The World Bank Report No: ISR9552 Implementation Status & Results Bangladesh Deepening MTBF and Strengthening Financial Accountability (P117248) Public Disclosure Copy Operation Name: Deepening MTBF and Strengthening Financial Accountability Project Stage: Implementation Seq.No: 5 Status: ARCHIVED Archive Date: 24-Jun-2013 (P117248) Country: Bangladesh Approval FY: 2010 Product Line: Recipient Executed Activities Region: SOUTH ASIA Lending Instrument: Technical Assistance Loan Implementing Agency(ies): Key Dates Board Approval Date 23-Sep-2009 Original Closing Date 31-Jul-2014 Planned Mid Term Review Date 18-Feb-2013 Last Archived ISR Date 23-Dec-2012 Effectiveness Date 29-Oct-2009 Revised Closing Date 31-Jul-2014 Actual Mid Term Review Date 18-Feb-2013 Project Development Objectives Project Development Objective (from Project Appraisal Document) The project aims to deepen and institutionalize the MTBF and build a more strategic and performance oriented budget management process, while strengthening financial accountability across the expenditure management cycle. The project supports fundamental reforms of operational budget management functions in both central units and line ministries. Enhanced budget process and financial accountability is likely to improve the allocative and operational efficiency in public expenditure management which in turn will enable better provision of key public services in support of the Government's social and economic policy objectives. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Component 1: Strategy Policy, Planning and Budget Management 18.09 Sub Component 1.1 Macro fiscal policy and management 5.18 Sub Component 1.2 : Debt, Treasury and Cash management 2.21 Public Disclosure Copy Sub-Component 1.3: Strengthen Budget Management and MTBF 7.70 Sub Component 1.4: Developing Planning Commission capacity in line with MTBF 2.53 Sub Component 1.5: Legal and regulatory 0.46 Component 2: Public Financial System 17.53 Sub Component 2.1: Accounting and Financial reporting 16.02 Sub Component 2.2. - Payroll, pensions, GPF, advances, assets, loans 1.52 Component 3: Capacity Building and Training 8.04 Project Management and Coordination 6.32 Page 1 of 9 The World Bank Report No: ISR9552 Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Public Disclosure Copy Overall Implementation Progress (IP) Moderately Satisfactory Moderately Satisfactory Overall Risk Rating Implementation Status Overview The Government, with support from a multi-donor trust fund administered by the World Bank, is implementing the Strengthening Public Expenditure Management Program (SPEMP) to modernize core institutions of budgeting and financial management in Bangladesh. The Deepening MTBF and Strengthening Financial Accountability project (DMTBF), the largest project funded by SPEMP, was recently reviewed by the World Bank. The USD 50 million project is implemented by the Finance Division of the Ministry of Finance and is expected to end in June 2014. The mission found that, overall, the project has maintained the solid implementation progress from the previous period. Based on this, the mission has upheld the overall score on implementation progress as “moderately satisfactory�. Among the key areas of progress are: � The work on MTBF has benefited from stepping up the engagement with line ministries. Secretary-level consensus has been reached on a comprehensive roadmap for the continued reform effort. At the same time the coordination between Finance Division and Planning Commission has improved, including securing a higher-level engagement of Planning Commission in central decision-making bodies in the budget formulation process (ceiling setting committee), and harmonization of budget preparation procedures. Finally the number of line ministries/divisions with formally established BMCs has increased. � The work of the task force established to detail the new classification structure is on-track to finalize its work by June 2013 together with new a manual on accounting procedures. � The development of the new integrated budget and accounting system (iBAS++) has progressed with agreements on the functional scope of the new system, finalization of the overall technical architecture, and drafting of system requirement specifications. � A comprehensive plan has now been prepared for development and modernization of payroll and pension controls and the software for the first has been completed and tested � 5 out of 7 systems for Self-Accounting Entities (SAEs) have been completed � The “post restructuring� training needs assessment (TNA) is finalized and consolidated training plans prepared. SOPs have been prepared for selection of participants, as well as planning, implementation and evaluation of trainings. Training facilities have been enhanced and roughly 2000 people trained in the last 6 months. Looking at the probability that the program development objectives (PDO) be met, there are however two principal risk areas: Firstly, while significant progress has been achieved in the formation of budget institutions across all line ministries and in gaining more ownership and commitment from the top level of line ministries, the project is only now on the verge Public Disclosure Copy of implementing some of the core elements of a well-functioning MTBF. There is less than 15 months left of the project in which to implement credible baseline forward estimates and make sure these are fully integrated in the budget process. While implementation guidelines have been prepared and may be used for the FY 13/14 process, international experience suggests that 15 months is very little time to implement such a transformative element in the budget process. During the same time period, the project would have to strengthen the budget-policy linkages through the formulation of a comprehensive budget strategy paper or an equivalent. Finally, while the coordination between Finance Division (FD) and Planning Commission (PC) has lately seen significant improvement, the engagement of Planning Commission and the incorporation of the Annual development Program in the MTBF-reform remains a risk factor in terms of reaching the necessary depth and scope of the reforms. The second risk area is associated with building the iBAS++ system as the technical foundation for reporting and financial statements living up to international standards (IPSAS Cash based consistent with COFOG and GFS2001) in fiscal year 2015. The existing iBAS-system does not support the new and expanded classification system for budget, accounting and reporting and the new system is therefore a prerequisite for fulfilling PDO-level objectives on IPSAS-compliance. Important decisions have been taken over the past six months, including on the detailing of the new budget classification system, and the design of the iBAS++ system. The timely launch of the iBAS++ system by June 2014, however, Page 2 of 9 The World Bank Report No: ISR9552 remains a risky enterprise due to the limited time frame and the limited managerial overview of the complexities of launching the new system. The mission recognized significant progress on a number of fronts, but due to the risks mentioned above, progress towards PDO remains “moderately satisfactory�. Public Disclosure Copy Locations No Location data has been entered Results Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target LMs with MTBF meeting specific criteria Percentage Value 0.00 0.00 90.00 Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments MTBF rolled out to all LMs BMCs, BWGs reconstituted BMCs/BWGs formed in all with revised ToR and BMW/ LMs Bs established in all 59 LMs by June 2012. Presentation of the unified budget format used in all MBFs produced in FY 2011-12. Guideline and formats for baseline estimate have been developed and submitted to FD and expected to be used in FY 2013-14. LMs reporting annual performance results as Number Value 0.00 1.00 300.00 per guidelines Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments The Guidelines on preparation of Annual Report Public Disclosure Copy against KPIs and Output Indicators and targets has been issued. The Ministry of Education has submitted and Health is expected to submit performance report soon. LMs producing quarterly financial management Percentage Value 0.00 17.00 90.00 reports meeting FD requirements. Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Page 3 of 9 The World Bank Report No: ISR9552 Comments Irregular and with 10 LMs have submitted considerable time lag Quarterly Financial Reports to Finance Division. Public Disclosure Copy Government annual financial statements Yes/No Value No No Yes prepared as per IPSAS cash based standard Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 consistent with COFOG and GFSM 2001. Comments iBAS++ is expected to be developed by June 2014 to meet the requirement of producing IPSAS cash basis statements for the following FY. Different activities related to iBAS++ like planning, scoping, technology selection, are in process. Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Deviation between forecasts in the original Text Value a) 1.0 a.-0.8 a. +/- 0.7 MTMF and actual results regarding : a) budget b) -2.7 b. -1.07 b. +/--0.5 deficit to GDP ratio b) debt to GDP ratio Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments Actuals are for end FY12. Actual against FY 13 target will be reported after June, 2013. Debt management entities provide annual Yes/No Value No No Yes report to the government Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments Actual against FY 13 target "Yes" means that 4 entities will be reported after June, provide report to government. 2013. Reports to include an evaluation of how the borrowings, derivatives, and Public Disclosure Copy other debt-related transactions have complied with the requirements set in the DM strategy. Cash balances calculated daily and Yes/No Value No No Yes consolidated by FD Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments Monthly cash flows plans are built on financial plans from LMs showing expected timing Page 4 of 9 The World Bank Report No: ISR9552 of revenue receipts and of expenditure commitments, consolidated for the Government as a whole. Public Disclosure Copy Variance between original budget and actual Text Value -8.1 -0.82 +/- 5.0 outturn fo previous FY Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments Actuals are by end FY12. Actual against FY 13 target will be reported after June, 2013. Line ministries receiving regular oversight from Text Value Oversight is focused only on 100 % compliance on budget 100 % oversight on financial Finance Division related to MTBF budget processes calendar achieved reporting and financial performance Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments Actual against FY 13 target will be reported after June, 2013. Line ministries producing gender budget Number Value 20.00 25.00 35.00 reports Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments Preparation of Gender Budget Reports for 40 line ministries is underway. Line ministries with budgets based on medium Number Value 0.00 0.00 5.00 term strategic business plans Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments Draft medium term strategic business plan prepared for Ministry of Agriculture, but budget not yet based on this plan. Adequate legal and regulatory support to the Text Value No - exisiting legal and Partial - list of rules, Partial reforms provided regulatory framework regulations and guidelines Public Disclosure Copy inconsistent with evolving approved by relevant task reforms force. 3 guidelines and circulars issued. First draft of GFR prepared. Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments Page 5 of 9 The World Bank Report No: ISR9552 iBAS functionality enhanced and applied as an Text Value none Functinal scope defined, Budget and ledger integrated FMIS across line ministries, overall technical architecture functionality available. departments, subordinate and upazilla levels finalized and system requirement specifications Public Disclosure Copy drafted. Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments Government financial statements are prepared Text Value Statements are delayed and Business requirements for Partial (system ready) on IPSAS cash basis in a timely manner do not comply with generation of financial international standards statements under IPSAS (cash-based) defined as part of iBAS++ development. Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments Partial means that the system is prepared for producing financial statements based on IPSAS cash basis, however, the statement itself will only be available in the following year iBAS used for Self Accounting Entities (SAEs) Text Value None for seven SAEs Partial Partial based on improved accounting standards and Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 procedures Comments Software has been developed and user acceptance testing is scheduled for June quarter 2013. Budget classification revised to meet budget Percentage Value 0.00 0.00 100.00 preparation and consolidation of accounting Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 data for financial reporting consistent with Comments Chart of accounts does not The detailed classifications for IPSAS comply with int'l standards the new chart of accounts will be presented to the budget Public Disclosure Copy classification task force for approval in June 2013 Other iBAS enhancements Percentage Value 0.00 50.00 100.00 Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments Accounting data are The database for employees inaccurate and fragmented is now available while testing of the pensioner database will be completed in June quarter 2013 Page 6 of 9 The World Bank Report No: ISR9552 Public servants receiving PFM training Percentage Value 7.00 33.00 100.00 Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments 7 % corresponds to 1661 33 % corresponds to 7,532 100 % corresponds to 22700 Public Disclosure Copy public servants public servants public servants Public servants reporting positive training Percentage Value 0.00 88.00 80.00 outcomes Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments No framework for reporting training outcomes Number of training days engaged in Number Value 0.00 15649.00 1400.00 PFMtraining & capacity building activities Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments No record of formal training days spent for providing training & capacity building in PFM area Number of management reports prepared Number Value 0.00 7.00 2.00 Date 28-Feb-2010 31-Mar-2013 31-Jul-2014 Comments Report contains comprehensive statement of all activities, evaluation, feedback organized on key PFM skill area, project components and key stakeholder institutions Data on Financial Performance (as of 30-May-2013) Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P117248 TF-95283 Effective 29-Oct-2009 29-Oct-2009 29-Oct-2009 31-Jul-2014 31-Jul-2014 Public Disclosure Copy Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P117248 TF-95283 Effective USD 50.00 50.00 0.00 37.48 12.52 75.00 Disbursement Graph Page 7 of 9 The World Bank Report No: ISR9552 Public Disclosure Copy Key Decisions Regarding Implementation To further expedite implementation and increase the likelihood of reaching the project development objectives, the following recommendations were presented to Government: 1) MTBF-reform. The mission recommended an immediate ratification of the MTBF- roadmap at ministerial level, and the establishment of a Planning Commission/Finance Division Working Group tasked with preparing a joint implementation plan for credible forward baseline estimates. To sustain a high-level engagement on the reforms, the mission also recommended that bi-annual workshops be held with the Secretaries of the big spending line ministries, Planning Commission and the Ministry Of Public Administration. 2) iBAS++ system. It was agreed during the mission to prepare a "whole-of-project schedule" which will include all the actions needed to launch the new iBAS system. It was further agreed to re-organize the Financial System Management Unit to ensure the continuation of the core iBAS++ team for a period of at least two years after project closure. The Finance Division should also seek a formal no-objection from the major stakeholders on the functional requirements no later than June 2013. 3) Project management has deteriorated and is now posing a risk to the achievement of the project's end-targets. The mission therefore recommended Finance Division to clearly state its expectations for the management of the project and regularly oversee that these expectations are met by the Project Management Coordination Unit (PMCU). The Public Disclosure Copy PMCU should fully exercise its financial authority and immediately initiate detailed and regular budget monitoring and disbursement planning. Regular meetings should be held between Finance Division, Management Implementation Support Consultants (MISC) and PMCU to jointly resolve critical operational and technical issues. An independent review of SPEMP was also completed in February 2013, which concluded that it is unlikely that all SPEMP targets will be reached by the end of the program period, but that the significant momentum achieved so far should not be lost. The review recommended that many elements of SPEMP where progress is currently being made should be considered for extension, provided that sufficient unspent funds remain. Discussions between government and development partners will be initiated on options and conditions for extension, and to prioritize areas for possible continued support. For development partners to consider a no-cost extension, GoB will need to follow up on the recommendations in the independent review report and the attached aide memoire. In addition, to allow informed discussions about options for extension to take place, there is an urgent need to provide credible estimates of spending up to closing date of the project, arrive at a shared understanding of which program targets are unlikely to be achieved, and identify priority areas for possible support beyond the program end-date. Page 8 of 9 The World Bank Report No: ISR9552 Restructuring History Level two Approved on 05-Mar-2012 Public Disclosure Copy Related Projects There are no related projects. Public Disclosure Copy Page 9 of 9