The World Bank Report No: ISR5864 Implementation Status & Results Bangladesh Deepening MTBF and Strengthening Financial Accountability (P117248) Public Disclosure Copy Operation Name: Deepening MTBF and Strengthening Financial Accountability Project Stage: Implementation Seq.No: 3 Status: ARCHIVED Archive Date: 07-May-2011 (P117248) Country: Bangladesh Approval FY: 2010 Product Line: Recipient Executed Activities Region: SOUTH ASIA Lending Instrument: Technical Assistance Loan Implementing Agency(ies): Finance Division, Ministry of Finance Key Dates Board Approval Date 23-Sep-2009 Original Closing Date 31-Jul-2014 Planned Mid Term Review Date Last Archived ISR Date 07-May-2011 Effectiveness Date 29-Oct-2009 Revised Closing Date 31-Jul-2014 Actual Mid Term Review Date Project Development Objectives Project Development Objective (from Project Appraisal Document) The project aims to deepen and institutionalize the MTBF and build a more strategic and performance oriented budget management process, while strengthening financial accountability across the expenditure management cycle. The project supports fundamental reforms of operational budget management functions in both central units and line ministries. Enhanced budget process and financial accountability is likely to improve the allocative and operational efficiency in public expenditure management which in turn will enable better provision of key public services in support of the Government's social and economic policy objectives. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Component A1: Strategic Budget Management in Finance Division 8.10 Component A 2: Developing Capacities for Debt policy and Management 2.70 Component A 3: Capacity Development in Line Ministries 10.90 Public Disclosure Copy Component A 4: Developing Planning Commission capacity in line with the MTBF approach 2.40 Component A 5. Accounting and Financial Reporting 19.30 Component A 6. - Strengthening Treasury and Cash Management Systems 0.50 Component A 7. - PFM Legislation and Regulations 2.60 Component A 8. - Payroll, Pensions, GPF, Loans & Advances, and Assets 1.80 Component A 9. - Training and Human Resources Development 13.10 Project and Change Management 7.40 Overall Ratings Page 1 of 6 The World Bank Report No: ISR5864 Previous Rating Current Rating Progress towards achievement of PDO Moderately Unsatisfactory Moderately Unsatisfactory Overall Implementation Progress (IP) Moderately Unsatisfactory Moderately Unsatisfactory Public Disclosure Copy Overall Risk Rating Implementation Status Overview The Deepening Medium Term Budget Framework and Strengthening Financial Accountability (DMTBF) Project has progressed unevenly in the first year of implementation, with progress achieved in two/three components. This in part was due to distance between MISC consultants and the government, complicated lines of authority under the implementation arrangement and complexity of the project, which addresses a range of complex and inter-related PFM reform issues. The complicated lines of authority have also delayed procurement which continue even till two years after the beginning of implementation of the project. Notwithstanding these difficulties, a comprehensive diagnostic process was completed in June 2011, consistent with the agreed time table, and progress was made in a number of other areas of reform, notably the roll-out of the MTBF across the whole Government, the introduction of the presentation of the Demands for Grants and Appropriations in the unified budget format. In the first quarter of the second year of the Project (July 2011-September 2011) there was an intensive dialogue between the MISC team and Officials at all levels in the Finance Division which culminated in a shared understanding of the “baseline� of PFM reforms in Bangladesh and a proposed Work Plan to achieve the development objectives. During this period, extensive discussions also took place between the World Bank, Finance Division and the MISC team aimed at restructuring the Project. The objective of the restructuring was to streamline the management structure to increase its agility and responsiveness to implementation issues, and to shorten the communication line between the Project and decision makers in Finance Division. A key element in the restructuring strategy was to place champions amongst government to key driving positions in the project as component directors and eliminating numerous layers of authority that were increasing government’s distance with the consultants. The more compacted project structure, from 9 into 3 components, is expected to deliver better coordination across project components. The Work Plan, its major deliverables, together with the resources required until the completion date of the project (30 June 2014), and the restructured Project and management arrangement were approved by the Project Steering Committee on 16 November 2012 and subsequently from the Government. Based on this clearance, the project team has revised the government’s Technical Assistance Project Pro-forma (TAPP) and the MISC contract, after which the Grant Agreement was revised and is awaiting signing by the Government. Most recently, a joint Government-Donor meeting was held on 15 April 2012 to finalize the Results Monitoring framework.The appointment of Component Directors is likely to streamline coordination. Also, it is expected that finalization of the revised M&E framework will strengthen monitoring procedures, and regular project executive committee meetings will improve overall project monitoring and supervision. Over the past year implementation progress has been notable mainly in the areas of budget preparation and management where international and national consultancy resources have continued to operate during restructuring. Regrettably, progress has been slow or non-existent in sub-components where the work plan and key positions have been newly created under the restructuring arrangement, as appointments cannot be made due to the considerable delay in securing approval and clearance for the Modified Contract. The mobilization of international resources for those new positions is expected to take place towards the end of May 2012. Public Disclosure Copy The implementation progress can be summarized as follows: * roll-out of the MTBF to the 57 major budgetary agencies is completed ahead of schedule and introductory steps have been taken to improve line ministry budget processes and institutions, including the establishment of dedicated budget wings to focus the budget preparation work, budget management committees and piloting of a strategic business planning concept. Also, the quality of budget documentation has seen an improvement, notably with the introduction in 2011/12 budget of key tables with recurrent and development budgets using the same economic classification and an improved quality of Ministry budget frameworks (MBFs). *While the MTBF has progressed horisontally, the institutionalization in line ministries is still at a very early stage and the level of awareness and capacity building about MTBF appear generally low. Operational plans for establishing a national institute for PFM capacity building have been drafted to overcome this gap, but actual trainings and capacity building efforts appear disorganized in lack of a proper training needs assessment and have yet to show noticeable results. *A sound medium term debt management strategy has been prepared and an upgrade of debt management software is being procured. *Macrofiscal forecasting has seen little progress and is still based on spreadsheets with inadequate use of econometric techniques. An econometric model is still in the design phase. * The planning component has shown very little progress due to coordination issues between Finance Division and Planning Commission and has consequently been reduced in Page 2 of 6 The World Bank Report No: ISR5864 scope to focus on the monitoring of the sixth five year plan (expected in June 2012), whereas other aspects, including analytical support for strategic planning and PIM will be carried out as a separate bank executed project. *The development of IBAS+ is at a critical stage. An overall strategy for systems development has been adopted based on a hybrid of a mainly in-house built system with COTS- software for discreet functions and the operation of the current systems enhanced and stabilized. Critical hirings of systems architect and IT-project manager have been decided but Public Disclosure Copy not fully executed. However, critical decisions are outstanding to confirm future business processes, and to finalize technical design specifications and systems architecture for the enhanced IBAS-system. In addition, there is a need to mitigate risks of on-going software development by adopting professional quality management standards and tools. *While a mapping of existing financial statements and supporting schedules has been completed to facilitate streamlining and a detailed strategy for transition to cash-based IPSAS has been developed, firm government decisions on fulfilling the associated requirements is urgently needed, including streamlining of public accounts. Further revisions of budget classification and COA are also needed to meet emerging reporting needs to assure the overall objective of timely reporting following international standards (GFS and IPSAS). Locations No Location data has been entered Results Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target Modernize long term strategic planning and Years Value policy development Date 30-Jun-2010 31-Jul-2014 Comments Budget policy deviation No change since the budget Decrease budget policy indices, especially for ADP for FY11-12 is still under deviation indices preparation Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Institutionalize and deepen the MTBF approach Years Value 20.00 57.00 Date 30-Jun-2010 31-Jul-2014 Comments MTBF piloted in 20 LM. MTBF rolled out to 57 MTBF extended to all LMs. Inadequate capacity and ministries and agencies Establish and operationalise coordination in macro-fiscal institutional structure for Public Disclosure Copy forecasting, Budget macro-management and allocations not fully linked to forecasting. Costing policies. methodology developed and initiated in key ministries. Improve budget classification for more effective Years Value budget management Date 30-Jun-2010 31-Jul-2014 Comments Classification of budget and GFS2001 compliant accounts is not fully compliant classification is developed with international standards and an implementation plan as specified in the GFS 2001 agreed. Training on new Page 3 of 6 The World Bank Report No: ISR5864 classification. Current classification initiated. Pilot classification does not allow LMs complete identification of identification of policy and main programs for programs. preparation of the program Public Disclosure Copy classification. Effective public debt management Years Value Date 30-Jun-2010 31-Jul-2014 Comments No debt strategy is in place. An integrated debt Retails debt (non-Bank debt) management institutional managed through outdated structure is put in place. All practices and systems. All actions for centralising debt debt records are kept in records are identified anda different institutions and are plan for integrating them is operated manually. agreed upon. First comprehensive debt report is produced and published. Progressively improve the disclosure/reporting of all contigent liabilities. Improve the linkages between procurement, Years Value planning and budgeting Date 30-Jun-2010 31-Jul-2014 Comments # Current budget submissions # Procurement Plans are do not take into account included in the Budget procurement plans presented Frameworks of key LMs on a with the project proposals. pilot basis Integrated budgeting, accounting, and Years Value monitoring functions at the line ministry Date 30-Jun-2010 31-Jul-2014 Comments (1) No clear formal structure Budget Management (1)A formalized structure that at the LM level that is Committee established in all integrates planning and responsible and accountable MTBF ministries and finance functions at the line for the budget management agencies (57) ministry level is developed throughout the entire cycle. and implemented in2 key pilot Public Disclosure Copy (2) Planning and Financial LMs. (2) Budget Administration in most LM is Management Committees weak and split into separate play a more active role in departments, mainly falling planning and monitoring into two categories of revenue budgets in the LM. (3) Internal and development budgets (3) control environment is Internal audit functions are progressively improved. (4) largely non existent and not Internal Audit strategy developed. (5) A plan for Page 4 of 6 The World Bank Report No: ISR5864 effective, despite internal establishing pilot InternalAudit controls guidelines units in LM is agreed. Consolidation of iIBAS towards a modern Years Value integrated budget and accounting system Public Disclosure Copy Date 30-Jun-2010 31-Jul-2014 Comments # The budget system is not iBAS update is still under # Completion of review of linked to iBAS at pay points diagnostic stage iBAS as GFMIS platform and (limiting system controls). # initiation of implementation of The accounting system does recommendations. # Payroll, not cover a range of foreign- pension and NPF study financed transactions. # The completed and an action plan functional specifications prepared to follow ofiBAS, as a GFMIS platform recommendations # Build a are not comprehensively central database in FD to developed # Current iBAS capture and store data in relies heavily on manual respect of the existing controls, including for physical assets of the payment systems, without Government # Workflow capacity for workflow processing initiated in GFMIS processing. # IT infrastructure and service provision within MOF is insufficient. Improve financial controls and reporting Years Value Date 30-Jun-2010 31-Jul-2014 Comments # Reconciliation of CGA and No major chnage # Progressively lower bank balances is not percentage of unexplained implemented rigorously, with imbalances in monthly and discrepancies in posting. # annual statements. # CGA reports are not regularly Reconciliation practices available to many LMs. # between BB and FD are Lack of budget and other data formalized and become more limits their usefulness to LM effective. managers. Public Disclosure Copy Data on Financial Performance (as of 26-Apr-2012) Financial Agreement(s) Key Dates Project Loan No. Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P117248 TF-95283 Effective 29-Oct-2009 29-Oct-2009 29-Oct-2009 31-Jul-2014 31-Jul-2014 Disbursements (in Millions) Project Loan No. Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P117248 TF-95283 Effective USD 50.00 50.00 0.00 23.10 26.90 46.00 Page 5 of 6 The World Bank Report No: ISR5864 Disbursement Graph Public Disclosure Copy Key Decisions Regarding Implementation Key decision for the coming 6 month period are: * to facilitate urgent government decisions on areas critical to IBAS+ development through upcoming review and advisory support: technical design, systems architecture and outstanding issues on business process and classification * to review upstream aspects of MTBF and assess how the institutionalization and capacity building in line ministries can be advanced * to facilitate gradual steps towards the overall strategic objective of unifying budget processes and presentations across Finance division and Planning Commission: policy coordination through facilitation of informal reform dialogue (reform clubs etc.), systems interfaces etc. * to closely monitor implementation progress through quarterly sessions leading up to project executive committee meetings * to closely monitor that restructuring is delivering in terms of improved project management and coordination Restructuring History Public Disclosure Copy Level two Approved on 05-Mar-2012 Related Projects There are no related projects. 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