Financial Management for the People of the Middle East & North Africa Issue 1 Jan 2014 www.cvmena.org Features Transitioning to Open Government Inger ANDERSEN (p4) Strategic Directions in MENA Gerard BYAM (p16) Let Them Eat Cash Shanta DEVARAJAN (p28) Building Trust & Institutions Hisham WALY (p2) Interviews Budgetary Transparency in MENA Vivek RAMKUMAR (p8) Accounting for SMEs Development Sahar NASR (p20) Themes Public Financial Management (p6-15) Corporate Financial Reporting (p18-25) 1 Building Trust & Institutions Governments and institutions must have the trust of citizens if they are to deliver services and achieve positive development outcomes. With- out such trust, citizens could disengage from the state. Enhancing transparency, accountability, and participation helps build trust. This is why the World Bank’s Financial Management unit in MENA decided to launch the Connecting Voices of MENA initiative, or, as we like to call it, CV MENA. CV MENA, more details next page, is a regional partnership that promotes improved financial management practices in both the public and private sectors. Its aim is to support the demands of citizens throughout the Arab World for better governance, a voice in public affairs, and social and economic inclusion. By fostering greater trans- parency, accountability, and participation, CV MENA hopes to promote greater investment in the region. CV MENA plans to take advantage of the windows of opportunity for change that are now open in the region. It will support capacity building in the area of financial management, facilitate the development of a professional community, and support the sharing and transfer of knowledge both within countries and across the region as a whole. The CV MENA journey started in April 2013 with a Boot Camp in Leba- non—"Control, Audit and Inspection in the Middle East"—with partici- pants from Lebanon, Jordan, Iraq, and Morocco. Another Boot Camp in Egypt covered "Good Practices in Supreme Audit Institutions." Then, our two main events, or Exchanges—“Public Financial Accountability in a Changing Environment” in Abu Dhabi, and “ Strengthening Accountancy as a Foundation for MSME Sector Growth and Job Creation” in Jordan— Hisham WALY drew nearly 500 participants from across the region. CV MENA is not just about training; we work with our clients on specific issues, con- Manager, Financial Management straints, and bottlenecks to find together the solutions that best fit the MENA, The World Bank local context. We do not try to impose so-called “best practices” or “pre-packaged solutions,” but rather we aim to be responsive to regio n- al and national voices and needs. To help communicate beyond those who attend CV MENA events and to create a space in which financial management professionals and mem- bers of the public accountability community can interact, six months ago we launched a virtual magazine on our CV MENA website. Now we are taking the magazine one step further. This is the inaugural print edition of the magazine; 5,000 copies are being distributed around the MENA region and to select locations across the globe. The print edition of CV MENA Magazine will be published four times a year. This magazine is designed to share knowledge about public financial management and corporate financial reporting, and to feature current and relevant news, articles, and books from around the region and the world. We plan to share this information with financial management practitioners in Ministries of Finance, supreme audit institutions, pro- fessional accountancy organizations, media, academia, and nongov- ernmental organizations, as well as with the general public in MENA. We hope you enjoy this first issue of the CV MENA Magazine. We wel- come your feedback as we tweak and fine-tune over the next few is- sues; share your thoughts with us at cvmena@worldbank.org. www.cvmena.org 2 CV MENA 4 Components The Exchange is a major annual forum that provides a channel for dia- A Boot Camp is a practical concept. It involves gathering a group of logue, enabling countries to share experiences and promoting societal- decision-makers and experts to address a particular issue through fo- governmental consensus building. It promotes intra-regional coopera- cused and intensive discussion that takes into account both technical tion and stimulates interest in improving public financial management and non-technical factors. After thoroughly examining the issue, the and corporate financial reporting in MENA. The Exchange facilitates group develops possible solutions and a work program to help imple- knowledge-sharing from transitional democracies and showcases suc- ment them. The experience is documented in a Solution Paper—a brief cessful experiences from fragile and conflict states. It starts where fi- note describing how a specific challenge or problem was addressed in a nancial management diagnostics leave off, supporting the creation of an collaborative and pragmatic fashion. The Boot Camps, together with enabling environment for reforms to move from concept to reality. The Solutions Lab and discussions in Maarefah, feed into the design of the Exchange helps catalyze innovative activities to develop regional public Exchange and CV MENA’s workprogram. goods and enables the World Bank to truly be a “Solutions Bank.” In partnership with the Bank’s Global Development and Learning Ne t- Maarefah responds to the need to implement, sustain, and build on the work (GDLN), CV MENA connects participants across the MENA region results of The Exchange, as well as to extend these benefits to those once each quarter to focus on finding solutions on topics related to unable to personally attend Boot Camps and Solutions Labs. Maarefah internal and external audit and corporate financial reporting. Solutions (“knowledge” in Arabic) is a Community of Practice (CoP) that serves as Lab realizes that an answer is not necessarily the solution: a time-tested a forum for ongoing dialogue and continuous peer-to-peer and expert “best practice” may not be optimal in a particular situation because it is knowledge exchange. The CoP—established by the Financial Manage- simply not politically or socially feasible at the time. The Labs help our ment Unit of the World Bank’s Middle East & North Africa Region in clients fashion an attainable solution—an alternative answer to the 2011 as a response to popular demand for change, accountability, problem—by bringing in other perspectives and different, yet relevant, transparency, and inclusiveness—is designed to serve as a robust base experiences from other countries. The Labs also feed into the design of for extending the dialogue and refocusing it on the needs of CV MENA. The Exchange. Our Partners MENA MDTF The MENA Multidonor Trust Fund CV MENA is partially funded by the MENA the MENA MDTF focuses on strengthening Multidonor Trust Fund—a programmatic trust governance, increasing social and economic fund that provides catalytic donor support to inclusion, creating jobs (from both the de- countries in MENA that are undergoing historic mand and the supply sides), and accelerating transition and reform. sustainable growth. In alignment with the Bank’s MENA strategy, which was developed in response to the Arab It supports technical assistance for project Inquiries: menamdtf@worldbank.org Spring, and with clear linkages to current and preparation, analytic studies, capacity build- future Bank-funded operations and programs, ing, and knowledge sharing. 3 The Transition To Open Goverment In The Arab World This is a particularly exciting time fortunate to engage with numer- • to attempt to mainstream citizen In the coming for work on open development, ous impassioned citizens and in- engagement across our entire months and years, because—in part thanks to new information and communication dependent organizations across the Region that are leading cam- portfolio—obtaining direct feedback from beneficiaries and one of the most technologies—people all over the paigns for public access to infor- citizens on how our projects and world are developing increased mation, for natural resource reve- programs are performing as important expectations about transparency, nue transparency, and for opening part of our routine results moni- accountability, and the degree to budgets to public scrutiny. toring. development which they should be able to par- • Our opportunities to communi- ticipate in the functioning of their The key message I have been cate with citizens have widened areas we will be governments. In just the past year, hearing is that open government dramatically: the MENA blog dealing with is we saw that protests in countries is vital for development and for has had over 400,000 page such as Brazil, India, South Africa, ensuring that citizens have a say in views, and on MENA Facebook open and Turkey were rooted in the shaping their countries’ future. we have nearly 300,000 follow- universal desire for greater, and ers and have reached around 20 government. more equal, prosperity and for And change is happening: citizens million unique visitors. greater participation and voice. in the Region today are more • Through outreach, beneficiary aware, engaged, and connected. engagement, and social media, Governments around the world Internet users jumped from 17% we increasingly work with civil have been responding with re- of the population in 2008 to 40% society through initiatives such forms that increase access to in- at the end of 2012, and 88% of the as the ANSA-Arab World and formation, establish checks and Middle East online population the new Global Partnership for balances to hold the executive uses social networking sites daily. Social Accountability. accountable, and devolve deci- This kind of growth has increased • But our strongest engagement sion-making and resources to local both people’s access to and their has been with our government levels. As one example, the num- demand for information, setting partners as we work together to ber of countries with access-to- the stage for an informed public establish mechanisms for en- information legislation has in- debate and for building consensus hancing transparency and open creased rapidly over the past two for important policy changes. government across the MENA decades, from 12 in 1990 to over Region. 80 today. At the World Bank Group, we are embracing this change and need Open government is transforma- Nowhere has the call for greater to respond to the new demands, tional: it changes people’s expec- voice and accountability been and adapt. Therefore, citizen en- tations of and faith in their gov- more loudly expressed than in the gagement has become an integral ernment, and it influences the Inger MENA Region—where civil society engagement, access to infor- part of our strategy and practices. As Vice President for the MENA way governments interact and engage with citizens. We are ANDERSEN mation, and freedom of the media rank among the weakest in the region, I am proud to highlight that: committed to continuing to sup- port our partners throughout the MENA Vice President, world—during the Arab Spring. Region as they work to bring the The World Bank  We have volunteered to be the benefits of open government to Over the past few years, I was first Region in the World Bank their countries and people. The Open Government Partnership is a multilateral initiative that aims to secure concrete commitments from governments to promote transparency, empower citizens, fight corruption, and harness new technologies to strengthen governance. To become a member of OGP, partici- pating countries must endorse a high-level Open Government Declaration; deliver a country action plan developed with public consultation, and commit to independent reporting on their progress going forward. Since 2011, OGP has grown from 8 countries to the 62 participating countries, including Jordan in MENA. 4 Photocredit: Arne Hoel 5 Public Financial Management In collaboration with Public Financial Management in a Changing Environment May 13-15, 2013 - Abu Dhabi, UAE Ms. Jennifer Thompson, Chief Financial Management Officer, The World Bank The Exchange: Public Financial Management (PFM) aimed to build RESULTS INDICATORS financial management capacity in MENA, better equipping involved 81% Participants who provided positive ratings on institutions in implementing governance reforms to strengthen ac- the quality and relevance of the event countability and transparency across the public sector (central and local). 80% Participants reporting awareness of the value of enhanced contacts and cooperation among These reforms are fully aligned with the World Bank’s new MENA MoFs, SAIs, CSOs, and media engagement framework, which promotes governance, voice, and inclusion. The Exchange PFM assisted Ministries of Finance, supreme 83% Media participants reporting interest in in- audit institutions (SAIs), civil society organizations (CSOs), and the creasing their coverage of public financial media in building a trusting and collaborative working relationship. transparency matters and of SAIs’ reports and Specifically, it helped create a safe space for the parties to liaise and recommendations share experiences. 64% Participating CSOs reporting that in future they The Exchange was also attended by donor representatives active in can be more proficient in reviewing public the area of PFM in MENA, academia, and other relevant stakeholders financial transparency matters and SAIs’ audit reports  On May 13, the sessions focused on themes of interest to senior participants from Ministries of Finance, such as those in charge 87% Participants reporting interest in membership of government accounting and financial controls; supreme audit in the CoP—Maarefah institutions; and other government agencies.  On May 14, the program was expanded to discuss points of in- Follow up A number of CV MENA follow-up activities, terest to both government participants and representatives from informed by The Exchange PFM discussions, CSOs and media with a role in public finance oversight. were prepared and will be delivered in the  Targeted roundtable discussions took place on May 15. coming months. Results on several indicators, measured at the conclusion of the event, illustrate the success of The Exchange. 6 Mr. Abdelkader Zgoulli, Secretariat General of ARABOSAI, President of the Mr. Benyoussef Saboni, Inspector General of Finance, Moroccan Ministry of Tunisia Court of Accounts: “SAI Reforms in Times of Change” Economy and Finance: “Government Financial Controls” Ms. Jean Moira Awinja Wameyo, Financial Management Manager, African Ms. Bettina Michelle Jakobsen, Chair of the INTOSAI Professional Standards Development Bank: “Opening Session” Committee, Assistant Auditor General of The National Audit Office of Denmark: “Professional Standards” Mr. Abdullatif Bennani, Advisor to the Cabinet of the President, Mr. Einar Gorrisen, Deputy Director General, INTOSAI Development Initiative: Court of Accounts of Morocco “Capacity Development to Strengthen Value and Benefits of SAIs” Maarefah (“knowledge” in Arabic) is a community of practice (CoP) established to serve as a forum for ongoing dialogue and continuous peer-to-peer and expert knowledge exchange. JOIN US! 1. Register at www.maarefah.net (Annabell Van den Berghe, 2. Let us know at cvmena@worldbank.org Maarefah Coordinator and Moderator) 3. Win a CONNECTING VOICES T-shirt! 7 Interview Interview Vivek RAMKUMAR Director of the International Advocacy and Open Budget Initiative Interview conducted by: Ibtissam ALAOUI “Transparency accompanied by opportunities for public participation can create an environment in which budgets are planned and implemented efficiently and equitably.” What does it take for countries in MENA to have more open and It can improve efficiency, effectiveness, and equity in public expendi- transparent budgets? ture and decision-making. But the most important reason for improv- ing budgetary transparency and public participation is that it can help For most governments in the world, including those in the MENA governments to build trust with their citizens, providing them with a region, improving budgetary transparency and supporting public voice and ensuring their dignity— all of which are essential hallmarks engagement is not a very difficult task from a technical point of view. of today’s democratic societies. Our biennial Open Budget Survey finds that a large number of MENA countries are already producing budget reports, but they are not How about the Morocco experience? How can Morocco lead the way making them available to the public. So our first recommendation for for other countries in the region? governments in these countries is to simply start putting on their websites the budget reports that they produce but do not yet dis- Morocco has already taken a couple of encouraging steps to improve close. We also know that transparency alone is often insufficient to budgetary transparency. For example, on our Open Budget Surveys, improve public financial management and accountability. Transpar- Morocco’s score doubled between 2006 and 2012 as the country ency accompanied by opportunities for public participation can cre- made more budget reports public. The 2012 Survey found that of the ate an environment in which budgets are planned and implemented 10 countries in the MENA region that were surveyed, Morocco is the efficiently and equitably. Such opportunities for participation can only one to publish a Citizens Budget—an important step by which include, for example, public meetings organized by the government government can help citizens understand budgets by presenting them in which the government provides budget information to citizens and in easily understandable language and widely accessible formats. Mo- collects their views on budget proposals, policies, and implementa- rocco can still do a lot more to further improve budgetary transparen- tion. cy—for example, by publishing budget planning and implementation reports that shed more light on how the government is managing What benefits do countries gain from being more transparent? national resources through its budget. To take another example, the government produces a Year-End Report on actual revenues collected Governments are under extreme pressure from internal and external and expenditures made—for internal use only. The government stakeholders to use public resources to meet citizens’ needs. In this should publish this report. It should also publish a Pre-Budget State- context, governments can get many benefits from greater budget ment to inform legislators and citizens about the overall assumptions transparency. Recent research shows that transparency can enable that will guide the development of the Executive’s Budget Proposal. governments to raise credit from the international financial markets The government can also increase the comprehensiveness of the Ex- at cheaper rates. It can also help improve fiscal discipline and prevent ecutive’s Budget Proposal to allow more in-depth analysis on budget- debt from ballooning out of control, as recently happened in some ary priorities. European countries. More details on the steps that governments in 100 countries can take to improve budgetary transparency are available on our website (www.internationalbudget.org). The Open Budget Initiative is a global research and advocacy program to promote public access to budget information and the adoption of accountable budget systems. International Budget Partnership (IBP) launched the initiative with the Open Budget Survey—a com- prehensive analysis and survey that evaluates whether governments give the public access to budget information and opportunities to partici- pate in the budget process at the national level. The IBP works with civil society partners in 100 countries to collect the data for the Survey. The first Open Budget Survey was released in 2006 and is conducted biennially. To easily measure the overall commitment of the countries surveyed to transparency and to allow for comparisons among countries, IBP created the Open Budget Index (OBI) from the Survey. 8 Photocredit: Arne Hoel 9 The Exchange PFM in Pictures OFM Exchange Government session group Lebanon Team: Minister of Finance, Media, Civil Society, and World Bank Ms. Sowmya Kidambi, Social Audits, Government of Andhra Pradesh: “Social Audits at the Community Level” All sessions had English, French, and Arabic interpretation and when the interpreter falls sick the Region's FM Manager does the interpretation instead. Extractive Industries Transparency Initiative (EITI) FYI KEY FACTS Launched in 2003, the Extrac- tive Industries Transparency 39 countries Transparency The World Bank around the globe have joined EITI in extractive industries is provides countries with technical Initiative (EITI) promotes and – which requires full disclosure of fundamental to ensuring that the assistance and grants to supports improved governance taxes, royalties and other fees benefits of a country’s natural implement EITI principles of and transparency in resource- from a country’s oil, gas and resources can help developing transparency and accountability. rich countries by ensuring mining sectors. nations in their quest to reduce companies publish what they About half of the countries are in poverty and boost shared pay and governments publish Africa with Iraq and Yemen from prosperity. what they receive in an EITI MENA. report. 10 Q&A CVMENA: From your experience in supporting SAIs, what would you say are the key challenges SAIs face today? Mona: There is no doubt that the SAI is a key player in a country’s public financial management system, providing comfort to parliaments, citi- zens, and others that the government is managing their finances well. The reality in many countries that SAIs lack the independence, authori- ty, skills, and resources to carry out thorough audits and to report the results freely and in a timely way. But during the last few years, there has been high demand for greater accountability, especially from such unconventional parties as citizens, the media, and civil society organiza- tions. The power of the people has never been stronger than it is today in MENA, and there is huge pressure on the region’s SAIs to step up to the challenge and work on strengthening their value in improving peo- ple’s lives. The complexity becomes greater when the government is far behind in terms of strategic planning, performance or results-oriented budgeting, accounting and reporting, and transparency. CVMENA: What are the key challenges facing development partners that are interested in helping SAIs? Mona: The main challenge continues to be sustainability! Is the capacity that has been or is to be developed sustainable? How to ensure that the advances made are not lost or even reversed after the cooperation ends? How to ensure that the knowledge gained is absorbed and sys- Mona EL CHAMI tematically assimilated by the SAI? How to ensure a minimal gap is min- Sr. Financial Management Specialist imal between the methodology adopted and the audit as practiced? MENA, World Bank Questions like these are usually related to how ready the SAI is to change and how aware it is of the critical need to get its house in order, define its priorities, complement its staff skills with additional expertise, improve its communications strategy, and protect its credibility and relevance. CVMENA: What advice would you give your colleagues from the Bank or other development partners when planning to support SAIs ’ institu- tional capacity building? Mona: SAIs’ ownership and management, leadership, commitment, and flexibility are definitely ingredients for successful operations. In addition to guaranteeing all of that, I advise them to collaborate with INTOSAI, the regional professional bodies, and other development partners to ensure complementarity of resources and programs. I would also advise them to target both the SAIs’ organizational capacity (planning, moni- toring and evaluation, etc.) and their professional audit capacity, and not to forget the capacity of the SAI to deal with the external environ- ment. Always start with an assessment (or use a current available as- sessment) to measure performance; and when enhancing audit meth- odologies, ensure that pilot audits are conducted, audit manuals are revised, and a structured program of training is maintained. The International Organisation of Supreme Audit Institutions (INTOSAI) operates as an umbrella organisation for the external gov- ernment audit community. For more than 50 years it has provided an institutionalised framework for supreme audit institutions to promote devel- opment and transfer of knowledge, improve government auditing worldwide and enhance professional capacities, standing and influence of mem- ber SAIs in their respective countries. INTOSAI is an autonomous, independent and non-political organisation. It is a non-governmental organisation with special consultative status with the Economic and Social Council (ECOSOC) of the United Nations. 11 Financial Management Tools SAI Performance Measurement Framework: New Tool for More Effective Government Auditing The International Organisation of Supreme Audit Institutions (INTOSAI) has developed a new tool to enable supreme audit institutions (SAIs) to better measure, manage, monitor, and report on their performance— the SAI Performance Measurement Framework (SAI PMF). The SAI PMF enables SAIs to evaluate their audit methodology and institutional framework. It helps them identify how they can improve their performance and thus make an even stronger contribution to the stewardship of public funds and good governance. While taking the country context and public financial management environment into consideration, the SAI PMF benchmarks the SAI’s practices against the key principles of the International Standards of Supreme Audit Institu- tions. The SAI PMF may be used for self-assessment, external evalua- tion, or peer review. Positive first experiences Following broad consultation, an official pilot version of the SAI PMF was presented at the INTOSAI Congress in Beijing in October 2013. Over 20 SAIs around the world are now planning or conducting as- sessments using the new tool, and the first experiences have been positive. The Court of Accounts of Djibouti was among the first to complete an Presented by assessment. The exercise helped the Court refine its development ob- Yngvild ARNESEN jectives and attract donor support. The Supreme Audit and Administra- tive Control Bureau of the Palestinian Authorities is planning an as- Financial Management Specialist sessment in cooperation with the World Bank and a peer SAI. Further MENA, The World Bank assessments are planned in Europe, Asia, Africa, and Latin America, and the World Bank supports several of them. Worldwide training on the tool A network of experts qualified to use the SAI PMF is being established through training courses run by the INTOSAI Development Initiative. So far around 200 assessors have been trained, including a number from the World Bank. Courses were held in Tunisia and Morocco in 2013, and the first course in Arabic is planned for early 2014. The target au- dience is SAI employees, staff of donor organizations, and consultants. The INTOSAI Development Institute (IDI) is a non-profit organization that aims to enhance the institutional capacity of Supreme Audit Institutions in developing countries through needs-based, collaborative and sustainable development programs in INTOSAI regions and groups of SAIs to meet the existing and emerging needs of stakeholders. Since 2010, the IDI is also the secretariat for the INTOSAI-Donor Cooperation. 12 The structure of the SAI PMF Performance in domains A to G is measured through 24 indicators: Domain A Domain D Domain E SAI-1 Financial Audit Results SAI-9 Overall Audit Planning and Quality Man- SAI-18 Ethics, Management and Internal Control SAI-2 Compliance Audit Results agement SAI-19 Asset Management and Support Services SAI-3 Performance Audit Results SAI-10 Quality Assurance of Audit Processes SAI-4 Judgment Results - Additional indicator SAI-11 Financial Audit Foundations Domain F for Courts of Accounts SAI-12 Financial Audit Process SAI-20 Human Resource Leadership and Function SAI-5 Annual Report & Other Reports SAI-13 Compliance Audit Foundations SAI-21 Professional Development and Training SAI-14 Compliance Audit Process Domain B SAI-15 Performance Audit Foundations Domain G SAI-6 Independence of the SAI SAI-16 Performance Audit Process SAI-22 Communications Strategy and Internal SAI-7 Mandate of the SAI SAI-17 Judgment Process - Additional indicator Communication for Courts of Accounts SAI-23 Communication with the Legislature, Judi- Domain C ciary and Executive SAI-8 Strategy for Organizational Develop- SAI-24 Communication with the Media, Citizens ment and Civil Society Organizations More information on the SAI PMF is available at www.idi.no. 13 PFM Events “Control, Audit, and Inspection” April 22-24, 2013 – Beirut, Lebanon Participants: 42 senior government officials; 5 experts from Moroc- co, Poland, and Lebanon; and an expert from Canada who delivered the training. Four Solutions Papers (one for each country and one for KRG-Iraq) were developed to document the discussions, the issues raised, and the possible solutions explored. Key points concluded: 1. All countries are in the early stages of developing internal con- trol and audit capabilities; three are considering or implement- ing legislative changes. 2. Internal controls are generally considered to be overlapping and weak. 3. Internal audit is weak and requires attention. 4. The modern concepts of internal control and the role of internal audit continue to be poorly understood. 5. External audit is somewhat more developed than internal au- dit. Objective: to offer a platform to (a) share knowledge and discuss good 6. Integrated financial management information system imple- practice regarding control, audit, inspection, and investigation in the public mentation is under way in half of the countries. sector, while drawing on international and regional experiences and appro- 7. Capacity development is needed for all components of the in- priate standards and guidelines; (b) convene the accountability institutions ternal control and internal and external audit system. in Iraq, Jordan, Lebanon, and Morocco; and (c) discuss country-specific 8. Donor-sponsored reforms are under way and/or planned in all challenges, opportunities, and the way forward. four countries. “International Standards for Supreme Audit Institutions” April 28-30, 2013 – Cairo, Egypt The discussion covered several aspects of the CAO including:  Legislative framework;  Independence, mandate, scope of work, accountability, and powers;  Scope of audits, procesus of transparancy  Staff development Means of cooperation among CAO, Parliament, and the legislation department of the Ministry of Justice were also explored. Presentations by international experts were delivered in mod- ules focusing on the following areas:  ISSAI (International Standards for SAIs);  SAI Professional standards and Human Resource develop- Objective: to expose key staff of the Central Auditing Organization of Egypt ment; (CAO) to current information about international standards and good prac-  Financial and compliance audits; tices for supreme audit institutions (SAIs) and experiences from other coun-  Performance audits and assurance work; tries with revising SAI legal frameworks.  Implementation and follow-up of audit findings;  Audit reporting and transparency; Participants: international experts; CAO auditors, accountants, and manag-  SAI financial independence and administration; ers; counselors from the Egyptian Ministry of Justice; members of the Egyp-  SAI mandate, strategy, and scope of work; and tian Shura council (legislation committee); representatives from the SAIs of  SAI legal and regulatory framework, Poland and Sweden. A consensus was reached on the importance of applying ISSAIs in CAO. 14 Solutions Lab Boot Camps Challenges and Opportunities of SAI Interaction with Stakeholders Adopting and Implementing IPSAS Central Auditing Organization of Egypt, Cairo, 24-25 November 2013 December 11-12, 2013 Location: Videoconference rooms of the World Bank offices in Mo- The Boot Camp will bring together officials from the Central Auditing rocco, Tunisia, Egypt, Yemen, Djibouti, Jordan, Lebanon, Iraq, Pales- Organization of Egypt to discuss interacting with stakeholders. SAIs tinian Territories, and Washington, DC; led by World Bank financial make significant contributions to their societies by bringing account- management specialists and an IPSAS expert ability, integrity, and transparency to government activities. These contributions are maximized when the SAIs are able to communicate Audience: 70 participants from MOF (and other public institutions) of the value of their role and the results of their work to citizens and the 9 countries other stakeholders in an effective manner. By publicizing their contri- butions and the results of their work, SAIs can stimulate understand- This Solutions Lab will discuss the status of IPSAS adoption and im- ing and support and catalyze improvement in government. plementation in 9 of the MNA countries, expose the participants to good practices of being compliant with IPSAS, and have a conversa- However, SAIs need to take many concerns into account when they tion regarding the challenges and opportunities of both adoption and communicate with the public—for example, the country context, the implementation. legal framework, and the generally sensitive nature of SAIs’ work. Answers to the questions of transparency are not straightforward. *** The Boot Camp will therefore give participants room for reflection and provide an opportunity to discuss concrete situations and chal- Solutions Lab on Cooperative Audits lenges with international experts and learn from examples from other countries. December 11-12, 2013 Location: Cairo, Egypt, with video conference connections with ex- *** perts from the Supreme Audit Institutions of Brazil and Poland SAIs’ Legal Frameworks: Audience: 15 participants from the Central Auditing Organization of Egypt (CAO) and the ARABOSAI. Foundations for Effective Government Auditing The Solutions Lab will be a targeted discussion on CAO's plans for Central Agency of Control and Auditing of Yemen (COCA), Cairo, No- cooperative audits with other Supreme Audit Institutions (SAIs). Co- vember 26-27, 2013 operative audits can be an effective tool for enhanced learning be- tween SAIs. The virtual format will enable CAO to draw on the experi- If SAIs are to carry out their functions effectively, certain conditions— ences of the SAIs with the widest experiences in the field. defined by INTOSAI in its International Standards of Supreme Audit Institutions (ISSAIs)—need to be in place: independence from the executive, SAI transparency and accountability, and professional audit practices. Appropriate legal frameworks provide a strong foundation Solutions Paper for the SAI’s objective oversight of the executive’s use of public re- sources. However, the SAI is not usually in a position to decide its own legal framework, and sometimes SAIs experience legal con- Opportunities for regional collaboration straints on their ability to function effectively. among SAIs, CSOs, and Media in MENA This Boot Camp will introduce key COCA staff to international good December 2013 practices in SAI legal frameworks, with presentations on such key issues for SAIs as independence, transparency, and accountability. Countries: Morocco, Tunisia, Egypt, Yemen, Djibouti, Jordan, The format of the event will be interactive, with a large degree of Lebanon, Iraq, Palestinian Territories discussion and interaction between the participants and the experts. The World Bank is financing a study to guide the regional collabora- tion between SAIs, civil society organizations (CSOs), and media in nine MENA countries. The study would survey representatives of 70 CSOs and media about their knowledge of and work with SAIs and 21 universities, businesses, and professional bodies. A Solutions Paper will be produced with survey results and recommendations to guide regional collaboration among SAIs, CSOs, and media. 15 Vision As World Bank President Jim Yong Kim noted in his To implement these strategic priorities, the World recent address before the 2013 World Bank-IMF Bank intends to scale up its support to the region in Annual Meetings, the aftermath of the Arab Spring this very critical period of its transition. World Bank has left many of the MENA countries with a triple lending in MENA increased by over 33% between challenge: (a) restoring macroeconomic stability; (b) fiscal years 2012 and 2013. We have further utilized reforming the economy to meet the high expecta- our convening power to funnel more resources from tions of the people who marched in the streets; and the international community to the region. For ex- (c) managing the transition to new constitutions and ample, we worked with donors to raise nearly $8 more open, contested, multiparty elections. These billion in support of Yemen’s recovery, and with the challenges would be daunting for any one country. Deauville Partnership we established a Transition The fact that they all have to be met in one region, Fund that has already committed just over $100 with possibilities for spillover effects across countries million in grant resources to help countries imple- should things go wrong (as we are seeing in Syria), ment key economic reforms. Moreover, the Bank has makes it all the more important that the internation- an active engagement in Jordan and Lebanon and al community marshall its resources to support the has stepped forward to respond to the spillover from brave men and women who risked their lives to the Syria conflict in these countries. demand the basic human dignity that is their due. In response to the challenging transition in the re- Moving ahead, we need to help countries attract Gerard BYAM gion, the World Bank Group has developed a new greater private investment for infrastructure, agricul- framework for engagement. Along with listening to ture, and food security. We need to provide budget Director, Strategy and Operations new governments and building programs of support support to encourage pro-growth structural reforms MENA, World Bank that meet their specific development goals, the Bank and enhance the effectiveness of public investment; has also expanded its consultations to include a and we need to help countries establish economic broad range of stakeholders in civil society whose and social programs that enhance the quality of voices were less accessible under earlier regimes. public services, create jobs, and improve livelihoods. Strategic Directions Building on the demands of the Arab Spring and the reform efforts that are under way, the new regional Bank supported programs will also include mecha- nisms to enable citizens to provide feedback on for a Region strategy is based on four main pillars (see figure 1): whether the objectives of the programs are being attained. in Transition  Strengthening Governance through transpar- ency and accountability measures to help cre- The challenges MENA faces today are many. But so ate responsive states that are held accounta- are the opportunities. The international community The Arab Spring ushered in a historic period of social, ble for their actions. must marshall its resources in response. Now is the political, and economic transformation in the Middle time for action. And with this resolve, the World East and North Africa (MENA) region—the effects of  Increasing Social and Economic Inclusion of Bank will harness its energy and resources to support which continue to reverberate throughout the region disadvantaged groups (e.g., women and mi- the regional priorities of creating jobs and support- and the wider world. The Arab Spring’s powerful nority groups) through economic measures ing sustainable growth, while at the same time pro- demand for democracy and voice opened unprece- and enhanced voice and participation. moting better governance and greater social inclu- dented opportunities for disrupting a system of sion. privilege and moving toward a new and more inclu-  Creating Jobs, including for youth and women, sive model of development. by providing an enabling environment for op- portunity, competition, innovation, and entre- Figure 1. World Bank's Strategic Pillars Two years on, however, transition countries remain preneurship. in MENA Region in deep political and economic crises. Social tensions have risen markedly, and in some places violence has  Accelerating Sustainable Growth through erupted. The struggle for legitimacy and identity, for short- and long-term policy actions promoting greater social trust and transparency, for more open climate-friendly growth to manage stresses on political systems and durable governance institutions natural resources. with popular support has taken place against a back- drop of declining living standards—which is severely undermining that very struggle. Economic growth These four strategic priorities are complemented has been too low to meet rising expectations. And with a focus on the cross-cutting themes of Gender, unemployment has actually risen instead of falling, Regional Integration, and fostering a Competitive while public services and private investment have Private Sector. Work on these pillars and themes will Red declined. Economic reform has generally been slow contribute to the World Bank Group’s twin goals of Sha and tentative in responding to these challenges. In eradicating extreme poverty and boosting shared effect, transition economies have been shocked— prosperity. from within by political developments, and from without by the Eurozone crisis and volatile oil prices. 16 Photocredit: Arne Hoel 17 Corporate Financial Reporting In collaboration with Strengthening Accountancy as a Foundation for MSME Sector Growth and Job Creation June 18-20, 2013 – Dead Sea, Amman, Jordan The Exchange covered three different, yet interrelated, topics: the Key Proposed Results and Framework for Monitoring and Evaluation development of micro, small, and medium enterprises (MSMEs), ac- countancy, and job creation. It explored the need for strong account- Intended Indicators Achievement Results ancy to underpin MSME development and access to finance, with a view to aiding this sector of the economy in contributing to job crea-  Government poli- YES – Roundtable-style sessions cy/strategy in- offered opportunities for discussion tion. As the countries of the MENA region seek ways to provide both formed stimulation, stakeholder involve- social and economic opportunities for their citizens, The Exchange Policy/strategy  Public debate ment and reflection on strategy. was designed to bring together high-level policymakers, academics, informed stimulated/initiated Participants were very pleased with  Contributed to the format of the event and its use the accountancy profession, civil society organizations, and others to stakeholder in- of roundtable discussion (90% satis- discuss working together to achieve this objective. volvement faction). YES - Inclusion of high-level speakers The Exchange included 140 participants from around the world, in- Facilitate exchange from around the world offered cluding 108 participants from the region, who came to Amman to of best practice with opportunities for exchange and share their experiences and learn from fellow speakers and at- Knowledge countries sharing of country experiences and deepened Countries share their practices. 80% of attendees sur- tendees. These participants represented roughly 83 different regional own successful veyed felt that the event was of high organizations, including the Egyptian Fund for Social Development, practices quality and of direct relevance to the Ministry of Finance of Iraq, the Palestinian Investment Fund, and their work. the Pan-African Federation of Accountants. YES – Community of Practice was Community of Prac- incorporated into agenda, and The Exchange supported the strengthening of MSMEs’ corporate Innovation tice operationalized discussions and comments helped to financial reporting framework with the objective of enhancing their approached Future Boot Camps inform the design of future activities. and solutions and Solutions Lab 92 % of event attendees were satis- ability to access finance and to strike the balance between improved design informed fied with the incorporation of financial information and lessening the regulatory burden. Partici- Maarefah CoP in the event activities. pants shared experiences and knowledge to enhance countries’ legal Capacity increase of YES – Inclusion of IFRS for SMEs frameworks to promote inclusive growth. Sessions promoted best Capacity of the small and medium training workshop allowed partici- practice regulation of MSMEs and discussed applied accounting practices profession pants to increase capacity and de- Increased applica- standards and alignment with the tax legislation. The Exchange also strengthened gree of application of these stand- tion for IFRS for ards. supported building the capacity of MSMEs and accounting practition- SMEs. ers in the areas of accounting, reporting, and auditing. 18 Ms. Joelle Le Vourc’h, ESCP Business School Europe: “Accountancy Education, Mr. Hatem Kawasmy- Chairman, Jordanian Certificaton and CPD – the Key to Strong Financial Information and Growth” Association of CPAs: “From ROSC AA to Reform” Mr. Paul Hurks, NBA Netherlands Professional Organization of Accountants, and Mr. Hasan Abdel Jabar, Advisor to the Minister, Dr. Saad Al-Sabti, Quality Assurance Expert, Saudi Organization of CPAs: “Fur- Director of Aid Coordination Unit (ACU), Ministry of National Economy, Pales- thering the Quality of MSME Financial Information through Sound Systems of tine: “Conclusion” Quality Assurance” Mr. Michael Wells, Director of International Financial Reporting Standards Ms. Laurie Gillow, Association of Accounting Technicians: “Building Accounting (IFRS) Education Initiative, IFRS Foundation: “IFRS for SMEs - Navigating Imple- and Financial Skills Necessary for MSME Growth” mentation” Micro, Small and Medium Enterprise Trust Fund Our Partners: MSME Facility for the Middle-East and North Africa Region The MENA MSME Facility comes under the umbrella of the Arab World Initiative (AWI). It is supported by two trust funds, one managed by the IFC, and another managed by the World Bank. The activities covered by the trust fund are expected to contribute to a sustainable improvement in inclusive (region, gender, youth) MSME development in the MENA region through improving the business environment, building the capacity of financial institutions and en- hancing the capacity of MSMEs. This will ultimately contribute to job creation, poverty reduction and overall inclusive economic growth. 19 Interview Interview Sahar NASR Lead Economist, World Bank Finance and Private Sector Development Department, MENA “Strong accounting is integral to the development of the MSME sector.” CV MENA: Why is the development of accountancy so important to CV MENA: This year's Exchange event included a session on the de- the furtherance of the MSME development agenda? velopment of bases of accounting tailored to the needs of Sahar: One of the main constraints to MSMEs’ access to credit is the microentities. What value did you see in this for MSME develop- lack of audited financial statements: almost 70 percent of banks cite ment overall? lack of transparency as an important obstacle to SMEs’ access to Sahar: In the MENA region micro-enterprises account for the majori- credit. Thus MSMEs with well prepared and audited financial state- ty of jobs. For example, in Egypt, more than 98 percent of enterpris- ments are better able to communicate their financial position and es are micro-enterprises, and they generate more than 85 percent of access finance. Additionally, their owners have better information on employment in nonagricultural sectors and 40 percent of total em- which to base business expansion and development decisions. Finally, ployment. Developing the microfinance sector is also critical for gen- MSMEs with a strong accounting function are better able to allocate der mainstreaming, since women dominate the sector. For example, resources toward more profitable business lines, and appropriately in Jordan, women account for 71 percent of all microfinance clients. undertake make or buy decisions. Hence, developing the bases of accounting tailored to the needs of microenterprises will have a positive impact on their performance, CV MENA: What is the biggest challenge you feel is facing MSME and more importantly, their access to finance. accounting and financial reporting? Sahar: The biggest challenge is awareness—awareness among CV MENA: Looking ahead to the 2014 Exchange—what are some MSMEs, stakeholders, and policymakers of the value of financial ac- topics/issues related to MSME accountancy and financial reporting counting and reporting to their business and to its long-term growth that you would like to see addressed? and success. Another big challenge is lack of knowledge about how Sahar: I believe it would be important for regulatory and supervisory to conduct adequate financial management and prepare financial bodies that regulate financial institutions, including non-bank finan- statements: World Bank surveys show that between 20 and 40 per- cial institutions (NBFIs), to participate in next year's event. This is cent of firms in most developing regions identify the lack of appropri- because one of the main issues that needs to be discussed is the ate skills as a major constraint to development. regulatory framework that governs the MSME sector. The inclusion of the regulatory and supervisory bodies and NBFIs will facilitate the CV MENA: Are there any other key issues/challenges that you feel exchange of information and knowledge sharing about the new up- stifle MSME accounting and financial reporting? dates in the regulatory framework and the sectors. It will also ena- Sahar: Many of the challenges facing MSME accounting and financial ble the main sector players to discuss and resolve hurdles. reporting are related to the overall challenges facing MSMEs more generally—for example, legislation that does not take into account CV MENA: Beyond the 2014 Exchange, how else might MNAFM co- the unique nature of MSMEs adds burdens to these entities when it operate with FPD on the development of MSME accounting? should be nurturing them and enabling them to grow and develop. Sahar: Areas where I see potential future cooperation would be Business education (whether on accounting or, more generally, on through the Regional MENA MSME Facility, which has three pillars— business management) may not be available to MSME owners and a more enabling environment, advisory services to financial institu- not suited to their needs. tions, and support and training to MSMEs—in all of which MNAFM can play an important role. Another good possibility is cooperation CV MENA: What do you see as the value of such events as the Con- in Egypt, Jordan, Tunisia, and Morocco through lines of credit, which necting Voices MENA Exchange Conference? can be used to leverage quality reforms. There has been previous Sahar: By helping to raise awareness of the issue of MSME account- success in this area: under an ongoing operation in Egypt, the SFD ing and financial reporting, The Exchange is a direct way to combat (the apex institution managing the loan) benefited from capacity the important challenge we just discussed—lack of awareness of the building in improving its internal control procedures, including up- importance and value of this aspect of MSME development. I also see dating the FM Manual and the internal audit risk-based approach an opportunity to bring together stakeholders and key policymakers strategy. Furthermore, by requiring the SFD to disclose its financial who can affect their country environments to launch partnerships statements, the project strengthened the SFD's governance structure that will better nurture the growth of these emerging enterprises. through enhanced transparency and accountability. 20 Photocredit: Arne Hoel 21 The Exchange CFR in Pictures The Exchange group picture Ms. Allyson Jerab, AMIDEAST: Representatives of the Exchange Conference Morocco delegation “Enhancing Women Entrepreneurs’ Capacity in Accountancy” The International Federation of Accountants (IFAC) FYI KEY FACTS IFAC was founded on October 7, 1977, in Munich, IFAC was established to strengthen the worldwide accountancy profes- Germany, at the 11th World Congress of Accountants. sion in the public interest by:  Developing high-quality international standards in auditing and assurance, IFAC is comprised of 179 members and associates in 130 public sector accounting, ethics, and education for professional account- countries and jurisdictions, representing approximately ants and supporting their adoption and use; 2.5 million accountants in public practice, education, gov-  Facilitating collaboration and cooperation among its member bodies; ernment service, industry, and commerce.  Collaborating and cooperating with other international organizations; and  Serving as the international spokesperson for the accountancy profession. 22 Profile Meet Gabriella Gabriella became involved in international development quite by accident. As a recent graduate of the University of Dayton, Gabriella participated in a summer service program that placed her in rural El Salvador assisting a small women's cooperative, MIBERLIM. The ob- jective of this summer was to support MIBERLIM in strengthening their accounts to prepare them for receiving small grants from local and national governments. What resulted was a change in her life's direction. Since that summer in Berlin, el Salvador, Gabriella has been active in the fielf of financial sector development.  2005-2007 Consultant for the World Bank, Accounting and Au- diting Report on the Observance of Standards and Codes (AA– ROSC) Program for the Europe and Central Asia region.  2007-2010 Management of international financial reform pro- jects at the CARANA Corporation, a USAID contractor firm spe- cializing in economic development.  2010-2012 Senior Technical Manager for the Member Body De- velopment Team at the International Federation of Accountants (IFAC) responsible for (a) facilitating the development and strengthening of Professional Accountancy Organizations (PAOs) in Southeastern Europe and Middle East / North Africa, and (b) supporting the IFAC and international donor community Memo- randum of Understanding to Strengthen Accountancy and Im- prove Collaboration (MOSAIC). Gabriella KUSZ  2012-2013 Supporting the development of the corporate finan- Sr. Financial Management Specialist cial reporting agenda throughout the MENA region with the MENA, The World Bank World Bank MNAFM Unit.  Certified Public Accountant (US CPA) licensed in the state of Virginia  MBA and Master’s in International Policy and Development (MPP)  Languages: English and Spanish; also, pursuing a certificate in Arabic Language and Cultures “Accounting is the global language of business—it is one of the most Gabriella notes that her passion for accounting reform and develop- important ways in which a company or government can communicate ment is, to put it mildly, rather unusual—“People always seem sur- its health, its challenges, and its aspirations. It is the information upon prised when I tell them the reason I travel to countries all over the which investors make decisions, citizens evaluate the accountability world and work with such a variety of organizations and stakeholders of their governments, and businesses seek finance and develop- is accounting reform.” But that doesn't get Gabriella down: "The mes- ment.” Gabriella is quick to note that “accounting and accounting sage we need to bring to our development partners—Ministries of reform is not just about the numbers: it is about facilitating economic Finance, SAIs, PAOs, accounting firms—is that accountancy reform growth and social progress—and therein lies the real value (no pun and development is important.” intended).” Mr. Abdulkareem Ahmed AlZAROUNI In Their Own Words Vice-Chairman of the Board of Directors GCC Accounting & Auditing Organization, UAE “The Exchange is actually in line with our strategy to help the SME sector by developing the accounting profession, and it will help the SMEs to play their role in our economy.” 23 Financial Management Tools The Reports on the Observance of Standards and Codes Accounting and Auditing (ROSC A&A) The Reports on the Observance of Standards and Codes (ROSC) Initia- tive is a joint World Bank/IMF program developed in the wake of the financial crises of the late 1990s to strengthen the international finan- cial architecture. The initiative includes 12 modules that focus on standards and codes areas, including accounting and auditing, which are key to a country’s risk assessment and economic framework. The global financial community considers the use of internationally recog- nized standards and codes necessary to provide a framework to strengthen domestic institutions, identify potential vulnerabilities, and improve transparency. Ultimately the ROSC Initiative aims to enhance countries’ resilience to shocks, support their risk asses sment, and strengthen important pillars of the market economic system. It contrib- utes to greater national and international financial stability by review- Presented by ing standards and codes in three main categories—policy transparency, financial sector regulation and supervision, and market integrity. Riham HUSSEIN The Report on the Observance of Standards and Codes—Accounting Financial Management Specialist and Auditing (ROSC A&A) aims to assist member countries in strength- MENA, The World Bank ening the quality of corporate financial reporting (CFR) through im- proved accounting and auditing. The program has two objectives: The World Bank’s Financial Management (FM) Sector completed 120 ROSC-AA reviews for 100 countries worldwide between 2002 and 2013. (a) Compare national accounting and auditing standards and In MENA we completed 8 ROSC-AA reports—in Morocco, Egypt, Leba- practices against International Financial Reporting Standards non, Jordan, Palestinian Territories, Tunisia, Yemen, and Algeria. (IFRS) and International Standards of Auditing (ISA) and ana- lyze the strengths and weaknesses of the institutions that un- In 2011 the World Bank conducted a study, based on the completed derpin the development and enforcement of these standards. ROSC A&A reports and action plans, to assess the lessons learned and The ROSC A&A review assesses the infrastructure for CFR, in- future directions of the ROSC A&A. The study concluded that the pro- cluding accounting and auditing requirements and practices, gram has successfully met its objective of providing analysis, infor- and makes policy recommendations to improve and reform mation, and knowledge on the institutional framework for and practice that infrastructure. of CFR in an expanding number of countries. More specifically, the study (b) Assist the country in developing and implementing a country highlighted the following: action plan for improving institutional capacity and strength-  The ROSC A&A program has created substantial knowledge for ening the country’s CFR regime. multiple stakeholders across all Regions regarding CFR, a key element of the financial architecture. The ROSC A&A review, therefore, is concerned with the adoption and  The ROSC A&A is a well-established and well-regarded diag- implementation of IFRS and ISA, as well as with the legal, organization- nostic and monitoring tool. It provides the framework for con- al, regulatory, and capacity factors that affect implementation. Each sistent, standardized assessment of the accounting and audit- report follows a standard structure, concluding with a set of policy rec- ing infrastructure, and the reports provide structured recom- ommendations that provide the basis for policy dialogue with the coun- mendations for country action plans. try authorities and other stakeholders, and inform the World Bank and  Implementation of the ROSC A&A recommendations is accel- IMF in developing assistance priorities and operations. Since the ROSC erating, within the available resources, reflecting a shift in the A&A reports are generally published, they also inform market partici- balance between diagnosis and implementation, with notable pants and other stakeholders of the state of CFR in the country. success stories. At the same time, follow-up to the ROSC A&A reviews and the extent to which review recommendations have been implemented have varied across countries. This summary of the ROSC-AA program is based on the study “ROSC-AA – Lessons Learned and Future Directions” (6/2011) 24 CFR Events Solutions Lab Boot Camps Adoption and Implementation of ISA for SMPs: Lessons Supporting the Development of the Accounting and Auditing Learned, Experiences Shared Profession in Yemen Dec 9: Session #1 Arabic language (Jordan, Palestine, Lebanon, Egypt, Yem- en, Iraq)—December 9, 2013. October 2-3, 2013 Dec 10: Session #2 French/Arabic language (Djibouti, Morocco, Tunisia)— Location: Yemeni Association of Certified Public Accountants (YACPA) Headquar- December 10, 2013. ters Training Centre, Sana’a. Location: Videoconference rooms of the World Bank offices in participating Participants: Representatives of the Central Bank of Yemen, COCA, the Ministry countries and Washington, DC; led by World Bank financial man- of Industry and Trade, the Ministry of Higher Education and Scientific agement specialists. Research, Deloitte, KPMG, Grant Thornton, the Association of Char- Participants: representatives from (a) professional accountancy organiza- tered Certified Accountants (ACCA), Sana’a University, Taiz University, tion (PAOs) s; (b) Ministry of Finance or ministry responsible for local audit firms, SMEs, and others. accounting and auditing activities; (c) SME nongovernmental or- This Boot Camp seeks to bring together over 60 representatives from both the ganizations; and (d) SMP audit firms. public and private sectors to discuss (a) the importance of corporate financial This Solutions Lab will offer an opportunity for both Arabic- and French- reporting and PAOs such as YACPA, and (b) the role YACPA can play in creating speaking countries to explore the adoption and implementation of ISA, in jobs, enhancing the economy, and contributing to good government, and to work particular by Small and Medium Practitioners (SMPs). Designed in response together to develop a Strategic Action Plan to guide YACPA in its development in- to feedback received from The Exchange: Strengthening Accountancy as a line with international standards and good practices. Foundation for MSME Sector Growth and Job Creation, this Solutions Lab seeks to provide additional guidance and assistance to support the further *** development of SMPs. Sessions will focus on countries’ experiences in adopting and implementing ISA, particular actions taken by country gov- ernments and PAOs to building SMPs’ capacity in these standards; and discussion on lessons learned and best practices. Strengthening Yemen’s Legal Framework: Standards Adoption and Clarification December 15-17, 2013 Solutions Paper Location: Yemeni Association of Certified Public Accountants (YACPA) Headquar- ters Training Centre, Sana’a. This workshop on strengthening the legal embodiment of the international standards (ISA/IFRS) in Yemen will be led by YACPA/World Bank and will be struc- Collection and Analysis of Data on the Challenges, Emerg- tured as a follow-up to the October 2013 Boot Camp on the legal adoption of the ing Issues, and Areas for Support for MENA Region SMP ISA and IFRS. This workshop will offer participants an opportunity to work with International Federation of Accountants (IFAC) Professional Accountancy Organi- Firms zation Development Committee (PAODC) and World Bank representatives to drill down further and develop an approach for overcoming this challenge. November 15 - December 31, 2013 Location: Egypt, Lebanon, Jordan, Palestine, Morocco, Tunisia *** With the aim of giving practitioners who operate in small- and medium- sized practices (SMPs) around the world an opportunity to express their Support to the Development of the Lebanese Association of views about important trends and developments that affect them and their Certified Public Accountants (LACPA) System of Quality clients, in January 2011 the International Federation of Accountants (IFAC) SMP Committee launched the IFAC SMP Quick Poll. The poll runs semi- Assurance and Enhancement of SMP Firm Quality Control annually and is published online. This year, in response to the low levels of participation by MENA region SMPs and the relatively few resources availa- December 12-13, 2013 ble on MENA region SMP needs, challenges, and emerging issues, CV MENA Location: Beirut, Lebanon. will work in coordination with the SMP Committee of IFAC to undertake a This Boot Camp will offer an opportunity for learning and engaging on the subject formal “launch” of the poll in the region. CV MENA consultants will provide of the IFAC revised Statements of Membership Obligations (SMOs)—in particular an overview of CV MENA and explain why such Quick Poll information is on the role and key structural components of a system of quality assurance. The important for understanding SMP growth, financial sector development, Boot Camp will explain the key changes in SMO 1, which covers Quality Assur- and the link between SMPs and their SME clients. By providing on-location ance; examine the success factors and challenges in the development of such a presentations and survey polling stations, CV MENA consultants will work system; and offer practical advice and guidance to LACPA as the organization to encourage increased SMP participation in the Quick Poll and increase continues to make decisions regarding the development and operation of a sys- data on MENA region SMPs. Following the close of the poll and collection of tem of quality assurance in Lebanon--with special focus on encouraging en- MENA region data, a summary report will be produced that is expected to hanced of quality in the provision of services by SMPs. A presentation by the provide CV MENA with strong data and analysis on this area of the profes- Délégation Internationale pour l'Audit et la Comptabilité will offer insight into sion and guide its future SMP-oriented activities. This data collection and various models for quality assurance reforms and lessons learned that may be research initiative has been designed in response to feedback received from transferrable to the Lebanese context. This Boot Camp has been designed in The Exchange: Strengthening Accountancy as a Foundation for MSME Sec- response to feedback received from The Exchange: Strengthening Accountancy tor Growth and Job Creation, which identified the need for further study as a Foundation for MSME Sector Growth and Job Creation, which identified the and recommendations on how CV MENA may best provide targeted sup- need for CV MENA support to LACPA in their efforts to access international expe- port. rience in the development of quality assurance systems. 25 In Their Own Words Rend AL-RAHIM Executive Director, The Iraq Foundation Former Iraqi Embassador to the United States “ The title of the discussion now is “Public Fi- nancial Accountability in a Changing Envi- ronment.” Obviously this is a very diplomatic way of saying “in an environment of extreme political change.” This is really what we're talking about. And even though Iraq has not gone through political change or extreme political change in the last two years, we feel we have been going through political change for the last 10 years. So some countries are newer to this than others. The political change that has happened in the last few years has brought with it a number of very good things, and a number of perhaps not such good things. But certainly what it has brought with it is a tidal wave of civil society activism and youth activism, which it is going to be very difficult for any government from now on to ignore or to suppress. And what this wave of civil soci- ety is demanding is what is broadly called democracy. But if you really unpackage the term, what they’re looking for is responsible, accountable government, and participation. Obviously they're also looking for jobs and so on; we have an ever-growing youth bulge in the MENA region, with very many unem- ployed youth, and so this is also part of the divide. This is kind of subsumed in the notion of responsible accountable government, which allows for broader and broader partic- ” ipation. CVMENA Exchange PFM, 2013 Photocredit: Arne Hoel 26 Books Public Financial Management and Its Emerg- ing Architecture M. Cangiano, T. Curristine, M. Lazare April 2013 Teresa CURRISTINE, Senior Economist, Fiscal Affairs Department, the International Monetary Fund st The first two decades of the 21 century have witnessed an influx of innovations and reforms in public financial management. The current wave of reforms is markedly different from those in the past, owing to the sheer number of innovations, their widespread adoption, and the sense that they add up to a fundamental change in the way governments manage public money. This book takes stock of the most important innovations of the past two decades—fiscal responsibility legislation, fiscal rules, medium-term budget frameworks, fiscal councils, fiscal risk management techniques, performance budgeting, and accrual reporting and accounting. Not merely a hand- book or manual describing practices in the field, the volume instead poses critical questions about innovation —what issues and challenges have appeared along the way, including those associated with the global economic crisis; and how the ground can be prepared for the next generation of public financial management reforms. Decisions about "who gets what, when, and how" are perhaps the most important that any government must make. So it should not be remarkable that around the world, public officials responsible for public budgeting are Open Budgets: facing demands—from their own citizenry, other government officials, eco- The Political Economy nomic actors, and, increasingly, international sources—to make their pat- terns of spending more transparent and their processes more participatory. of Transparency, Participation, and Surprisingly, rigorous analysis of the causes and consequences of fiscal transparency is thin at best. Open Budgets seeks to fill this knowledge gap Accountability by answering a few broad questions: How and why do improvements in S. Khagram, A. Fung, P. de Renzio fiscal transparency and participation come about? How are they sustained April 2013 over time? When and how do increased fiscal transparency and participa- tion lead to improved government responsiveness and accountability? Small and medium enterprises (SMEs) are the main source of private sector jobs in MENA. But despite the important role SMEs play in the economy, they still face several obstacles: financial institution lending capacity, enter- SMEs for Job Creation in prises’ creditworthiness, liquidity of financial intermediaries, and the avail- the Arab World ability of risk-sharing instruments. S. Nasr and D. Pearce January 2012 Among the major challenges also facing the sector are non-conducive legal and regulatory frameworks, poor financial infrastructure, information asymmetry, and a weak judicial and legal system. Moreover, there are non- financial challenges: lack of adequate business development services, en- terprise managerial and marketing skills, advanced technology, and skilled labor. All this hinders the development of the SME sector in the MENA re- gion. 27 Viewpoint Shanta DEVARAJAN Chief Economist MENA, World Bank Let Them Eat Cash The Economist has an excellent article on giving cash transfers, condi- Up to now, criticisms of the idea of cash transfers has been that poor tionally or unconditionally, to poor people to alleviate their poverty. people will waste the money on alcohol or tobacco, rather than using it Calling it “possibly the single best piece of journalism on cash transfers to educate their children or start a business. [When I presented the idea that I’ve seen so far,” Chris Blattman—one of the scholars whose re- in South Sudan, I was told that “people will use the money to take a n- search has provided grist for this mill—laments that such writing “tends other wife (sic).”] The research largely counters this criticism. But the to make the Pulitzer committee fall asleep in bed.” Maybe so, but the debate misses another important aspect of replacing traditional public idea is potentially transformative. expenditures, such as free schools and clinics, and subsidized energy, water, and food with cash transfers. It shifts the accountability for these That cash conditional on sending your children to school or taking them services to the government. When governments provide free or subsi- for a medical checkup improves health and education outcomes has dized goods and services, poor people have little choice but to consume been established for some time now. More recently, some studies show what is provided. Often, the quality or even access is poor. But when that unconditional cash transfers could have the same effect. Chris’s they are given cash with which to “buy” these services, poor people can work demonstrates that giving cash to idle young people leads to higher demand quality—and the provider must meet it or he won’t get paid. As business earnings than if the money were used to run vocational train- a farmer in Andhra Pradesh, India, after subsidized water was replaced ing courses for these people. In parallel, Todd Moss at the Center for with full-cost pricing, put it, “We will never again allow the government Global Development and my colleague Marcelo Giugale and I (along to give us free water.” with several others) have been exploring the idea of transferring oil revenues to citizens as cash transfers, as a way of reducing the resource Likewise, in resource-rich countries, the oil revenues go directly from curse that afflicts many resource-rich countries, especially in Africa. the oil company to the government without passing through the hands Gabon for instance, with a per-capital income of $10,000, has the se- of citizens. As a result, citizens may not know how much revenues there cond-lowest child immunization rate in Africa. Marcelo and I show that, are and, worse, may not have as much incentive to scrutinize govern- with just 10 percent of resource revenues’ being transferred directly to ment spending, because they don’t think of it as “their money” (even citizens (in equal amounts), poverty can largely be eliminated in the though it is). With cash transfers, citizens will at least know something smaller resource-rich African countries. about the size of the revenues and, possibly, have greater incentive to scrutinize how it is being spent. The criticism of cash transfers—which Furthermore, the technology for making transfers has improved signifi- usually comes from senior government officials--may have less to do cantly. Alan Gelb and Julia Clark show that biometric ID cards can be with a concern that the money will be misspent and more with the loss had for a few dollars each. The Indian government is rolling these out to of discretion in government spending. Put another way, cash transfers its 1.2 billion citizens (about 300 million already have them). With these have the potential to shift not just poverty-reducing policies but also the cards, cash can be transferred electronically and, possibly, through mo- balance of power between government and its citizens, in favor of the bile phones. Not surprisingly, there is a lively discussion in India of re- latter. placing its poorly-targeted and inefficient subsidies with cash transfers. 28 Photocredit: Arne Hoel 29 MENA’s FM Unit The Financial Management unit in MENA focuses on two strategic objectives:  Helping developing partner countries build their FM capacity, and  Providing reasonable assurance that financing provided by the Bank is used for the intended purposes with economy and efficiency. Project Country Region The FM unit provides assessment, design, and The FM unit provides information on the over- The FM unit establishes arrangements for port- implementation support services to ensure all fiduciary environment and risks, and pro- folio and budget monitoring of operational that, for Bank-financed operations, partner motes and supports building FM capacity as services, ensuring value-for-money and con- countries have in place appropriate FM ar- appropriate for each country’s development sistent quality across the board. It also pro- rangements to support achieving project de- priorities and institutional environment. It motes Regionwide initiatives to create and velopment objectives, provide for compliance provides FM diagnostics, policy and technical disseminate knowledge. The Connecting Voices with Bank FM requirements, maintain financial advice, advisory services, and technical and of MENA (CV MENA) initiative provides a plat- integrity, and support the development of project assistance to partner countries; and form for learning and dialogue among relevant sustainable FM capacity. It actively seeks to facilitates FM learning, knowledge exchanges, Regional stakeholders to promote sound public use country FM systems where they are as- and access to relevant global expertise. financial management and corporate financial sessed as adequate. reporting. Manuel VARGAS Rama KRISHNAN Lead Financial Management Specialist Lead Financial Management Specialist MENA Financial Management Unit, World Bank Group MENA Financial Management Unit, World Bank Group Practice Management: (1) Public Financial Management, (2) Corporate Practice Management: (1) Decentralization, (2) Social Accountability, Financial Reporting, (3)FM systems, tools and processes Citizen Engagement; (3) Integrated Reporting, (4) Fragility and Conflict Operational Services: Poverty Reduction and Economic Management, Operational Services: Sustainable Development (SD) Human Development, Financial and Private Sector Development Manuel oversees operational portfolio FM quality, which includes staff mentor- Rama leads the professional practices related to decentralization, social account- ing, advice, and review, to promote coherent FM risk management across the ability, citizen engagement, integrated reporting, and fragility and conflict and is Region. He also provides technical leadership to the MNAFM PFM and CFR pro- the FM liason for the SD Sector. Under Rama’s leadership, synergies between the fessional practices. The work on the operational portfolio helps not only to en- decentralized implementation of Bank-financed operations, through either local sure fiduciary assurance, but also to identify opportunities to strengthen country governments or communities, and the governments’ own decentralization agen- systems—for example, when budget system bottlenecks (PFM) impede efficient das, are exploited. This is of particular relevance to several MENA clients that project implementation (Operations), or when the quality of external auditors in want to bring government services closer to the beneficiaries, but need to ensure the country (CFR) affects the assurance derived from project audited financial that streamlined processes and adequate controls are in place to ensure that statements (Operations). These feedback loops enable continuous improvement, funds flow where they are needed. Similarly, fostering demand for public finan- as country-level dialogue to enhance, for example, budget execution controls and cial accountability through civil society organizations and other venues for citizen the adequacy of the accountancy profession through development policy loans, engagement and media will be equally critical to the delivery of Bank operations Investment Projects Financing, or analytic and advisory work results down the and to the clients’ pursuit of open and transparent government initiatives. line in more streamlined and accountable delivery of the programs financed by the Bank. 30 Country Technical Assignments Practices (TP) Public Financial Corporate Financial Cross-Cutting Franck BESSETTE (Sr. FMS) Management (PFM) Reporting (CFR) Themes Tunisia Algeria Financial Controls Accounting & Auditing Fragility & Post Conflict Morocco Jad MAZAHREH Gabriella KUSZ Mohamed YEHIA Walid AL-NAJJAR Riham HUSSEIN Saleh MANARY Libya Internal Audit Islamic Finance GAC in Projects Rima KOTEICHE (Sr. FMS) Rima KOTEICHE Gabriella KUSZ Jad MAZAHREH Yngvild ARNESEN Nadi MASHNI Rock JABBOUR Lebanon Djibouti Government State-owned Social Accountability & Accounting Enterprises Citizen Engagement Jad MAZAHREH (Sr. FMS) Hosam DIAA Gabriella KUSZ Mona EL CHAMI Kamel BEZZINE Hosam DIAA Wael EL SHABRAWI Jordan Iraq Decentralization Banking & Insurance Trust Funds Moad ALRUBAIDI Gabriella KUSZ Rima KOTEICHE Nadi MASHNI Hosam DIAA Laila MOUDDEN Mohamed YEHIA (Sr. FMS) Egypt Extractive Industries Integrated Reporting Knowledge Tools Franck BESSETTE Gabriella KUSZ Denis LARGERON Palestinian Mohamed YEHIA Shirley FORONDA Ali SALAMAH Territories SAIs & Parliamentary Micro, Small, and Disbursement & Risk Moad ALRUBAIDI (Sr. FMS) Oversight Medium Entreprises Management Systems Mona EL CHAMI (MSMEs) Shirley FORONDA Yemen Yngvild ARNESEN Gabriella KUSZ Ali SALAMAH GCC [Gulf Cooperation Council] Riham HUSSEIN Rima KOTEICHE Ali SALAMAH Laila MOUDDEN Moad ALRUBAIDI Sr. FM Specialist Program Assistant Operation Assistant Sr. FM Specialist Countries: Lebanon, Djibouti TP: Knowledge Tools, Disbursement Morocco Countries: Yemen, GCC TP: Internal Audit, Trust Funds & Risk Management Systems TP: Trust Funds TP: Decentralization cvmena@worldbank.org 31 Spring 2014 32