The World Bank Report No: ISR13530 Implementation Status & Results Timor-Leste Planning and Financial Management Capacity Building Program (P092484) Public Disclosure Copy Operation Name: Planning and Financial Management Capacity Building Project Stage: Implementation Seq.No: 10 Status: ARCHIVED Archive Date: 13-Jun-2014 Program (P092484) Country: Timor-Leste Approval FY: 2006 Product Line: IBRD/IDA Region: EAST ASIA AND PACIFIC Lending Instrument: Technical Assistance Loan Implementing Agency(ies): Key Dates Board Approval Date 21-Mar-2006 Original Closing Date 10-Jul-2011 Planned Mid Term Review Date Last Archived ISR Date 12-Nov-2013 Effectiveness Date 15-Nov-2006 Revised Closing Date 31-Jan-2014 Actual Mid Term Review Date 04-Jun-2010 Project Development Objectives Project Development Objective (from Project Appraisal Document) Capacity in the Ministry of Finance strengthened for prudent, effective and accountable planning and management of public finances to promote growth and poverty reduction. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Strengthening Capacity in the General Directorate of State Finances 7.40 Strengthening Capacity in the General Directorate of Revenue and Customs 3.50 Strengthening Capacity in the General Directorate of Policy Analysis and Research 2.94 Strengthening Capacity in the General Directorate of Corporate Services 6.03 Professional Development Program 2.80 Public Disclosure Copy Program Implementation 2.40 Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Satisfactory Moderately Satisfactory Overall Risk Rating Low Low Implementation Status Overview Page 1 of 11 The World Bank Report No: ISR13530 The Public Financial Management Capacity Building Project (PFMCBP) closed on January 31, 2014. The project has been under implementation for 7 years and 2 months. The project was approved in May 2006, became effective in November of 2006. It has been restructured two times to align project interventions to the Government's National Strategic Plans and strengthen support during a rapid expansion of the role of government, and the budget, to deliver economic growth and access to public services. Public Disclosure Copy The final year of implementation has coincided with a step improvement in the institutional and management capacity of the Ministry of Finance, and continued policy achievements, with direct support from the project. Noteworthy policy achievements include the publication of the first full series of national accounts to 2011, Timely submission of the 2014 budget within a prudent fiscal envelope and reduced reliance on external advisers, preparation of financial regulations, a budget preparation manual, settling of payment arrears, a clean up of databases for taxpayers, the preparation of a customs code and infrastructure for border-crossings, and the completion of only the second time release study for port cargo. These achievements occurred during a Ministry re-structuring and the preparation of a new organic law following the 2012 parliamentary elections and aimed at delivering the Ministry's Strategic Plan. Senior Management positions have been re-filled through robust merit-based recruitment. Clear job descriptions and key performance indicators have been prepared, drawn from the Ministry's Annual Action Plan and Strategic Plan. A Young Professionals stream has absorbed project-funded scholarship returnees and external talent. In essence, Senior management in the ministry are now working to the same set of goals, and are being held fully accountable for their delivery through an individual and ministry-wider performance monitoring framework. The project, and in particular its engagement with the Directorate General of Corporate Services, directly supported this. The results achieved through project component activities help deliver the PDO, for instance: - Improvements in budget execution over time (with the exception of 2012) reflect continued high growth in nominal spending, which translates into high non-oil GDP growth, and poverty reduction, especially in Urban areas. Government spending accounted for 7 percentage points of 9.5 percent non-oil growth measured in 2010. - More effort on domestic revenues has resulted in actual revenues systematically exceeding budget targets, together with an improving non-oil fiscal deficit, demonstrate a maturing of the government's PFM system, and notably a step up in revenue management. - A legal and HR unit have been created and strengthened by a recent ministry-wide staff and task mapping exercise, directly building both institutional capacity, as well as individual capacity. - the compilation of national accounts, and training in the macro-framework, and the preparation of an agreed statistics workplan for government, have provided essential data for policies to plan and protect high growth rates. - While it still takes too long overall, improvements in releasing financial accounts, coupled with more timely submission of the budget to Parliament with much fewer consultant inputs, greatly strengthen the government's accountability and the likelihood that PFM reforms will continue. Locations Country First Administrative Division Location Planned Actual Timor-Leste Distrito Dili Dili Public Disclosure Copy Timor-Leste Not Entered Democratic Republic of Timor-Leste Results Project Development Objective Indicators Page 2 of 11 The World Bank Report No: ISR13530 Indicator Name Core Unit of Measure Baseline Current End Target Institutional Development and Capacity Text Value IDCBP implemented in part In early 2013, the ministry IDCBP established as a Building Plan implemented and ongoing needs through MOF reorganization prepared a task and staff sustainable and government Public Disclosure Copy identified. and merit-based appointment mapping analysis, and used it wide approach to identifying process. to determine skills gaps. It and overcoming skills gaps Agreed it will be finalised as developed a formalprocess among civil servants. part of Strategic Plan process for identifying training needs, to December 2010. candidates and courses. In parallel, the government's professional development plan, the MoF component of which was supported by PFMCBPs PDP component, evolved into the government wide Human Capital Developent Fund. This fund, set up to support government wide training, drew heavily on the guidelines and processes established under PFMCBP. Merit-based recruitments to senior mangement positions in the ministry of finance were made based on assessments of core and task specific skills required. Based on this, areas for development for successful candiates were identified, and now form part of individual training plans. Date 03-Jun-2010 31-Jan-2013 31-Jan-2014 Comments This indicator is met. This indicator is met. The Public Disclosure Copy IDCBP is considered the precursor to the Government Wide Human Capital Development Fund (HCDF) Intermediate Results Indicators Page 3 of 11 The World Bank Report No: ISR13530 Indicator Name Core Unit of Measure Baseline Current End Target Budget with medium-term outlook submitted to Text Value 2010 Budget submitted on Multi-year estimates of Continued timely submission Parliament on time. time as per Budget and expenditure and revenue of quality budget, and Public Disclosure Copy Financial Management Law. prepared based on macro improved medium-term fiscal Strengthen quality of forward framework. forecasts. estimates. 2011-2014 budgets submitted to parliament 45 days before end of fiscal year. Date 03-Jun-2010 31-Jan-2014 31-Jan-2014 Comments This indicator is met. Fiscal discipline maintained through reduction Text Value Reduction in non-oil deficit Non-oil fiscal deficit as a % of Reduction in non-oil deficit to in the non-oil deficit as a % of GDP. (<100% of non-oil GDP) non oil GDP in 2010 = 71% <80% of non-oil GDP. following moderation in Non-oil fiscal deficit as a % of spending growth for 2009 and non oil GDP in 2011 = 81.3% 2010 State Budgets. Non-oil fiscal deficit as a % of non oil GDP in 2012 = 78.5% Non-oil fiscal deficit as a % of non oil GDP in 2013 = 98% Date 03-Jun-2010 31-Dec-2013 31-Jan-2014 Comments Non-oil fiscal deficit as a % of Partially met. While dropping Partially met. While dropping non oil GDP in 2009 = 71.1 to roughly 80% and below to roughly 80% and below 2011 and 2012, the deficit 2011 and 2012, the deficit increased to 98% of non-oil increased to 98% of non-oil GDP based on a downward GDP based on a downward revision to estimated 2013 revision to estimated 2013 non-oil GDP. Much of the non-oil GDP. Much of the volatility in this indicator volatility in this indicator stems from volatility and stems from volatility and revisions to the non-oil GDP revisions to the non-oil GDP figure. figure. Aggregate revenue and expenditure outturn # Text Value Revenue outturn is over 90% Expenditure outturns for FY11 Aggregate revenue and 80% of budget in the last two years in 2009, compared to around = 84% and in FY12 = 66%. expenditure outturn at least Public Disclosure Copy 75% in 2008. Expenditure FY13=66% 85% of budget in last two outturn in 2009 is close to Revenue outturns for years. 90%. FY11=140%, FY12 = 194%, FY13=100.6% Date 03-Jun-2010 31-Dec-2013 31-Jan-2014 Comments Partially met (Revenue Partially met. While revenue outturn systematically has strongly overperformed, exceding targets, but expenditure outturns have expenditure outturn in FY12 fallen below 85%. While below 80%, and remaining execution of the recurrent Page 4 of 11 The World Bank Report No: ISR13530 below, albeit closer to, 80% in budget remains above 95%, 2013). Measures to improve infrastructure spending has budget credibility are taking fallen following the completion effect, as budgets are of large projects, notably Public Disclosure Copy reduced into line with (rising) electrification. Lowering of spending capacity. budgets, and continued improvements to execution capacity are likely to mean overall execution rates rise sharply to over 85% in 2014. # Quarterly publication of budget Text Value Reports have been submitted All quarterly reports between Continued full functionality of execution reports within two months of the end on time to Parliament. 2010-2013 prepared and Transparency Portal. of the quarter. published on time but recent reports presented only in protuguese making them less accessible to Tetum speaking citizens. Date 03-Jun-2010 29-Oct-2013 31-Jan-2014 Comments This indicator is met. This indicator is met. The transparency portal has been steadily improved, now including more data (e.g. execution rates by all classifications), and with greater accessibility of reports (including full data downloads). Civil society used it to propose questions for Parliamentarians during the budget debate. Daily reconciliation of government bank Text Value Full reconciliation of accounts Bank reconciliations of the Government accounts up to accounts using FMIS. 2005-09 ($850mn in receipts TSA still carried out within two date and reconciled in FMIS. and $800mn in payments). weeks of the the close of each month. Government Public Disclosure Copy accounts in commercial banks not reconciled. Date 03-Jun-2010 31-Dec-2013 31-Jan-2014 Comments This indicator is partially met. This indicator is partially met. Reconciliations with the Reconciliations with the central bank are happening, central bank are happening, although with some delay. although with some delay. Page 5 of 11 The World Bank Report No: ISR13530 Timely publication of audited annual financial Text Value Annual Audited Accounts for Audited accounts for 2010 Publication of annual audited accounts. 2008 are published as published on 4 November financial accounts within 30 required though with some 2011 days after its presentation to delay because of change in the Prime Minister. Public Disclosure Copy auditors Audited accounts for 2011 published on 11 December 2012. Audited accounts for 2012 not published as of 31 December 2013. Date 03-Jun-2010 31-Dec-2013 31-Jan-2014 Comments This indicator is partially met. This indicator is partially met. Audited statements are Audited statements are prepared and submitted to prepared and submitted to Parliament, although with Parliament, although with delay. Delays are caused by delay. Delays are caused by late submission by the late submission by the Ministry of Finance to the Ministry of Finance to the court of auditors, as well as court of auditors, as well as delays in assessment there. delays in assessment there. Improving results from public perception Text Value In 2010, first survey by Asia Unpublished reults of a Improving results from public surveys, for each Directorate, of efficiency, Foundation shows a poor survey by a local think tank, perception surveys, for each effectiveness, ethics and integrity public perception of Customs, find year on year Directorate, of efficiency, slightly better for Revenue improvements in the effectiveness, ethics and perception of corruption index integrity related to interactions with government officials, notably at the Port. Date 03-Jun-2010 31-Dec-2013 31-Jan-2014 Comments Met. While not published, the Met. While not published, the Ministry has reacted strongly Ministry has reacted strongly to survey findings, including to survey findings, including engaging to improve training engaging to improve training Public Disclosure Copy and regulation of customs and regulation of customs brokers, and undertaking a brokers, and undertaking a port cargo time release study. port cargo time release study. Increasing domestic tax collections as a % of Text Value In 2009, domestic tax was 9% Domestic tax of non-oil GDP Increasing domestic tax non-oil GDP of non-oil GDP, an increase in 2010 = 5.4% collections as a % of non-oil from 8% in 2007 Domestic tax of non-oil GDP GDP in 2011 = 7.0% Domestic tax of non-oil GDP in 2012 = 7.3% Page 6 of 11 The World Bank Report No: ISR13530 Domestic tax of non-oil GDP in 2013 = 9.5% Date 03-Jun-2010 31-Dec-2013 31-Jan-2014 Public Disclosure Copy Comments Met. The increasing trend Met. The increasing trend measured from 2010-2012 is measured from 2010-2012 is evidence that this indicator is evidence that this indicator is met. met. National accounts published by the Statistics Text Value Source data for national National accounts published Source data for national Directorate and three staff trained as national accounts being established, for the period 2001 - 2011 accounts established; national accounts specialists by July 2011 and efforts under way to based on improved accounts published; and three appoint staff. SD have set expenditure and business staff trained. April 2011 to publish national activity statistics. Two staff accounts and GDP estimates members trained on basic elements of the national account compilation. This activity still needs significant external support. Offtrack to producing 2012 accounts due to consultant turnover. Date 03-Jun-2010 31-Dec-2013 31-Jan-2014 Comments Partially met (staff not fully Partially met (three staff trained) trained, but not yet able to replicate). Statistics Work Plan agreed by MoF and other Text Value Key elements of SWP being The annual SWP is being Completion of initial targets stakeholders, with implementation plan agreed implemented (HIES, BAS and implemented which includes within the SWP. and funding secured by end-2010 APS). Additional funding the release dates for trade, secured from other donors. CPI, financial and other economic data. The Statistics Directorate does not have a multi-year schedule of planned statistical and survey activities. Date 03-Jun-2010 31-Dec-2013 31-Jan-2014 Public Disclosure Copy Comments This indicator is met. This indicator is met. The National Directorate of National Statistics has been elevated to a Directorate General of National Statistics. A survey calendar has been prepared that is more realistic than previous. In addition, an Annual Action Plan and Procurement Plan, as well as Page 7 of 11 The World Bank Report No: ISR13530 individual survey plans exist. Funding has been secured from the state FY14 budget, and donors to carry out the Public Disclosure Copy survey plan. Macroeconomic framework sets annual budget Text Value A macro framework has Macro framework developed National staff able to update ceilings starting in 2009, with four staff able to started to set the annual and is being used to establish and interpret macro model update and interpret the framework byJuly budget ceilings. The model is fiscal ceilings and revenue and framework. 2011 gradually being updated and envelope since 2011. refined. At this stage it seems Government staff are not able unlikely that four staff will be to fully manage the macro able to update and interpret model. the framework by July 2011 Date 03-Jun-2010 31-Jan-2014 31-Jan-2014 Comments Met (although staff not fully Met (although staff not fully trained). trained). Completion of merit-based appointments Text Value Appointment of Grades A-B Systematic evaluation of More than 75% of positions across MOF and more than 75% are qualified completed. Performance managers (both current and occupied by qualified staff. staff. management system being potential) led to replacement developed. of a number of senior managers and appointment ofall managers and coordinators on performance contracts containing KPIs against 5 Year Operation Plan.Result: all managers received rating of satisfactory (C) or above in performance assessment in November 2013 Date 03-Jun-2010 31-Jan-2014 31-Jan-2014 Comments Partially met. Starting from Partially met. Starting from the top, senior management the top, senior management Public Disclosure Copy and grades A to C completed and grades A to C completed and competent. Grades D and and competent. Grades D and E remain to be reviewed. E remain to be reviewed. Establishment and staffing of Internal Audit Unit Text Value No progress to date. New Organic Law established Establishment and staffing of the Office of Inspection and Internal Audit Unit. Audit headed by the manager at the equivalent level of Director General, supported by 4 staff (2 x Grade C, 1 x Grade D, 1 x Grade E). Audit Page 8 of 11 The World Bank Report No: ISR13530 Plan was prepared and approved by the Minister. At the time of preparing this report - 8 investigations had Public Disclosure Copy been completed; 2 audits were underway; and, a number of additional investigations were being undertaken. The Internal Audit Adviser was appointed supporting the staff within the Unit, providing capacity building andprofessional inputs. Date 03-Jun-2010 31-Jan-2014 31-Jan-2014 Comments met Met. See detailed explanation above. Establishment and staffing of Legal Unit Text Value Limited progress to date -- New Organic Law established Establishment and staffing of difficulty in finding suitably the Office of Legal Support Legal Unit. qualified staff. The Program headed by a manager at the has provided important in-line level of Director General. A function. PFMCBP National Adviser was appointed as the Acting Coordinator, pending appointment of a qualified Unit Head. The Office of Legal Support currently has 2 additional national staff. PFMCBP has two international legal advisers workign in this office, to support the oeprations of the unit. There is also services provided for commercial and Public Disclosure Copy businss lawyer, pro-bono by DLA Piper International. The Office of LegalSupport has provided in excess of 150 legal opinions in 2013, and issued 210 formal pieces of legal advice. Date 03-Jun-2010 31-Jan-2014 31-Jan-2014 Comments Met Met. See detailed explanation above. Page 9 of 11 The World Bank Report No: ISR13530 Improved project supervision rating on Text Value Improvements in all aspects All project supervision ratings Satisfactory ratings across all implementation progress, procurement and of program implementation are rated satisfactory. program implementation financial management though more work needed on indicators. FM, M&E, and reporting Public Disclosure Copy Date 03-Jun-2010 19-Mar-2012 31-Jan-2014 Comments Met Met. Data on Financial Performance (as of 03-Apr-2014) Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P092484 IDA-H2100 Closed 21-Mar-2006 18-May-2006 15-Nov-2006 10-Jul-2011 31-Jan-2014 P092484 TF-93959 Closed 18-Mar-2009 18-Mar-2009 18-Mar-2009 10-Jul-2011 31-Jan-2014 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P092484 IDA-H2100 Closed USD 7.00 7.00 0.00 7.43 0.00 106.00 P092484 TF-93959 Closed USD 25.10 25.10 0.00 24.32 0.78 97.00 Disbursement Graph Public Disclosure Copy Key Decisions Regarding Implementation Page 10 of 11 The World Bank Report No: ISR13530 At closure, the key issues raised in the last ISR have been addressed, thereby helping ensure the sustainability of project results achieved, and an orderly administrative closure of the project, including robust reporting: (i) Although the funding modalities under PFMCBP come to a close, the sustainability of gains has been ensured as the Government program continues with own funding, and a Public Disclosure Copy direct financing arrangement from Australia and the EU, ready to begin immediately. The fact that the Ministry will now receive direct assistance akin to budget support from key development partners, shows a level of confidence in Ministry systems, strengthened over time with project support. In addition, the World Bank has been invited to remain formally engaged in the identification of reform priorities, and advisory services to deliver these priorities. (ii) All PFMCBP consultants being retained, have been contracted, and key project support (PIU) staff have been absorbed into corporate services Directorate General. Their job descriptions include completing project closure, the last audit, and financial and operational reporting. (iii) The Ministry's own comprehensive performance mapping and assessment of all technical assistants, including those hired under PFMCBP, will be completed in March. This will be a valuable input to the project Implementation Completion Report. (iv) At closure, the project will have executed ca. 98 percent of its $32.1 million funding. The balance is due to currency gains and natural lags in filling consultant positions that fell vacant during the final 14 month extension of the project. Any remaining (in progress) closure issues will be captured in the Implementation Completion Report due before the Project's end disbursement date of 31 July 2014. Restructuring History Level one Approved on 19-Feb-2010, Level two Approved on 25-May-2011 Related Projects There are no related projects. Public Disclosure Copy Page 11 of 11