Document of The World Bank Report No:80650 v1 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ECONOMIC GOVERNANCE AND INSTITUTIONAL REFORM PROJECT ADDITIONAL FINANCING CREDIT No. 49070 MAY 7, 2011 TO REPUBLIC OF LIBERIA June 14, 2013 ABBREVIATIONS AND ACRONYMS AF Additional Financing BIR Bureau of Internal Revenue CSA Civil Service Agency EGIRP Economic Governance and Institutional Reform Project GAC General Auditing Commission GoL Government of Liberia HRMIS Human Resource Management Integrated System IDA International Development Association IFMIS Integrated Financial Management Information System ITAS Integrated Tax Administration System LIPA Liberia Institute of Public Administration MDA Ministries, Departments, and Agencies MLME Ministry of Land, Mines, and Energy MOF Ministry of Finance MS Moderately Satisfactory NBC National Bureau of Concession PDO Project Development Objective PFM Public Financial Management PPCC Public Procurement and Concession Commission SES Senior Executive Services SIGTAS Standard Integrated Government Tax Administration System TIN Tax Identification Number USD U.S. Dollar Regional Vice President: Makhtar Diop Country Director: Yusupha Crookes Country Manager: Inguna Dobraja Sector Manager: Mark Roland Thomas Task Team Leader: Raymond Muhula 2 LIBERIA Economic Governance and Institutional Reform Project – Additional Financing RESTRUCTURING PAPER CONTENTS A. SUMMARY ............................................................................................................................................. 4 B. PROJECT STATUS................................................................................................................................. 4 C. PROPOSED CHANGES ......................................................................................................................... 5 Annex 1: Revised Results Framework and Monitoring ................................................................................... 8 Annex 2: Reallocation of Proceeds ................................................................................................................ 11 Annex 3: Extension of Closing Date.............................................................................................................. 12 3 LIBERIA ECONOMIC GOVERNANCE AND INSTITUTIONAL REFORM PROJECT ADDITIONAL FINANCING RESTRUCTURING PAPER A. SUMMARY 1. The proposed changes include extension of the closing date, revision of the results framework, and reallocation of credit proceeds of the additional financing. These changes are critical for achieving the project development objective as the one-year extension of the closing date will provide sufficient time to complete implementation of technical assistance that will enhance capacity of the Ministry of Land, Mines and Energy to perform technical inspection of commercial mining. The revision of the results framework is expected to increase the likelihood of Project Development Objective (PDO) achievement as the revised indicators better reflect the outcomes of project interventions. Finally, the closing date extension entails an incremental project management cost during the extension period, thus requiring the reallocation of credit proceeds. This is the first extension of the additional financing that is expected to be fully disbursed within the proposed closing date extension. B. PROJECT STATUS 2. The original Economic Governance and Institutional Reform Project (EGRIP), approved by the Board in May 13, 2008, became effective in May 23, 2008 and was restructured in August 1, 2011. The changes included an additional financing in the amount of US$7 million, extension of the closing date, revision of the results framework, and reallocation of proceeds of the original project. The additional financing (AF) became effective on October 26, 2011. Both the original and AF will be closed on December 31st 2013. 3. The Project’s Development Objective (PDO) is to improve the efficiency and transparency in managing public financial and human resources management, focusing on revenue administration, public procurement, budget execution and payroll management. Implementation progress for the EGIRP is rated Satisfactory following the latest supervision mission in November/December 2012. Support to create a Data Center was completed and operationalized. The scaled up activity, an intensive procurement training program, at the Financial Management Training School has been running successfully. It graduated 22 procurement specialists for the first year in May 2013 and has recruited 30 new students to be trained for the second year. These 4 specialists are now working in ministries and agencies. The AF support has enabled the Senior Executive Program (SES) to continue capacity building in some ministries and agencies, while the government is preparing a transition plan for SESs after the project’s closure. Implementation of activities to strengthen mining sector capacity, however, has progressed slowly. The revision of the Mineral Development Agreement (MDA) has been launched and extensive consultations with stakeholders have been ongoing. A technical assistance to strengthen mining inspection capacity has not yet begun as the selection of a consulting firm is still ongoing. Once the selection firm is selected, it will take one year to complete the technical assistance. The mid-term review in December 2012 concluded that financial, procurement and project management are satisfactory. As such, there are not pending audits or legal covenants that are outstanding. 4. During the mid-term review, the mission raised the PDO rating from Moderately Satisfactory to Satisfactory to reflect implementation progress of some activities. Transparency and accountability in budget management has been enhanced as the completion of data centers at the Ministry of Finance and at the General Auditing Commission (GAC) are connected to the Integrated Financial Management Information System (IFMIS), thereby improving access of GAC to government financial statements. Transparency in public procurement and, consequently, efficiency of public spending is expected to be improved by the recruitment of graduates of the Procurement Training School as qualified procurement specialists in ministries and agencies. Additionally, the Liberia Institute of Public Administration (LIPA) has completed in-service procurement training of 103 government officials (including 23 females) from 14 ministries, 12 agencies or commissions, the Judiciary and the Office of the Vice President. 5. Given slow implementation progress in the mining sector, the government has requested for one-year extension of the closing date to ensure completion of the technical assistance to strengthen mining inspection during the next 12-18 months. This activity is considered critical for the mining sector as it will contribute to improved transparency in the sector as well as increase technical capacity of the Ministry of Land, Mines and Energy (MLME) to monitor and inspect commercial mining operations on a regular basis to ensure their compliance with the concession contracts signed with the government. C. PROPOSED CHANGES  Results framework (Annex I). The Project Development Objective (PDO) remains relevant. Proposed revisions to the results framework are shown in Table 1. Changes are mainly made to adequately reflect interventions directly attributable to the project. The proposed changes have been agreed by the Bank and the PIM will be updated accordingly. 5 Table 1: Revisions to the Results Framework PDO: Improve the efficiency and transparency in managing public financial and human resources management, focusing on revenue administration, public procurement, budget execution and payroll management. PDO indicators Comments/ Current Proposed change* Rationale for Change Aggregate expenditure outturns Continued compared to the original approved budget and disaggregate for five key ministries (disaggregated by ministry) Business procedures in commercial Continued but baseline and Target value changed to reflect the registration of taxpayer in the Bureau target values revised. effect of automation on qualitative of Internal Revenue (manual versus automation) and quantitative changes (business procedures) Baseline: Manual with 11 steps Target: Automation with 13 steps Qualified procurement specialists Continued graduated from intensive procurement training working in Ministries, Departments and Agencies (MDAs) Ministries, Departments, and Continued Agencies (MDAs) registered in HRMIS IFMIS Report published monthly Continued Intermediate Results indicators Posting of quarterly expenditure Continued reports on MOF website after end of reporting period Issuance of legislative report on Continued annual financial statement of public sector accounts after end of reporting period Tax revenue captured in the ITAS Continued Quarterly inspections of industrial Continued scale mining operations performed by MLME Annual technical audits of large-scale Continued mining operations conducted by MLME and NBC Contracts valued at over USD Continued 250,000 that have undergone annual external audits by GAC submitted to national authorities Procurement monitoring system Revised – ‘MDAs with Revision to better reflect interventions developed and operational in PPCC procurement tracking under the project and realistic targets. for MDAs methodology piloted by PPCC’ 6 Civil servants registered using Dropped The project no longer supports this biometrics activity due to limited funding. A new career stream for Continued procurement is established by CSA and endorsed by GoL Procurement specialists working in Continued MDAs completed in-service procurement training provided by LIPA LIPA annual training calendar Dropped The indicator is not linked to project’s created with course offerings intervention, i.e. delivery of in-service targeting civil servants and procurement training program. communicated to MDAs LIPA Board of Governors established Dropped Establishment of Board of Governors with representation from key for LIPA is a political matter and does government ministries not reflect project’s interventions. * Indicate if the indicator is Dropped, Continued, New, Revised, or if there is a change in the end of project target value  Reallocations of proceeds (Annex 2). The proceeds of additional financing will be reallocated from component I (Strengthened Public Financial Management) to component III (Project Management) to ensure continued project oversight and results monitoring during the period of project extension. Amount of the Amount of the Credit Percentage of Credit Allocated Allocated (expressed Expenditures Category (expressed in in SDR) to be Financed SDR) (Inclusive of (Revised) (Current) Taxes) (1) Goods, works, consultants’ services, and Training under 3,200,000 3,039,000 100% Part I of the Project (2) Salaries and Operating Costs under Part II.2 of 1,100,000 1,100,000 the Project 100% (3) Goods, consultant’s services, Training and Operating Costs under 200,000 361,000 100% Part III of the Project TOTAL 4,500,000 4,500,000 100% Closing date (Annex 3). The current closing date will be extended for one year (from December 31, 2013 to December 31, 2014). 7 Annex 1: Revised Results Framework and Monitoring Liberia: Economic Governance and Institution Reform Project – Additional Financing Baseline Progress Original To Date Data Source/ Responsibility for Core UOM2 Targets Frequency Comments PDO Level Results Indicators1 Project (2012/13) Methodology Data Collection 3 (2007-08) 2013/14 2014/15 1. Aggregate expenditure outturns Project coordinator Minus implies that compared to the original approved Analysis of National aggregate outturn was Percent 21 -5.5 -4 0 Annual budget and disaggregate for five key Budget document lower than original ministries (disaggregated by approved budget ministry) Project coordinator Minus implies that Analysis of National aggregate outturn was Percent No data -26 -20 -10 Annual a. Ministry of Agriculture Budget document lower than original approved budget Project coordinator Aggregate outturn was Analysis of National Percent No data 8 6 4 higher than original b. Ministry of Education Annual Budget document approved budget Analysis of National Project coordinator Aggregate outturn was Percent No data -13 -3 -2 Budget document lower than original c. Ministry of Health Annual approved budget Analysis of National Project coordinator Aggregate outturn was d. Ministry of Land, Mines and Percent No data -22 -15 -10 Budget document lower than original Energy Annual approved budget Analysis of National Project coordinator Percent No data -7 -5 0 Aggregate outturn was e. Ministry of Public Work Budget document lower than original 1 Please indicate whether the indicator is a Core Sector Indicator (for additional guidance – please see http://coreindicators). 2 UOM = Unit of Measurement. 3 For new indicators introduced as part of the additional financing, the progress to date column is used to reflect the baseline value. 8 Annual approved budget 2. Business procedures for Number Manual Manual Automa Autom Annual Direct observation Project coordinator commercial registration of tax payers with with tion ation and test by BIR in the Bureau of Internal Revenue with 13 with 13 11 steps 11 steps steps steps 3. Qualified procurement specialists Project coordinator graduated from intensive Certificates of Number 0 23 70 100 Annual procurement training working in graduation Ministries, Departments and Agencies (MDAs) Inspection by CSA Project coordinator 4. Ministries, Departments, and Number 0 25 27 29 Annual of HRMIS Agencies (MDAs) registered in HRMIS registration Analysis of IFMIS Project coordinator Yes/No No No No Yes Annual 5. IFMIS Report published monthly Report Intermediate Indicators Component I: Strengthened Public Financial Management 1. Posting of quarterly expenditure Days 90 48 484 484 Quarterly www.MOF.gov.lr Project coordinator reports on MOF website after end of reporting period 2. Issuance of legislative report on Months Not More 12 8 Annual General Auditing Project coordinator GAC recently issued annual financial statement of public issued than 24 months Commission report annual financial sector accounts after end of reporting months months on issuance of the statements of public period legislative report sector accounts for FY2010/11 and FY2011/12 for the first time since after the end of the civil war. 4 The last quarterly fiscal report posted on the MoF website on May 18, 2012 is Q3 (end March 30 2012) 2011/12. Subsequently, the annual fiscal report 2011/12 was posted on March 18, 2013. For FY2012/13, MOF no longer post quarterly reports but mid-year fiscal report. 9 3. Tax revenue captured in the ITAS Percent 0 0 50% 100% Annual BIR’s SIGTAS’s Project coordinator Data Entry in Core Module 4.Quarterly inspections of industrial Yes/No No No No Yes Annual Analysis of MLME Program scale mining operations performed inspection reports coordinator by MLME 5. Annual technical audits of large- Analysis of technical MLME Program Yes/No No No No Yes Annual scale mining operations conducted audit reports coordinator by MLME and NBC 6. Contracts valued at over USD Analysis of report by Project coordinator 250,000 that have undergone annual % 0 0 0 10% Annual GAC and PPCC external audits by GAC submitted to national authorities PPCC report on Project 7. MDAs with procurement tracking Number 0 0 0 5 Annual piloting of tracking Coordinator methodology piloted by PPCC Component II: Initiating Civil Service Reform 1. A new career stream for CSA’s approval of a Project procurement is established by job classification for Coordinator CSA and endorsed by GoL Yes/No No No No Yes Annual procurement profession 2. Procurement specialists working Certificates of Project in MDAs completed in-service Number 0 41 141 1415 Annual completed training Coordinator procurement training provided by LIPA 5 End of intervention by the original project. 10 Annex 2: Reallocation of Proceeds Liberia – Economic Governance and Institution Reform Project – Additional Financing P107248 (CREDIT 4907-LR) Restructuring Paper 1. Proceeds for Liberia, Economic Governance and Institution Reform Project – Additional Financing, Credit No 4907-LR, Project P107248 will be reallocated as follows: Amount of the Amount of the Credit Percentage of Credit Allocated Allocated (expressed Expenditures Category (expressed in in SDR) to be Financed SDR) (Inclusive of (Revised) (Current) Taxes) (4) Goods, works, consultants’ services, and Training under 3,200,000 3,039,000 100% Part I of the Project (5) Salaries and Operating Costs under Part II.2 of 1,100,000 1,100,000 the Project 100% (6) Goods, consultant’s services, Training and Operating Costs under 200,000 361,000 100% Part III of the Project TOTAL 4,500,000 4,500,000 100% 2. Implementation progress is satisfactory as most activities supported by the AF have been completed, ongoing or initiated. The data centers at MOF and GAC were recently completed and operationalized. The scaled up activity, intensive procurement training program, is ongoing and the program recently graduated the first batch of procurement specialists. SESs have continued their capacity building services in ministries and agencies. Selection for the firm to provide technical assistance to strengthen the capacity of the Ministry of Lands Mines and Energy (MLME) has been initiated. 3. The proposed reallocation is necessary to ensure continued coordination, support, oversight and monitoring and evaluation of the results framework by the project management unit at MOF during the one-year extension of the project, and to ensure completion of outstanding activities in the MLME. 11 Annex 3: Extension of Closing Date 1. The closing date for Liberia, Economic Governance and Institution Reform Project – Additional Financing, Credit No 4907-LR, P107248 will be extended from December 31, 2013 until December 31, 2014. 2. The Project Development Objective remains relevant and achievable. A number of activities have been implemented satisfactorily and show results. For instance, the data centers at the Ministry of Finance and the General Auditing Commission were recently completed and operationalized. The scaled up activity, intensive procurement training program, is ongoing and the program recently graduated the first batch of procurement specialists. Senior Executive Service personnel have continued their capacity building services in ministries and agencies and are an important compliment to core civil servants in ministries and agencies where they are deployed. Finally, selection for a firm to provide technical assistance to strengthen the capacity of the Ministry of Lands, Mines and Energy (MLME) has been initiated. 3. The proposed extension is necessary to ensure continued oversight by MOF and monitoring and evaluation of the results framework by the project coordinator during the one-year extension of the project. It will also ensure completion of outstanding activities in the MLME. The Borrower has in place an action plan to complete the project by the new closing date. 4. This is the first proposed extension of the closing date of the additional financing. 5. Details of the proposed reallocation between categories are shown in the annex. 12