To enhance state building outcomes, the Bank should provide increased support to reform-oriented FCS for capacity building at national and subnational levels through predictable, programmatic budget support, complemented by technical assistance, and investment lending. This would involve more systematic dialog with other development partners to reach agreement on measures to build capacity and sustain reforms. abc
The Bank has made considerable effort on civil service reform but there has been lack of traction due to political economy interests which weaken client ownership. In several FCS, Bank attempts to build capacity of the civil service reform have been adversely affected by the substitution of civil servants by externally-funded advisers who function as a "second civil service," the recruitment of civil servants to project implementation units implementing donor-financed projects, and the competition for skilled national staff among donor agencies and international nongovernmental organizations (NGOs). These measures are often necessary to provide urgent humanitarian and reconstruction assistance, and to rejuvenate the government and the economy in the immediate aftermath of conflict. However, in the medium term, unless they are absorbed within the public sector, they also weaken, rather than strengthen the capacity of the civil service. Building sustainable civil service capacity is in keeping with the G7+ objective of aligning donor assistance with national programs and country systems under the New Deal.
Regular and predictable budget support has been found to be correlated with improvements in policy and institutional reforms, especially when the reforms have been complemented by related investment lending and technical assistance. Among the CPIA indicators, regular budget support is most highly associated with improvement in the ratings for governance reforms in public sector management.
WB: Agree. In relation to the findings, Management would like to point out that the debate on how to balance reliance on parallel structures (including PIUs) with efforts to strengthen government systems in FCS is complex and highly controversial. Parallel structures are very heterogeneous in their design and impact on performance and sustainability. Management takes a differentiated view on the topic of parallel structures and commits to continue to more actively and consciously manage the challenge of balancing and integrating parallel structures with sustainable institution building, in line with the WBG commitment to use, or build capacity toward the eventual use, of country systems.
In relation to the recommendation, Management commits to consider the appropriate use of programmatic development policy operations to support the country policy and reform priorities, in response to client demand and when conditions are conducive to such an instrument.
On the recommendation to improve donor-coordination in public administration reform, Management action is already underway. A proposal has been developed to pilot a joint UN-WB diagnostic framework for (re-) establishing core-government functions in post-conflict situations.
Management will continue to encourage coordination at the country level as part of the broader post-WDR 2011 commitment on greater partnership with UN agencies. To this end, the Bank and UN operate a Partnership Trust Fund that supports joint work, a Partnership Framework, and the UN-WB Fiduciary Principles that allow for close coordination in implementation, including execution of each other's projects.
Action 3: Prepare tools and guidance notes to enable staff to better engage in supporting the enhancement and use of country-systems in IDA FCS.
Indicator: A set of appropriate tools and guidance notes developed.
Baseline: No specific tools exist on how to support capacity building and address country-system weaknesses in FCS.
Target: Note prepared for staff guidance on use of country systems module on use of country systems added to core course on FCS operational practice.
Timeline: [t.b.d. by FY14]
Action completed during the last fiscal year. No update for this fiscal year.
As outlined in last year's response, the IEG recommendation was focused on the trade-offs between utilizing PIU support to provide urgent service delivery in FCS (especially in post-conflict situations) and building state capacity. The IEG recommendation was particularly interested in management articulating how it would transition to predictable, programmatic budget support, complemented by technical assistance, and investment lending. IEG recognizes the considerable progress made by management in the preparation of tools and guidance notes to enable staff to better engage in supporting the enhancement and use of country-systems in IDA FCS. In addition, it appears that the usage of government PFM systems for donor financed projects has improved significantly as evidenced in the summary note on 33 FCV countries and their application of public financial management to World Bank projects. Procurement in FCV situations will also benefit from a simplified New Procurement Framework (NPF). The policy became operational as expected in July 1, 2016 with the preparation of the detailed guidance documents. Management expects that this will enable staff to better engage in the use of country systems in FCV settings. Thus, management has satisfied their commitments with regards to the Action Plan. However, IEG remains somewhat concerned with regards to capacity building of FCS countries. While these new policies and procedures ease the implementation burden, they do not replace the need for coordinated donor support to strengthen FCS country systems and to illustrate the range of ways budget support needs to be applied in FCS circumstances.
The Bank acknowledges that the key trade-off in using country systems in FCV environments is between fiduciary risk and the risk of undermine emergent country. The decision of how much risk a donor can bear and the balance of programmatic and fiduciary risks becomes fundamentally political. The Bank has been a proponent of encouraging countries to move towards increased usage of country systems. It has since shared the guidance note on how to move to an increased level of the usage of country systems with client countries and shared progress being made at g7+ gatherings where the CCSA has convened. To meet the institutional policy mandate, the FCV CCSA has worked with many Global Practices including the Governance Global Practice. It has on a quarterly basis tracked progress on measures being undertaken by staff and task teams to deepen the usage of the six core aspects of PFM in IDA financed projects. Latest results indicate that significant progress has since been made on use of PFM systems for donor financed projects in the core six areas that get used in IDA financed projects. For example, Liberia has migrated a total of 15 IDA projects to full usage of country systems in the six core areas with an additional 15 projects preparing to be migrated before October 31, 2016. Several others countries are using various aspects of country systems with the major aspects being usage of Supreme Audit Institutions as well as Budgeting and reporting.
In 2014/2015, the FCV CCSA selected ten countries across the globe for a review of capacity building efforts to discern lessons of better use of existing PFM systems for IDA financed projects. This report has since been internally reviewed and awaits wider Bank peer review for a decision to be made to share the lessons. It is expected that the complete report with clear recommendation of the models will be available by December, 2016, disseminated and shared within the Bank and other donors.
The new Procurement Policy Framework approved the WBG Board on July 21, 2015 also includes two innovations relevant to the subject: The use of acceptable procurement approaches other than the World Bank's, including: Other multi-lateral development banks other development partners such as UN agencies/bi-lateral agencies Borrowers' own implementing agency procurement arrangements (subject to review and acceptance by the Bank) Physical hands-on support from Bank staff to help low capacity borrowers run procurements.
Please find attached a detailed, comprehensive document of a summary of status of use of country systems in public financial management by 33 FCV countries as of May 20, 2016 and their potential plans. There is a body evidence of use of budgeting, treasury, procurement, internal and external audit, IDA funds transferred through the Central Bank, expenditure approval processes etc. These of course vary by country.
Procurement in FCV situations benefits from a simplified New Procurement Framework (NPF). The policy became operational as
The IEG recommendation focused on the trade-offs between utilizing PIU support to provide urgent service delivery in FCS (especially in post-conflict situations) and building state capacity. IEG's recommendation was based on lessons learned from weak performance observed in the area of civil service reform in many FCS and, recognizing the intractability of reform in this sector in many FCS, asked the Bank to be selective by working with reform-oriented at national and subnational levels. One pathway recommended - based on evaluation lessons - was through predictable, programmatic budget support, complemented by technical assistance, and investment lending. This would involve more systematic dialog with other development partners to reach agreement on measures to build capacity and sustain reform.
Management agreed on one specific action: to prepare tools and guidance notes to enable staff to better engage in supporting the enhancement and use of country-systems in IDA FCS. The Note would be prepared for staff guidance on use of country systems and a module on use of country systems would be added to the core course on FCS operational practice. The 2015 Management Update notes that:
(1) a âHow To Noteâ was developed by the FCV CCSA in June 2015. It was reviewed by six FM managers within the Bank and that it was (planned to be ) shared with G7+ secretariat at the Annual Meetings, and in turn, with donors who to deepen the use of country systems.
(2) A module on the use of country systems has also been added and delivered in two core courses delivered to Bank staff on FCS operational practice.
Other efforts directly in line with the IEG recommendation are ongoing:
(3) The FCV CCSA has selected ten countries across the globe for a review of capacity building efforts to help come up with specific models of building capacity and better use of existing PFM systems. It is expected that the complete report with clear recommendation of the models will be available by December, 2015, disseminated and shared within the Bank and other donors. IEG would welcome receipt of this report, and a briefing (a BBL could also be arranged).
The Management also notes that the new Procurement Policy Framework approved the WBG Board on July 21, 2015 also includes two innovations relevant to the subject: The use of acceptable procurement approaches other than the World Bank's, including: Other multi-lateral development banks Other development partners such as UN agencies, bi-lateral agencies, other development organizations Borrowers own implementing agency procurement arrangements (subject to review and acceptance by the Bank). While these new procedures may ease implementation burden, IEG notes that they do not replace the need for coordinated donor support to strengthen FCS country systems.
The use of country systems in financial management in Bank financed projects, covering Planning and Budgeting, Accounting, Treasury Management, Internal Audit, Financial Reporting and External Audit, has been pursued by the Bank as a de facto position in many FCS. To "use the country FM system" means to rely on the existing FM system or any of its components in implementing an investment project. For example, in the area of accounting and reporting, use of country systems means using the government accounting system, national accounting standards, and government financial statements. This is why in July 2009, a Guidance Note to staff was issued by the Bank to provide clarity on what aspects ought to be assessed before relying on the country system. Based on this, a "How To Note" was developed by the FCV CCSA in June 2015 and reviewed by the six FM managers within the Bank. This note is expected to be shared with the G7+ secretariat October 2015 and in turn, with donors who to deepen the use of country systems. The FCV group also tracks progress on implementation every quarter and shares the results with the g7+ secretariat. Significant progress on use of PFM systems for donor financed projects has been made in the core six areas that make up core PFM tenets.
Additionally, with the consolidation of various lending policies into one Investment Policy Lending Framework, the use of country systems has been embedded in para 7: "The financial management arrangements for the project rely on the Borrower's or Implementing Entity's/ies existing institutions and systems, with due consideration of the capacity of those institutions."
The FCV CCSA has selected ten countries across the globe for a review of capacity building efforts to help come up with specific models of building capacity and better use of existing PFM systems. It is expected that the complete report with clear recommendation of the models will be available by December, 2015, disseminated and shared within the Bank and other donors.
The new Procurement Policy Framework approved the WBG Board on July 21, 2015 also includes two innovations relevant to the subject:
The use of acceptable procurement approaches other than the World Bank's, including:
Other multi-lateral development banks
Other development partners such as UN agencies, bi-lateral agencies, other development organizations
Borrowers own implementing agency procurement arrangements (subject to review and acceptance by the Bank)
Physical hands-on support from Bank staff to help low capacity borrowers run procurements
A module on the use of country systems has also been added and delivered in two core courses delivered to Bank staff on FCS operational practice.