PROJECT INFORMATION DOCUMENT (PID)



PROJECT INFORMATION DOCUMENT (PID)

APPRAISAL STAGE

Report No.: AB6390

|Project Name |Public Financial Management Strengthening Technical Assistance Project |

|Region |AFRICA |

|Sector |Central government administration (100%) |

|Project ID |P122476 |

|Borrower(s) |GOVERNMENT OF SENEGAL |

| |Ministry of Economy and Finance |

| |Ministry of Economy and Finance |

| |Avenue Carde |

| |Senegal |

| |Ministry of Economy and Finance |

| |Senegal |

| |Tel: (221) 33 8214587 Fax: (+221) 33821 8312 |

| |layedieng1@yahoo.fr |

|Implementing Agency | |

| |PCRBF |

| |MEF, Immeuble Centre A. Peytavin |

| |Senegal |

| |Senegal |

| |Tel: +221338214587 |

| |layedieng1@yahoo.fr |

|Environment Category |[ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined) |

|Date PID Prepared |February 22, 2011 |

|Date of Appraisal Authorization |March 7, 2011 |

|Date of Board Approval |April 26, 2011 |

1. Country and Sector Background

1. From the mid-1990s until 2005, Senegal had one of the best economic performances in Sub-Saharan Africa. While there were brief episodes of low growth, real GDP grew on average by about 5 percent annually, about 2½ percent a year on a per capita basis, contributing to a sharp drop in the incidence of poverty and marking the first sustained increase in average per capita growth since independence in 1960. Poverty declined rapidly—the fraction of the population that fell below the national poverty line declined from 68 percent in 1994/95, to 57 percent in 2000/01, and to 51 percent in 2005/06. Since 2005, however, a rapid succession of shocks, some external and some internal, and compounding each other, have taken a toll on the economy. Following the food and fuel price shocks in 2008, economic activity slowed further in 2009 because of the global economic downturn and domestic shocks, including temporary electricity shortages. Real GDP growth is estimated to have been 1½ percent in 2009. Lower external demand and downward pressure on remittances, tourism receipts, and foreign direct investment (FDI) have reduced growth. The agricultural sector, which benefited from supportive policies and favorable weather, helped to mitigate the impact of depressed demand at home and abroad on the secondary sector (construction, energy) and particularly the tertiary sector (transport, tourism services). Growth is currently projected at 4 percent in 2010 and 4.4 percent in 201[1]. The overall fiscal deficit is expected to reach 4.8 percent of GDP in 2010, broadly in line with the budget target. Inflation is expected to remain below 2 percent. But risks remain, including a weak global recovery, higher oil prices, and persistent electricity supply problems, and opportunistic pre-election changes in economic policies.

2. Indeed, Senegal’s broadly stable political climate is likely to become more complex as the country moves towards the 2012 presidential elections. In March 2009, local elections led to a victory of the opposition parties in the majority of main municipalities, including Dakar and Saint Louis. This outcome boosted the confidence of the opposition and the results were accepted peacefully by the presidential majority. Subsequently, in September 2009, President Wade has announced his intention to run for a third term in 2012[2], and has moved to consolidate the political base around his party, the Parti Démocratique Sénégalais (PDS). Against this background, several Cabinet changes have taken place over the last year, though with little impact on the broad direction of economic policy so far. Overall, in the next 12-18 months, the political economy of economic management and reforms is likely to be challenging. As the political debate sharpens on the road to the early 2012 presidential elections, including on the track record of President Wade’s administration, the commitment to reforms on which a broad consensus has yet to be developed could be more difficult to advance. Moreover, pressures on the public finances are likely to build up. However, the demand for results could also result in additional momentum in the implementation of the Government’s growth, human development, social protection, environmental and governance agendas.

3. The Government is committed to address the country’s economic challenges and has developed a second Poverty Reduction Strategy Paper (PRSP-II). The PSRP-II has four strategic pillars: (i) wealth creation; (ii) capacity building and the provision of basic social services; (iii) the protection of vulnerable groups; and (iv) the promotion of good governance and participation. While the first three pillars were already at the center of the PRSP-I, the fourth pillar reflects the government's acknowledgement that improving the quality of public services and strengthening transparency and accountability both in the public and private sectors are crucial to make headway on poverty reduction. In addition, the PRSP II progress report[3] noted significant improvements in the management of public finances, including macroeconomic stability in a very difficult context, introduction of medium term expenditures framework in key sectors, improvements in budget’s credibility. This is the sub-para numbering for this level. This is the sub-para numbering for this level. This is the sub-para numbering for this level.

4. Recent Assessments performed by or at the request of the authorities have identified a range of weaknesses in Senegal’s Public Financial Management (PFM) system. These assessments include the 2003 Country Financial Accountability Assessment (CFAA), the 2007 Public Expenditures and Financial Accountability (PEFA[4]), and a 2008 IMF Technical Assistance report. These reports identified a number of critical shortcomings in budget preparation and execution processes as well as internal and external controls. As an initial response to these challenges, the Government developed an action plan in 2003, which is regularly updated[5] to include progress made in the PFM reforms as well as new challenges. As a result of government’s efforts to address the identified PFM issues, there has been significant progress in the Public Financial Managements reforms. Medium Term Expenditures Frameworks have been developed in key priority sectors, budget execution processes have significantly improved with the development of a budget management information system (SIGFIP) and an accounting information system (ASTER). Despite these improvements, there are significant challenges, as summarized below, which still need to be tackled.

5. Legal and institutional framework. West African Economic and Monetary Union (WAEMU) has adopted in 2009 six new PFM regulations (Directives) covering transparency in public finances in general, budget preparation and execution laws, government accounting, budget classifications, central government chart of accounts (CoA), and central government operations (tableau des operations financières de l’Etat- TOFE). These new regulations set ambitious objectives such as performance budgeting, significant changes of internal and external control methodologies, modernization of expenditures management, implementation of accrual accounting and new budget classification aligned with international standards. The draft laws related to these regulations are expected to be approved by the Senegalese Parliament by April 30, 2011. These new regulations are expected to be fully implemented over a period of five years from 2012 to 2017. Their specific impacts in the financial management system and procedures are yet to be assessed, but are expected to be significant, given the strong focus on results and principles contrary to the current model which is rules based. The country will therefore need strong support to implement these reforms. The table below gives the indicative timetable for the adoption of the laws and regulations derived from the WAEMU directives:

Table 1: Indicative timetable for the adoption of the WAEMU directives

|Law / Regulation |Indicative period of adoption |

|Organic law on budget laws to Parliament by end-December 2010; |April 2011 |

|Decree pertaining to the General Regulations governing Public Accounting (RGCP) |June 2011 |

|Decree pertaining to budget nomenclature |June 2011 |

|Decree pertaining to the government chart of accounts |August 2011 |

|Decree pertaining to the government financial operations table (TOFE) |September 2011 |

Budget preparation. There is no coherent forward-looking perspective in the budgetary planning process. Despite the development of Medium Term Expenditure Frameworks (MTEF) in key sectors, the link between sectoral policies and priorities, and the budget is still very weak. Moreover, the sectoral MTEFs are not fully disclosed in the budget documents sent to the Parliament. The new sets of directives developed by WAEMU include the adoption of a performance-based budgeting system. This approach will require a major change of the budgeting system and a significant strengthening of the capacity of line ministries. In addition, the process of planning, evaluating, and selecting public investment projects is very weak. This has led to the selection of various major public investment projects without any cost benefit analysis.

6. Budget Execution. Budget execution is affected mainly by (i) excessive centralization of budget execution authority[6] in the Ministry of Finance; (ii) significant extra-budgetary operations; (iii) weak oversight of public Institutions/Agencies; (iv) non incorporation of significant budget expenditures, including integrating payroll and pensions into the budget management information system, (v) difficulties in the interfacing between the various financial management information systems, i.e. Revenues (GAINDE for Customs, SIGTAS for Tax), Expenditures (SGFIP), and Accounting (ASTER). With regards to the decentralization of budget execution authority to line ministries (“deconcentration de l’ordonnancement”), a piloting was undertaken under the MTDF and delegated payment authorizers (“Ordonnateurs delegues”) and Financial Comptrollers (“Controleur des Operateurs Financieres”) were nominated in 5 line ministries. However, the results are mixed as line ministries do not have sufficient authority to execute their budgets and there are no clear capacity building plans in place to prepare them to take over the management of their resources as required by the WAEMU regulations. In addition, the budget execution process is lacking of a procedures’ manual to enable and guide public servants to perform their duties. This lack of procedures manual is a cross cutting issue and affects all the different stages of the budget management system, including revenues and expenditures.

7. Extra-budgetary expenditures and oversight of public institutions/agencies. Senegal scored very low in the PEFA indicator PI 7: Extent of unreported government operations. The level of unreported extra-budgetary expenditures (other than donor funded projects) constituted 17% and 24% of total expenditures respectively in 2006 and 2007. In addition, an audit by the Office of the Inspector-General of Finance (IGF) conducted in June 2009 identified significant extra budgetary spending[7]. The authorities have taken steps to regularize these extra-budgetary spending as well as public institution/agency debt issues. These efforts include the adoption of a new law[8] regulating the creation, the management and controls of public institutions and agencies. The next step in the reform agenda is to support the full implementation of this law, including the strengthening of financial relations between the Treasury department and public institutions/agencies.

8. Public financial management information system. Senegal uses the following computerized systems to support its financial management procedures: SIGFIP for the budget, ASTER for the accounting, cash management and reporting, and COBOL (which is being replaced) for the Payroll. On the revenue side, it uses GAINDE for Customs and SIGTAS for Tax. Although a Financial Management Master Plan has been developed, the respective departments of the Ministry of Finance are developing their own accounting software with limited involvement of the Information Technology Directorate (Direction du Traitement Informatique de l’Etat - DTAI). As a result of these uncoordinated initiatives, sequencing of the technical improvements and a reengineering of the administrative and control procedures have not been implemented. The most notable example is the development of a separate system for the Payroll without any plans for Pensions even if interfaces with SIGFIP have been incorporated in the technical design. In addition, a separate human resource management database is being developed by the State Information Technology Department (Direction Informatique de l’Etat) but this is being carried out in isolation and without consideration of the requisite linkages with other applications. Consequently, significant weaknesses remain in the management of the public wage bill. None of the existing applications covers Pension which is a significant component of Government’s expenditures.

9. Cash management, accounting and reporting. The financing pressures that emerged on the treasury of the State in the third quarter of 2008, have revealed weaknesses in cash and debt management. They exposed the inability of the State to finance public expenditures in context of an environment of tight bank lending and lack of alternative sources of funding public programs. Although accounting and reporting have improved significantly with the implementation of ASTER as a non-integrated, stand-alone system that is interfaced only with SIGFIG, the application remains more of a transaction processing system whose value addition could be better enhanced through integration or interfacing with other budget management systems. Currently, temporary cash constraints are met by ad hoc clawing-back of budget releases and shortening the front-loading of releases to service delivery agencies - a practice that, among other things, undermines the quality of the process and is not aligned with sector Ministries responsibilities for executing their policies and budgets. Weak cash management undermines the budget execution efficiency and impacts service delivery efficiency and effectiveness through a lack of predictability in expenditures commitments.

10. Internal audit and controls. The effectiveness of internal audit and controls has been identified, by various assessments including the 2007 PEFA, as one of the most important challenges in Senegal. Indeed, internal audit functions are carried out by the General Inspectorate of Finance (IGF), the Inspector General (IGE), and various Internal Audit departments in Line Ministries and other institutions including Tax and Customs. The audits are conducted with no coordination; a factor that impairs their consistency and effectiveness. IGE has not played its coordination role and all the institutions lack the tools and methodology to perform their functions. A risk-based approach is yet to be developed, and information technology is not being used for audits in line with modern practices. As a result of these weaknesses, Senegal scored very low in the related PEFA indicators.

11. External audits and legislative oversight. Senegal’s Supreme Audit Institution is one of the strongest in WAEMU and has made significant progress over the last years with the support of various donors, including the World Bank and the European Commission. The extent of the audit backlog remains however a case for concern. To date, the last Budget Review Act (Appropriation Accounts) audited by Cour des Comptes is that of the fiscal year 2007[9]. The review and judgment (certification) on the public accounts from fiscal year 2003 have not started. Significant efforts are required to clear the backlog and prevent the buildup of any new backlogs. The scope of the audits does not include performance or value for money reviews. Cour des Comptes is also facing serious capacity constraints, including inadequate staffing, very obsolete archive system, limited use of the IT system, etc. As a result of the delays in carrying out the audits, the ex-post legislative oversight role has been severely limited. The Public Accounts Committee (Commission des finances) is itself also facing serious capacity constraints and has not yet reviewed the Audited Financial Statements and audit reports submitted to Parliament by Cour des Comptes.

12. Debt management. A recent evaluation of debt management performance - using the Debt Management Performance Assessment tool (DeMPA) reveals the following strengths: (i) the legal framework clearly establishes the responsibilities for public debt management, vesting the President and Parliament with ultimate decision making powers. In addition, a recently established National Committee for Public Debt Management (Comité National de la Dette Publique, CNDP) facilitates the coordination between all institutions involved in public debt management; (ii) the policy coordination between debt management and fiscal and monetary policies is fairly strong, through the formulation of the medium-term macroeconomic framework that is the foundation for the annual budget laws; and (iii) there is a strong coordination between the BCEAO and the Treasury in the management of domestic debt, including through frequent reconciliation of accounts balances between the Treasury and the Central Bank, and cash flow management for the Treasury. This coordination is also accompanied by a clear distinction of functions and roles of monetary, budgetary, and debt management authorities in public debt management decisions. Despite these strengths, a debt management strategy is yet to be developed. Besides, since June 2009, the responsibility to initiate and sign-off on cooperation agreements, including the signing of public debt agreements, has been fragmented between two Ministries—the Ministry of Finance and the Ministry in charge of International Cooperation. The latter is currently mandated to ensure creditor-debtor relationships with a set of Asian countries, excluding Japan. This new institutional arrangement carries a significant risk that debt strategy, and management functions and decisions, including reporting, will become increasingly fragmented as well, with the potential to weaken overall debt management in Senegal. The debt management information system acquired in 2000 needs to be upgraded and run on a different platform to allow an interface with the other budget management information systems, notably SIGFIP, ASTER, and SIGTAS.

13. To address these challenges, the Government has developed a comprehensive PFM action plan for the period 2009-2012. Although the action plan does not fully incorporate the changes introduced by the 2009 WAEMU regulations, it constitutes a solid basis for the project and the selectivity thrust for the underlying activities to be implemented. In addition, following the 2003 CFAA, the Government in coordination with the donors has established a Joint Steering Committee (Comite Conjoint de Suivi et d’Harmonisation - CCHS) comprising donors members[10] of the PFM thematic group, key departments of the Ministry of Finance, representatives from Cour des Comptes, the National Assembly, the Prime Ministry, and the Presidency. A Public Financial Management Reform Secretariat has been established since 2003 to coordinate the implementation of the reforms. It is located in the Ministry of Finance. The unit is headed by a former Senior Public Accountant who serves as an advisor to the Minister of Finance. He is assisted by a PFM specialist and an accountant.

2. Objectives

14. The proposed project development objective is to enhance the credibility, transparency, and accountability in the management and use of public resources.

3. Rationale for Bank Involvement

15. The FY07-10 Country Assistance Strategy[11] (CAS) for Senegal was approved by the Bank’s Board on June 20, 2007. The CAS recognizes that more efforts are needed to address the challenge of weak governance in Senegal, and introduces a “governance filter” comprising four core principles to ensure that governance considerations are mainstreamed into all WBG’s programs: (i) improve transparency and efficiency in the use of public resources; (ii) increase public sector accountability; (iii) strengthen and modernize the judicial system; and (iv) enhance mechanisms for private sector governance. This focus should help Senegal to close the gap with successful emerging countries. The project is in line with the governance filter’s objectives of improving transparency and efficiency in the use of public resources and increasing public sector accountability. In addition, this project will provide technical assistance in critical areas supported by the PRCS series. The development hypothesis underlying this particular technical assistance project is that the improvement of the budgeting, financial control, reporting and audit systems of the Government of Senegal will make a substantial contribution to the country’s sound public financial management, which in turn impacts on better governance and hence improves the efficiency and effectiveness of public expenditures, and thus increases the potential for economic growth and poverty reduction.

16. The Country Partnership Strategy Progress Report (CPSPR) that assessed progress in implementing the FY07-10 CAS for Senegal was discussed by the Board of Executive Directors on June 18, 2009. The Progress Report confirmed that, while progress against the CPS goals has been mixed, the strategic objectives set out in the CPS remained consistent with national priorities. The Bank’s team has been working closely with the authorities to take proactive measures in addressing policy and implementation challenges so as to raise the likelihood of an overall positive outcome for the CPS. This project contributes to addressing the identified challenges and is consistent with the government own priority reform program. Indeed, the proposed operation builds on the PRSC series and the achievements under the Multi Donor Trust Fund (MDTF) which provided funding to support the reform of budgetary practices and public finances in Senegal during 2004-2009.

17. The program of budgetary and financial reforms was initiated under the guidance of the Ministry of Economy and Finance (MEF) and with the technical and financial support from donors based on the recommendations of CFAA and PEFA reports. In response to these recommendations, an Action Plan for Improving the PFM Systems in Senegal was adopted by the Inter-ministerial Council in July 23, 2003. A structure was put in place to guide the implementation of the reforms. This structure was made of: (i) a PFM Reform Secretariat (Projet de Coordination des Reformes Budgetaires et Financieres – PCRBF), and a (ii) a Joint Steering Committee (Comite Conjoint de Suivi et d’Harmonisation - CCHS), comprising donors members of the PFM thematic group and the CCP, was established to provide operational guidance in the coherent implementation of reform actions. This proposed technical assistance operation will use the same organizational structure, and the lessons learned from implementing the MDTF would be incorporated in the operational arrangements under this operation.

4. Description

18. The project aims to support the modernization of the Public Financial Management System in Senegal during the coming four years. It includes four components: (1) Strengthening Fiscal Policies and Planning; (2) Improving Budget Execution Processes; (3) Strengthening the capacity of external audit and legislative oversight; and (4) Project Management. Because it is a continuation of the MDTF that has assisted the Government in reforming budgetary practices and the management of public finances, it would be able to build on the areas that have outstanding issues to be resolved. This targeted approach is expected to leverage the positive impact of the project, if government commitment is sustained as expected. Since many of the activities to be implemented under the project would cut across several entities, the process of change management, would be specifically supported under the project, particularly for the activities requiring strong buy-ins, e.g. assessment and selection process of large public investment projects, decentralization of commitment controls to line ministries, strengthening internal audit processes, legislative oversight, etc.

19. Component 1: Strengthening Fiscal Policies and Planning (US$2 millions). This component aims at improving expenditures policy allocations, including reduction of potential deficit financing. It will support the on-going efforts by the Government of Senegal to align the legal framework with the new WAEMU directives. It includes two sub-components: (i) Improvement the legal framework and extension of the Medium Term Expenditures Framework; and (ii) Development and implementation of a debt management strategy.

20. Sub-Component 1.1: Support of the Reform of the Legal & Institutional Framework and extension of the Medium Term Expenditures Framework (US$1.4 million). The objective of the sub-component is to improve the legal framework and expand the sectoral MTEF developed under a Multi Donor Funded program administered by the World Bank. It also aims at improving the selection and evaluation processes of public investments projects.

21. Under this sub-component, the project will finance the following key activities: (i) assessment of the impact of the WAEMU directives and update of the PFM legal framework and reform action plan to incorporate the changes introduced by the WAEMU directives; (ii) Update and dissemination of the MTEF; (iii) Development and implementation of a framework for the assessment of the economic viability of public investment projects; (iv) economic management studies to inform budget preparation processes and sectoral analysis.

22. Sub-component 1.2 – Development and Implementation of a Debt Management Strategy (US$0.6 million). This sub-component aims at improving debt management. The project will finance the following activities: (i) development of a medium term debt management strategy, which will be annexed to the budget documents; (ii) development and dissemination of a manual of procedures for debt management; (iii) enhancement and deployment of the debt management information system; and (iv) capacity building of the staff in key areas of debt management, i.e. borrowing and related financing activities, cash flow forecasting and debt sustainability analysis, Operational Risk Management, etc.

23. Component 2: Improving Budget Execution and reporting Processes (US$5 millions). This component will support the on-going efforts by the Government of Senegal to modernize the budget execution processes by rendering them more efficient and transparent.

24. This component will have three sub-components: (i) Strengthening of the Budget Execution Processes; (ii) Enhancing Budget Management Information Systems, and (iii) Strengthening Internal audit and controls.

25. Sub-component 2.1: Strengthening Budget Execution Processes (US$1.5 million). This sub-component aims to support the Treasury department in the implementation of the WAEMU regulations by developing and disseminating an operation manual as well as conducting capacity building activities for accountants. It will support the decentralization of commitment authority to line ministries.

26. It will specifically finance the following activities: (i) capacity building of line ministries’ staff; (ii) Development and dissemination of an operation manual as well as conducting capacity building activities for accountants; (iii) Development of a harmonized financial and accounting regime for public agencies/institutions; (iv) development and dissemination of budget execution manuals; and (v) change management activities to create broad consensus and identify key incentives around the reforms above.

27. Sub-component 2.2: Enhancing Budget Management Information Systems (US$2.5 million). This sub-component aims at developing the interface between the budget management information systems and enhancing the accounting and budget modules (ASTER and SIGFIP).

28. It will finance the following activities: (i) a technical assistance study of the specific requirements for systems enhancement and interfacing of the 6 core PFM information systems, including the upgrading needs of ASTER and SIGFIG as well as the interfacing or integration of the payroll module with the proposed pensions’ module; (ii) assessment of the volumetric capacity requirements of servers for increased government transactions in the medium term; (iii) acquisition and commissioning of servers for enhancement of hard disc storage and processing capacities for the enhanced applications (including data migration), allowing for interface requirements and procurement of computer hardware; (iv) review of the business processes to expunge redundant system processes.; (v) improvement of the electronic data transfer systems – WAN/LAN connectivity; (vi) identification of the financial reporting requirements and establishing the reporting tools; (vii) implementation of the required enhancement/upgrading as well as the interfacing between the different applications, and payment of software licenses and annual maintenance costs for up to 2 years; (viii) roll-out of the enhanced systems to Ministries and Agencies consistent with the WAEMU Directives on decentralization of commitment authority to line ministries; (ix) training and other capacity building activities on the enhanced and upgraded systems to end users and support teams.

29. Sub-component 2.3: Strengthening Internal Audit Processes (US$1 million). The objective of this sub-component is to support the Government of Senegal in enhancing the performance of the internal control systems, through an operational internal audit function.

30. It will finance the following activities: (i) development of Internal Audit Framework and Strategy as well as Internal Audit Manuals; (ii) initiating in the Use of Computer Aided Auditing Techniques (CAATs); (iii) strengthening Audit Units on audit follow-up; and (iv) change management activities to create broad consensus and identify key incentives around this reform.

31. Component 3: Strengthening the capacity of external audit and legislative oversight (US$2.3 millions). This component aims at enhancing the external oversight in the management of public finances. It will be implemented under two inter-related sub-components: Strengthening External Audit Processes, and Strengthening the Legislative Oversight.

32. Sub-component 3.1: Strengthening External Audit Processes. The objective of this sub-component is to accelerate the modernization and capacity building of the Audit Court (Cour des Comptes). It will support the following activities: (i) assisting the Cour des Comptes in completing the auditing and certification of the backlog of audits and developing and action plan to prevent the built up of audit backlogs; (ii) introducing computer-assisted audit techniques and assisting Cour des Comptes to implement its master plan; and (iii) developing auditor capacity in conducting performance and special audits.

33. Sub-component 3.2: Strengthening the Legislative Oversight. The objective of this sub-component is to strengthen the Parliamentary Finance Commission’s capacity for carry out ex-post reviews of audited accounts and audit reports, and to also facilitate the Public Access to Information about the Parliamentary Oversight Committee work. It will fund the following activities: (i) updating and maintaining website of parliamentary oversight committee reports; (ii) reviewing current methods of informing the media about committee proceedings to enhance media relations; (iii) building capacity of members of the PAC to carry out reviews of audit reports and audited accounts; (iv) publishing minutes of committee meetings and maintaining reporting on parliamentary website on a current basis; and (v) exploring the practicality of opening committee meetings to the public.

34. Component 4: Project Management (US$0.70 million). This component will provide support for the coordination, administration, financial management, procurement, monitoring and evaluation and dissemination of the Project. It will also support change management activities, where necessary. The capabilities to be supported under this project will not only benefit the proposed Bank project but also the Government budgetary reform agenda.

35.

5. Financing

|Source: |($m.) |

|BORROWER/RECIPIENT |1.5 |

|International Development Association (IDA) |10 |

| Total |11.5 |

6. Implementation

36. The implementations arrangements under the proposed project would follow the existing structure established under the MDTF, but with due attention to ensuring: (i) the availability of sufficient human resource capacity for successful implementation outcomes; and (ii) the effective participation of line ministries and other beneficiaries, such as Cour des Comptes, the Parliament, the civil society, and the private sector in the steering committee. The implementation arrangements will be along the lines of a Ministerial Orders[12] issued in July 2003 and in March 2010, setting out the administrative framework of the PFM reform program, which include: (i) a Joint Steering Committee (Comite conjoint d’Harmonisation et de Suivi – CCHS); and (ii) a PFM Reform Secretariat (Projet de Coordination des Reformes Budgetaires et Financieres – PCRBF). In addition, a National PFM Steering Committee will be established for this project. The paragraphs below describe the role and responsibilities of each entity in the structure.

37. The Joint Steering Committee (Comite conjoint d’Harmonisation et de Suivi - CCHS), comprising of Government officials, the Civil Society and the Donors[13] that make up the Thematic Group on Public Finances and Budget Support, oversees the reform program. The CCHS, who meet every four months, will provide overall advice on the progress of the reforms and discuss any coordination issue in the funding of the PFM action plan. Its role would be strictly advisory. To oversee the implementation of the PFM reforms, a National Steering Committee will be established.

38.

39. The National PFM Steering Committee (Comite de Coordination et de Pilotage - CCP) will be responsible for the policy aspects of PFM reforms in Senegal. The CCP will be chaired by the Minister of Finance or his Designate and will comprise all national institution members of the CCHS, plus the private sector and representatives of the key line ministries. The head of the Executive Secretariat of the PCRBF acts as the secretary of the CCP. The CCP meets quarterly to: (i) discuss the strategic direction and orientation of PFM reforms, including progress in meeting project PDOs; (ii) review the implementation status of the PFM reform action plan; (iii) provide guidance and address policy related issues; (iv) approve the budget and the annual work plans.

40.

41. PFM Reform Secretariat (Secrétariat Exécutif du Projet de Coordination des Reformes Budgétaires et Financières – PCRBF). The Executive Secretariat will be in charge of the day to day implementation of the activities. It is headed by a senior public servant who reports directly to the Minister of Finance as technical advisor. Within the SE, there is a Fiduciary Unit to handle the financial management, including the disbursement aspects of the project. In order to strengthen the capacity of the ES and address some of the weaknesses identified during the implementation of the MDTF, a procurement specialist and a monitoring and evaluation specialist will be recruited. In addition, the Technical Committees (TCs), established during the implementation of the MDTF, will be revived. These TCs cover the six core dimensions of the PEFA, i.e. (i) Credibility of the budget; (ii) Comprehensiveness and transparency; (iii) Policy-based budgeting; (iv) Predictability and control in budget execution; (v) Accounting, recording and reporting; (vi) External scrutiny and audit. They comprise Focal Points (FPs) of the implementing entities and will be in charge of operational monitoring of the implementation of the reforms. The TCs meet monthly and are chaired by the head of Executive Secretariat (ES) of the PCRBF. The TCs could be assisted by short term consultants who will be hired by the ES. The TC would be an important vehicle for reviewing the implementation of project activities. Each focal point will make brief monthly presentations during their meetings, regarding the progress of the project activity under the jurisdiction of his/her organization. Each focal point is supposed to advise the TC of any issues of project implementation that have been encountered. The focal point should have ostensible authority to speak and make decisions on behalf of his/her organization.

7. Sustainability

42. The design of the project includes an in-built sustainability arrangement. The reform activities whose implementation the project will support are essentially government-led and are mainstreamed within the operational machinery of the civil service. An approach adopted is not to revamp the entire PFM structure, but rather to upgrade the existing systems and improve the practices consistent with the requirements of new laws and regulations to be adopted as part of the implementation of the WAEMU protocols. The interventions designed under the project will not result to any significant recurrent costs to the Government in excess of their current outlays, but will improve the efficiency and effectiveness of PFM systems and procedures, and thus enhance public satisfaction from Government’s management of public finances. In addition, technical experts to be recruited to support the TCs will be imbedded in the government departments to ensure sustainability.

43. With regards to the PFM information system, a key challenge for sustainability is the approach that the Government would need to take to bring together the multiplicity of fragmented information systems a number of which are technically redundant and could be better integrated as sub-modules within some of the six core applications in use. The costs of maintaining these individual stand-alone systems, quite apart from their inherent operational deficiencies and the pitfalls arising from their non-standardization, would be difficult for Government to sustain in the long run. A review of the specific characteristics of these systems and the adoption of a rationalization plan will however assist the Government to create better value addition from the use of information technology as a PFM tool. The DTAI and the ADIE, being the technical arm of the Government information technology service, are well positioned to support the implementation of the rationalization process within the spirit of the CCP strategic direction during the life of the project. Nevertheless, an intensive program of change management is required, in tandem with the required systems changes, to enable favorable results to emerge from the rationalization process.

44. Finally, the implementation of the project will remain anchored entirely with the existing institutions put in place by the Government since 2003 (after the CFAA/CPAR exercises). These institutions are currently being fully resourced and closely monitored by the Government, with limited direct support from the Donors.

8. Lessons Learned from Past Operations in the Country/Sector

45. This design of the project has benefitted from the lessons that have learned from the implementation of the MDTF operation. The MDTF ICR noted a number of weaknesses that have been taken account in the design of the Project. Poor human resource capacity in the implementing units of the MDTF hampered close monitoring of the implementing units which slowed the pace of implementation of the reforms. Lack of familiarity with World Bank procedures also led to delays in obtaining “no objections” for procurement actions which in turn delayed project implementation. The cross-cutting nature of some of the reforms was not clearly understood by some of the implementing units. This lack of understanding also led to delays in implementing the program. In addition, several reforms, e.g. decentralization of commitment authority to line ministries, improvements in internal audit processes, etc., faced strong resistance from a number of implementing entities. These shortcomings have been addressed in the design of project components. Indeed, a change management activity has been added to deal with the resistance the project may face in the implementation of some of the reforms. A procurement specialist will also be hired to increase the capacity of the PCRBF. Finally, short term consultants will be hired to support the implementing entities in the development of the TORs and technical designs of the activities.

46.

9. Safeguard Policies (including public consultation)

|Safeguard Policies Triggered by the Project |Yes |No |TBD |

|Environmental Assessment (OP/BP 4.01) | |X | |

|Natural Habitats (OP/BP 4.04) | |X | |

|Pest Management (OP 4.09) | |X | |

|Physical Cultural Resources (OP/BP 4.11) | |X | |

|Involuntary Resettlement (OP/BP 4.12) | |X | |

|Indigenous Peoples ( OP/BP 4.10) | |X | |

|Forests (OP/BP 4.36) | |X | |

|Safety of Dams (OP/BP 4.37) | |X | |

|Projects in Disputed Areas (OP/BP 7.60)* | |X | |

|Projects on International Waterways (OP/BP 7.50) | |X | |

10. List of Factual Technical Documents

1. Country Assistance Strategy (2007).

2. Senegal Poverty Reduction Strategy Paper II (2006).

3. Public Expenditure and Financial Accountability (2007).

4. IMF Country Report No. 10/362, Senegal Policy Support Instrument December 2010.

5. IMF Country Report No. 10/368, Senegal: Poverty Reduction Strategy Paper Annual Progress Report. December 2010.

1. Contact point

Contact: Fily Sissoko

Title: Lead Financial Management Specialist

Tel: (202) 473-5045

Fax: (202) 614-5045

Email: fsissoko@

2. For more information contact:

The InfoShop

The World Bank

1818 H Street, NW

Washington, D.C. 20433

Telephone: (202) 458-4500

Fax: (202) 522-1500

Email: pic@

Web:

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[1] Source: IMF country Report No. 10/362, December 2010.

[2] President Wade won his first term, for a seven year mandate, in 2000. A subsequent amendment to the Constitution allows two five-year terms for the Presidency, effective from the 2007 elections, in which President Wade won his second term.

[3] Source: IMF Country Report No. 10/368, December 2010.

[4] See annex 7 for the 2007 ratings of all indicators. An update of the PEFA is scheduled for 2011.

[5] The PFM reform action plan is updated before every CCHS meeting. The last update was done on November 2010.

[6] Currently, all administrative stages of the expenditure processes (commitment and controls, issuance of payment orders) are done by the Ministry of Finance.

[7] These extra budgetary expenditures amount to CFAF 37 billion, and public agency and institution debt amount to CFAF 67 billion as at December 31, 2008.

[8] Law No. 2009-20 of May 4, 2009 and Decree No. 2009-522 of June 4, 2009.

[9] The 2006 Financial Statements have been audited, but not yet transmitted to the Parliament.

[10] A matrix of donors support for 2010-2011 is attached in annex 8

[11] A new CPS covering the period FY11-14 is expected to be presented to the Board of IDA in FY11.

[12] See Ministerial Orders (Arrêtés) No00522 of July 30, 2003 creating a PFM Steering Committee and a PFM reform Secretariat, and No. 02775 of March 22, 2010 which amended the Ministerial Order (Arrêté) no. 05425/MEF dated June 25, 2004 creating the “Comite Conjoint d’Harmonisation et de Suivi” (CCHS)

[13] These donors include the IMF, the World Bank, the African Development Bank, the European Cooperation, the Netherlands, etc.

* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas

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