The World Bank Implementation Status & Results Report Fiscal Performance Improvement Support Project (FSP): (P159655) Fiscal Performance Improvement Support Project (FSP): (P159655) SOUTH ASIA | Afghanistan | Governance Global Practice | IBRD/IDA | Investment Project Financing | FY 2018 | Seq No: 2 | ARCHIVED on 29-Nov-2018 | ISR34873 | Implementing Agencies: Ministry of Finance, Islamic Republic of Afghanistan, National Procurement Authority, Supreme Audit Office Key Dates Key Project Dates Bank Approval Date: 19-Dec-2017 Effectiveness Date: 01-Jan-2018 Planned Mid Term Review Date: 30-Jun-2020 Actual Mid-Term Review Date: -- Original Closing Date: 28-Dec-2022 Revised Closing Date: 28-Dec-2022 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) To contribute to the improvement of domestic revenue mobilization and public expenditures management, and of reinforcing a performance oriented management culture in the Ministry of Finance. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Component 1: Budget as Tool for Development:(Cost $10.00 M) Component 2: Revenue Mobilization:(Cost $40.00 M) Component 3: Treasury Management, Accountability, and Transparency:(Cost $30.00 M) Component 4: Institutional Capacity Building and Performance Management:(Cost $20.00 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Overall Risk Rating High High Implementation Status and Key Decisions The Fiscal Performance Improvement Support Project (FSP) is designed to improve management of public finances in Afghanistan by strengthening the capacity of the Ministry of Finance, the National Procurement Authority and the Supreme Audit Office. The FSP will support the implementation of the Afghanistan Fiscal Performance Improvement Plan (FPIP) through recipient-executed investment financing. The Project Development Objective is: “to contribute to the improvement of domestic revenue mobilization and public expenditures management, and of reinforcing a performance-oriented management culture in the Ministry of Finance”. The project focuses on four key result areas: (i) Improved 11/29/2018 Page 1 of 9 The World Bank Implementation Status & Results Report Fiscal Performance Improvement Support Project (FSP): (P159655) development budget execution rate; (ii) Increased domestic revenue as a percentage of GDP; (iii) Increased compliance with audit recommendations; and, (iv) Improvement in core institutional capacity, represented by a reduction in the number of long-term technical assistants. Financing is provided by a US$25 million International Development Association (IDA) grant and a US$75 million grant from the Afghanistan Reconstruction Trust Fund (ARTF), managed by the World Bank on behalf of 34 donors. This was approved by the ARTF Management Committee on December 13, 2017 and the World Bank Board on December 19, 2017. The project is strongly government-owned with an additional US$100 million in parallel financing from the Government of the Islamic Republic of Afghanistan (GoIRA). The FSP provides strategic support at a critical moment in Afghanistan’s development. Improved public financial management and revenue generation is central to the Government’s self-sufficiency agenda. To enable development results in this high-risk operation, the FSP is complemented by tailored World Bank-executed technical assistance and a new programmatic Incentive Program (IP) Plus Development Policy Grant (DPG). This approach creates strong incentives for progress while tangibly supporting Government’s technical reforms at an investment level. The FSP became effective on January 1, 2018. Overall Implementation Progress and progress towards achievement of the Project Development Objective (PDO) since its effectiveness are rated as "Satisfactory". Key implementation developments secured to date include: (a) Budget Processes; Fiscal Policy; and Development Policy. MoF has successfully implemented reforms to the budget process through a revised budget circular and budget submission template. These reforms have introduced strategic screening and improved costing information in budget submissions, as well as including gender tagging to support gender responsive budgeting. Development projects have been reviewed with an objective to create fiscal space by identifying poorly performing/weak-execution projects, and flagging them for possible cancellation. National Priority Programs have been completed and substantial progress made on costed implementation plans. These documents will provide the basis for policy links in future spending decisions. The executive draft of the 1398 Budget has successfully been prepared to reasonable timeframes. The budget documentation has included improved content on fiscal risks and contingent liabilities. (b) Tax Administration: The IMF estimate of 2018 revenue/GDP ratio is 11.8 percent, exceeding the Year 1 FSP target. Implementation of the Afghanistan Revenue Department (ARD) Value-Added Tax (VAT), Communication, and Single Large Taxpayer Office (SLTO) implementation plans is underway. (c) Customs Administration: Automated Systems for Customs Data (ASYCUDA) roll-out continues, with 18 Customs offices connected. Additional modules are also being added. The Afghanistan Customs Department (ACD) has also made changes to the selectivity criteria for the Risk Management System, which has shown positive results as the number of Red Channel declarations requiring physical inspections have come down significantly. UNCTAD’s contract for ASYCUDA implementation has also been extended for the next three years, which also covers a substantial transition. The Feasibility for implementing a National Single Window (NSW) and establishing a Trade Information Portal is also progressing well, and on track to be completed by June 2019. (d) Procurement Reform: The NPA has advanced its piloting of Electronic Government Procurement (eGP), with each of the following modular systems now fully developed and in various stages of implementation and information on these provided to the public via the NPA’s website: Afghanistan Procurement Contract Management System (APPMS); (ii) Afghanistan Procurement Facilitation System (APFTS); (iii) Afghanistan Contract Progress Monitoring System (ACPMS); and (iv) Afghanistan Vendor Registration and Classification System, Works (AVRSC-W). Open Contracting Partnership (OCP) and Open Contract Data Standards (OCDS) initiatives have also advanced. Frameworks for two ministries have been launched as a pilot. To buttress procurement capacity and professionalization, batch central recruitment of 697 procurement positions (to be transitioned into a professional cadre) has been completed. The NPA has provided on-boarding and other basic trainings to the recruited staff. (e) Institutional Capacity and Performance Management: As part of GoA’s shift to a “Tashkeel first” agenda, National Technical Assistance (NTA) migration has commenced across all FSP entities (MoF, NPA, SAO). MoF in particular has made considerable progress, rationalizing 53 percent of its NTAs under FSP. The FSP further prioritizes sustainably building up and retaining capacities, particularly of women. This includes newly launched comprehensive programs for identification and grooming of female talent in MoF, and the automatic transfer to civil service positions of women completing ongoing internship programs (that favor inclusion of female applicants) in the NPA. These programs are buttressed through a benchmark in the programmatic IP Plus DPG on at least 30 percent participation of women across the civil service, including in senior management positions. In terms of performance management, a Scoping Report has been completed to guide collaborative leadership skills and strengthen the cohesiveness and effectiveness of leadership teams in the context of FPIP. Implementation of its recommendations has been initiated with Bank support. The MoF Performance Management Team (PMT) has also now developed and launched a publicly accessible web- based Afghanistan Performance Management Information System (APMIS). Risks Systematic Operations Risk-rating Tool 11/29/2018 Page 2 of 9 The World Bank Implementation Status & Results Report Fiscal Performance Improvement Support Project (FSP): (P159655) Risk Category Rating at Approval Previous Rating Current Rating Political and Governance High High High Macroeconomic High High High Sector Strategies and Policies Substantial Substantial Substantial Technical Design of Project or Program Substantial Substantial Substantial Institutional Capacity for Implementation and Sustainability High High High Fiduciary Substantial Substantial Substantial Environment and Social Low Low Low Stakeholders Substantial Substantial Substantial Other High High High Overall High High High Results PDO Indicators by Objectives / Outcomes To contribute to the improvement of public expenditures management. IN00584609 ►Increased development budget execution rate (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 54.00 54.00 67.00 75.00 Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 Overall GoIRA development budget execution for 1396 was 67 percent, exceeding the Year 1 FSP target (57 percent). Final development budget execution for 1397 will become available following completion of Comments: the fiscal year (December 22, 2018), and will be reported upon as part of the next ISR update. IN00584611 ►Effective implementation by budgetary units on the external audit recommendations (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 15.00 15.00 15.00 60.00 Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 Achievement on this indicator remains in line with the baseline value and below the Year 1 FSP target (20 percent). This is largely due to suspension of the procurement process for the Audit Management Information System (AMIS) by the GoIRA Central IT Committee. Remedial action has been agreed to Comments: resolve this issue. In the interim, it has been agreed that SAO will prepare an excel-based record to track audit observations and their implementation. To contribute to the improvement of domestic revenue mobilization. IN00584610 11/29/2018 Page 3 of 9 The World Bank Implementation Status & Results Report Fiscal Performance Improvement Support Project (FSP): (P159655) ►Increased domestic revenue as a percentage of GDP (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 10.70 10.70 11.80 12.20 Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 The IMF estimate of 2018 revenue/GDP ratio is 11.8 percent, exceeding the Year 1 FSP target (10.9 Comments: percent). To contribute to reinforcing a performance oriented management culture in the Ministry of Finance. IN00584612 ►Improvement in core institutional capacity, represented by a reduction in the number of long-term technical assistants (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 499.00 499.00 335.00 250.00 Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 The number of long-term technical assistants has been reduced to 335 across MoF (275), SAO (37) and Comments: NPA (23) including vacant positions (under recruitment), exceeding the Year 1 FSP target (450). Intermediate Results Indicators by Components Component 4: Institutional Capacity Building and Performance Management IN00584617 ►Simplification and standardization of MOF Administration business processes (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target MOF Administration MOF Administration MOF Administration MOF Administration business processes not business processes not business processes business processes Value simplified and simplified and not simplified and simplified and standardized standardized standardized standardized Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 Simplification and standardization of MoF Administration business processes is currently behind the Year 1 FSP target (mapping of 50 percent of relevant MOF administration processes completed). Procurement for firm consultancy to facilitate MoF Administration business process re-engineering and automation has yet to commence. In the meantime, however, this exercise has been made a priority with the 2018 FPIP Comments: Plans for the Deputy Minister (DM) and Director General (DG) levels as well as across all Deputy Ministry for Administration teams. Several teams are currently embarking on preparation and/or update of Standard Operating Procedures (SOPs), considered the first step towards business process mapping. IN00584623 ►Improvement in performance management coverage, represented by an increase in the number of teams adopting FPIP (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 90.00 90.00 100.00 140.00 Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 11/29/2018 Page 4 of 9 The World Bank Implementation Status & Results Report Fiscal Performance Improvement Support Project (FSP): (P159655) The number of teams adopting FPIP within MoF, SAO, and NPA has increased to over 100, in line with Comments: the Year FSP target. IN00584627 ►Transparency and citizen engagement in reform planning, represented by timely publication of annual and mid-year FPIP assessment reports (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 Timely publication of FPIP assessment reports is currently behind the Year 1 FSP target (Yes). The MoF Leadership Team decided to suspend the 2018 mid-year FPIP assessment due to delays in finalizing plans. These plans were only completed by July 2018. Plans were published within the publicly accessible web-based Afghanistan Performance Management Information System (APMIS) developed by the MoF Comments: PMT. At the request of MoF, 2018 FPIP plans were reviewed by the Bank with the Bank's findings recorded in a formal Quality Assurance Report that has now been publicly disclosed by MoF. The 2018 annual FPIP assessment is due by end-February 2019 and progress towards its preparation and timely publication will be reported upon within the next ISR update. Component 1: Budget as Tool for Development IN00584618 ►Increased budget execution rate of the provinces by implementing new provincial budgeting policy. (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 57.00 57.00 57.00 75.00 Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 Provincial budget execution data is not currently available. This data will be collected and reported Comments: upon as part of the next ISR update. The baseline value is retained in the meantime. IN00584624 ►Improved gender disaggregated statistical analysis and documentation (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Gender disaggregated Gender disaggregated budget and Gender disaggregated Gender disaggregated budget and expenditure data, and Value budget and expenditure budget and expenditure expenditure data not statistical analysis data not available data not available available available for 6 pilot ministries Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 There is currently no gender-disaggregated statistical analysis reflected in budget preparation. Priority work during the first year of FSP has been focused around systematic reform of the overall budget process. Accordingly, efforts towards integration of gender-disaggregated analysis have been deferred. Comments: An important step in this regard has been including a request for gender analysis within the new budget template. IN00584625 ►Large projects are properly appraised with the support of a new PIM Unit to be established (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 10.00 10.00 10.00 50.00 11/29/2018 Page 5 of 9 The World Bank Implementation Status & Results Report Fiscal Performance Improvement Support Project (FSP): (P159655) Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 Achievement on this indicator remains in line with the baseline value and below the Year 1 FSP target (15 percent). This is not indicative of a slowdown in progress during the current reporting period but is reflective of the fact that while a total of 175 Project Concept Notes (PCN) have been received and screened following the Budget Circular (BC), none of these projects have been equal to or above US$100 Comments: million in value, the focus of the current indicator. Of the 175 submitted PCNs, 112 projects are above US$5 million (but below US$100 million) in value and have accordingly been received by MoF; and the remaining 63 projects are below US$5 million in value and therefore received by the Ministry of Economy. IN00584626 ►Effective M&E of development projects through development of a proper M&E system (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 10.00 100.00 Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 There has been progress with establishing a reporting system through which 10 percent of development projects have been monitored and evaluated by the MoF Policy Department to date, below the Year 1 FSP target (20 percent). Much of the current reporting period was spent development this new system. Comments: Now that this is established and operational, monitoring of development projects is expected to accelerate in line with targeted FSP milestones moving forward. Component 2: Revenue Mobilization IN00584613 ►Implement ARD Re-Organization and Modernization Plan (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target SLTO Implementation Plan Approved. VAT/SLTO Unit All regional revenue Value Plan approved by cabinet Plan approved by cabinet Created and Staffed. offices report to ARD Criteria for Taxpayer Reallocation Approved. Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 The Afghanistan Revenue Department (ARD) developed the Single Large Taxpayer Office (SLTO) Implementation Plan that has provided more detail, prioritization, and sequencing to its overall re- organization and reform. The original phases planned in this indicator will need to be adapted. The main Comments: focus will shift to centralization of management of large taxpayers first. In this period, the VAT and SLTO unit was created with a staff of ten people. Criteria for the re-allocation of taxpayers by revised thresholds were agreed and the transfer of taxpayers is underway. IN00584619 ►Increased number of active tax filers (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target LTO: 195; MTO: 5325; LTO: 195; MTO: 5325; LTO: 233; MTO: 5262; LTO: 380; MTO: Value STO: 3137 STO: 3137 STO: 3233 10400; STO: 6713 Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 The number of active tax filers has increased across both the LTO and STO. In the case of the LTO, the increase (233) is in line with the Year 1 FSP target (232). In the case of the STO, the increase (3233) Comments: remains below the Year 1 FSP target (3850). On the other hand, the number of active tax filers across the MTO has actually decreased (5262) and is currently below the FSP baseline value (5325). 11/29/2018 Page 6 of 9 The World Bank Implementation Status & Results Report Fiscal Performance Improvement Support Project (FSP): (P159655) IN00584614 ►Staff and business processes are in place for VAT implementation in 2020 (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target VAT business No staff or processes in No staff or processes in Value VAT staff recruited. processes developed place place and staff trained Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 The Year 1 FSP target has already been met with a Value-Added Tax (VAT) Implementation Plan and Communication Plan and a Single Large Taxpayer Office (SLTO) Implementation Plan drafted, reviewed and approved. The Year 2 FSP target is partially met with the VAT office now staffed with a team of Comments: approximately ten staff. Training has not yet been completed. As the VAT and SLTO taxpayer turnover thresholds have been synchronized, this team will support both units. IN00584615 ►Percentage increase in custom duties through enhancement of ASYCUDA customs automation (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 5.00 5.00 12.80 100.00 Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 Customs duties increased by 12.8 percent in 1396 compared to 1395, both in terms of total Customs collection and Customs duty collection, exceeding the Year 1 FSP target (10 percent). Final 1397 Comments: collection data will become available following completion of the fiscal year (December 22, 2018), and will be reported upon as part of the next ISR update. Component 3: Treasury Management, Accountability, and Transparency IN00584616 ►Web based AFMIS extended to embassies and selected districts, municipalities, and SOEs (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target All embassies, 300 No embassy, district, No embassy, district, districts, 20 1 municipality Value municipality, and SOE municipality, and SOE municipalities, and at connected to AFMIS. connected to AFMIS connected to AFMIS least 5 SOEs connected to AFMIS Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 Progress on roll-out of the AFMIS to embassies, municipalities, districts and State-Owned Enterprises (SOEs) is behind schedule on the Year 1 FSP target (10 districts and 10 municipalities connected to AFMIS). The system has only been rolled out to Kabul Municipality. The main reasons for the slow Comments: progress were an unstable AFMIS system at central level during the first six months of the year, non- finalization of contracting with FreeBalance, and limited HR capacity within the Treasury Department. Remedial measures and actionable timelines have been agreed for each of these bottlenecks. IN00584620 ►Afghanistan Institute of Certified Public Accountants (CPA) established and two batches trained (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Institute established, CPA law enacted and Value Institute not established Institute not established CPA law enacted, and curriculum developed. curriculum developed Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 11/29/2018 Page 7 of 9 The World Bank Implementation Status & Results Report Fiscal Performance Improvement Support Project (FSP): (P159655) The Accountancy Law has been approved by both houses of Parliament and the draft curriculum for the two local papers (Tax and Law) have been developed with consultant support, exceeding the Year 1 FSP target and in line with the Year 2 target. The next step is to ensure that the Institute of Certified Public Comments: Accountants (CPA), which is currently still working as unit of the MoF Treasury Department, is fully established. IN00584622 ►Number of IADs in Line Ministries that are strengthened and functioning based on standards set out by IIA (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 26.00 Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 MoF’s Internal Audit Department (IAD) is supporting capacity building of Line Ministry IADs, but presently the intern audits carried out are not compliant with Institute of Internal Auditors' (IIA) standards. As a Comments: result, achievement on this indicator is not considered to have improved upon the baseline value and remains below the Year 1 FSP target (5 Line Ministries). IN00584621 ►Rolling out e-GP in the pilot phase in 3 or more departments (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 3.00 Date 30-Aug-2017 08-Apr-2018 14-Nov-2018 28-Dec-2022 Progress on roll-out of e-GP to pilot departments is in line with the FSP Year 1 target (0 departments) with this first year dedicated towards system development. The system includes 16 modules on which there has been considerable progress with completion of full system development planned in 2020. Higher priority modules, however, have been agreed with the Bank to be completed by end-2019. Progress on each of the modules is captured below: 1. Afghanistan Procurement Contract Management System (APPMS): 100 percent completed. 2. Afghanistan Procurement Facilitation System (APFTS): 100 percent completed. 3. Afghanistan Contract Progress Monitoring System (ACPMS): 100 percent completed. 4. Afghanistan Vendor Registration and Classification System, Works (AVRSC-W): 100 percent completed. 5. Afghanistan E-Tendering System (AETS): 35 percent completed, planned completion date is September 30, 2019. This is the most important system amongst all 16 modules and the major indicator under FSP. Comments: 6. Afghanistan E-Catalogue and e-purchasing system (AECS-AEPS): System development and programming has started. 7. Afghanistan Vendor Debarment System (AVDS): Completed. 8. Afghanistan Procurement Record Management System (RMS): In-progress. 9. Afghanistan Cost Management System (ACMS): Not yet started. 10. Afghanistan Procurement e-learning Platform (APLP): Not yet started. 11. Afghanistan e-Specification System (AESS): Database development started. 12. Afghanistan Contract Management System (AFCMS): In-progress. 13. Afghanistan e-Reverse Auction (AERA): Not yet started. 14. Afghanistan Asset Management System (AAMS): In-progress. 15. Afghanistan Administrative Review System (AARS): Not yet started. 16. Afghanistan Contract Award Approval System (ACAAS): At concept stage. Data on Financial Performance Disbursements (by loan) 11/29/2018 Page 8 of 9 The World Bank Implementation Status & Results Report Fiscal Performance Improvement Support Project (FSP): (P159655) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P159655 IDA-D2630 Effective USD 25.00 25.00 0.00 14.47 10.57 58% P159655 TF-A6277 Effective USD 75.00 75.00 0.00 3.00 72.00 4% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P159655 IDA-D2630 Effective 19-Dec-2017 25-Dec-2017 01-Jan-2018 28-Dec-2022 28-Dec-2022 P159655 TF-A6277 Effective 19-Dec-2017 25-Dec-2017 01-Jan-2018 28-Dec-2022 28-Dec-2022 Cumulative Disbursements Restructuring History There has been no restructuring to date. Related Project(s) There are no related projects. 11/29/2018 Page 9 of 9