergence of a meritocratic civil service. The accountability and power relationships evolving from settler elite more or less continue to determine the patronage and clientelism in the Civil Service in post conflict Liberia. A governing principle based on the assumption of cultural superiority set the stage for an exclusive system that has consistently constrained peace and sustainable development. The upshot: Liberia “has never in its history known anything approximating the current, technocratic idea of good governance…” 78 206. Second, formal systems of public administration continue to suffer from a hierarchical system of capture by elite interests. Civil servants tend to be insecure, and believe that they serve at the behest of a patron and not as part of an efficient and results- oriented administration. For example, the pension system was generally understood to be the President’s token of appreciation for good service to the country, and has remained, not only a pittance, but also wholly non-contributory. A history of patronage has combined with post conflict complication to produce a highly unequal compensation regime. It has created a dual pay structure- with salary top ups for a few- within the Civil Service. Officially intended to motivate skilled professionals to stay in the Civil Service, this discretionary system has promoted bias, and remains a significant source of tension in the public sector. 77 Suba Belle Associates (2013). Stakeholder Analysis for Public Sector Modernization Project (Processed). 78 Ellis, S. The Mask of Anarchy: The Destruction of Liberia and the Religious Dimension of an African Civil War. London: Hurst & Company, 2005, xxv. 85 207. Third, the creation a dual political system at the founding of the state- the one providing for the elite settler community that dominated national governance and politics generally, and the other catering to native Liberians in the hinterland continues to affect delivery of government services. This dualism infuses all state -society- interactions, limiting the access the majority of Liberians have from services normally delivered by the state, and undermining efforts to remake the character of post war Liberia. The majority of services are concentrated in Monrovia, and given the insecurity of tenure that pervades the system generally, as well as the fluid terms and conditions of service, most government officials are reluctant to be posted outside Monrovia. 208. Finally, deep divides continue to exist in the Liberian society. They are reflected in the structure of the Civil Service, employment practices, remuneration and career progression. Divisions that emerged during the founding of the country interact with tensions between different tribes and regions to create a complex socio-political environment that is reflected in government institutions. Research to date suggests that exclusion, institutional decay, patronage and clientelism that undermine Civil Service reform efforts and a lack of trust in the institutions lies at the core of Liberia’s fragility. Exclusion from services and access to economic opportunity together with the legacy of tension between different groups continues to shape the political and economic dynamics. These four factors have in turn led to reform blockages that continue to plague the civil service reform agenda. These are: Poor alignment of political environment and sequencing of reforms, Absence of a national consensus on strategy and implementation modalities, and weak strategic leadership and coordination. We discuss each in turn. V. Explaining reform blockages: identify the causes 209. Poor alignment of political environment and sequencing of reforms. Both the Civil Service Reform Strategy (CSRS) promulgated in 2008 and the draft Public Service Reform Strategy envisaged a comprehensive approach to reform. However, the major challenge remains that of aligning strategy to political context, capacity and sequencing. The professionalization of the public service and introduction of meritocratic principles in appointments and promotions in the service has predictably produced resistance from both those who exercise and those who benefit from political patronage. Predictably, there has been little success in implementing the stated aspirations of the Civil Service Reform Strategy. 210. Absence of a national consensus on strategy and implementation modalities. Even though there are political assurances about commitment to a national reform agenda, there is no coherent “all of government” approach to reform. There is little consensus among the key institutions and leaders of the Government of Liberia about the strategy and its implementation modalities. Thus, for example, key stakeholders e.g. MoF, CSA and, GC and each has its own strategy and priorities which do not appear to be fully synchronized. The senior political leadership of key line ministries, which employ the vast majority of Liberian civil servants, has not been engaged in consultations about the need for and nature of potential reforms. Pervasive negative effects of political patronage that characterizes all appointments in Liberia’s public service remain the dominant factor in current payroll and personnel management. Yet, without some significant progress towards de-politicization it will be difficult to make lead way in 86 professionalizing the service, and building sustainable capacity for its role in the implementation of development programs, and effective delivery of public service. 211. Weak strategic leadership and coordination. The challenge in implementation of reforms starts with securing local champions. The Liberian context is complicated by the near autonomous structure of ministries and agencies; there is no reform champion with the appropriate institutional command to spearhead reforms across the entire government. The literature of public sector reforms is clear on the need for reform champions, especially the need for political will and indigenous leadership. 79 Implementation of reforms will gain satisfactory momentum and traction only when, firstly, the key institutions at the center of government achieve a consensus on the reform priorities and implement modalities. Secondly, success will depend on the GOL’s ability to create ownership and obtain the active support of a range of “distributed agents 80 .The ministries and agencies at the center of government should collaboratively mobilize, guide and oversee on implementation of necessary reform measures by sector ministries and agencies. 212. Low implementation capacity. Capacity remains a major constraint to achieving reform objectives in the civil service. As evident in the reforms already initiated, implementation of the reforms is often complex in technical, organizational and institutional dimensions. The CSA, like line ministries and agencies, is constrained to actively engage MACs in the reform of the management practices in the Civil Service by two factors: (i) the CSA has neither direct functional nor professional control to influence human resource management of individual ministries and agencies, and (ii) the patronage culture that pervades appointments in the ministries does not allow either the center (CSA) or the management in MACs, including HRM officers to perform their roles and functions with any professional orientation; and (iii), while some existing human capacity is under-utilized, the payroll and personnel management staffs of all MACs still lack much of the technical knowledge and skills they need to efficiently and effectively perform their functions. A deferent approach/orientation is indispensable. VI. (Re) Aligning the Incentive Structure: Agencies as reform entry points 213. In order to address this collective action problem, the next phase of the reform program will promote an "on their own approach". This "bottom up" approach is preferable in the Liberian context where accountability systems and incentive structure is diffused. While strong political leadership and support is critical, an exclusively "top down" approach is insufficient to yield stronger "ownership" as ministries view their agencies as autonomous entities, and therefore tend to ignore instructions from the Civil Service Agency. Ministries and agencies will thus be required to be active participants in their own reforms. Rewards would be provided on the basis of agreed criteria. The MACs would responsible for executing a reform contract agreed upon with key stakeholders, including the Ministry of Finance (MoF), CSA and the Office of the President. This would be based on a set of criteria, known as Disbursement Linked Indicators. Terms and conditions for accessing the funds shall be agreed and stipulated 79 Derick W. Brinkerhoff and Crosby B.L. (2002). Managing Policy Reform: Concepts and Tools for Decision Makers in Developing Countries, Kumarian Press. 80 Andrews, Matt (YR). See Matt Andrews: “The Limitations of Institutional Reform in Developing Countries.” 87 in the contract. This incentive based participation would allow individual ministers to drive the reform agenda, and take credit for success. A Change Team will be created in each participating ministry and expected to drive the reforms. It will be staffed with specialized staff to lead specific reform areas (see fig. 6.1). Establishing the basic building blocks of the reform and change management in the ministries and agencies is a crucial task towards opening-up an enabling environment for further reforms and continuous operational services (e.g. education public health, infrastructure and other services) improvement. 214. The proposed reform path in this project builds on the fundamental principle that human resources are key drivers of any reform to happen. The focus of change management is how to create the culture of reform in the ministry’s human resources and allow them to accept and bring to useful practice those means and tools to reform in order to achieve intended results. A basic step is putting orderly arrangements of functions and assigning responsibilities under clearly defined accountabilities. Making organizational performance indicators clear is key element. Fundamental to this step is a definition of measurable and time bounded performance levels of human resources assigned to production or delivery processing organizational units. With this in view, the priority task is the establishment of a Human Resource Management Unit that serves as a domain of change on human resources systems. Using its functions and responsibilities (human resource management), appropriate change management processes and procedures shall be designed, carried out and assessed for continuous improvement. Table 6.1: Operationalizing the Political Economy Driven Implementation Operationalizing the Political Economy Driven Implementation 1. Strategic Oversight Team identifies the participating ministries 2. Participating ministries agree on specific indicators and targets for all DLIs 3. Strategic Oversight Team approves DLI indicators and targets 4. Independent verifier evaluates progress and reports to Strategic Oversight Team when it considers that DLI targets have been achieved 5. Strategic Oversight Team consults with its stakeholder body and, on the basis of that consultation, confirms the recommendation of independent verifier (if the recommendation is not confirmed, the Strategic Oversight Team would request the independent verifier to work with the ministry in question to provide additional corroboration of the recommendation) 6. The Strategic Oversight Team authorizes disbursement of DLI rewards 7. Disbursement to qualifying ministries 215. With the Change Team as propeller for those intended changes to occur, the change management process is expected to gradually install functioning organization structures in ministries and agencies. Establishing the basic building blocks of the reform and change management in the ministries and agencies is a crucial task towards opening-up an enabling environment for further reforms and continuous operational services (e.g. education public 88 health, infrastructure and other services) improvement. The processes involved are multi- faceted and how these are integrated into a coherent and synchronized way using a human resource management system approach is an overarching matter to take to fruition. 216. In this exercise, the Change Team is considered as the tool to operationalize those processes and procedures (see fig 1). The Change Team shall be created at the central level in key specialized areas in human resource management, change management, planning, job classification and pay and compensation, quality assurance, and information and communication. The Change Team will drive the “On-their-own Approach” - All government agencies are encouraged to take active participation in this process. Fig. 6.1: Organizational Arrangement of a Change Team of a typical Ministry Deputy Minister CSA or delegate of Change Agent the Minister MIS HRM P&G OD & Specialist (With AIC Specialist Planning Human Resource Specialist) Specialist Department Department of Planning of respective ministry Line Line Line Line MIS Group Department Department Department Departments 217. A third party verification team of independent consultants will be constituted to monitor implementation and results of the reform program. Technical assistance and training will be provided to the verification team as necessary, including through engaging external experts. The verification team will periodically (potentially once a year, to align with a project ISR) assess the performance of the ministries vis a vis the reforms and performance standards set in place through extensive interviews and review of performance data. VII. Conclusion 218. This analysis aimed at providing an understanding of the key political economy drivers of public sector reforms in Liberia. It has demonstrated that reform momentum has been slowed by both structural and institutional factors- largely conditioned by politics. It concludes that improving the chances of reform success will require constant engagement with 89 key sector ministries directly, in addition to working with relevant implementing agencies. Further analysis of the political economy of reforms will be useful during project implementation to detect and take advantage of new windows of opportunity. Finally, implementation will need to be tampered by a sense of realism about reform as a process. 90 Annex 7: Donor Engagement in Public Sector Reform in Liberia Liberia: Public Sector Modernization Project I. Introduction 219. The decline of the Liberian civil service started in the 1980s. This was the result of political turmoil that preceded the full blown conflict that would engulf the West African country for much of the 1990s up to the middle of the first decade of the 21st Century. Political interference, low wages, poor motivation, weakening capacity and loss of confidence in key institutions responsible for managing the Civil Service e.g. the Civil Service Agency (CSA) and the Liberia Institute of Public Administration (LIPA) primed the civil service for an eventual collapse that was only accelerated, and worsened by the onset of civil war. 220. A decade and a half of civil conflict destroyed the institutional structure of the Civil Service. During the conflict, many experienced and qualified professional staff left the public service because salaries fell to very low levels, while the public payroll remained bloated with excessive numbers of unskilled staff added during successive years of transitional governments. 81 The upper and middle levels of technical staff were non-existent, and the few qualified public officers who remained in their posts during the civil war were effectively de- skilled. Moreover, the Civil Service Agency (CSA) lost control of its statutory role on recruitment and was incapable of ensuring compliance with personnel management policy. 82 These problems to a large extent persist, even if modest progress has been made to bring some order into the management of the Civil Service. The current structure of the Civil Service is plagued by a number of structural and institutional weaknesses including low pay, poor alignment between skills and functions, inadequate human resource management processes, weak payroll controls and political interference. 83 These problems are exacerbated by the challenge faced by the CSA to assert itself in the execution of its constitutional mandate, low quality of its own staff, poor remuneration, low budget and lack of essential equipment to perform its function. 221. Following the signing of the Accra Peace Accords in 2003, the National Transitional Government of Liberia (NTGL) was formed to manage the affairs of state pending the first post conflict general elections scheduled for 2005. Supported by several donors, NTGL focused on undertaking post conflict reconstruction based on the Results Focused Transition Framework (RFTF) beginning 2004. Governance and the Rule of Law, including efforts to 81 Since the end of conflict, minimum civil service salary has been increased from about $15 per month to $100 per month. Teachers and doctors with Bachelor degrees get a slightly higher minimum amounts. The salary is however, supplemented by a number of allowances. 82 The Civil ServiceAgency Act (1973…); Article 89 of the 1986 constitution provides for the establishment of a Civil Service Commission. 83 During the signing of the FY13 budget, the President identified ‘ghost workers’ and compromised payroll as the reason for not increasing civil service salaries, promising to increase salaries with savings from ongoing work to clean the payroll. 91 address capacity shortage in the government, were among the nine key areas in the Framework. The Governance Reform Commission (later Governance Commission), one of the four commissions under the Accords, was given the responsibility of managing these reforms. 84 While the Interim Government (2003-2005) focused on short term post crisis measures to consolidate peace and stabilize the country, the return to multi-party democracy has created the environment for long term reconstruction program under President Ellen Johnson Sirleaf’s administration since 2006. 222. The end of hostilities and the elections of 2005 provided sufficient ground for engagement of development partners through a range of short term projects aimed at resuscitating a fully destroyed Liberian civil service. The Liberia Reconstruction and Development Committee (LRDC) and the Governance Economic Management Program (GEMAP) provided the overall strategic foundation for this early engagement. Key projects that were initiated during this, and subsequent, period were meant to provide base functionality to the Civil Service, by creating the foundational elements of a modern Civil Service: job description, grades, salary structure, and management policies and capacity of core institutions. Key donors during the initial period included the DFID, EU, and UNDP. World Bank, USAID initially focused on economic governance under GEMAP, were later additions, as was SIDA. 85 223. An early situational analysis of the Liberian Civil Service after the end of the war identified the following: (i) large number of employees; including many on the payroll with no corresponding job assigned. For instance, an early head count found 29 plumbers in the Ministry of State , even though there was no water in the Ministry; (ii) the challenge faced by the CSA to control appointments ( the result of political patronage). Politically motivated appointments in many ministries did not factor establishment posts, qualifications or competence; (iii) Low pay levels: huge drop in salary from the pre-war levels of US$1500 per month to US$15-US$30 after the war Even the allowances that were meant to fill pay gaps would sometimes be in arrears and (iv) overlapping structures in ministries and agencies: this was the result of large numbers of individuals brought into the payroll post conflict. These initial projects intended to address these structural problems amid low capacity, weak strategic leadership, and a difficult political economy context. Donors responded through a mixture of initiatives- but mostly aimed at strengthening the capacity of the civil service to function. II. Strategic Approach to Addressing Capacity Weaknesses 224. Both the government and the donor community identified long and short term measures to mitigate the capacity shortage in the public sector. While it is difficult to clearly attribute the improvement of state capacity on any one of these initiatives, collectively, they have contributed to the stabilization and improved performance of the public sector in Liberia as shown in table 7.1 below. Three categories of capacity surge initiatives emerged with respect to immediate post- war Liberian Civil Service. 84 See: 85 See Adam Smith International (2009). Liberia Civil Service Capacity Building Project, Progress Report, March 2009- October 2009. 92 225. High level immediate capacity relief: In the short term, the World Bank and other donors relied on high level expatriate consultants to undertake specific activities within the government. One example was a range of internationally recruited (including Liberians) technical staff hired under the Governance and Economic Management Assistance Program (GEMAP) and the Liberia Emergency Capacity Building Support (LECBS) to provide financial and procurement management expertise in various State Owned Enterprises and other key revenue generating and management agencies. Others included consultants funded by projects that provided technical expertise to the Ministry of Finance and other implementing agencies. 226. Mid-level short-term capacity building: These were mainly Liberian nationals hired on short-term contracts to provide mid-level managerial and technical skills, to provide and build capacity in the Civil Service. This included following short term capacity initiatives funded by various donors: the Senior Executive Service Program (SES), Transfer of Knowledge from Expatriate Nationals (TOKTEN), and the United Nations Mission in Liberia (UNMIL). We look at each in turn. (i) Senior Executive Service (SES): This initiative was a multi-donor effort that financed the hiring of 100 professionals to alleviate the capacity shortage in the Civil Service. The World Bank contributed US$ 2.3 million to fund 35 out of these 100 positions (two recruits did not take their assignments) as well as funding for operating expenses. The remaining 75 positions were funded by other donors. All professionals under this program were initially hired on three year contracts. By June 2011, 98 professionals had been hired on performance contracts and placed in about 28 ministries and agencies, as well as in 15 counties countrywide. (ii) Transfer of Knowledge through Expatriate Professionals (TOKTEN): USAID funded 77 Liberian professions recruited locally and abroad on short term contracts of 6-18 months. (iii)United Nations Mission in Liberia (UNMIL): In addition to military and police units, UNMIL also deployed a range of Civil Affairs officers, both local and expatriate, who perform a number of technical duties usually undertaken by members of the Civil Service. 227. In addition to these purely short-term measures donors also supported mid-level- long term capacity building: These were designed as long term capacity building initiatives. They (a) Financial Management Training School: This is a World Bank funded program funding a training institute admitting 30 graduate students every year for a two year Master’s program in accounting and financial management. The students receive a stipend and are employed by the MoF upon graduation; and (b) Strengthening Liberia Institute of Public Administration: This World Bank funded program aims to develop procurement capacity in Liberia’s public sector. The program funds equipment, training of trainers, and in-service course for procurement officers. Table 7.1: Improvement on the Bertelsmann Transformation Index (2008-2010) Indicator Definition 2006 2008 2010 Status Index Measures a country’s achieved state 2.8 4.2 5.1 93 of development on the way to democracy and a market economy Market Measures socio economic level, 2.4 3.1 4.0 Economy Status market organization, currency and price stability, private property, welfare regime, economic performance, sustainability Democracy Measures stateness, political 3.2 5.3 6.2 Status participation, rule of law, stability of democratic institutions, political and social integration. Management Measures quality of governance 3.6 5.0 6.0 Index among decision makers Management Measures steering capability, resource 3.7 5.2 6.4 performance efficiency, consensus building, international cooperation Level of Measures structural conditions such 8.9 7.9 7.5 Difficulty as drought or civil war that hinder steering a country towards positive change III. Strategic Support to Institutional Strengthening 228. Governance and Economic Implementation Support Program (2004): The Governance and Economic Implementation Support Program was funded by the Department for International Development (DFID) and implemented jointly with the Governance Reform Commission with the objective of preparing a number of studies. The studies covered: a new civil service code of conduct; new civil service administrative regulations; a review of mandates and functions of ministries, autonomous bodies and state enterprises; and specific management reviews of the Civil Service Agency (CSA) and Liberian Institute of Public Administration (LIPA), the main organizations with responsibility for civil service management and personnel development in Liberia. These studies were intended to support the rebuilding of the civil service, and were thus prepared in anticipation of the forthcoming elections that would produce a new government for the period beginning in 2006. 86 229. Civil Service Capacity Building Program (2006): The Capacity Building Program was funded by the Department for International Development (DFID) and implemented jointly with the Liberia Institute of Public Administration, Civil Service Agency and the Governance Commission. The main objective of the Civil Service Capacity Building Program (CISCAB) was to achieve “a level of institutional performance that will deliver the mandates and functions assigned to the three key agencies - GRC, CSA and LIPA.” It was assumed that addressing the institutional weaknesses of these three core agencies would contribute to the eventual tackling of the key problems that the Civil Service experienced such as pay and motivation, levels of 86 See. DFID ( 2006). CISCAB project document and framework. (DRAFT), p.9. 94 skill and experience amongst personnel and Structures, systems and processes in key delivery institutions. 230. The Capacity Building Program project was emphatic: “if successful, [it] will decisively affect the capacity of the Liberian Civil Service to push through reforms in the second and third levels. The project focused on supporting some key areas on: strategy/policy making; personnel management and personnel development; and efficiency and effectiveness in these key agencies to improve civil service performance. With the Civil Service Agency, the project would cover the following: creating an effective personnel recording system; pay reform; defining an effective personnel policy; training of personnel directors; and creation of management services capacity; development of a performance management system; creation of a manpower training and development policy; formation of a grievance board; developing comprehensive policy options for tackling salary areas. A nascent, poorly capacitated, poorly remunerated post conflict outfit was supposed to tackle about nine large agendas in 30 month. CISCAB was terminated in 2010. The project correctly targeted the central management agencies (e .g. Civil Service Agency) for support, but designed a scope so wide that would have challenged even an established agency in peace time. 231. Civil Service Reform Project (2008): 87 This project was funded by the World Bank’s Program on Low Income Countries Under Stress (LICUS) for a period of three years beginning in 2008. The development objective of the project was “to set the stage for priority reforms in these areas, gathering data, drafting strategies and building capacity to address the core institutional issues”. This project was meant to kick-start the implementation of the more comprehensive civil service reform strategy, which GOL promulgated in 2008. The project was implemented by the Civil Service Agency under World Bank execution. The strategic focus of the project was to support the Civil Service Agency (CSA) re-establish the basics of human resources management in the civil service and, more broadly, help the Government address the legacy of injustice from the civil war. The purpose of the grant was priorities for public sector management, including civil service reform and good governance. 232. The LICUS project focused almost exactly on the same issues of the day: development of pay and employment strategy; restructuring of MDAs; Design and implementation of a human resource management and information system (HRMIS); pension reform; Training and Capacity Building. It achieved modest results in (a) development of a Medium Term Pay Strategy completed in 2009; training of Human Resource Management staff; functional review of 14 ministries and agencies, initial work on Biometrics and human resource information management system, a pension study to support the development of a contributory pension scheme, and development of new grading structure. 233. Nonetheless, the impact of the project was assessed to be modest, with enormous risk for sustainability. The need for follow-on and scaling-up interventions was highlighted by an evaluation of the project. The evaluation noted that the challenges needed to be addressed 87 See: LICUS Project Document -- 95 comprehensively, strategically and systematically in order to consolidate and sustain the gains so far. 88 234. Like CISCAB before it, the LICUS project was also designed with ambitions, and thus was not deep enough in tackling the core performance problem of the Civil Service. For the same reasons of capacity, weak leadership, poor motivation, absence of an enabling political environment, the project delivered mostly outputs- but with modest outcomes. IV. Lessons for current and future engagement 235. Client participation in design and implementation is crucial: it is crucial that client staff is engaged in identifying project priorities and in implementation. At the design stage, they should be explained the efficacy of the chosen implementation modalities. To ensure meaningful staff participation, at the minimum, a project support team, however lean, should be established within the beneficiary organization(s). The preparation of this project has been thoroughly consultative where all key stakeholders have been engaged in discussions about the scope, components, and costs. There have been three preparation missions, two consultation forums, a stakeholder analysis, and numerous meetings with technical staff 236. Interventions should target specific organization(s): In post conflict settings the tendency is to approach reform in a general way, without a sharp focus on management and performance at the organizational level. A whole sector focus tends to spread out resources, and given weak capacity, tends to produce few results. Emerging literature on public sector reforms has also pointed to “asymmetric reform” as useful approach to tackling the problem of spreading reform efforts. In this project, focus is on a few key ministries at the operational level, on the one hand, and intensive support of three agencies who are critical for managing the country’s public sector reform agenda. 237. Short and medium term interventions should be anchored in a comprehensive strategic framework: In order to ensure strategic prioritization of the interventions, and thereby maximize prospects for impact and sustainability, it is important that the short and medium term interventions are anchored in a comprehensive strategic framework. This should be supplemented by a strong leadership and prioritization- breaking the strategic priorities into short and medium term goals. Over the past few years, the reform agenda has tended to cover everything at the same time, making it difficult to quantify progress and outcomes. The design of the project has been tailored to address this problem through the development of an action plan based on milestones sequenced in order to outline specific prerequisite actions attached to disbursement. 238. Long term commitment of external support is crucial to ensure consolidation and sustainability of implementation results: Immediately after engagement, the sector benefitted from only modest funding against a strategic plan budget at about US$52 millions. Reforms momentum has therefore been shortchanged by absence of consistent funding. The government has therefore tended to undertake disjointed programs depending on funding availability and 88 World Bank (2012) Evaluation of LICUS Project, p. 40. 96 their objectives, which are not necessarily aligned with government priorities, without the kind of external support that initial engagement provided for the civil service projects, there is doubt that Government budget will allocate a reasonable quantum of resources to sustain reforms in the civil service. Therefore, long term commitment of external support is crucial to ensure consolidation and sustainability of implementation results. This project has addressed this problem by providing sufficient funds to ensure maximum focus on key reform during the project period. 239. Target outcomes should be ambitious but realistic: Previous projects have tended to include unrealistic results that did not seem to take into consideration the context of reform. Additionally, the interventions of the project were for comparatively short periods and often, end outcomes and impact are only discernible in a medium to long term time horizon. Second, there is the perennial challenge of exclusive attribution of impact on interventions by one project. At a more fundamental level, given the post-conflict socio-political and economic context in which the projects were implemented, may not be appropriate outside a long term strategic perspective. This project has focused on modest results, sequenced in a way that each builds on the next. Monitoring and Evaluation staff will be trained to collect data and progressively measure outcomes in the course of project implementation. 240. The importance of understanding the reform context: Specifically, project design should be based on the realism about what is relevant, necessary, and second, what could be accomplished in the current setting, given the capacity and political economy constraint. Finally, design should focus on dealing with “basics first”. 89 The design of this project has been influenced by a number of political economy analyses by SIDA, USAID and the World Bank on the overall country context as well as sector level stakeholder issues. 90 For instance one key lesson emerging from all the analyses, and which has influenced project design and content, is that the formal state apparatus (including the civil service) has been used to exploit and promote personal interest. 91 It has also benefitted from emerging lessons learned in the implementation of the ongoing public sector reform projects in Liberia and from Sierra Leone, also a fragile state. From Sierra Leone, lessons include the need to work with “the grain”, identifying, in incremental fashion, areas of reform that have a higher chance of success. 92 241. Additional lessons from implementation experience include the need to (i) fully align and coordinate donor partnerships, hence the focus on a MDTF 93 (ii) prepare a programmatic approach to support public sector reform, with links to ongoing activities in other areas of the public sector, such as financial management,(iii) prioritize and sequence reforms consistent with the government designed reform strategies hence this second phase of reforms that endeavor to deepen the work began under ongoing projects ( both by Bank and USAID), and (iv) use 89 International Evaluation Group (2008). Public Sector Reform: What Works and Why? Washington DC: The World Bank. 90 Chemonics (2013) Liberia Governance Stakeholder Survey: Key Study Report Task Order 13 (Draft). 91 See for instance: SIDA Help Desk (2012). Desk Study- Political Economy Analysis of Liberia ( Draft) 92 Vivek Srivastava and M. Larizza (2012). Working with the Grain for Reforming the Public Service: A live Example from Sierra Leonne”, World Bank Policy Research Paper No. 6152. Washington DC: World Bank. 93 World Bank (2011). Project Appraisal Document (PAD): Integrated Public Financial Management Reform Project. Washington DC: the World Bank. 97 existing government operations through institutions such as the Civil Service Reform Directorate to build capacity and promote ownership, and (v) the need for a results based approach to ensure reform uptake and reward actual implementation rather than intentions.94 Finally, from Tanzania the important lesson learned is the need to tailor project design to match the capacity of the borrower and implementing agency, i.e. “don’t outpace the client”. 95 V. Conclusion 242. Development partners have engaged in the reconstruction of the Liberian public sector since the end of conflict. While the majority of the programs were initially designed to address short term post conflict needs, they were able to provide the foundational support necessary to rebuild a capable Civil Service as envisaged in the Civil Service Reform Strategy. This early collaboration among a few development partners has now been strengthened through a number of joint activities among various partners. There is evidence of a degree of coordination on interventions geared towards reform of the Civil Service and the public sector generally, among the development partners (DPs). At the national level, several DPs have subscribed to the “New Deal” for which a Trust Fund to support Liberia’s development will imminently be established. 243. Policy dialogue between partners and the government is improving. The establishment of a multi-donor trust fund to support a new Public Sector Modernization Project has brought together three main development partners focusing on civil service reform. Similar efforts are evident with respect to public financial management and decentralization. The government has increasingly assumed the responsibility for donor coordination in these areas. 94 Srivastava (2013) 95 World Bank (2013). Implementation Completion Results Report (ICR). Performance Results and Accountability Project (P092898). Washington DC: the World Bank, p.36. 98 Annex 8: Selection criteria for participating ministries Liberia: Public Sector Modernization Project Introduction 244. There are 29 ministries and agencies in which civil servants are employed in the Liberian civil service. These ministries range in size between 140 and 13,000, with a median of about 307. Given the asymmetric nature of the reform proposed, and the need to identify an objective criterion for selecting participating ministry, the CSA proposed that the team uses two variables (a) willingness to reform and (b) size of ministry, based on number of civil servants. Both variables are important given the need to focus on ministries that are responsive, while also ensuring that reform coverage is sufficiently large to produce impact. Methodology 245. The variable “willingness to reform” was based on (i) timely submission of responses to an assignment given by the President to members of the Cabinet on a range of issues covering civil service reform (questions are below), and (ii) timely submission of personnel lists to the Civil Service Agency, for analysis. The two indicators were assigned 24 and 12 points respectively, for a cumulative total of 36 points. The second variable “number of civil servants” was assigned 12 points (and 13 for Min. of Education—due to its outlier status). All ministries with civil servants were grouped into the following categories: “largest”, “large”,” above average”, “average” and “small”. To find the final score in order to produce a ranking of the ministries for purposes of selection, the sum of the s ‘willing to reform” and “ number of civil servants” was used as described below. Discussion 1. Willingness to reform 246. The willingness to reform criterion is set on a scoring scale of 0 to 36 points to determine rank, with 36 points being the maximum achievable points. This criterion was derived from combining the scores of two integral activities for civil service reform: (a) the quality and timely submission of the Cabinet assignment given by the President on civil service reform issues, and (b) the timely submission of personnel listings to the CSA for analysis. Table below shows the result. Table 8.1: Criterion: “Will to reform” Rank Will to Reform= Cabinet Assignment + Personnel Listings (out of 36 total points) (out of 24 points) (out of 12 points) 1 30 CSA 18 12 2 29 MoT 17 12 3 28 MoGD 19 9 99 28 MICAT 16 2 4 27 MoFA 15 12 5 26 MoA 17 9 6 24 MoF 18 6 7 23 GSA 17 6 22 MoHSW 19 3 8 22 MoL 16 6 22 MoIA 13 9 21 MoPT 18 3 9 21 MoLME 12 9 21 MoCI 12 9 20 MoJ 14 6 10 20 MoS 14 6 17 MNS 17 0 11 17 MoE 14 3 17 MoPW 11 6 12 12 MoYS 0 12 13 11 NIC 11 0 14 6 MoD 0 6 LAST 3 MoPEA 0 3 (a) Cabinet Assignment 247. The Cabinet assignment was assigned personally by President Sirleaf to gauge the enthusiasm for civil service reform among cabinet members. It was designed to provide an opportunity for Cabinet members to voice their concerns as well as showcase their strategies for overcoming potential resistance to the reform process. It is set on a 24 point scale and is derived from the quality of the Cabinet assignment and its timely submission to the CSA. Cabinet Assignment (24 points) = Quality of Assignment (12 points) + Timely Submission (12 points) 100 Cabinet Assignment (Total of 24 points) Quality of Assignment Timely Submission (Six questions total) 12 points: Made deadline 2 points: excellent answer 8 points: Missed deadline by 1-21 days 1 point: satisfactory answer 4 points: Missed deadline by more than 21 days 0 points: less than satisfactory answer 0 points: Failed to complete Total: 12 points possible Total: 12 points possible 248. The quality of the assignment, set on a 12 point scale, is quantified by tallying the number of questions each Ministry or Agency answered (or left blank) and the quality of answers in terms of relevance to the question along with the breadth of content in answering. The “timely “submission” of the assignment makes up half of the Cabinet Assignment total points and is also set on a 12 point scale. Ministries and Agencies that completed the assignment before the Cabinet meeting of September 16, 2013, received the full 12 points, as this was the deadline set by the president. Those who submitted the assignments between one and 21 days after the deadline received 8 points; those who submitted more than 21 days after the deadline received 4 points, and those that failed to complete the cabinet assignment were not awarded any point. Table 8.2: Typology of Questions for the Cabinet Assignment Qtn. 1: Qtn 2: Qtn3: Qtn 4: Qtn 5: Qtn6: Strengths Weaknesses Concerns Essay Help those Compensation affected i. In your MAC, i. In your MAC, what are i. Do you anticipate i. If workers are i. What is the lowest what are two to two to three major resistance to reforms laid off in your monthly wage in your three major weaknesses of your in your MAC? MAC […], what MAC? strengths of your workforce to carry out its do you think can workforce to carry mandate? Please describe the be done to help out its mandate them after they initial steps you ii. What do you b. ii. What do you think are ii. What will you do will take to begin are fired? Please ii. What is the highest think are the the reasons for these to overcome such the reform process list three ways. monthly wage in your reasons for these weaknesses? potential impediments in your MAC (300- MAC? strengths? 500 words) iii. What are some iii. How would you go iii. What do you think steps you could about rectifying the causes is the ideal range of take to leverage of these weaknesses? wages in your MAC? these strengths? 101 Table 8.3: Sub-Criterion: Civil Service Assignment Cabinet Q.5 Help Q.6 Q.1 Q.2 Q.3 Timely M&A assignment Q.4 Essay those Ideal Strengths Weaknesses Resistance? Submission Total affected Wage MoGD 19 1 1 2 2 0 1 12 MoHSW 19 2 2 2 2 2 1 8 CSA 18 0 1 1 2 1 1 12 MoF 18 1 0 1 2 1 1 12 MoPT 18 1 1 1 1 1 1 12 GSA 17 1 1 1 1 1 0 12 MNS 17 1 1 1 0 1 1 12 MoA 17 1 1 0 1 1 1 12 MoT 17 0 1 1 1 1 1 12 MICAT 16 2 1 1 2 1 1 8 MoL 16 0 1 1 0 1 1 12 MoFA 15 2 1 1 1 1 1 8 MoE 14 2 1 1 1 1 0 8 MoJ 14 1 2 1 1 0 1 8 MoS 14 1 1 0 1 2 1 8 MoIA 13 0 1 1 1 1 1 8 MoCI 12 1 1 1 0 0 1 8 MoLME 12 2 2 1 1 1 1 4 MoPW 11 2 2 1 1 0 1 4 NIC 11 1 1 1 2 1 1 4 MoD 0 0 MPEA 0 0 102 b. “Timely Submission of Personnel Listing” The Personnel Listing, which is the second activity that makes up the will to reform criterion, is likewise an important activity that showed a M&A’s willingness to submit their personnel listing for CSA Analysis. Without the personnel listing, few or no numbers can be obtained to ascertain the extent of the ghost or wage bill problem. For the Personnel listing a total score of 12 points was possible. The first five M&As to submit their personnel listing received 12 points; the next five received 9 points; the next 5 received 6 points; and the last five received 3 points. Table: Sub-criterion: “Timely submission of Personnel Listings” Score M&A 12 MoYS (Sept. 10) 12 MoT 12 MICAT 12 CSA 12 MoFA 9 MoCI 9 MoLME 9 MoGD 9 MoIA 9 MoA 6 MoD 6 CSA 6 MoS 6 MoJ 6 MoL 6 MoF 3 MoPW 3 MoPT 3 MoPEA 3 MoE 3 MoHSW (Oct. 15) 103 2. Relative size of the ministry ( number of civil servants) 1. This criterion is based on the assumption that some ministries are so large that the impact of any proposed reform would not be felt if they are left out. The ministries are grouped below as either Largest (1); Very Large (4) and Large (2). The rest are classified as above average, below average, or small. Table: Criterion: “Number of civil servants” Points (out of 23 MACs # of Civil Servants Designation Statistical 12) (excludes Justification (Box supplementary) plot) 13 (extreme Maximum, outlier +1 MoE 12468 Largest Extreme outlier point) 12 MoHSW 3843 Very Large Outlier 12 MoIA 3685 Very Large Outlier 12 MoJ 3622 Very Large Outlier 1103.5 upper 12 MoF 1377 Very Large bound; outlier 10 MoPW 601 Large 601 3rd quartile 10 MoD 601 Large 8 MoLME 521 Above Average 8 MoS 448 Above Average 8 GSA 330 Above Average 8 MoPT 314 Above Average 6 MICAT 307 Average 307 Median 6 MoFA 307 Average 307 Median 4 MoA 303 Below Average 4 MoT 286 Below Average 4 NIC 272 Below Average 4 MoCI 268 Below Average 266 1st quartile 2 MNS 264 Small 2 MoYS 175 Small 2 MoL 163 Small 104 2 MoPEA 152 Small 2 MoGD 143 Small 2 CSA 137 Small Minimum Result 2. In order to determine the selection criterion: “Willingness to reform and relative size of ministry (by civil servants)”, a final score of out of a total of 48 (willingness to reform = 36 + size of ministry= 12) was assigned to the ministries to determine the final list of participating ministries. These are: Ministries of: Finance, Health and Social Welfare, Justice, Internal Affairs, Education, Information and Tourism, and Foreign Affairs. Even though Civil Service Agency and General Service Agency ranked at six and seven respectively, there are strictly speaking not service delivery entities and have very few staff. Table: Selection Criterion “Will to reform and relative size of ministry (by civil servants)” Score: Will to reform + No.of Ministry Civil Servants Rank MoF 36 1 MoHSW 34 2 MoIA 34 2 MICAT 34 2 MoFA 33 3 MoT 33 3 MoJ 32 4 CSA 32 4 GSA 31 5 MoE 30 6 MoA 30 6 MoGD 30 6 MoLME 29 7 MoPT 29 7 MoS 28 8 MoPW 27 9 MoCI 25 10 MoL 24 11 MNS 19 12 MoD 16 13 NIC 15 14 MoYS 14 15 MoPEA 5 16 105 IBRD 33435R2 11°W 10°W 9°W 8°W 9°N 9°N LIBERIA GUINEA SIERRA To Irié LEONE To Voinjama Buedu Kolahun To Mt. Wuteve L O FA . Pendembu (1,380 m) ts M 8°N Vahun 8°N i e iz ng g To Ra i o no Kenema Gelahun g iz W Zorzor To o lo Lola . ya W ts be Yekepa Yekepa M nda G fa Via ba Nia of To im Nzérékoré N L Kongo GBARPOLU Gbalatuah Senniquellie To Danané To Ganta Karnplay Zimmi GRAND Bopolu Bo CAPE Gbarnga 7°N l Palala 7°N P au MOUNT St. Zeansue Zienzu BONG Yopie Sagleipie Tubmanburg Totota Bong Town Robertsport NIMBA CÔTE BOMI n Klay MARGIBI Botata Gloie Nu o D’IVOIRE Careysburg To hn Tapeta Tappita Toulépleu Kakata Jo St. Bensonville Tobli MONROVIA Harbel GRAND BASSA Guata Poabli Kola Town MONTSERRADO Hartford Gaamodebi Zwedru 6°N Babu 6°N RIVER CESS Buchanan Trade GRAND GEDEH Town Gonglee Dube Pyne tos Ce s Bokoa Cestos City SINOE Pelokehn Kopo Juazohn RIVER GEE AT L A N T I C OC EAN Sehnkwehn Kahnwia Kanweaken Fish Town Tawake Tawlokehn 5°N Greenville 5°N M GRAND A Nyaake Nana Kru RY K R U Barclayville LA Sasstown N LIBE R I A Grand Cess Plibo D To Tabou SELECTED CITIES AND TOWNS Harper COUNTY CAPITALS NATIONAL CAPITAL 4°N RIVERS MAIN ROADS This map was produced by the Map Design Unit of The World Bank. 0 20 40 60 80 100 Kilometers The boundaries, colors, denominations and any other information RAILROADS shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any COUNTY BOUNDARIES endorsement or acceptance of such boundaries. 0 20 40 60 Miles INTERNATIONAL BOUNDARIES 10°W 9°W 8°W JULY 2007