A Partnership for Improving Governance and Accountability in Honduras                                  94056
                                                                                                       April 16, 2012




 IDA Supports Web-Based Public Financial Management, Stronger Audit
 and Control Systems


Overview
With the support of several international donors, Honduras introduced a web-based public
financial management system that not only links all central government agencies but also
provides real-time financial information accessible to its citizens. The country also established
an independent Supreme Audit Institution and internal control offices in each central
government agency to monitor and audit the adequate use of public resources.


Challenge
With approximately 60 percent of the population living below
                                                                     More Results
the poverty line in 2009, Honduras has historically been one
of the poorest countries in Latin America. This reflects weak

                                                                     60%
economic growth and recurrent macroeconomic imbalances,
vulnerability to natural disasters, and a long legacy of
periodic mismanagement. Limited institutional capacity in the
public sector and the 2009 political crisis contributed to the       of the population living below
                                                                     the poverty line in 2009
challenge of implementing necessary reforms.




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Approach
For government-wide participation and impact, project
components were directly linked to the country’s
                                                                     social audits were conducted at
development program, and the project carried out activities          community level between 2004
that cut across the water, education, and energy sectors.            and 2007
The Poverty Reduction Support Technical Assistance Credit
(PRSTAC) project built on multi-stakeholder engagement,
which included several government agencies and sectors.             LEARN MORE
Sweden, Japan, the UK, and the International Development
                                                                      Honduras Poverty Reduction
Association (IDA) together provided financing for this project.
                                                                      Technical Assistance Credit
                                                                      (2004-10)

Results                                                               Website Ministry of Finance
                                                                      Honduras
As part of the effort to improve accountability and
governance, the PRSTAC project helped achieve the                     Website Public Sector Group
                                                                      Latin America & Caribbean
following key results:

       Between 2005 and 2010, the integrated financial
       management system was upgraded to a web-based
       version, which also added modules for budget,
       treasury, human resources, and accounting. The country now manages all of its
      expenditures through a single treasury account.

      By 2010, all internal control units in government institutions were operating under the
      rules established by the Supreme Audit Institution, compared with just 10 percent in
      2004.

      The project boosted the involvement of civil society in the development process of the
      country, specifically through the provision of workshops, technical assistance, and
      equipment. Between 2004 and 2007, about 50 social audits were conducted at
      community level.

      An audit of teacher posts, carried out by the Supreme Audit Institution, found an
      alarmingly high presence of teacher absenteeism and “phantom teachers”, constituting
      an estimated annual loss of US$19 million. These findings triggered public awareness
      and discussion, in particular among parents who subsequently demanded better delivery
      of education services.

      Cooperation and technical support in the water sector contributed to decentralization
      efforts at the municipal level, where over 50 municipalities now autonomously manage
      their water and sanitation services.



Bank Contribution
The International Development Association (IDA) provided US$8 million to support the project.


Partners
A US$5-million grant from the Swedish government financed activities of the Supreme Audit
Institution, and project management. With its roots in the Heavily-Indebted Poor Countries
 initiative and the Poverty Reduction Strategy processes, donor coordination in Honduras has
evolved and is now built around aid partnerships. Currently, IDA is working hand-in-hand with
the Inter-American Development Bank (IADB) and Germany’s KfW in the preparation and
implementation of donor-supported public sector reform projects.


Moving Forward
As part of the donor coordination in Honduras, IDA – in coordination with the IADB and KfW –
is preparing a follow-up project to consolidate achievements under the PRSTAC initiative. KfW
will support the Supreme Audit Institution, while the IADB and IDA are launching projects with
the Ministry of Finance and the Presidency.