The World Bank FOR OFFICIAL USE ONLY - Afghanistan ...

Document ofThe World Bank

FOR OFFICIAL USE ONLY

PROJECT PAPER

ON A

PROPOSED ARTF GRANT

IN THE AMOUNT OF US$ 73 MILLION

TO THE

ISLAMIC REPUBLIC OF AFGHANISTAN

FOR A

SECOND PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT (PFMR II)

May 25, 2011

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS(Exchange Rate Effective XXX, 2011)

Currency Unit= Afghani (AFN)AFN XX= US$1

FISCAL YEARMarch 21 – March 20

ABBREVIATIONS AND ACRONYMS

ACCA

ACSIADBAFMIS

ANDS

Association of Certified Chartered Accountants Afghanistan Civil Service InstituteAsian Development BankAfghanistan Financial Management Information SystemAfghanistan National Development Strategy

APAPARDS

Afghanistan Parliament Assistance ProgramAfghanistan Reconstruction and Development Services

ARTF Afghanistan Reconstruction Trust FundATPCAS

Audit Training ProgramCountry Assistance Strategy

CATCIPS

CMUDADAB

Certified Accounting TechnicianChartered Institute of Procurement and SupplyContract Management UnitDesignated AccountDa Afghanistan Bank

DFIDDPG

Department for International DevelopmentDevelopment Policy Grant

EA Environmental AssessmentFM Financial ManagementFMCGDP

Financial Management ConsultantGross Domestic Product

GOA Government of Afghanistan HRHRCDP

HRMD

IADIARCSC

Human ResourcesHuman Resource Capacity DevelopmentProgramHuman Resource Management DepartmentInternal Audit DepartmentIndependent Afghanistan Reform andCivil Service Commission

IDA International Development Association of the WBG

IFACIMF

International Federation of AccountantsInternational Monetary Fund

IPSAS

IT

International Public Sector AccountingStandardsInformation Technology

ISN Interim Strategy NoteLANM&E

Local Area NetworkMonitoring and Evaluation

MAIL Ministry of Agriculture Irrigation and Livestock

MCMEW

Management CommitteeMinistry of Energy and Water

MIS Management Information SystemMOFMOE

Ministry of Finance Ministry of Economy

MRRD Ministry of Rural Rehabilitation and Development

NSCO&M

National Steering CommitteeOperation and Maintenance

ORAFPACB

Operational Risk Assessment FrameworkPublic Admin Capacity Building Project

PCBOPCUPDOs

Procurement Capacity Building OfficerProject Coordiation UnitProject Development Objectives

PEFA

PFCPFMPFMRPFMRII

Public Expenditure and Financial Accountability Procurement Facilitation ConsultantPublic Financial ManagementPublic Financial Management Reform ProjectSecond Public Financial Management Reform Project

PPU Public Procurement UnitPSC Project Steering CommitteeRIMUROSC

Reform Implementation and Management UnitReport on Observation of Standards and Codes

SBDSSDUSPCSIGAR

Standard Bidding DocumentsSpecial Disbursements UnitSpecial Procurement UnitSpecial Inspector General Afghanistan Reconstruction

TA Technical AssistanceTOR Terms of ReferenceUSAID

VPP

United States Agency for International DevlopmentVerified Payroll Program

WBG World Bank Group

Vice President: Isabel M. GuerreroCountry Director: Nicholas J. Krafft

Sector Manager: Jennifer K. ThomsonTask Team Leader: Paul Sisk

AFGHANISTANSecond Public Financial Management Reform Project

CONTENTSPage

..................................................................................................................................Introduction 4

Emergency Challenge: Country Context, Government’s PFM Performance & Road Map and ....................................................................................................Rationale for Proposed Project 5

...................................................................................................................................The Project 8

..................................................................................................Appraisal of Project Activities 10

..................................................................Implementation Arrangements and Financing Plan 13

.................................................................................................Risks and Mitigating Measures 18

...........................................................Annex 1: Detailed Description of Project Components 20

.........................................................................Annex 2: Results Framework and Monitoring 36

.......................................................................Annex 3: Summary of Estimated Project Costs 37

................................................................................Project Cost Summary - Component wise 37

.....................................Annex 5: Financial Management and Disbursement Arrangements 53

.......................................................................................Annex 6: Procurement Arrangements 64

......................................................Annex 7: Implementation and Monitoring Arrangements 94

........................................................................Annex 8: Governance and Accountability Plan 99

.............................................Annex 9: Project Preparation and Appraisal Team Members 105

....................................................................................Annex 12: Documents in Project Files 107

ISLAMIC REPUBLIC OF AFGHANISTANSecond Public Financial Management Reform Project (PFMRII)

PROJECT PAPER

SOUTH ASIA REGION

Basic InformationBasic InformationBasic InformationBasic InformationBasic InformationBasic InformationBasic InformationBasic InformationBasic InformationBasic InformationCountry Director: Nicholas J. KrafftSector Director: Fayez OmarTeam Leader: Paul Sisk Project ID: P120427Expected Effectiveness Date: June 29,

2011Lending Instrument: Emergency Recovery Grant

Country Director: Nicholas J. KrafftSector Director: Fayez OmarTeam Leader: Paul Sisk Project ID: P120427Expected Effectiveness Date: June 29,


Country Director: Nicholas J. KrafftSector Director: Fayez OmarTeam Leader: Paul Sisk Project ID: P120427Expected Effectiveness Date: June 29,


Sectors: Public administration- Finance (100%)Themes: Public expenditure, financial management and procurement (95%); Other public sector governance (5%)Environmental category: CExpected Closing Date: December 31, 2014Joint IFC: NoJoint Level: Not applicable







Project Financing DataProject Financing DataProject Financing DataProject Financing DataProject Financing DataProject Financing DataProject Financing DataProject Financing DataProject Financing DataProject Financing Data[ ] Loan [ ] Credit [ X ] Grant [ ] Guarantee [ ] Other:[ ] Loan [ ] Credit [ X ] Grant [ ] Guarantee [ ] Other:[ ] Loan [ ] Credit [ X ] Grant [ ] Guarantee [ ] Other:[ ] Loan [ ] Credit [ X ] Grant [ ] Guarantee [ ] Other:[ ] Loan [ ] Credit [ X ] Grant [ ] Guarantee [ ] Other:[ ] Loan [ ] Credit [ X ] Grant [ ] Guarantee [ ] Other:[ ] Loan [ ] Credit [ X ] Grant [ ] Guarantee [ ] Other:[ ] Loan [ ] Credit [ X ] Grant [ ] Guarantee [ ] Other:[ ] Loan [ ] Credit [ X ] Grant [ ] Guarantee [ ] Other:[ ] Loan [ ] Credit [ X ] Grant [ ] Guarantee [ ] Other:Proposed terms: ARTF Grant TermsProposed terms: ARTF Grant TermsProposed terms: ARTF Grant TermsProposed terms: ARTF Grant TermsProposed terms: ARTF Grant TermsProposed terms: ARTF Grant TermsProposed terms: ARTF Grant TermsProposed terms: ARTF Grant TermsProposed terms: ARTF Grant TermsProposed terms: ARTF Grant Terms

Financing Plan (US$m)Financing Plan (US$m)Financing Plan (US$m)Financing Plan (US$m)Financing Plan (US$m)Financing Plan (US$m)Financing Plan (US$m)Financing Plan (US$m)Financing Plan (US$m)Financing Plan (US$m)SourceSourceSourceSourceSource Total Amount (US $m)Total Amount (US $m)Total Amount (US $m)Total Amount (US $m)Total Amount (US $m)

Total Project Cost:

ARTF: June 21, MC Meeting TBA, MC Meeting

Total Project Cost:


Total Project Cost:


Total Project Cost:


Total Project Cost:


73.0

60.0 13.0

73.0

60.0 13.0

73.0

60.0 13.0

73.0

60.0 13.0

73.0

60.0 13.0

Client InformationClient InformationClient InformationClient InformationClient InformationClient InformationClient InformationClient InformationClient InformationClient InformationRecipient: Islamic Republic of AfghanistanResponsible Agency: Ministry of Finance (MOF)Contact Person: Mamoon Sarway Reform Implementation & Management Unit Coordinator Ministry of FinanceTelephone No.: 0093-799-342002, 0093-700-173050Fax No.: 0093 20 210 3439Email: [email protected]

Recipient: Islamic Republic of AfghanistanResponsible Agency: Ministry of Finance (MOF)Contact Person: Mamoon Sarway Reform Implementation & Management Unit Coordinator Ministry of FinanceTelephone No.: 0093-799-342002, 0093-700-173050Fax No.: 0093 20 210 3439Email: [email protected]









Estimated disbursements (Bank FY/US$m)Estimated disbursements (Bank FY/US$m)Estimated disbursements (Bank FY/US$m)Estimated disbursements (Bank FY/US$m)Estimated disbursements (Bank FY/US$m)Estimated disbursements (Bank FY/US$m)Estimated disbursements (Bank FY/US$m)Estimated disbursements (Bank FY/US$m)Estimated disbursements (Bank FY/US$m)Estimated disbursements (Bank FY/US$m)

i

mailto:[email protected]

mailto:[email protected]

FYFY 20122012 20132013 201420142014 2015AnnualAnnual 24.024.0 28.028.0 18.018.018.0 3.0CumulativeCumulative 24.024.0 52.052.0 70.070.070.0 73.0

Project Development Objective and DescriptionProject Development Objective and DescriptionProject Development Objective and DescriptionProject Development Objective and DescriptionProject Development Objective and DescriptionProject Development Objective and DescriptionProject Development Objective and DescriptionProject Development Objective and DescriptionProject Development Objective and DescriptionProject Development Objective and Description

Project development objective: The proposed PDO is to strengthen public financial management through effective procurement, treasury and audit structures and systems in line with sound financial management standards of monitoring, reporting and control.

Project description: The project will continue to support good public financial management performance developed under the Public Financial Management Reform (PFMR) Project (P099980) in central control entities (Ministry of Finance, Control and Audit Office), and extend support to executing agencies both in Kabul and provinces while strengthening related systems and developing capacity in the civil service to operate the public financial management systems. The project’s investments include support for: extensive procurement training and institutional strengthening in line ministries, automation of the administrative systems in line ministries and integration of these with the centralized financial management information system, to improve service delivery capacity; establishment of the legal framework and training for profession accountants in Afghanistan, to address the lack of capacity in FM skills and introduce regulation of public interest companies; and building skills and improving infrastructure for both internal and external audit to improve management oversight of its own operations and strengthen external accountability of the executive.



















Safeguard and Exception to PoliciesSafeguard and Exception to PoliciesSafeguard and Exception to PoliciesSafeguard and Exception to PoliciesSafeguard and Exception to PoliciesSafeguard and Exception to PoliciesSafeguard and Exception to PoliciesSafeguard and Exception to PoliciesSafeguard and Exception to PoliciesSafeguard and Exception to PoliciesSafeguard policies triggered:Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12)Safety of Dams (OP/BP 4.37)Projects on International Waters (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60)

Safeguard policies triggered:Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12)Safety of Dams (OP/BP 4.37)Projects on International Waters (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60)






[ ] Yes [X] No[ ] Yes [X] No[ ] Yes [X] No[ ] Yes [X] No[ ] Yes [X] No[ ] Yes [X] No[ ] Yes [X] No

[ ] Yes [X ] No [ ] Yes [X] No

[ ] Yes [X] No



[ ] Yes [X] No



[ ] Yes [X] NoDoes the project require any exceptions from Bank policies?Have these been approved by Bank management?

Does the project require any exceptions from Bank policies?Have these been approved by Bank management?






[ ] Yes [X] No [ ] Yes [ ] No [ ] Yes [X] No [ ] Yes [ ] No [ ] Yes [X] No [ ] Yes [ ] No

Conditions and Legal Covenants:Conditions and Legal Covenants:Conditions and Legal Covenants:Conditions and Legal Covenants:Conditions and Legal Covenants:Conditions and Legal Covenants:Conditions and Legal Covenants:Conditions and Legal Covenants:Conditions and Legal Covenants:Conditions and Legal Covenants:

ii

Financing Agreement Reference

Description of Condition/CovenantDescription of Condition/CovenantDescription of Condition/CovenantDescription of Condition/CovenantDescription of Condition/CovenantDescription of Condition/CovenantDescription of Condition/Covenant Date DueDate Due

Section I.A.1(a) of Schedule 2 to the FA

Establishment and maintenance of Project Steering Committee with sufficient staffing, resources and functions acceptable to the Administrator







Throughout Project implementation

Throughout Project implementation

Section I.A.1(b) of Schedule 2 to the FA

Establishment and maintenance of a Reform Implementation and Management UnitEstablishment and maintenance of a Reform Implementation and Management UnitEstablishment and maintenance of a Reform Implementation and Management UnitEstablishment and maintenance of a Reform Implementation and Management UnitEstablishment and maintenance of a Reform Implementation and Management UnitEstablishment and maintenance of a Reform Implementation and Management UnitEstablishment and maintenance of a Reform Implementation and Management Unit

Throughout Project implementation.


Section I.A.2(a) of Schedule 2 to the FA

Maintenance of a procurement facilitation consultant under terms of reference acceptable to the Administrator









Section I.A.2(b) of Schedule 2 to the FA

Employ a financial management consultant under terms of reference acceptable to the Administrator







December 31, 2011December 31, 2011

Section I.A.2(c) of Schedule 2 to the FA

Employ a consulting firm under terms of reference acceptable to the AdministratorEmploy a consulting firm under terms of reference acceptable to the AdministratorEmploy a consulting firm under terms of reference acceptable to the AdministratorEmploy a consulting firm under terms of reference acceptable to the AdministratorEmploy a consulting firm under terms of reference acceptable to the AdministratorEmploy a consulting firm under terms of reference acceptable to the AdministratorEmploy a consulting firm under terms of reference acceptable to the Administrator

December 31, 2011December 31, 2011

Section I.A.2 (d) of Schedule 2 to the FA

Maintenance of qualified financial management staff Maintenance of qualified financial management staff Maintenance of qualified financial management staff Maintenance of qualified financial management staff Maintenance of qualified financial management staff Maintenance of qualified financial management staff Maintenance of qualified financial management staff

Throughout the Project implementation

Throughout the Project implementation

Section I.B (a) of Schedule 2 to the FA

Update of Financial Management Manual Update of Financial Management Manual Update of Financial Management Manual Update of Financial Management Manual Update of Financial Management Manual Update of Financial Management Manual Update of Financial Management Manual July 31, 2011July 31, 2011

iii

4

A. Introduction

1. This Project Paper seeks the approval of the Afghanistan Reconstruction Trust Fund (ARTF) Management Committee (MC) to provide a Grant in an amount of US$ 73.0 million to the Islamic Republic of Afghanistan for the proposed Second Public Financial Management Reform Project.

2. The proposed Project builds on the outcomes of a series of IDA operations and bilateral donor technical assistance projects that have been aimed at assisting the government of Afghanistan (GOA) to establish the legal framework for public financial management (PFM) and put in place the capacity at the central government level to operate the PFM systems and processes for budget planning, execution and monitoring. The Project’s development objective is to strengthen public financial management through effective procurement, treasury and audit structures and systems in line with sound financial management standards of monitoring, reporting and control.

3. As such, the proposed project responds to the desire of major donor agencies and GOA to channel more official development assistance through the budget, as donors transition out of direct implementation, by ensuring continued high level PFM performance through direct operational support in the form of expert advisors for the core public financial management systems - treasury and budget operations, public sector procurement and grant external audits. Now while, a sound basis has been established for PFM performance, progress has been slow in building civil servant capacity, automation of administrative processes, management oversight via internal audit and external accountability. To address these areas, the proposed project will build on the foundations in place by focusing on development of PFM systems development in line ministries and intensive training in procurement, financial management and audit across government. Similarly, support for the establishment of an accounting profession in Afghanistan and activities to create demand for public sector accountability are proposed. The operation will not address any reform in budget formulation, outside of integrating the budget system with AFMIS, in revenue, outside of the oversight through internal and external audit, or in the financial sector supervision, which is the mandate of the Central Bank.

4. The project would therefore extend technical assistance to (a) further build the capacity of central government (Ministry of Finance, Control and Audit Office) to ensure integrity, transparency and accountability of public expenditures, with particular focus on internal and external audit; and (b) develop the organizational infrastructure, systems, processes and staff capacity in the line ministries and the provincial offices of the Treasury for them to discharge their PFM functions and responsibilities with efficiency and accountability.

5. The Project’s key outcomes would be measured using the following indicators: (a) donors channel increased portion of development assistance to Afghanistan through the government

5

budget; (b) improved internal audit i.e. quality of standards applied, management responses and coverage; (c) improved external audit i.e. quality of standards applied, improved response and coverage; (d) at least 50% of procurement under the budget is done by line ministries without the support of ARDS; and (e) increased number of functions carried out by regular ministry staff that were previously carried out by contracted staff. The project is slated for ARTF in accordance with the financing strategy of the ARTF endorsed by the GOA and ARTF donors.

B.Emergency Challenge: Country Context, Government’s PFM Performance & Road Map and Rationale for Proposed Project

Country Context

6. After several decades of wars and civil strife, building an effective state - one that can provide security and services to the people - has been at the heart of the reconstruction effort in Afghanistan. The government has made remarkable progress in many areas such as primary education, basic health services, irrigation rehabilitation, and rural development. However, the country remains extremely fragile. Security remains a serious obstacle to the delivery of reconstruction assistance and implementation of reconstruction programs. Afghanistan’s poverty and social indicators remain among the lowest in the world. Government capacity is weak despite improvements and the pace of implementation of reconstruction programs has been short of popular expectations. Strengthening the country’s public financial management to accelate aid utilization, provide faster and better services to Afghan people, and ensure transparency and accountability of public expenditure is a top priority for the government in taking the reconstruction agenda forward.

Government’s PFM Performance

7. With assistance of IDA and other donors, the government has made significant progress over recent years in establishing a functioning public financial management (PFM) system under the direction of Ministry of Finance, which has been the single, most crucial enabling factor for the implementation of government budget. The legal framework underpinning PFM (Public Finance and Expenditure Management Law and Public Procurement Law) has been established. Through a series of IDA grant operations, specialized international firms have been engaged and have been providing direct operational support to the Treasury of Ministry of Finance, the Afghanistan Reconstruction and Development Services (ARDS) for public sector procurement management, and the Control and Audit office (CAO) for carrying out external audits for all IDA and ARTF funded operations in Afghanistan .

8. The government-wide PFM systems were assessed using the Public Expenditures and Financial Accountability (PEFA) Public Financial Management Performance Measurement Framework in 2005 and 2007. Afghanistan’s ratings against the PEFA indicators portray a public sector where public finances are, by and large, being used for their intended purposes as authorized by the budget; and the budget is processed with transparency and has contributed to aggregrate fiscal discipline. A comparison of Afghanistan’s 2008 results

6

indicates that it now ranks higher than middle income countries in several key areas of PFM. Moreover, the comparison between the first and second assessment shows significant improvements within Afghan PFM systems. Out of total 28 performance indicators, 17 indicators improved and four deteriorated, while seven remained unchanged.

9. The government–wide PFM systems have generated the following outcomes: (a) all transactions under the budget are now effected on-line in real time through the Afghanistan Financial Management Information System (AFMIS) with the corresponding benefits of automated controls; (b) since 2008, monthly financial statements covering central government have been published and operating units can produce on their from AFMIS at any time updated budget execution reports; (c) every year since 2006, the audited annual appropriation statements of the Government (Qatia) have been submitted to Parliament within six months of the end of the fiscal year in accordance with public financial management law; and (d) 450,000 government employees have been registered under the verified payroll program of whom 290,000 are receiving salary through direct transfer to their bank accounts. Treasury staffing has also improved since 2005 when only a few key civil service positions in the Treasury Department were filled and those few civil servants working in the department were incapable of carrying out the basic functional responsibilities of their roles. Currently, the majority of key civil service positions are filled and civil service personnel do most of the day-to-day work of the Treasury Department.

10. While the December 2007 PEFA-based PFM performance assessment reported significant positive developments in Afghanistan’s PFM systems since the 2005 assessment, it also highlighted a number of weaknesses which must be addressed. To improve Afghanistan’s PFM performance, actions in the following areas are critical:

i) PFM capacity outside the Ministry of Finance: Capacity development in line ministries, as executing agencies of expenditures, is critical. Compared with the progress in the Ministry of Finance, developments in most line ministries lag behind. Particularly, capacity building on public procurement should be accelerated so that line ministries can progressively take greater responsibility for procurement activities.

ii) Internal and external audit: Internal audit work in line ministries does not meet recognized professional standards. In addition to in-house training in the ministries, formal academic/professional training in auditing should be made available for staff in internal audit departments. Also, most internal audit manuals are very outdated and need to be revised based on modern internal audit practices that also take into account the current context in Afghanistan. Likewise, capacity for external audit needs to be further developed along with a revised legal foundation based on international standards. Acceleration of the accounting and auditing certification process for all professional staff should be pursued.

Government’s PFM Roadmap

7

11. In the wake of discussions between the GOA and the donor community on a planned transition for the GOA to take greater responsibility in managing the reconstruction agenda, the GOA prepared and shared with donors at the Kabul Donor Conference in June, 2010 a PFM Roadmap. The PFM Roadmap is guided by the vision that (i) policies that reflect the aspirations and needs of the Afghan People, drive the Government Budget; (ii) a Government Budget assigns responsibility for development outcomes; (iii) efficient public finance and equitable allocation of resources sustain economic development; and (iv) accountable civil servants and equitable delivery of services build citizens’s trust in Government. The Roadmap sets out reforms which seek to ensure efficient, transparent and accountable use of public resources, increase aid absorption capacity and secure on-budget donor aid, and improve development outcomes. The strategy encompasses all major functions of the Ministry of Finance (MOF), CAO and PFM across government. Alongside steps to further strengthen the legal framework and PFM infrastructure and capacity of MOF and CAO, the Roadmap outlines a decisive further step in delegating responsibilities for budget making, spending decisions, and procurement to line ministries and provinces under the supervision of the MOF, in order to reduce the daily management of line ministries’ financial operations by the MOF itself when operating conditions in terms of acceptable standards of transparency and accountability in line ministries so permit. Such delegation will help strengthen ownership and results focus in budget preparation and execution. It would provide more incentive for line ministries to plan for and achieve results than to “game” the budget and treasury operations systems. Line ministries would accept increased responsibilities for results and become increasingly transparent with improved reporting and auditing.

Rationale for Proposed Project

12. During the reconstruction period, there has been effective coordination of support for PFM among the key donors. IDA has been leading in providing technical assistance in treasury, procurement and audit, with support from USAID and US Treasury advisors. DFID, along with UNDP, has provided both operations support and capacity building to the Budget Department of MOF while DFID and USAID have supported the Revenue Department. The Asian Development Bank (ADB) has contributed to the reorganization and development of procedures in the provincial offices of the MOF which dovetails with the IDA support of the centralized operations in Treasury and the roll-out of the centralized systems to Mostoufiats Coordination is facilitated by agreement on the government’s PFM Roadmap and its implementation. Given that the technical assistance to be provided by the proposed project represents a natural continuation and deepening of reforms supported by prior and ongoing IDA grant operations, GOA and donors have requested that the project be financed by ARTF with IDA providing supervison and implementation support.

13. Building core PFM capacity in government has been one of the fundamental thrusts of the Bank’s interim support strategy for Afghanistan. The Bank has gained valuable insight on PFM issues in Afghanistan both through the IDA funded technical assistance projects and the extensive analytical work on PFM. Given its successful record of providing technical assistance on PFM, the Bank has gained the recognition and confidence of the Government

8

and donors and is uniquely positioned to assist the Government in implementing the PFM Roadmap.

C. The Project

Project Development Objectives

14. The Project’s development objective is to strengthen public financial management through effective procurement, treasury and audit structures and systems in line with sound financial management standards of monitoring, reporting and control.

Summary of Project Components

15. The project consists of the following four components.• Component 1: Procurement Reform (US$ 21.47 million): The component would provide

support to build procurement management capacity throughout government and institutional capacity in the public sector, and as far as practicable in the private sector, and to complete the legal and institutional framework for procurement. This improved in procurement knowledge, systems and institutions would contribute to better development budget execution. There are three sub-components:

Subcomponent 1.1 Procurement Facilitation: Provision of consultancy services of a Procurement Facilitation Consultant (PFC) to assist the ARDS in (i) processing civilian on-budget public procurement; (ii) completing regulatory and institutional frameworks for procurement; and (iii) capacity building through knowledge transfer to staff in line ministries.

Sub-component 1.2 Capacity Building in Line Ministries and Provinces comprising (i) support to the Public Procurement Unit (PPU) and the Afghanistan Civil Service Institutue (ACSI) to lead capacity building and institutional building activities; and (ii) the deployment of 3 groups of procurement specialists, under the PPU, to the line ministries a) to liase with central authorities on training and support the application of training in the day to day operations; b) to act as procurement controllers to contribute to the preparation of procurement plans, report on progress of the plans and coordinate input into the procurement MIS; and c) as procurement facilitators to assist on more complex procurement and accelerate budget execution.

Sub-component 1.3 Institutional Development: Support would be provided for completing the legal framework, preparing a compendium of all relevant legal documents and for operation of the Appeal & Review Committee and training on dispute resolution. Taking into account the lessons of the 7 ministries and 6 provinces already reorganized, the institutional development of the rest of the central and provincial budget units would be carried out. Support also would be provided for designing an effective and strategic communication and procurement disclosure policy to raise awareness, and to enhance and operate the procurement management information system (MIS). • Component 2: Financial Management Reform (US$ 23.88 million) The component aims

to support high level PFM performance and build staff and institutional PFM capacity

9

throughout government through support for training, systems development and process renewal. There are four sub-components:

Sub-component 2.1 Treasury Operations and Systems Development: Through the services of a Financial Management Consultant (FMC), direct operations support and systems development for treasury functions for more efficient delivery of treasury services and strengthened internal controls will be provided as well as counterpart training. This sub-component’s activities would also include the establishment of a disaster recovery plan and equipping an AFMIS IT back-up facility.

Sub-component 2.2 Human Resources Capacity Development: Support would be provided for developing job specific certifiable finance skills and general skills of treasury and finance staff of MOF and line ministries. A Treasury Communications Plan will be developed and implemented to support reforms.

Sub-component 2.3 Professional Accountants Organization Development: Support would be provided for establishing the legal framework and structures for development and regulation of an accounting and auditing profession and for the training of professional accountants in Afghanistan.

Sub-component 2.4 Line Ministry Public Financial Management Assessments: The project would finance a detailed review of internal control and public financial management performance of 7 line ministries; a first set of 7 line ministries is under review through the support of the PFMR project.• Component 3: Audit Reform and Performance (US $ 24.70 million) The component aims

to improve public sector governance through nine sub-components grouped under Internal Audit and External Audit.

Internal Audit: Through three sub-components, support would be given for institutional reforms in internal audit and capacity building to improve management oversight. Additionally, support is provided for the development of information systems and the purchase of and training in automated auditing tools.

External Audit: Through 6 sub-components support would be given for capacity building and for carrying out independent reviews of on-budget donor funded operations as well as of all operations under the budget of nine line ministries over the project period. Additionally, support would be provided for the Public Accounts Committee and the purchase of office and IT equipment for the new CAO offices.

• Component 4: Reform Management (US$ 2.95 million) The component aims to support improvement in monitoring and management of technical assistance and human resources in the MOF. Through 4 sub-components: 4.1 Strengthening Monitoring and Evaluation; 4.2 Strengthening MOF Human Resources Management Department; 4.3 Project Executive Management; and 4.4 Other Institutional Strengthening and Capacity Building, support would be provided for strengthening M&E, HR management development, and project management in MOF and for unforeseen needs for related technical assistance and analytical work.

10

Expected Outcomes

16. Key outcomes expected to be achieved through these activities include: (a) donors shift 20% of their off-budget official development assistance to Afghanistan to on-budget; (b) extension of internal audit coverage, done to professional standards, to 75% of the budget operations; (c) effecting external audit coverage of an acceptable standard to 75 % of the budget operations; (d) at least 50% of procurement under the budget is done by line ministries without the assistance of ARDS; and (e) increased numbers of regular ministry staff performing functions previously carried out by contracted staff.

D. Appraisal of Project Activities

Economic and Financial Analysis

17. Since the proposed operation is a technical assistance project, no economic analysis has been carried out. The project is expected to yield high benefits in that: (a) line ministries are able to execute budget and deliver services efficiently; (b) fast track capacity building of civil servants to operate the PFM systems contributes to sustainability of PFM; and (c) strengthened internal and external audit function and operation would contribute to good governance. Cumulatively, these benefits would lead to greater confidence on the part of the public, and donors, that Government is responsive to felt needs and that the apparatus of government is operating efficiently and transparently. It would then support the strategy of increasing the transfer of donor resources to the government system. As the project is focused on changing the institutional environment in a high risk country, establishing a trend is considered more important than reaching pre-determined targets.

Technical Aspects

18. Component 1: Procurement Reform. The component builds on the success of both centralized oversight of civilian procurement for the entire budget under the Afghanistan Reconstruction and Development Services (ARDS) and the development of the regulatory framework, institution and capacity building, started under the Public Administration Capacity Building Project (PACB) IDA-H1440 in 2005. ARDS oversight is key in supporting the aim to put more donor funds on-budget both for assurance of compliance and to achieve more development spending. The component’s approach to delivery of procurement training is considered best practice in Afghanistan as the training is delivered through the Afghanistan Civil Service Institute (ACSI), with the technical assistance and oversight of the Procurement Policy Unit of MOF, thereby strengthening the ACSI and building permanent training capacity. The component’s activities focus on support to line ministries for conducting procurement, reporting on compliance and applying knowledge from the classroom training. The training is critical to effect the restructuring of procurement units centrally and in provinces which will allow the delegation of procurement oversight as provided for in the law. Support to establish the long overdue appeal and review function will contribute to assurance on the fair application of the law. Development of a communication and disclosure

11

strategy also will contribute to awareness of the procurement reform agenda and the public’s interest in public procurement.

19. Component 2: Financial Management Reform. The Treasury Department’s performance in timeliness and reliability of reporting is already remarkable but as on-budget donors’ funds continue to surge, this good performance must continue. To support this good performance and to up-grade installations and underlying systems, an operations support consultant will be engaged to carry out the systems integration for putting in place administrative systems for service delivery units. Treasury’s performance and sustainable capacity will be strengthened with duty specific training while certification training in accounting will be offered to all financial management staff throughout Government. Support will be provided to begin establishing an administrative and legal framework for developing and regulating a sustainable accounting and auditing profession in Afghanistan to develop professionally recognized accountants and auditors which are needed in both the public and private sectors.

20. Component 3: Audit Reform and Performance. Improving management’s oversight by building internal audit is essential for sound PFM performance and governance. With the clarification of MOF’s mandate to conduct internal audit across government, MOF is poised to take this function to a new standard. Expectations for external audit are more modest; donor grant audits are already being conducted to a high standard but as funding grows the quality of audits of operations funded by all sources should be raised. Capacity will improve from both the training at and exposure to the supreme audit institution of India and the classroom training offered under the USAID technical assistance underway at the CAO.

21. Component 4: Reform Management. Monitoring and evaluation of progress under the project and reforms under the MOF rest on the work of the RIMU in MOF which is well equipped and poised to continue to effect this.

Institutional Aspects

22. While the project is operating in a weak capacity country environment, ownership and commitment by MOF for PFM reforms are strong. The implementation arrangements for the PACB and PFMR projects have worked well and these will be maintained for this proposed PFMRII Project. These arrangements include a project coordination unit (RIMU) in MOF assisted by a technical assistance team funded by the project, which will be responsible for overall project implementation, including back-up to the procurement and financial management units. Project implementation is supported by firms and local contract staff in all implementing units. The highly visible PFM reforms are closely monitored by the MOF through the ministry wide technical assistance monitoring process under RIMU and through the program monitoring progress under the National Priority Program for Finance and Economic Reform under the Deputy Minister for Policy. Donors groups, both under the government-wide mechanism and now under the ARTF donor groups, also monitor progress on government commitments on PFM.

Lessons Learned and Reflected in Project Design

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23. The Implementation Completion Report of the PACB Project highlighted a number of issues, which persist under the ongoing PFMR project that are addressed in the design of this proposed project. These issues also arise and were expanded on in the following analytical work by the Bank: World Bank and DFID, Afghanistan Public Expenditure Management Performance Assessment, June, 2008; World Bank and DFID, Public Expenditure Review 2010; World Bank, DFID and ADF, Vulnerability to Corruption Study, 2008.• Inadequate Human Resources, Capacity in PFM. Engaging international firms and local

consultants to perform basic PFM functions has been a default strategy. Sustainability and consolidation of achievements in PFM is challenged as trained local highly specialized advisors move from the ministries to work on projects outside the budget or in the private sector while civil servants cannot take over the related duties. Coordination with the proposed ARTF Capacity Building for Results Program project, which is under preparation, has led to the incorporation of a component for market related compensation for FM and procurement specialists. At the same time, intensive training of civil servants should provide an incentive and allow these civil servants to qualify for these salaries.

• Durability of PFM Reforms. The Government, while generally dedicated to making improvements, has taken unilateral action to reverse or restrain progress in the legal framework. Donor coordination around the ARTF Incentive Program and consultations on the PFM Roadmap have led to firm commitments to maintain and improve the legal framework.

• Limited Automation of PFM Processes. The current systems to support service delivery are largely manual, and lack some basic functions. The project supports the development of the related service delivery administrative processes.

• Corruption Risk. The country operating environment carries a high risk to perceived corruption. Further strengthening of procurement and audit including developing social accountability and support for the activities of the Public Accounts Committee should help address these issues

• Internal Audit. Management oversight is key to good governance. This oversight is constrained by the lack of an effectively operating internal audit function, except in the MOF. Building internal audit capacity in each line ministry cannot be done in the short term so implementing the approach provided in the Public Expenditure and Finance Law which entrusts MOF to establish internal audit throughout the government would be the most effective and expeditious route to establish the function across government, while at the same time supporting the development of internal audit in the line ministries, where feasible. This approach is supported by the proposed project.

• External Audit. The external accountability of the executive must be strengthened if confidence in its performance is to be built. Many achievements in PFM are discounted because there is little independent oversight or assurance that the reports and decisions of the executive deserve credibility, particularly given the perception of rising corruption. A

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new legal framework, training for members of a public accounts committee and training and technical support to the CAO are needed and are included in the proposed project.

• Accounting Profession. There is a very limited accounting and audit profession in Afghanistan due to an acute shortage of qualified professionals. There is no recognized body that represents or promotes the profession in Afghanistan, nor regulation of the profession. Accounting and auditing services are provided by expatriate accountants, but there is no oversight of these services. Auditors are not subject to civil liability under any legislation and there is no law that provides for auditors to obtain professional indemnity insurance. The only recognized accountancy training available is provided by the Afghan Chapter of the Association of Certified Chartered Accountants (ACCA). Due to the poor educational standards, Afghans students are opting to join the Certified Accounting Techncian (CAT) qualification of ACCA – a qualification that does not require a formal prior education history. This lack of accounting and auditing infrastructure and poor practice conditions undermine and perpetuate the limited pool of accounting and auditing skills for the public and private sectors and limit the oversight of public interest entities (many of which are public sector organizations). Support is included in the proposed project to develop the capacity of accounting and auditing in Afghanistan and establish a sustainable structure of effective regulation and oversight of the profession.

E. Implementation Arrangements and Financing Plan

24. As with the PACB and PFMR projects, the components would be implemented through four departments of the MOF, ARDS in the Ministry of Economy and the CAO. The Directors of the respective units would be responsible for implementation; each unit would have the support of the project implementation cells already staffed and operating under the PFMR project. The units would continue to support with transaction processing, contract control, and reporting. These cells have satisfactorily supported implementation in the past. The RIMU of the MOF would continue to coordinate and report on project activities. This RIMU has functioned with the authority of the Minister and has been supported by local advisors who demonstrated expertise in institutional development, change management and project implementation. The project would be implemented through an annual project work planning and budgeting process reflecting the input of the affected units and be subject to annual program reviews of achievements. Donor coordination would be part of the annual review and programming process. The detailed activity and procurement plans for the first year of the project are complete and were used as the basis for the budget submission for the coming fiscal year of the implementing units.

25. Project Reporting: Each implementing unit would report quarterly to RIMU on physical and financial progress. RIMU would maintain the overall project management information system and be responsible for collation of progress reports and reporting to the Project Steering Committee (PSC) and IDA. These reports would include, inter alia: (a) up-to-date physical and financial progress compared to annual and end-of-project targets; (b) updated indicators of project performance compared to annual and end-of-project targets; and (c)

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successes and problems encountered during the reporting period with suggested remedial actions.

26. Project Coordination: The overall project coordination and oversight would rest with the PFMR Project Steering Committee (PSC), established in 2006 to provide cross-ministry oversight and guidance. The PSC was established to maintain focus on results, ensure good communications and provide a consolidated view of the reform under the project. It would be responsible to review progress and recommend any necessary changes to the reforms, component activities, implementation arrangements or performance measurements. The SC would be chaired by the Minister of Finance, or his delegate, and would receive secretariat support from RIMU. The Committee members comprise senior MOF departmental managers (Treasury, Budget, Internal Audit, Administration, and PPU), a representative of the Ministry of Economy (responsible for procurement operations support) and a representative of the CAO.

27. Project Monitoring and Evaluation: RIMU would be responsible for the monitoring & evaluation of the project as well as that of the MOF strategic plan, reforms and technical assistance (TA) to MOF. It has already established a results-based M&E system for the MOF strategic plan and the PFMR Project. The system integrates implementation based M&E system (inputs, activities, outputs) with results based indicators and mostly focuses on the results i.e. outcomes and impact of the interventions. The M&E specialists at RIMU would continue to conduct monitoring and evaluation of the MOF strategic plan, TA and the project with focus on institutionalization of the system and creating a permanent M&E Unit within the MOF. RIMU would report to MOF top management on strategic plan progress and to the PSC and Bank on the project progress.

28. Governance and Accountability Action Plan. This proposed PFMR II Project would be implemented in a high risk environment. However, the very outputs of the project address relevant risks and include timely, reliable reporting on all operations under the budget, including all investment operations like the PFMR II Project, centralized oversight of all non-security procurement over a modest threshold and external audit done to a high standard of all IDA and ARTF investment operations. Similarly, the expansion of effective internal audit and capacity building of the CAO add depth to these arrangements. These measures contribute to good governance by improving both management oversight and improving transparency, while at the same time act to constrain corruption by reducing the opportunities for financial leakages and procurement corruption which are the two forms of corruption that most threaten donor funds directly1. Moreover, the Government of Afghanistan (GOA) is fully committed to the Project and further reforms which are also central to fiscal discipline and transparency and support channeling more development assistance through the budget.

29. Bank supervision is largely unencumbered since the project operations are concentrated in Kabul where supervision has not been affected by the security concerns, or in the provincial

1 The forms of corruption which drive the Transparency International perception index would include bribery, extortion, grand corruption and patronage which are not direct threats to donor funds on-budget and are not constrained by the PFM Framework.

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capitals where missions can be carried-out with due protection. Similarly, the nature of the project transactions, mostly involving consultant contracts, are subject to close supervision by the RIMU and the Bank. Nevertheless, to mitigate and guard against governance, corruption and fraud risks and improve transparency and accountability in implementation of this proposed PFMR II project, several measures have been incorporated in the implementation and monitoring arrangements. These measures are included in the Governance and Accountability Plan (GAAP) to identify and mitigate critical risks in achieving the development objectives. The GAAP measures include: (a) implementation arrangements for PFMRII Project that build upon the lessons learnt from PFMR project; (b) fiduciary processes including FM and Procurement which respond to the risk; and (c) enhanced monitoring and evaluation arrangements.

Project Costs and Financing Plan

30. The cost of this proposed project is estimated at US$ 73 million including physical and price contingencies. The project will be financed by an ARTF grant of US$ 73 million.

Financial Management, Disbursement and Audit Arrangements

31. At the project level, financial management will be coordinated by the RIMU of the MOF. The RIMU reports to the Minister of Finance and serves as the "secretariat" for the PFM Reform SC. The RIMU will recruit a Financial Management Specialist who will have responsibility for the financial management activities of the project including: preparing required monthly, quarterly and annual reports; coordinating with other component implementing entities to ensure that adequate financial management requirements are met; liaising with the Special Disbursements Unit (SDU) to ensure that the project’s Designated Account (DA) is replenished when due; and responding to project audits.

32. Quarterly unaudited Interim Financial Reports will be prepared by the RIMU accounting unit and submitted to the Bank within 45 days from the end of the quarter. Consolidated project reports will be prepared, reviewed, and approved by the MOF.

33. A DA will be opened at Da Afghanistan Bank (DAB, Central Bank) in the name of the project on terms and conditions satisfactory to IDA. The DA will be maintained by the MOF. Withdrawal applications for new advances and expenditure reports will be submitted monthly. Financial management arrangements for the project are set out in detail in Annex 5.

Fund Flows

34. Fund management for the Project will follow existing procedures. As with all public expenditure, all payments under the project will be routed through MOF. In keeping with current practices for other projects in Afghanistan, the DA will be operated by the SDU in the Treasury Department of MOF. Requests for payments from DA funds will be made to the SDU by the RIMU. In addition to payments from the DA funds, the RIMU can also request the SDU to make direct payments to consultants or consulting firms, and special commitments for contracts covered by letters of credit. Such requests will follow World

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Bank’s procedures. All withdrawal applications to IDA, for advances, reimbursement, and direct payment applications, will be prepared and submitted by MOF.

Accounting and Reporting

35. The RIMU will ensure that project transaction records are reflected in the AFMIS to generate required monthly, quarterly and annual reports.

36. The FM Manual in place for the current PFMR project is to be updated/modified by the RIMU to reflect the arrangements for this proposed project, and is to be approved by the Bank. The FM Manual will outline guidelines for project activities including specific requirements for each component implementing entity and will include: i) roles and responsibilities for all FM staff, ii) documentation and approval procedures for payments, iii) project reporting requirements, and iv) quality assurance measures to help ensure that adequate internal controls and procedures are in place and are being followed.

37. The FM Manual also will establish project financial management in accordance with standard Afghan government policies and procedures including use of the Government Chart of Accounts to record project expenditures. The use of these procedures will enable adequate recording and reporting of project expenditures. Overall project accounts will be maintained centrally in SDU, which will be ultimately responsible for recording of all project expenditures and receipts in the Government’s accounting system. Reconciliation of project expenditure records with MOF records will be carried out monthly by the RIMU.

Disbursement Method

38. Disbursements from the grant will be made using advances, reimbursement, direct payment, and payments under Special Commitments. Expenditures will be documented using records or against reports, in the form of statements of expenditures, as appropriate.

Audit of Project Funds

39. The Auditor General (CAO), supported by the Audit Agent, is responsible for auditing the accounts of all IDA and ARTF-financed projects; the CAO also will be responsible for this project’s audit. Annual audited project financial statements will be submitted within six months of the close of the GOA’s fiscal year. Specifically for the CAO implemented activities, for any year for which the Administrator so determines, the GOA will prepare separate financial statements for the CAO’s implemented activities and these will be audited by independent auditors acceptable to the Bank (other than the CAO) and these audited financial statements will be furnished to the Administrator jointly with the project financial statements.

40. The key issues raised in these projects’ audit reports up to Solar Year 1388 have been communicated to the client and the responses have been received and are being by the Bank.

Responsible Entity

41. The responsible entity for the annual financial statements and the audit report is the Ministry of Finance.

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Procurement Arrangements

42. Procurement for the project will be administrated in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated January 2011. “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated January 2011 and the provisions stipulated in the Financing Agreement. In addition, the World Bank’s “Guidelines on Preventing and Combating Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants” dated October 15, 2006 and revised January 2011 have been shared with the recipient. The World Bank’s Standard Bidding Documents, Requests for Proposals, and Forms of Consultant Contract will be used. Goods following National Competitive Bidding (NCB) procedures shall be procured using the agreed Standard Bidding Documents (SBDs) for Afghanistan. In case of conflict/contradiction between the World Bank’s procurement procedures and any national rules and regulations, the World Bank’s procurement procedures will take precedence as per the Article 4(2) of the Procurement Law July 2008 (Amendments in January 2009 incorporated) of the GOA, the IDA Procurement/Consultant Guidelines shall prevail.

43. With donor assistance, Afghanistan has made considerable efforts to establish the Legal and Regulatory Framework for public procurement over the last five years. A Procurement Law, reflecting international best practice in public procurement was enacted in November 2005 replacing the earlier procurement regulations. While the law provides a very modern legal system for procurement, effective implementation of the law may encounter difficulties in the current weak institutional structure and capacity of the Government. A Procurement Policy Unit (PPU) has now been established under MOF to ensure implementation through the creation of secondary legislation, standard bidding documents, provision of advice, creation of the necessary information systems for advertising and data collection. “Rules of Procedure for Public Procurement,” which details the better implementation of the Procurement Law, has been issued by MOF as circular number PPU/C005/1386 dated April 12, 2007. The Procurement Appeal and Review mechanism is in place and the Manual of Procedures for “Procurement Appeal and Review” has been issued by MOF as circular number PPU/N001/1385 on March 18, 2007. The Procurement Law was revised in July 2008 and amended in January 2009 and issued as a new Law by the Ministry of Justice and was published in the Official Gazette Number 957, 29.10.1387 (18 January 2009). The revised “Rules of Procedures for Public Procurement” has also been issued as circular PPU/C027/1387 of November 18, 2009.

44. The Special Procurement Commission (SPC) comprising the Ministry of Justice and Ministry of Economy (MOE), under the chairmanship of MOF, approves high-value contracts. These approvals will be done according to Article 91 of the Afghan Public Procurement Law.

45. In the absence of adequate capacity to manage procurement activities effectively, some interim arrangements have been put in place to improve Afghanistan’s procurement management. Specifically, a central procurement facilitation service, the ARDS Procurement Unit (PU), has been established under the supervision of MOE.

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46. MOF has limited experience in handling procurement under Bank Guidelines. Therefore all large value procurement would be handled by the ARDS. The MOF Procurement Department will be strengthened by hiring the services of two procurement specialists. The RIMU will be responsible for coordinating the procurement activities under the project and is staffed with a procurement assistant. The procurement assistant shall coordinate all small value procurement. The implementing units will submit procurement requests to the MOF Procurement Unit for action. This proposed PFMR II project is a follow-on project to the PFMR project and the current procurement arrangements have generally worked well and will continue under this proposed project with increased emphasis on continuous on-the-job as well as formal training in procurement to address concerns of staff turn-over. With the above arrangements, the procurement risk is rated as “Medium”. General description of various procurements under different expenditure categories are described in Annex 6. A detailed procurement plan has been prepared for the project.

Bank Implementation Support and Supervision and Arrangements

47. Given the governance challenges and weak capacity issues facing Afghanistan, the Bank has developed a results and risk management framework for developmental activities in Afghanistan. This includes helping the Government establish and operate appropriate systems for PFM, public procurement, and internal and external audit; taking governance and accountability measures into project design; and focusing on greater implementation support to clients with risk-based fiduciary arrangements to maximize results. The proposed project directly supports strengthening and enhancing the major elements of this framework and the project will utilize the overall framework for supervision.

48. As the majority of the project’s activities, particularly the financial management and procurement aspects are centered in Kabul, the Bank’s ability to supervise the project on site is not severely impacted. The project task team will: (i) use Kabul-based staff to maintain continuous dialogue with the client together with regular implementation support and conduct regular review meetings; (ii) organize and carry out supervision missions supported by local and international technical specialists to oversee implementation of respective components, and (iii) full project supervision will be carried out every six months with reporting to the MOF and Bank management.

F. Risks and Mitigating Measures

49. The overall risk rating at implementation is high as defined in the project ORAF (Annex 4). Based on the experience of ongoing IDA projects in Afghanistan, the major challenges that the project may face are related to capacity and coordination (within government and among donors), as well as delays in procurement or mis-procurement. The deteriorating security may slow down implementation and discourage contractors from bidding, and agencies may not be able to source high level TA on a timely basis and at reasonable cost. To mitigate the risks, structure project oversight and Bank supervision will help address coordination and commitment issues that may arise, and a range of specific steps including long lead times and engagement of specialist support for procurement will address potential delays. The project

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is designed to specifically address capacity issues in accounting, auditing in general and PFM specifically. Details are provided in the ORAF in Annex 4.

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Annex 1: Detailed Description of Project ComponentsAFGHANISTAN: Second Public Financial Management Project

Project Components50. The proposed PFMR II Project will be implemented over a period of three years under four

components arranged by area of reform: procurement, financial management, audit and reform management. The first three components continue the support for sound PFM performance provided under preceding projects through operations support activities such as procurement facilitation, treasury operations and grant audits support. New activities for completing the legal framework and strengthening external oversight, extending training and systems development to line ministries, introducing certification related training for civil servants, extending internal audit across government and initiating the establishment of an accounting profession in Afghanistan are covered in the related reform area.

1.1 Procurement Reform ($21.5 million)

51. The component aims to build procurement capacity of staff throughout government and institutional capacity in the public sector, and where practicable in the private sector, in terms of enhanced procurement procedures and practices under national law and completion of the legal and institutional framework for procurement. As the legal framework for public procurement is largely complete, the emphasis under this operation will be on implementing this framework to achieve more economical public procurement and greater transparency. The component has three sub-components: Procurement Faciliation whick will continue the centralized oversight of compliance of all civilian procurement and Capacity Building and Institutional Development which improve human capacity, procurement systems and organizations in central and provincial level operations to address the low rate of development budget execution to the extent that these arise from procurement.

Procurement Facilitation (ARDS) ($8.6 million)

52. The Afghanistan Interim Administration established the Afghanistan Assistance Coordination Authority (AACA) in 2002 with responsibility for procurement oversight and facilitation which was transferred to the ARDS under the Ministry of Economy. The procurement facilitation was always assisted by an international firm of procurement specialists. Since there are still no ministries considered fully capable of independent procurement processing, the services of a central procurement facilitation consultant under ARDS to directly support line ministries with the procurement process for both procurement for donor programs and for domestically funded procurement is still required. This sub-component seeks to maintain emergency procurement capacity to facilitate rapid, transparent utilization of donor resources for reconstruction and development. The Procurement Facilitation Consultant (PFC) works

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closely with the staff of the ARDS to ensure transfer of knowledge and development of procurement capacity for procurement facilitation. The PFC handles procurement for all goods, works and services under the budget in the non-security sector over thresholds agreed with IDA, unless the relevant budget units have been assessed as having sufficient procurement capacity by IDA. The terms of reference for the PFC include: assessing existing laws, regulations, and procedures, and developing a concrete action plan for enhancing the procurement environment and building human capacity. Now, although the PFC’s team is located at the ARDS, a different approach is envisaged to be followed under this proposed project whereby the team leader of the consultants’ team will be located at the ARDS and all other key staff would be located at the line ministries. Through this modified approach, the procurement facilitating consultant will have better interaction with the line ministries and also will be able to mentor the line ministries’ procurement staff. Moreover, while the PFC services and support would be continued under the proposed project, the decentralization process envisaged through the transfer of procurement responsibilities, which is integral to this project, will mean that the need for such direct operational support would decrease significantly over time.

1.2 Capacity Building in LM and Provinces (PPU/ACSI) ($8.85 million)

53. Following the enactment of the Public Procurement Law, a Public Procurement Unit (PPU) in the MOF was established. The PPU has led the implementation of reforms and established training programs carried out under the Civil Service Institute. This unit will lead the following activities in capacity building and institutional strengthening.

54. Training. A procurement training program consisting of 3 levels of training (Basic, Intermediate and Advanced) was designed and went into operation in December 2007, some 2,600 staff have studied under the training. The program is supported by a full suite of training materials and database for trainees and is driven by a training needs assessment of all line ministries. A total of 8 national procurement trainers have been trained and are in place to teach Basic and Intermediate Procurement Courses. Continuation of capacity building activities in the line ministries and in provinces through the establishment of a fully-fledged Procurement Department at the Afghanistan Civil Service Institute (ACSI) is beyond the scope of the project. However, the project will prepare a work plan for staffing, training facilities and IT equipment to ensure proper delivery of the training programs. All the training programs, materials documentation produced under the project will be handed over to the PPU for future use in the ACSI. Consideration will be given to the development of ACSI’s competency to offer procurement training including investigating the feasibility of becoming a certified provider of training for the Chartered Institute of Procurement and Supply (CIPS). The component will finance the continuation of development of procurement expertise within the public sector through support to selected officers to study for professional qualifications such as those offered by the CIPS. A transfer of all administrative functions, such as trainees registration database and trainees certification processes, from the PPU to the ACSI will take place over the life of the project. Private sector understanding of public procurement will be addressed through periodic workshops both on the subject of the general legal framework and on the specifics of bidding requirements and process.

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55. Procurement Capacity Building Officers. Support for application of the training will be assisted by positioning Procurement Capacity Building Officers (PCBOs) in the line ministries, and designing and implementing a special training program for the PCBOs to enable them to assume new responsibilities of Procurement Trainer and deliver procurement training programs to procurement officers within each ministry.

56. Procurement Controllers. Support would continue for Procurement Controllers who were introduced under the existing PFMR project in 2009. The Procurement Controllers have provided key assistance to the PPU and the Contract Management Unit (CMU), which supports the Special Procurement Commission, and have contributed to better compliance and capacity by ensuring that line ministries prepare reliable procurement plans.

57. Temporary Capacity on Procurement to Key Line Ministries. A surge of on-budget donor funding is expected to occur during the project’s life. The project will support line ministries by financing Procurement Specialists under the PPU to prepare and effect the more complex procurement in 25 key ministries. These posts of Procurement Specialist will be twinned with local staff to transfer knowledge and skills and will be phased out over the life of this project.

1.3 Institutional Development (PPU) ($4.02 million)

58. Strengthening Procurement Regulation and Oversight. An amended Procurement Law 2008 went into effect in July 2008 which delayed delivery of standard bidding documents (SBDs) and other legal support, as well as related training. This sub-component will finance support for advice on changes to the legal framework and completion of the remaining legal documents i.e. redrafting of the Procurement Law or constitutional enacting of all amendments and the preparation of a compendium of all pertinent legal documents into one management published document, in English, Dari and Pashtun. The sub-component also will finance expert advisor services to support the operations of the Appeal & Review Committee and training on dispute resolution, which are critical to build faith in the fair application of the law.

59. Transferring Procurement Capacity and Responsibility. Seven ministries have completed the institutional development of their procurement departments under which an adequate organization has been established along with relevant job descriptions, systems and procedures (specifically: MOF, Ministry of Agriculture, Irrigation and Livestock (MAIL), Ministry of Public Health (MoPH), Ministry of Rural Rehabilitation and Development (MRRD), Ministry of Public Works (MoPW), Ministry of Energy and Water (MoEW),and Ministry of Economy (MoE). A Joint Advisory Committee (JAC) chaired by the PPU and comprising representatives of the ministries and the Independent Reform and Civil Service Commission (IARCSC) approved the institutional development assessments for five Ministries and plans are under implementation; the institutional development assessments of the remaining two ministries (MoPH and MoEW) are to be submitted for approval in fiscal year 2011/2012. The draft institutional development reports for six provinces- Balkh, Herat, Kandahar, Kunduz, Nangarhar and Bamyan-are ready and proposed for implementation in fiscal year 2011/2012. The implementation of institutional development should allow the rationalized procurement units to conduct stand alone procurement. Institutional development

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of entities is planned to be extended progressively to all the remaining central and provincial entities with a plan for 100 percent coverage by the end of this proposed project.

60. Social Accountability. Now that the legal framework is substantially complete, procurement reform should address the traditionally passive public response to expenditure on procurement and encourage greater oversight by other stakeholders. The immediate need is to design an effective and strategic communication and procurement disclosure strategy, taking into account the specific country circumstances. To better support the transition to the new legal framework, and its related capacity building, an effective communication component will be designed to raise awareness of the reform agenda and its implications for: (i) the government (politicians, parliamentarians, and public officials); (ii) the private sector (bidders, consultants suppliers); and (iii) civil society at large (academia, non-governmental organizations, civil society organizations, civilians). The activities of this sub-component and the awareness it would raise also should mitigate risks of failure by ensuring a wider constituency is reached, ownership is created, and support is provided for dealing with corruption through a sound, efficient and transparent procurement process. Putting procurement out in the open within civil society would also set the stage for possible future inclusion of civil society as an oversight element in the procurement function once the GOA has developed its strategy on anti-corruption. For this approach, the project will finance a consultant (housed within the PPU) to support developing a communications and awareness strategy and for situational analysis/assessment in respect of possibilities for social accountability measures.

61. Developing MIS. A procurement monitoring information system (MIS) has been designed and the required hardware and software have been purchased, installed and configured. The website design and the dynamic part of the MIS have been completed. E-monitoring and e-trainees modules are currently under construction. The sub-component will support preparation of the data center, purchase of the server and requisite equipment, completion of the remaining modules and operation of the system and site during the project life.

2. Financial Management Reform ($ 23.88 million)

62. To date, technical assistance on financial management has concentrated on day-to-day operations via support for the AFMIS, financial reporting, and control over payroll. AFMIS is the integrated financial management information system which supports the Treasury Department where all the accounting and payments functions are concentrated. Assistance also has been provided for the expansion of AFMIS across government, development of payroll systems and enhancement of systems functionality. Systems development comprised both technical support in development of the information technology platform necessary for AFMIS and functional support such as the re-design of business processes, training of users and guidance and help desk operations. Capacity development activities included training Treasury Department staff through a mix of on-the-job training and formal classroom training in accounting and finance across government. Training also was provided in the areas of basic skills (English language, basic computer literacy and office skills); technical skills

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(public finance management theory and advanced information technology); and job-specific skills, including the development of training curriculum.

63. Public financial management outputs attributable to these efforts include: i) all transactions under the budget are now effected on-line in real time through AFMIS with the corresponding benefits of automated controls; ii) 450,000 government employees have been registered under the verified payroll program of whom 290,000 are receiving salary through direct transfer to their bank accounts; iii) every year since 2006, the audited annual appropriation statements of the Government (Qatia) have been submitted to Parliament within six months of the end of the fiscal year in accordance with public financial management law; and iv) since 2008, monthly financial statements covering central government have been published and all line ministries offices in Kabul have on-line to AFMIS and can generate budget execution reports at any time. Treasury staffing has also improved since 2005 when only a few key civil service positions in the Department were filled and those few civil servants working in the department were incapable of carrying out the basic functional responsibilities of their roles. Currently, the majority of key civil service positions are filled and civil service personnel do most of the day-to-day work of the Department.

64. Nevertheless, treasury functions face the following serious limitations both in systems capabilities and staff skills.

• There is very limited automation of FM processes for the executing units outside of the core functions of AFMIS (budget control, accounting, payments) and there is no integration of AFMIS with budget, debt or other FM systems.

• Although the staffing situation has improved, recruitment of suitably skilled staff and retention of trained staff remains a key challenge because of low civil service compensation. Staff trained for Treasury Department positions are able to successfully compete for better-paid jobs in donor-funded consultancy positions across Government, in donor organizations themselves and, in a few cases, in the private sector. More technically challenging tasks in systems development and maintenance, program and project management and accounting and financial reporting still require significant support of international and local contract staff. Provincial offices of the Treasury (Mustofiats) find it difficult to recruit personnel for even basic day-to-day functions, with no local applicants able to meet the Civil Service Commission’s educational requirements of the positions. Responding to the rapidly changing policy environment with the required changes to business processes and systems continues to require significant support from international advisers. Following the London and Kabul Conferences in 2010, donors have committed to put more resources on-budget. This positive development will exacerbate staffing issues in the Treasury Department due to the resultant increase in transaction processing workload and financial reporting requirements.

• Related to the state of the accounting and auditing infrastructure and application of accounting and auditing standards in Afghanistan, the Bank carried out an Accounting and Auditing Report on Observance of Standards and Codes (ROSC) study in 2009. The study documented the underdeveloped state of regulation of accountants, auditors, public auditing

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firms and financial reporting of public interest entities, lack of application of standards and education in accounting and auditing. There is no approved body representing the accounting and auditing profession and no training leading to a recognized professional designation. This situation impacts severely on the availability of adequately trained and qualified accounting and auditing staff for both the public and private sectors and inadequate regulation of the auditing profession – a critical accountability mechanism in PFM – and financial reporting.

65. This component aims to support high level PFM performance and build staff and institutional capacity for PFM functions throughout government through support for systems development and process renewal and training.

2.1 Treasury Operations and Systems Development ($14.37 million)

66. Treasury employs both a Treasury Single Account for non-earmarked funds and special accounts for earmarked funds for which all transactions are recorded on-line in AFMIS. This ensures control and timely reporting of all on-budget funds and meeting the challenges of an aid-dependant country which includes uncertain cash flows, aid-conditionality and a need for a strongly defined structure of funds, diverse financial reporting and audit demands. As AFMIS functionality is developed, Treasury procedures will require enhancement to achieve the full benefits of the enhanced AFMIS to support more efficient delivery of Treasury services alongside strengthened internal controls and improved reliability and relevance of government financial information. The project would finance the services of a Financial Management Consultant (FMC) to assist with the following activities.

67. Transaction Processing, Accounting and Financial Reporting To achieve incremental improvement in the areas of transaction processing, accounting and financial reporting including follow-up on audit reports, reconciliations and cash flow forecasting the FMC will assist Treasury to maintain or improve timely transaction processing, including enhanced guidance and support to revenue collection and spending units. The FMC will assist the Treasury to improve accounting practices in Treasury Headquarters and Provincial Mustofiats to ensure reliable information is available for financial reporting and will recommend accounting procedures to improve the management of accounts payable, receivables, inter-company transactions and period-end procedures. The FMC also will assist Treasury to maintain standards of financial reporting while it undergoes change processes to move to International Public Sector Accounting Standards (IPSAS) compliant annual statements.

68. Support for Business Processes and Organizational Change. The PFM reform agenda implies new policies and initiatives and support for business processes which will require organizational changes in three areas: fiscal arrangements with sub-national levels of government with the implementation of the “Sub-National Governance Policy”; financial planning to strengthen the relationship between planned expenditures and approved allotments and program-based appropriations as reforms are carried out; and further integration of AFMIS with the Central Bank for payment processing and continuation of expansion of the Verified Payroll Program (VPP) across Afghanistan so that all civil servants

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receive their salary through a direct transfer to individual bank accounts under tight payroll controls.

69. Business Continuity. To reduce risks to business continuity, the FMC will provide up-to-date disaster recovery plans and procedure manuals and assist the Treasury in the implementation of those plans. The FMC also will work to fully implement all the facilities of the new server, including for example electronic document storage. Goods for the off-site backup facility ($2.2m) will be sourced outside the FMC contract but are considered in the cost of this sub-component. The off-site facility will support all systems under the Treasury Department (AFMIS) and the Budget Department.

70. Access and Enhancement of AFMIS. The FMC contract will include system integration services to widen access and enhance AFMIS. AFMIS is administered by the Treasury Department and supports the functions and controls of budgeting, general ledger, accounting, cash sales, payments and financial reporting through the FreeBalance Financial Accountability Suite (Version 6.2/6.5). Many applications are in use outside the AFMIS and there is no automated integration of data between AFMIS and related non-core systems nor data warehousing to support integrated reporting capability. Data is passed or shared between systems using either user-driven extract-transform-load procedures or printing of reports and manual data entry and reconciliation. Treasury will source directly from the AFMIS system supplier, FreeBalance Inc., technical services for establishing a dedicated support center in Afghanistan. The dedicated support center will assist the Treasury in augmenting its efficiency in using the FreeBalance software. This dedicated service will provide an onsite second level help desk, system administration and problem analysis which can be delivered by an in-country team of locally hired and trained FreeBalance experts.

71. Improved management reporting. The FMC will introduce performance monitoring of reporting and controls, catalogue AFMIS reports and survey government users of financial information to determine prioritized requirements for improved reporting of financial information to support resource management. The FMC will assist Treasury to expand access to AFMIS to secondary budgetary units in provinces or district level offices of MOF across the Afghan Government.

72. Seamless Integration and New Modules. The FMC will assist the Treasury Department to achieve seamless integration with other Afghan Government systems where practical and economical, for example: the central bank (DAB) and banking systems, the Debt Management System, State Budget Preparation System, Donor Assistance Database (DAD), Human Resources and Procurement Management Information System (MIS). The FMC will assess improvements in the AFMIS operations that could be introduced through improved functionality provided in the FreeBalance 7.0 web based applications, particularly opportunities for more efficient system operations in phasing out applications in use in Treasury outside of the AFMIS FreeBalance system, which were introduced due to perceived weaknesses in the FreeBalance application. Similarly, MOF aims to expand the AFMIS to include non-core applications for procurement/purchasing, payroll, and fixed asset/inventory management and accounting. The FMC will assist the Treasury in defining detailed

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requirements for non-core applications in respect of the PFM legal framework, information required by the MOF and budgetary units and then assess options in the market or in-house developments in terms of applications or modules able to meet the defined requirements. This assessment should consider IT infrastructure issues and may recommend that certain requirements be met through applications not under the administration of Treasury Department. The FMC will prepare a project plan for implementation of non-core modules across government in accordance with an agreed approach; identify and/or recruit the required resources to carry out the project, carrying out procurement to obtain the necessary software, hardware and related services in accordance with the Project Plan, develop or configure the software to meet the specified requirements, design the business procedures for the new applications for all impacted areas (including outside the Treasury Department), and carry out required testing prior to implementation and training. Related to sustaining the performance of AFMIS and considering the high risk of attach of the MOF premises and destruction of the IT center, a disaster recovery plan would be completed and “hot site” recovery infrastructure acquired and the site established and kept ready for operation.

73. Treasury Staff Training. The FMC will identify key staff (international and local consultants) assigned to activities under the consultancy and assign three counterpart staff to work in a team with the key staff to plan and implement required changes to business procedures. The key staff of the FMC will assist assigned counterpart civil service personnel to prepare their individual training plans and monitor the implementation of the individual training plans quarterly and participate in annual performance appraisals of their assigned counterpart civil service personnel. The FMC will provide materials and information as inputs to job specific skills training modules and will review the modules developed under Human Resource Capacity Development sub-component for suitability as each module is drafted.

2.2 Human Resource Capacity Development ($3.22 million)

74. To address basic and higher skills gap of staff in the MOF the project will finance job specific, certifiable finance skills and general skills to be implemented under a Capacity Development Unit (HRCDP) in the Treasury. The approach will be based on individual training plans prepared for department staff in headquarters, financial management staff in line ministries and mustofiats (provincial offices of the Treasury) to identify priority modules of basic skills, technical skills and job-specific skills. Training in basic and technical skills would be given by local training organizations. For attending training outside standard working hours, staff will be paid a training stipend based on both attendance and at least a passing mark in the regular course assessment. The HRCDP will receive the reports from Training Providers and will calculate payment of stipends for approval by the Director General - Treasury. For the job specific skills training, the HRCDP will develop curriculum and training materials identified in the Treasury Training Plan, and will administer and coordinate the delivery of training, including assessments of staff and follow-up evaluation of training and amendments of curriculum and materials required as identified in the evaluation. Regional training centers will be established in 5 regions of Afghanistan to meet the Individual Training Plan requirements of provincial-based Treasury Department staff.

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75. Certified Accounting Technician (CAT). The project will finance delivery of technical training modules to civil service staff from the MOF and staff in line ministries for all staff for whom this training is relevant to their duties and where staff can demonstrate success in taking the CAT papers.

76. Treasury Communications Plan. The project will finance activities under the Treasury Department to design and implement a plan to ensure that: i) the internal control framework, supported by financial procedures, is clearly understood by key staff across the finance function of Government; 2) reforms implemented are clearly communicated to employees; 3) key financial information available through the Treasury Systems is available to managers across government; and supports effective financial reporting that is relevant and reliable thereby improving accountability over the use of public resources to the Parliament, civil society, media, donors and the public.

2.3 Professional Accountants Organization Development ($5.00 million)

77. In response to the recommendations of the recent Afgahanistan Report on Observance of Standards and Codes (ROSC) Accounting and Auditing study, this sub-component will finance the establishment and functioning of a National Steering Committee (NSC) involving key stakeholders from the public and private sector, including higher education representatives, to coordinate, supervise and direct reforms to begin the process of establishing and regulating accounting and auditing in Afghanistan and building this essential capacity. The NSC will serve as the ultimate trustees of ensuring that Afghanistan has a high quality financial reporting and auditing system in place and the infrastructure to develop capacity and regulate the accounting and auditing professions and practices.

78. The NSC will develop an action plan (including short, medium and long term measures) to develop accounting and auditing capacity in Afghanistan. This action plan will form the basis for a government program of education and training which will require both financial and technical support from development agencies and the international accounting and auditing community and professional bodies such as the International Federation of Accountants (IFAC) and related country institutions. Large scale education and training in accounting and auditing has to be the backbone of establishing a profession in Afghanistan if the effort is to be successful and the profession is to meet its objectives. This sub-component will finance the costs of the Secretariat to the NSC, including the costs of international accounting experts to advise the NSC, to carry out the NSC’s recommendations to effect establishing and regulating the profession, as well as to oversee the accreditation of accountants and auditors and their training. The Secretariat will also maintain the action plan developed by the NSC, track achievement of measures identified in the action plan and amend the action plan as agreed by the NSC. The Secretariat will include a Program Office to organize the support for the international advisors, the Secretariat itself and of the NSC.

2.4 Line Ministry PFM Assessment ($1.29 million)

79. The Government’s PFM Roadmap which aims to build capacity to absorb more funding on-budget, commits the Government to carry-out PFM assessments of 14 line ministries. In the

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past, assessments of PFM capacity have largely been derived from a review of high level indicators on PFM outputs. However, under the current PFMR project, a more detailed tailored assessment of the full budget cycle: budget formulation, procurement, financial management, reporting and financial controls is being financed for seven line ministries. The second stage of reaching seven more line ministries will be financed under this proposed PFMR II project.

3. Audit Reform and Performance ($ 24.70 million)

80. This component aims to improve governance in the public sector by: (i) supporting improvements in management’s own oversight of financial operations by raising the skills of internal auditors and providing modern information technology tools, and (ii) supporting strengthening external accountability through training external audit staff, contracting assistance for the audits of donor funded projects and providing equipment to support their operations.

81. Internal Audit. The purpose of strengthening the capacity of the Internal Audit Departments (IAD) is to improve scrutiny of departmental budget execution and revenue collection processes though objective, well organized enquiry and response processes. To prepare IAD for this, training in basic auditing and accounting was provided and work practice tools developed under donor funded projects. IAD’s internal audit process within the MOF is already generally appropriate for the types of audits it currently performs. Auditors are knowledgeable of the audit processes and produce reports that are substantiated by objective, documented evidence. Separately funded US Treasury Advisors are in place until 2014 to provide on-the-job training and improve auditing methods to incorporate assessments of internal controls, a deficiency noted in earlier supervision missions. IAD is effective in MOF with a good follow-up system and has a supportive Audit Committee comprising senior MOF members. IAD’s is expanding its activities across all ministries. The internal auditors currently in place in the ministries are being included in the ministry audits and a program of training is being considered for these staff. The longer term strategy of IAD is to hire 250 additional auditors and perform financial audits in all ministries of the Government. The maturing IAD needs to continue to develop effective audit and implementation procedures and create an information and communications technology (ICT) system to support and manage its growing operations.

3.1 Internal Audit Capacity Development ($1.9 million)

82. To date support has been provided for training has included on-the-job training with advisors assisting in internal audits, attendance at the Audit Training Program (ATP), and attendance at the Certified Accounting Technical (CAT) program. These would continue through this proposed PFMR II project and will be expanded, as necessary, to meet the needs of the IAD as staff numbers increase. Further, provision of these and other trainings for the internal auditors in the line ministries will be provided as necessary, including a program to train staff of internal audit departments of the 24 line ministries in basic accounting, auditing, English language and IT. There will be a process to identify the requirements for this accounting and auditing training on a needs basis and a review of the existing available training courses for

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their relevance. A priority would be to establish a Train-the-Trainers program to create a sustainable rollout of training though the ministries. A further two international audit advisors and an information systems audit advisor will be provided to assist with roll-out of the audits to line ministries and provide on-the-job training.

3.2 Internal Audit Institutional Development ($6.2 million)

83.As the practice of internal audit develops in Afghanistan, it would be able to benefit from relations with other internal audit professionals and be supported by an institutional framework that is consistent with international practices for the profession. To develop coordination across the IA activities an Internal Audit Forum will be formed with representation from all line ministries under the chairmanship of IAD and a common IA Charter will be prepared. Audit manuals will be prepared for specialist areas. To ensure quality of audits as in ministries, a quality review system in accordance with international practices will be applied and standard procedures for follow-up of audit findings will be implemented. In due course, if a sufficient cadre of certified Internal Auditors emerges a Chapter of the Institute of Internal Auditors will be formed. The sub-component will finance individual consultants to develop work practice tools, lead audits and carry-out quality control.

3.3 Internal Audit Information Technology Development ($1.5 million)

84. Local and Wide Area networks will be established in the MOF connected with other IA units to meet the audit management needs of the IAD. Connection to the AFMIS, ASYCUDA (the customs declaration system) and SIGTAS (the income tax system) for IA purposes will be assessed. IAD has 15 desktop computers and 25 laptops and there are only a few internet connections and no database system. Communications therefore are at a low level of development and will compromise the growth and development of the IA function. Follow-up of IA findings is currently monitored through a manual system, which is untenable for an effective process. Standard audit working paper toolkits are in Word format. Handwritten audit working papers and reports are difficult to manage and provide poor opportunities for supervision and review. A Local Area network (LAN) of 100 nodes supporting 135 desktop /laptop computers is proposed for the first year. The best mix of laptops and desktops will be decided through consideration of optimal working patterns. Expansion to other nodes and to the Fraud Investigation Unit will follow as the function expands. The IA planning, conduct, reporting and follow-up cycle will be made more effective by automation of the processes through a database system to allow the IAD to move towards a paperless office. For IAD where confidentiality and ethical behaviors are crucial to its reputation and role, an automated system that records the audit process and results is much less prone to interference or corrupt practices, as well as providing efficiencies in work flows and the capabilities to work remotely in order to produce effective results.

External Audit

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85. Technical assistance to the CAO to date has concentrated on improving audits of donor grant projects through contracting a highly regarded accounting firm to work jointly with the CAO on the audits. The accounting firm has also worked to gradually improve the capability and competence of the CAO audit staff assigned to the grant audits. This has been achieved by a mix of English language training (because the accounting documentation and accounts are maintained in English), classroom training in audit methods, and on-the-job training. Through this process some staff have been trained to modest levels of competency. However English language competency is a major barrier to gaining audit competencies, examining documentation, and preparing worthwhile reports on grant audits and thus needs to be more aggressively addressed and this need will be fully addressed in this proposed PFMR II project. The accounting firm also has worked with the CAO to improve its technology, its institutional capacity and its legislative framework. The CAO is moving into new accommodation in Kabul and some provinces and requires improved physical and technical infrastructure.

86. The CAO has improved its reports but, except for the grant audits, these are getting no public exposure and insufficient support from legislative and executive scrutiny to provide effective response to the audits to improve government sector PFM. Also, because access to provincial operations has been curtailed due to security issues, it may be better covered by establishing provincial offices of the CAO - this is now planned and will be supported by the project. Following a US Government’s review of CAO capacities, USAID agreed with the CAO to provide technical assistance to develop an audit methodology to be applied to all CAO government sector audits. The CAO would like now to train the CAO staff in this new methodology and develop audit manuals and apply these in its audit processes. This should bring about significant change in its outputs. This proposed PFMR II project will continue support for the grant audits though the services of a professional accounting firm and will include, as a separate activity, the training in the new methodology, development of the relevant audit manuals and application of this methodology in nine line ministries over the project period. The project would also fund the cost of an advisor to the Auditor General for policy development and supervision of technical assistance and the cost of advanced training of CAO staff through the cooperation with the SAI of India where an MOU has been signed on such cooperation.

3.4 Direct Audit Support – Grant Audits (5.5 million)

87. The continuing scarcity of English speaking auditors and the lack of sufficient understanding of financial statement audits within the CAO have required that an expert auditing firm play a significant role in the conduct of donor grant audits. This consultancy, which is central to the World Bank fiduciary framework, allows the Government audit agency with this technical assistance of the firm to meet the grant requirement for annual project audits. This support will focus on direct, technical audit support for planning, field work, reporting and supervision of all ARTF and IDA operations and other key bilateral on-budget projects, estimated to be about 40, for Solar Years (March 21 to March 20) 1389, 1390 and 1391. For the team dedicated to donor grants, the firm will provide on-the-job training. The Government is also looking for the contractor to contribute to building adequate skills of this

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team of 20 auditors through class room training on accounting and auditing and English language training.

3.5 Direct Audit Support - Line Ministries ($3.62 million)

88. It is widely accepted that to help enable the CAO to become an effective supreme auditing institution, the Afghan Government needs to enact legislation providing the CAO with sufficient independence and authority to fulfill its responsibilities in accordance with internationally recognized audit standards. Similarly, it must build sustainable internal capacity through a capacity development plan which contributes to the government’s strategy to improve accountability. This also is the view expressed by the US Government SIGAR report on the CAO.

89. At present no audits, outside of the donor grant audits done with the technical assistance of the audit firm, PFK (UK), are being performed by the CAO in accordance with recognized auditing standards or even using a standard auditing methodology. However, with the enactment of a new audit law, expected to be in place before the end of year one of this proposed project, the CAO would be more independent of the executive and could, with higher quality work, provide well founded views on the executive’s financial reports to Parliament and its management of public finance.

90. In anticipation of the enactment of the audit law approved by Cabinet March 7, 2011, which will establish the CAO as an independent audit entity with direct report to Parliament; assistance will be given to the CAO to implement the new audit methodology, under preparation by a USAID funded advisor, for the state budget statements. This methodology would support regulatory audits done to international auditing standards. A firm would be contracted to deliver training on use of the methodology and lead the application of this methodology in nine ministry audits, which represent 85% of government operations. In year one of the project, the auditor advisor firm will focus on building the basic capacity necessary to support an effective professional auditing organization by giving class room training to selected staff to develop the required competencies in the application of the new methodology.

91. Both to complete the training on the standard audit methodology and to derive some immediate benefit from its adoption, the CAO will undertake to carry-out audits of 9 line ministries over the project period which together implement over 85% of the development budget and most of the uses of donor funds on-budget.

92. The objective of the line ministry audits will be to express an opinion on the financial report of the individual line ministries, that is the Qatia which is the local version of a Budget Statement, and give an assessment of the controls and the findings on financial management regulatory compliance during the related fiscal year.

93. The approach would follow that used for the Grant audits, i.e. the teams would operate under a lead auditor from the auditing advisor firm which would act alongside a Director of the CAO, while the CAO staff would participate in each stage of the audit and carry-out the field work together with the local contract staff of the firm. The audit firm advisors would provide

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on-going technical support to the trainees in the field, acting as on-the-job trainers. Extensive on-the-job training is an integral part of training skilled auditors. The CAO has already benefited from classroom training on auditing fundamentals and INTOSAI standards.

94. In this regard, to raise the level of the educational profile of CAO staff and bring into the CAO, staff of an age and disposition capable of absorbing training effectively, the CAO would hire a team of local contract staff as interns, with requisite language skills and university graduate qualifications. It is expected that these contract staff would be enrolled in certification related accounting and audit courses would eventually applying for civil service positions in the CAO as these come available under the new pay schemes to be introduced under the emerging civil service programs.

95. In year one of this proposed project, contract staff and CAO staff would be trained in the methodology and one line ministry would be reviewed. Three more line ministries would be reviewed in year 2 and five in year 3. Each line ministry audit would have an international advisor assigned full time in year one and two; in year three each international advisor would lead two audits. The audits would draw on work from the grant audits and from the compliance audits carried by the CAO during the related year.

Line Ministry Audit Coverage and Resources RequiredLine Ministry Audit Coverage and Resources RequiredLine Ministry Audit Coverage and Resources RequiredLine Ministry Audit Coverage and Resources RequiredYear 1 Year 2 Year 3

No of Line Ministries Audited 1 3 5Cumulative Percentage of Development Expenditure covered

19% 65% 86%

International Advisor Auditor 1 2 2International Trainer and Auditor 1 1 1Local Contract Audit Staff/Interns 3 6 10Local Contract Trainer Staff 2 2 2CAO Civil Servant Audit Staff 6 18 30

3.6 Policy Advice to the Auditor General and Coordination ($2.78 million)

96. This sub-component finances the cost of a full-time advisor (International Consultant) to the CAO to coordinate TA in the CAO, advise the Auditor General on policy and operational matters, support the Auditor General in implementing new audit law, monitor implementation of the PFMR II project, oversee the Strategic Development Plan for the CAO, coordinate training activities in CAO and international relations and oversee the Public Accounts Committee component.

3.7 Training Support ($0.60 million)

97. To date training support has been provided under the World Bank project by advisors, specialists, and the audit advisory firm. This proposed PFMRII project will be selective and apart from the continued training by the audit advisory firm in support of the grant audits,

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which would especially involve English language and on the job training, and training in the audit methodology for line ministry audits, it will concentrate on continuing support for the CAO in training programs from the SAI of India for specialized and more advanced audits.

3.8 Infrastructure Support ($2.10 million)

98. The CAO is shortly to move into new accommodation which requires improved physical infrastructure for audit operations, including an Information Technology Center, database systems for audit management, office furnishings, and online access to AFMIS. The CAO is also considering the creation of provincial offices. Provincial offices in less secure or more remote areas where travel from Kabul is difficult could better service the auditing needs for oversight of the budget execution and revenue collections. The CAO has identified its equipment requirements including computers and relevant software for the field and central audit staff which would be financed by the project.

3.9 Public Accounts Committee Strenghtening ($0.50 million)

99. Following the convening of the new Wolesi Jirga, the PAC will be established early in 2011. In assembling the building blocks for the creation of the PAC, the process benefitted immensely from study visits to South Korea, the United States, Bangladesh as well as India sponsored by the USAID and the World Bank’s current Public PFMR Project and implemented under the Afghanistan Parliamentary Assistance Project (APAP). However, the two key institutional players in the budgetary oversight functions, namely the CAO and the PAC require significant assistance in three key areas to carry out their duties effectively. To further improve the accountability of public finances at the National Assembly through the PAC, the project, along with the APAP project, will finance activities including regular committee support, workshops in Kabul with high level short-term consultants, and study visits to other Public Accounts Committees in selected countries.

4. Reform Management ($ 2.95 million)

100.The component will support improvement in monitoring and management of technical assistance and human resources in the MOF. The Reform Implementation & Management Unit (RIMU) was established in the MOF with a mandate to assist in strategic planning and strategic plan monitoring and evaluation (M&E), monitor reforms and all technical assistance projects within the Ministry, establish, develop and strengthen the Human Resources Management Department (HRMD) and be the coordination unit for the World Bank funded projects on PFM in MOF. Since its inception, the Unit has established results-based M&E system throughout the Ministry, updated annually the strategic plan of the Ministry, created mechanisms for monitoring technical assistance projects, helped established the HRMD, revised the Ministry staffing structure in line with a pay and grading system with more than 6000 job descriptions, assisted the HRMD to carry out administrative reforms and implement pay and grading system and developed a financial management manual for the PACB/PFMR projects. The HRMD is still reliant on RIMU, particularly for the development and strategic functions, which need to be addressed through further support. This component will finance RIMU’s continued support.

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4.1 Strengthening Monitoring and Evaluation ($0.26 million)

101.The RIMU will continue with current practices of assisting MOF to develop/update its strategic plan and conduct periodic monitoring and evaluation of the progress within the Ministry. For the purpose of sustainability, the RIMU will work to institutionalize the M&E system within the Ministry by establishing a structure and job descriptions for an M&E Department, providing capacity building through class room and on--the job training and reviewing and revising the M&E manual.

4.2 Strengthening of MOF Human Resources Management Department ($0.81 million)

102.The RIMU’s focus will move to developing each section of the HRMD to enable it in the long term to carry out their strategic HRM role with little external assistance. This includes HRM strategic planning and assistance in its implementation. Moreover, focused intervention will be in strengthening different HRM functions, such as organizational development and restructuring, merit based recruitment, training and development, performance appraisal and record keeping and employees’ relations.

4.3 Project Management ($0.38 million)

103.The RIMU will continue to provide smooth operations support for this proposed PFMR II project. This includes overall coordination of the project, preparation of the project annual budget and implementation plans, project procurement plan, financial monitoring reports, performance monitoring reports and project asset registration. Assisting implementing units in administrative issues of the project is also part of their function. Moreover, it would provide secretariat services for the Project Steering Committee.

4.4 Other Institutional Strengthening and Capacity Building ($1.50 million)

104.Funds have been included under this component to cover assistance relating to future requests for technical assistance or analytical work in areas related to the overall objective, including: support to manage the design and delivery of PFM technical assistance across government and broad based training for the Ministry of Finance and line ministries as a result of ongoing reforms to the procurement and financial management framework within government.

Annex 2: Results Framework and Monitoring

AFGHANISTAN: Second Public Financial Management Reform Project

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S/N Performance Indicators Baseline 1389 Benchmark 1390 Benchmark 1391 Benchmark 1392 End of Project TargetsEnd of Project Targets C o l l e c t i o n & Reporting

PDO Donors shift 20% of their off-budget official development assistance to Afghanistan to on-budget

Now a t $ 1 .8 billion

5% increase 5% increase 10% increase 20% cumulative increase20% cumulative increase M O F – D o n o r Financial Review

PEFA ratings for internal audit (P-21) improve to B.

R a t i n g o f C : coverage under 50%, not done to r e c o g n i z e d standard and no a c t i o n b y management.

20% coverage, done to recognized std and line ministry responses given to most MOF audits.

25% of coverage, line min i s t ry done to recognized std and responses given to all MOF audits.

35% of coverage, aud i t s done to a recognizd std and responses given to all M O F a u d i t s a n d action taken.

75% cumulative coverage of expenditure and 75 % revenue done to recognized standard and responses given to all audits done by MOF and action taken on most.

75% cumulative coverage of expenditure and 75 % revenue done to recognized standard and responses given to all audits done by MOF and action taken on most.

MOF Internal Audit Annual Report and M O F A u d i t Committee minutes.

PEFA ratings for external audit (P26) improve to B.

R a t i n g o f C : coverage under 50%, not done to a r e c o g n i e d standard and no e v i d e n c e o f follow-up,

20% of coverage, done to a recognized std and evidence presented of follow-up .

25% of coverage done to a recognized std and evidence presented of follow-up.

35% of coverage done to a recognized std and evidence presented of follow-up.

75% cumulative coverage of e x p e n d i t u r e d o n e t o a n acceptable std and evidence presented of follow-up.

75% cumulative coverage of e x p e n d i t u r e d o n e t o a n acceptable std and evidence presented of follow-up.

CAO semi-annual repor t s and WB project supervision reports.

At least 50% of procurement under the budget is done by line ministries conducting stand-alone procurement

2 ministries 14 ministries 21 ministries Remaining Procurement under these should equal 50% of procurementProcurement under these should equal 50% of procurement

Quar te r ly ARDS Report with MOF Budget Execution Statements

Increased number of functions carried out by regular ministry staff that were previously carried out by contracted staff.

0 0 10 20 20 separate functins in MOF20 separate functins in MOF R I M U / H R M D , TA assessment reports

Performance Indicators Baseline 1389 Benchmark 1390 Benchmark 1391 Benchmark 1392 End of Projects TargetsEnd of Projects Targets C o l l e c t i o n & Reporting

Output IndicatorsOutput IndicatorsOutput IndicatorsOutput IndicatorsOutput IndicatorsOutput IndicatorsOutput IndicatorsOutput IndicatorsOutput IndicatorsComponent 1: Procurement Reform Component 1: Procurement Reform Component 1: Procurement Reform Component 1: Procurement Reform Component 1: Procurement Reform Component 1: Procurement Reform Component 1: Procurement Reform Component 1: Procurement Reform Component 1: Procurement Reform

1 Number of line ministries and provincial offices of line ministries restructured for

stand-alone procurement

7 ministries, out o f w h i c h 2 certified to do s t a n d a l o n e procurement

14 ministries7 provinces

21 Completed14 Provinces

LMs Completed25 ProvincesLMs Completed25 Provinces

all LM and 25 provinces completed

PPU/RIMU/ARPR/PPU reports

2 Number of line ministry and mustofiats procurement staff completing duty-specific procurement training and accredited.

Up to now about 2600 Procurement s t a f f h a v e received training

600 procurement staff of line ministries and 100 procurement staff of mustofiats

600 procurement staff of line ministries and 200 procurement staff of Mustofiats

600 procurement staff of line ministries 600 procurement staff of line ministries

1,800 more procurement staff of line ministries and 3 00 p r o c u r e m e n t s t a f f o f mustofiats

PPU/RIMU/ARPR/PPU reports

3 Legal framework, legal documentation and disclosure policy completed and Appeal and Review Committee and the dispute resolution system is functioning

Legal in place but not operational.

W o r k s h o p f o r dissemation of Appeal and Review process to private sector.

Publication of annual report on Appeal and Review Committee activitiy.

Publicaction of semi-annual report on Appeal and Review Committee activity.

Publicaction of semi-annual report on Appeal and Review Committee activity.

Semi annual reporton Appeal a n d R e v i e w C o m m i t t e e activities.

PPU/RIMU

S/N Performance Indicators Baseline 1389 Benchmark 1390 Benchmark 1391 Benchmark 1392Benchmark 1392 End of Project Targets C o l l e c t i o n & Reporting

Component 2: Financial Management ReformComponent 2: Financial Management ReformComponent 2: Financial Management ReformComponent 2: Financial Management ReformComponent 2: Financial Management ReformComponent 2: Financial Management ReformComponent 2: Financial Management ReformComponent 2: Financial Management ReformComponent 2: Financial Management Reform4 Timeliness, quality and dissemination of

in-year budget execution reports, Posted on Treasury website within 30 days from end of each month

Posted within 25 days 1. Posted within 20 days

Posted fortnightly Posted fortnightly Posted fortnightlyTr e a s u r y / R I M U /Treasury reports/APR

5 Timeliness and quality of annual audited financial statements submitted to the legislature and donors.

Audited Qatia statements submitted to National Assembly on 22nd Sep

Qatia and Annual Cash Based Financial Statements and info on liabilities and assets issued by Sept 21.

1. Qatia and Annual Cash Based Financial Statements and info on liabilities and assets issued by Sept 21.




Tr e a s u r y / R I M U /Treasury reports/APR

6 Disaster Recovery Plan and Testing No Disaster Recovery Plan

Disaster Recovery Plan approved.Report on first test of Disaster Recovery operations.

Report on second test of Disaster Recovery Operations.

Report on third test of Disaster Recovery Operations.

Report on third test of Disaster Recovery Operations.

Report on fourth test of Disaster Recovery Operations. Tr e a s u r y / R I M U /

Treasury reports/APR

7 FreeBalance Financial Accountability Module

AFMIS uses FreeBalance Financial Accountability Module Version 6.2

Preparation for upgrade to Version 7 (browser-based)

Version 7 Financial Accountability implemented for all AFMIS sites.

Tr e a s u r y / R I M U /Treasury reports/APR

8 Legal framework and structures for development and regulation of an accounting profession and for training of professional accountants is established and operational

No framework Steering Committee estalbished and

Secretariat established

Legal framework draft law approved by Cabinet and training material prepared.

Registry of Members and students established and training underway.

Registry of Members and students established and training underway.

Legal framework agreed and training underway.

MOF PPU and WB supervision

9 Line ministry PFM Assessment completed.

No assessments 7 LM Assessments under PRMR project

completed

7 LM Assessment under PFMRII

completed

Benchmark met.Benchmark met. 14 LM Assessments completed.

MOF Budget Dept, WB supervision

Component 3: Audit Reform and PerformanceComponent 3: Audit Reform and PerformanceComponent 3: Audit Reform and PerformanceComponent 3: Audit Reform and PerformanceComponent 3: Audit Reform and PerformanceComponent 3: Audit Reform and PerformanceComponent 3: Audit Reform and PerformanceComponent 3: Audit Reform and Performance9 Number of internal audits evaluated by

external party to be done to acceptable standards.

4 10 15 25 3434 Internal Audit Dept annual reports and WB supervision of PFMRII

10 Number of internal audit staff trained and accredited

112 300 320 340 360360

Internal Audit Dept annual reports and WB supervision of PFMRII

11 Number of external audits verified as done to international auditing standards

Just the WB grants

All WB Bank grants and one regulatory audit

All WB Bank grants and three regulatory audits

1. All WB Bank grants and 9 regulatory audits

All WB Bank grants and 9 regulatory audits annuallyAll WB Bank grants and 9 regulatory audits annually

CAO semi-annual reports and WB supervision of PFMRII.,

S/N Performance Indicators Baseline 1389 Benchmark 1390 Benchmark 1391 Benchmark 1392 End of Project TargetsEnd of Project Targets C o l l e c t i o n & Reporting

Component 4: Reform ManagementComponent 4: Reform ManagementComponent 4: Reform ManagementComponent 4: Reform ManagementComponent 4: Reform ManagementComponent 4: Reform ManagementComponent 4: Reform ManagementComponent 4: Reform ManagementComponent 4: Reform Management12 N u m b e r s o f h u m a n r e s o u r c e

management staff completing duty-specific training in their respective specialties

1 training conducted for all

All 75 staff of HRMD All 75 staff of HRMD

All 75 staff of HRMD

AllAll RIMU/HRMD/APR

Annex 3: Summary of Estimated Project Costs

Afghanistan: Second Public Financial Management Reform Project

Project Cost Summary - Component wise

Components Year 1 Year 2 Year 3 TotalComponent 1: Procurement Reform

1.1 Procurement Facilitation ( ARDS) 2.84 2.87 2.89 8.601.2 Capacity Building in LM and Provinces (PPU/ ACSI) 2.38 3.23 3.25 8.85

1.3 Institutional Development (PPU) 1.25 1.41 1.36 4.02

Sub-total 6.47 7.50 7.51 21.47

Component 2: Financial Management Reform 2.1. Treasury Operations and Systems Development - Continued consultancy support including FreeBalance system Dedicated Support Center (includes Equipment of IT Backup for AFMIS of $2.2) 6.47 4.17 3.73 14.372.2 Human Resources Capacity Development –Support for capacity development and Communications 1.32 1.02 0.88 3.222.3 Professional Accountants Organisation Development -

1.74 1.63 1.63 5.002.4 Line Ministry PFM Assessment

1.29 0.00 0.00 1.29Sub-total

10.82 6.82 6.24 23.88Component 3: Audit Reform and Performance

3.1 Internal Audit Capacity Development

0.79 0.79 0.33 1.903.2 Internal Audit Institutional Development

2.05 1.85 2.31 6.203.3 Internal Audit Information Technology Development 0.60 0.55 0.35 1.503.4 Direct Audit Support – Grant Audits (External Audit) 1.75 1.75 2.00 5.503.5 Direct Audit Support – Line Ministries(Qatia)

1.0 1.0 1.62 3.62

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3.6 Policy Advice to the Auditor General and Coordination (External Audit) 0.83 0.95 1.00 2.783.7 Training Support - under MoU with CAG of India ( External Audit) 0.20 0.20 0.20 0.603.8 Infrastructure Support (External Audit)

0.80 0.70 0.60 2.103.9 Public Accounts Committee Strengthening ( External Audit) 0.10 0.20 0.20 0.50Sub-total 8.11 7.98 8.61 24.70Component 4: Reform Management 4.1 Strengthening Monitoring and Evaluation

0.08 0.09 0.10 0.264.2 Strengthening MOF Human Resources Management Department 0.25 0.27 0.30 0.814.3 Project Management

0.11 0.12 0.14 0.384.4 Other Institutional Strengthening and Capacity Building 0.50 0.50 0.50 1.50Sub-total 0.94 0.98 1.03 2.95Total 26.34 23.28 23.38 73.00

Table of Total Project Costs by Component and Type of Expenditure

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Risk Category

Risk Rating

Risk Rating Explanation Risk Description

Proposed Mitigation Measures

StatusC= completedO = ongoingNYD = Not yet DueN/A = Not Applicable


1. Project Stakeholder Risks

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Annex 4Operational Risk Assessment Framework (ORAF)

Concept to Appraisal Package VersionAFGHANISTAN

Public Financial Management Reform Project II

Project Development Objective(s)

The development objective of the proposed project is to strengthen public financial management through effective procurement, treasury and audit structures and systems in line with sound financial management standards of monitoring, reporting and controls.

PDO Level Results Indicators: Donors shift 20% of their off-budget official development assistance to Afghanistan to on-budget.

PEFA ratings for internal audit (P-21) improve to B

PEFA ratings for external audit (P26) improve to B

At least 50% of procurement under the budget is done by line ministries conducting stand-alone procurement

Increased number of functions carried out by regular ministry staff that were previously carried out by contracted staff.

Risk Category

Risk Rating





.1 Stakeholders

High The likelihood of this risk materializing is low as borrower has a proven track record in PFM reforms and the recent Kabul conference further commits the GoA to specific objectives of the project

The impact on the PDO would be high however as the there has been instances of legal framework changes without due consultation ( procurement law) and failures to implement the agreed legal framework ( external audit).

The Government could respond to political pressure and refrain from further reforms or reverse provisions already in place which could undermine the PDOs and weaken the fiduciary framework for the portfolio disbursements. So the risk is that Borrower relations could deteriorate over changes in the PFM legal framework.

There is also risk arising from limited interest and follow-through by the line ministries and provincial authorities in the procurement and FM reforms, continued interference by the CAO in the internal audit functions, hesitation by the government in providing independence to the CAO from the executive branch, and delays in the establishment and effectiveness of the Public Accounts Committee.

Through the National Priority Programs consultative process , the ARTF Incentive Program and the World Bank DPG dialogue with the Government on reforms will continue and encourage reforms in line with Kabul Conference commitments and the PDOs.

OngoingOngoing

2. Operating Environment Risks

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Risk Category

Risk Rating





.1 Country Risk

High Afghanistan is currently a “high likelihood / high impact” context in terms of country risk. Nevertheless, over the past 8 years, project design has mitigated successfully and built a strong portfolio of activities. This has much to do with the strong ownership of projects by government counterparts.

Politics, Security & Governance: Escalating insurgency-related violence has increased the level of fragility in the political and governance environment, while also impacting ability of the government to deliver services and programs (district accessibility very low: 9/364 = safe). Volatility expected through end 2010 with parliamentary elections. Key risks include impact on project implementation and ability to supervise in parts of the country.

The formal systems of the state are penetrated by a variety of informal networks and vested interests. The most powerful of these are based on the opium economy. The state itself is a fragile coalition of interest groups mostly anchored in particular ethnic groups, factions, parties or geographical areas. Key risks include cabinet reshuffles, impacting on key policies or project implementation.

Environment: Environmental/Social Impact Assessments (ESIA) are required under an Environment Law, but no regulatory policies and procedures have been developed to guide agencies. The National Environmental Protection Agency (NEPA) has assumed responsibility for enforcing environmental laws and policies, including the ESIA system, but lacks adequate technical capacity in environmental/social management. Key risks include long term environmental & social impact of extractive industries.

Civil Society Capacity: NGOs continue to play a critical role in delivering government services, especially in health, education, and rural development. Accessibility and security have nevertheless declined. In addition, government oversight of NGO activities has constrained freedoms.

Afghan media continues to grow and diversify. But the freedom of the media and access it gets to information is much greater in Kabul than outside the capital.

The use of the internet and mobile phones continues to grow rapidly and has broadened the flow of news and other information, particularly for urban Afghans.

Systemic Fraud & Corruption: Corruption continues to be widespread and pervasive. Afghanistan’s ranking in Transparency International’s Corruption Perceptions Index has slipped from 176 out of 180 countries surveyed in 2008 to 179 out of 180 countries surveyed in 2009.

Mitigation of this risk is outside the scope of the Bank – however the Bank will continue to monitor developments closely and will modify programs if necessary. Third party monitoring and remote sensing/GPS are used increasingly for monitoring & supervision.

Political governance risk outside the scope of WB. Impact on corruption at project level is medium, however can be partially mitigated through fiduciary ring-fencing (see below).

The Bank adopts a pragmatic approach to project design & implementation involving an Environment & Social Management Framework (ESMF) and ESIAs. In addition, the Bank is pursuing a Strategic Environmental Assessment of the mining sector and a Country Environmental Assessment (institutional & policy review).

The Bank continues to advocate for NGO and private sector involvement in program implementation. The Bank has ongoing dialogues with civil society through NSP, EQUIP, BPHS among other programs.

EXT Kabul interacts frequently with Afghan media organizations and promotes transparency of Bank operations through Public Information Centers (PICs)

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Risk Category

Risk Rating





.1 Institutional

High It is highly likely that commitment and capacity to implement reform which has been demonstrated by MOF will not be the same for CAO. The impact is low however since the effect is contained by work of the operations support advisor firm to the CAO and the oversight now by Parliament.

The possible lack of commitment by the CAO is a threat to project PDO’s and implementation.

The Project Coordination and Oversight Committee through its quarterly meetings will bring to attention of the Minister of Finance any change in commitment of individual units.

Also, close monitoring by the WB, its agents and other stakeholders should lead to corrective action and be communicated in semi-annual Aide Memoires following supervision.

Reporting on the advance of the PFM Roadmap by the WB to the Consultative Group on the National Priority Programs will also alert Government and stakeholders to deviations from agreements.

Target Date: with project effectiveness.

OngoingOngoing

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Risk Category

Risk Rating





3. Implementing Agency Risks (including FM & PR Risks)

Medium I Although the impact would be significant the likehood is low since adequate mitigation for of th e identified risks should allow implementation in line with plan.

Capacity to implement is threatened by possible low response by consultants, low procurement capacity in some implementing units and wide range of implementing units could all contribute to delays in implementation.

Timely sourcing of consultants, capacity building in procurement and close Bank supervision provide adequate mitigation of the identified risks.

On-goingOn-going

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Risk Category

Risk Rating





3.1 Capacity Medium I

While the impact of the weak capacity is high there is low likelihood of incurrence given the procurement and planning steps to be taken.

Because of the security risk implementing agencies may not be able to source high level TA on a timely basis at a reasonable cost. Implementation also depends on timely action by a number of agencies which could mean delay if coordination in not well done. The risk of fraud and corruption is high given the environment.

Steps to ensure suitable consultants are timely sourced include: (i) long lead times for sourcing provided for in the implementation;(ii) flexibility in covering security costs in consultant contracts (iii) procurement methods will consider reluctance of new firms to respond to call for bids. Target date: with project effectiveness.

To improve Governance, close supervision by the WB and effective project coordination through the Project Steering Committee will contain this risk. Target date: SC with project effectiveness and Bank supervision every six months.

Low prior review thresholds and intensive TA on FM to centralized systems which are used for the project will mitigate the corruption risk.Target date – with effectiveness of the project.

NYD – some considered in project design.

NYD – some considered in project design.

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Risk Category

Risk Rating





3.1.1.Procurement

Low likelihood because all the implementing agencies are backed up by RIMU which prepares the consolidated procurement plan and conducts close monitoring, however turnover of qualified staff is an issue.

Procurement capacity in the CAO and some units of MOF is weak which could lead to delays or mis-procurement and undermine project implementation.

The project will have a substantial component on building the capacity of implementation agencies and the government ministries in procurement, and contract management. In addition, technical assistance by hiring of international procurement specialists would support the staff of the PCU in procurement, contract management in the CAO and IA of MOF.

Target date: with project effectiveness.

NYDNYD

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Risk Category

Risk Rating





.2 Governance

Medium I

While the impact would be high the likelihood is low because the project objectives are integral to the plans of the same implementing units and the record on implementation is good.

The project will be implemented through the CAO, the Ministry of Economy, 4 departments in MOF; it also depends on the cooperation of the Civil Service Institute for training in procurement. Decision making by the Borrower via the Project Steering Committee can only be implemented once the relevant implementing unit agrees and has the capacity to follow-up. There is a risk that decisions will be drawn out or their implementation delayed.

Close supervision by the WB via semi annual supervision missions and full reporting and discussion at the Project Streeting Committee will be applied to mitigate this risk.

Target date: thorough out project life.

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Risk Category

Risk Rating





.2 Fraud and Corruption

Medium I

The occurrence of corrupt acts with project funds would have a high impact but is unlikely to occur given the nature of the expenditure, mainly in large contracts, the Bank’s close supervision of these and low thresholds for prior review and the fact that there have been no incidences of misuse of project funds in the 4 predecessor projects with the same agencies.

Fraud and corruption remain endemic in Afghanistan and projects operate in an environment with weak internal audit and external accountability. Misappropriation of funds by an implementing agency would undermine faith in the PFM systems and agencies and result in delays in implementation.

Close WB supervision with low thresholds, and semi-annual supervision with exhaustive SOE review and procurement ex post reviews act as detection and deterrence. Prevention occurs through the centralization of cash management, accounting in Treasury and the oversight of procurement for all components by the facilitation firm in ARDS.


NYD but in project design.

NYD but in project design.

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Risk Category

Risk Rating





3.3.1 Financial Management

While misuses of funds would impact on implementation as they could result in delays in disbursements these are unlikely to occur since the FM arrangements do provide for considerable reduction of opportunity of abuse.

The recurring high incidence of incompliance in with the government’s procurement and FM rules on the recurrent budget indicate weak application of the control framework which may lead to misappropriation of funds and delays.

Minimize use of Designated Account, maximize direct payments to consultants.Presence of FM Agent at the Treasury of Ministry of Finance, responsible for processing payments, transaction recording and reporting. Presence of Audit Agent at the CAO, responsible for external audit of the project.

Target date. Thorough out project life.

NYD but in the project design.

NYD but in the project design.

4. Project Risks

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Risk Category

Risk Rating





.1 Project Design

High Work delays are likely to arise in the coordination of the many units involved in implementation of new software and absorbing training. Their impact on progress implementation would be significant.

The cooperation and support of the line ministries is critical in the implementation of new software and to absorb FM and procurement training as well as for the roll-out of internal audit. There is a risk to implementation from lack of buy-in from line ministries .

Areas of coordination will be monitored closely by the WB and by the Donor Coordination Group involved in the National Priority Program which is tracking the PFM Roadmap.


OO

.1 Social & Environmental

Low This operation is a technical assistance operation, primarily implemented in the HQ of MOF and ministries in Kabul. Project involves no land use, movement of people or disposal of waste

No significant risks.

.1 Program & Donor Risk.

Medium I

The project contributes to the PFM Road Map which is the Government’s plan to continue sound PFM performance and reforms so there is low likelihood of occurance although the impact would be high.

Lack of coordination among donors on PFM TA Conflicting advice and uneven coverage of PFM TA could disperse attention and attention to the key reforms.

Donor Group on Governance meetings and coordination should constrain this threat.

OO

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Risk Category

Risk Rating





.1 Delivery Quality Risk

High This risk is both likely and its impact significant given the number of entities and civil servant involved and the possible delay before the government wide public administrative reform becomes effective.

Sound PFM performance is attained through Government contracting scores of local consultants to operate the PFM systems.

Civil servants are being trained to take over these duties however because of uncompetitive salaries civil servants may leave public service following training and certification which leaves Ministries dependent on more training.

Introduction of a staff incentive program to address the salary issue is planned under the WB Public Admin Reform project but its impact may occur late in this project. In the meantime incentives in terms of training and recognition will be used to retain staff.

Target date: intensive training with effectiveness of project. Incentive program by year 2 of project.

OO

A - Proposed Rating before Appraisal:

Project TeamRisk Rating: Preparation

Risk Rating: Implementation Date Comments

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Overall Risk Medium IHigh May 5,2011

The overall rating takes into account the risks identified above. The “Medium I” rating for preparation stems mainly from the possibility that donors who have expressed interest to fund this project through the ARTF get the related appropriations on time. The High rating for implementation is based on the country risk , institutional risk and project design risk.

B - Review by IL Risk Team at Appraisal

Risk TeamRisk Rating: Preparation

Risk Rating: Implementation Date Comments

Overall Risk Medium I High 05/04/2011

GENERAL COMMENTS:Overall Risk Rating.The overall risk ratings of MI for preparation and High during implementation seem appropriate. (provided by SARDE on IL ‘s behalf).

Final Rating at Appraisal:

PCN Decision Chair

Risk Rating: Preparation

Risk Rating: Implementation

Processing Track Date Comments

Overall Risk Medium I High Track 2 05/05/2011

The overall rating takes in to account the risks identified above. The Medium I rating for preparation stems mainly from the possibility that donors who have expressed interest to fund this project through the ARTF get the related appropriations on time. The High rating for implementation is based on the country , the institutional and design risk: specifically the security situation which may affect implementation of large contracts and the possible difficulity with the transfer of PFM duties to civil servants as these may leave following training.

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Annex 5: Financial Management and Disbursement Arrangements

AFGHANISTAN: Second Public Financial Management ProjectCountry Issues

105.The Bank has gained substantial experience and understanding of the financial management environment in Afghanistan through the large number of projects under implementation over the past four years. The Public Financial Management Reform Project (PFMRP) is the primary instrument to continue and enhance the fiduciary measures put in place during the past years to help ensure transparency and accountability for the funding provided by the Bank and other donors.

106.A PFM performance rating system using 28 high-level indicators that was developed by the Public Expenditure and Financial Accountability (PEFA) multi-agency partnership program was applied in Afghanistan in 2005 and 2007. PEFA is comprised of the World Bank, IMF, EC, and several other agencies. The system is structured around six core dimensions of PFM performance: i) budget credibility, ii) comprehensiveness and transparency, iii) policy-based budgeting, iv) predictability and control in budget execution, v) accounting, recording, and reporting, and vi) external scrutiny and audit. Afghanistan’s ratings against the PFM performance indicators generally portray a public sector where financial resources are, by and large, being used for their intended purposes. This has been accomplished with very high levels of support from international firms; this assistance will continue to be needed over the medium term if these ratings are to be maintained. There is also much room for improvement.

107.In spite of undeniable gains made in reconstruction since the end of 2001, the challenges facing Afghanistan remain immense; not least because of the tenuous security situation in the region and continued prevalence of a large illegal and illicit economy. The policy framework benchmarks have not yet been fully estimated so various priorities are funded through the annual budgeting process. The rising costs of the security sector constitute the major constraint on attainment of fiscal sustainability. With regard to executive oversight, the national assembly will play an increasingly active role. All in all, the new national development strategy has created high expectations of the executive which could prove to be quite difficult to meet.

108.The public sector, in spite of considerable efforts to reform its core functions, remains extremely weak outside of Kabul. The lack of qualified staff in the civil service and the absence of qualified counterparts in the government after 30 years of war and conflicts is a binding constraint. Delays in reforming the pay structure and grading of civil servants have severely crippled the public administration of the country. Domestic revenues lag behind expenditures by a factor of ten to one. Large-scale corruption could emerge to undermine the government’s efforts to enhance aid flows through national accounts. Capacities to track expenditures and monitor expenditure outcomes have improved, but they need rapid and substantial strengthening if progress toward the attainment of national development targets is to be monitored. Currently, 75% of external revenues bypass government appropriation systems.

109.The World Bank is financing a Financial Management Consultant to assist the Ministry of Finance, an Audit Advisor to assist the Control and Audit Office, and a Procurement Facilitation Consultant to assist in Procurement-related activities. Also an Internal Audit function is being developed within the Ministry of Finance with World Bank financing. USAID, and earlier the Indian Aid Assistance Program, is financing a team of consultants and advisors to assist the Da Afghanistan Bank in local as well as foreign currency operations. The activities carried out under the existing Public Financial Management Reform projects have helped the Government to ensure that appropriate fiduciary standards are maintained for public expenditures, including those supported by the Bank and the donor community.

110.Progress has been slower than expected in shifting from operations support provided by the three Direct Operations Consultants to capacity development and knowledge transfer to the civil servants.

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Given that, is expected that the Consultants will continue to be required for the medium term. Challenges still remain in attaining the agreed upon fiduciary standards and also to further enhance them. And to make matters more complex, the regulatory environment in Afghanistan has advanced significantly in the past three years. Unfortunately, even mastery of basic skills in the early environment does not fully qualify the civil servants to work effectively in the new emerging environment.

Risk Assessment and Mitigation

111. The table below identifies the key risks that the project may face and indicates how these risks are to be addressed. The overall FM risk rating is “High” but the residual risk rating after application of the mitigating measures is “Substantial”.

Risk Risk Rating

Risk Mitigation Measures Residual Risk

Condition of negotiations,

Board or Effectiveness

(Y/N)1. INHERENT RISKCountry Inherent Risk M Source - PFM study M NProject Financial Management Risk H Ensure Designated Account

remains active with regular expenditure reporting, maximize usage of direct payment method for expenditures; major procurement through Procurement Facilitation Consultant.

S N

Perceived Corruption H Government commitment, internal controls and internal audit will help to reduce the high level of perceived corruption.

S N

Overall Inherent Risk H S2. CONTROL RISK1. Weak Implementing Entity S Reform Implementation

Management Unit (RIMU) of MOF will undertake the day-to-day management and the existing PFM Reform Steering Committee (PSC) will perform oversight function. Both RIMU and PSC have defined TOR. Bank has reviewed these TORs and found them adequate. A Financial Management Specialist will be recruited specifically for the RIMU to take responsibility of the project FM activities.

M N

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2. Funds Flow S Payments will be made to contractors, consultants, and suppliers from the Designated Account (DA) by SDU-MOF. In addition to payments out of DA funds, the implementing entity can also request the SDU to make i) direct payments from the Grant A c c o u n t t o c o n t r a c t o r s , consultants or consulting firms, and ii) special commitments for contracts covered by letters of credit.

These payments would only be made by SDU after due processes and proper authorization from the implementing entity

M N

3. Budgeting S Ensure that project funds are allocated in the annual Government Development Budget. In addition, project should ensure that it seeks for MOF’s approval of unutilized budget amount at each year end, as carried forward budget. Approved carried forward budget are used at the beginning of the new year, and ensure disbursements are made while waiting for the Parliament’s approval of the new year’s budget.

RIMU will coordinate with each c o m p o n e n t i m p l e m e n t i n g e n t i t y f o r p r e p a r a t i o n o f annual work plans and budgets; these would then b e p r e s e n t e d t o t h e P S C for approval. PSC’s function as the oversight body and highest decision making organ of the project includes approval of the budget; however, it is not a statutory provision.

M N

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4. Account ing Pol ic ies and Procedures

S Project will follow international standards. Project accounting procedures and details of the FM arrangements will be documented in an FM Manual to be prepared by the RIMU and approved by the Bank

M N

5. Internal Audit H The internal audit directorate of MOF will review project internal control systems.

S N

6. External Audit H Will be audited by CAO with support from Audit Advisor

S N

7. Reporting and Monitoring H Strengthening the SDU is a priority under the FM Consultant contract, to provide information that will comply with agreed format of financial reports.

This will be facilitated by the excel-based accounting system that will be utilized by the RIMU to maintain records and generate required reports.

S N

OVERALL CONTROL RISK H SDETECTION RISK S Adequate accounting, recording,

and oversight will be provided in project procedures.

Accounting/Recording/oversight by SDU – MOF of all advances/M-16 supported by Financial Management Consultant.

M N

R I S K R A T I N G : H = H I G H R I S K ; S=SUBSTANTIAL RISK; M=MODEST RISK; L-LOW RISKOVERALL FM RISK RATING H S

Strengths and Weaknesses Strengths112.The Government provides assurance to the Bank and other donors that the measures in place to

ensure appropriate utilization of funds will not be circumvented. The Government strongly supports reforms through the Public Financial Management Reform Project to enhance financial management in Treasury operations, public procurement, internal audit in the public sector, and external audit by the Auditor General.

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113.A specific strength is that this is a follow-up project, and thus, the agencies involved in the implementation of each component have experience in implementing Bank projects and following Bank procedures.

Weaknesses and Action Plan

114.The main weakness in this project, as in many others in Afghanistan, is the ability to attract and retain suitably qualified and experienced counterpart staff especially for Financial Management. The additional staff to be funded by the project, together with intensive training programs included in this project, is expected to strengthen the fiduciary arrangements.

Action Plan – To be reviewed at ‘Initial Supervision’

SignificantWeaknesses

Action Responsable Agent

C o m p l e t i o n Date

Project internal controls and procedures need to be defined

Financial Management Manual updated/modified and approved by the World Bank

RIMU/MOF 31st July 2011

Implementing Entity 115.The project would be implemented under the authority of the Minister of Finance (MOF). The

Minister would be assisted by the PFM Reform Steering Committee (PSC) comprising senior MOF departmental managers, a representative of the Ministry of Economy (MoEc) responsible for procurement administration, and a representative of the CAO to maintain focus on results, good communications and a consolidated view of the reform and to discuss and recommend any necessary policy and regulatory improvements.

116.The PSC will serve as the oversight body for the project. The committee will convene at least every quarter to review progress with implementation and review and approve work plans and budget. PSC’s function as the highest decision making organ of the project includes approval of the budget, however, it is not a statutory provision.

117.Daily operations of the project would be managed by RIMU. The RIMU would report to the Minister of Finance on project implementation and will also report and serve as the "secretariat" for deliberations of the PSC. The specific role o f the RIMU would be to plan, coordinate, monitor and evaluate the implementation of the overall PFM reform strategy work program and the achievement of its intended results. This would cover all project-supported activities including those implemented through the MOE and the CAO as well as activities financed by other donor partners (for example, DFID, supporting the development of the Budget Department). The RIMU would also undertake analyses and recommendations of key policy issues affecting the efficient performance and sustainability of PFM reforms. It would be responsible for planning, facilitating and obtaining the contributions of the IARCSC to developing the MOF human resources management capabilities so that they are consistent with overall civil service management regulations and best practices. Lastly, the RIMU would facilitate establishing and maintaining linkages with line ministries and Mustofiats that would be the "clients" in strengthening PFM institutions.

118.Managers of the PPU, Treasury, Internal Audit, MoEc, and CAO being supported through the project (and by other donors) would be responsible for achieving their own specifically assigned results, once they had agreed with annual work plans and established implicit performance agreements through the PSC. The RIMU would monitor these performance agreements.

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119.The Financial Management Specialist now working at RIMU will take responsibility for financial management activities of the project, which will include: ensuring that relevant accounting records as maintained; preparing required monthly, quarterly and annual reports; coordinating with other component implementing entities to ensure that adequate financial management requirements are met; liaising with the SDU to ensure that the Designated Account is replenished when due; and responding to project audits.

120.To ensure that the implementing entities responsible for the other components maintain adequate records and prepare technical and financial reports of their activities, the existing arrangement of a dedicated manager and an accounts officer assigned by the MoEc and CAO will be maintained.

Budgeting

121.RIMU will coordinate with each component implementing entity for the preparation of annual work plan and the derivation of annual budget. This would then be submitted to the PSC for approval. PSC’s function as the oversight body and highest decision making organ of the project includes approval of the budget, however, it is not a statutory provision. RIMU shall also coordinate quarterly budget reviews to ensure adequate budget discipline and control. It will be responsible for ensuring that project expenditures for each fiscal year are captured in the governmental development budget of that fiscal year. The RIMU must get approvals from the presidential office and the Parliament and attach them to B27 and Project Coding Sheet forms at the time of requesting yearly allotments for contracts under the project to avoid delays in payment processing. This will be in respect of the amounts for the activities implemented by MOF, however, for the other components, the respective implementing entities will do follow similar process. In addition, project should also ensure that it seeks for MOF’s approval of unutilized budget amount at each year end, as carried forward budget. Approved carried forward budget are used at the beginning of the new year, and ensure disbursements are made while waiting for the Parliament’s approval of the new year’s budget. Project should seek for approval of carried forward budget forty-five (45) days before the end of the fiscal year end.

Funds Flow

122.The standard funds flow mechanism in Afghanistan will be followed in this project. Project funds will be deposited in the Designated Account (DA) to be opened and maintained at the Da Afghanistan Bank (DAB). The DA, in keeping with current practices for other projects in Afghanistan, will be operated by the Special Disbursement Unit (SDU) in the Treasury Department of MOF. Requests for payments from the DA will be made to the SDU by the project when needed.

123.In addition to payments out of DA funds, the project can also request the SDU to make i) direct payments from the Grant Account to consultants, consulting firms or suppliers, and ii) special commitments for contracts covered by letters of credit. These payments will follow World Bank procedures. All project payments will be made to either international firms or local firms that have bank accounts in DAB, a local commercial bank, or an overseas bank. All payments will be made either through bank transfers into the account of such firms or by check.

FUNDS FLOW CHART

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World Bank / IDA

SDU (MOF)

RIMU (MOF), MOE & CAO

Consultants/ Suppliers, etc

Payments

Designated Account

Provides SOEswith supporting documentation,

reconciliations,& requests replenishment transfers to

Designated Account, OR requests Direct Payments

IDA ReplenishesDesignated

Account

Direct payments

FUND FLOW DIAGRAM

Invoices

Legal requirements for authorized signature124.Ministry of Finance has authorization to disburse funds from the Grant. If necessary, specimen

signatures of authorized signatories’ in MOF will be submitted to the Bank prior to commencing disbursements.

Accounting 125.The SDU will maintain a proper accounting system of all expenditures incurred along with

supporting documents to enable IDA to verify these expenditures. The FM staff of the RIMU and Finance Officers of the other components implementing entities will: i) supervise preparation of supporting documents for expenditures, ii) prepare payment orders (Form M16), iii) obtain approval for M-16s from the relevant authority depending on the payment amount, and iv) submit them to the Treasury Department in MOF for verification and payment. While original copies of required supporting documents are attached to the Form M16, the project units are required to make and keep photocopies of these documents for records retention purposes. The FM Consultant in the MOF/SDU will use the government's computerized accounting system, AFMIS, for reporting, generating relevant financial statements, and exercising controls.

126.RIMU FM staff will ensure that essential project transaction records are kept in AFMIS to generate required monthly, quarterly, and annual reports. At the MoEc and CAO, the assigned accounting officer will maintain essential project records and prepare basic financial reports (Receipts and Payments Account) on their activities.

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127.The FM Manual, to be updated or modified by the RIMU, and to be approved by the Bank, will include: i) roles and responsibilities for all FM staff, ii) documentation and approval procedures for payments, iii) project reporting requirements, and iv) quality assurance measures to help ensure that adequate internal controls and procedures are in place and are being followed.

128.The existing FM Manual has also established project financial management in accordance with standard Afghan government policies and procedures including use of the government Chart of Accounts to record project expenditures. The use of these procedures will enable adequate and timely recording and reporting of project expenditures. Overall project accounts will be maintained centrally in SDU, which will be ultimately responsible for recording all project expenditures and receipts in the Government’s accounting system. Reconciliation of project expenditure records with MOF records will be carried out monthly by the RIMU.

Internal Control & Internal Auditing

129.The FMS in RIMU will be responsible for coordinating FM activities for the project with the SDU. Project–specific internal control procedures for requests and approval of funds have been described in the FM Manual including segregation of duties, documentation reviews, physical asset control, asset verification, and cash handling and management.

130.Annual project financial statements will be prepared by SDU/MOF detailing activities pertaining to the project as separate line items with adequate details to reflect the details of expenditures within each component.

131.The project financial management systems will be subject to review by the internal audit directorate of MOF. The programs will be determined by the Director General of Internal Audit using a risk-based approach. Internal audit TORs will be included in the project’s updated FM manual, required to be reviewed and approved by the Bank. The Internal Audit Department of MOF, which is also being supported by this project has been assessed and found capable of meeting the needs of this project.

132.The frequency of the internal audit exercise should be at least every six months. A copy of each internal audit report should be provided to the World Bank once completed.

133.The Bank also reserves the right to conduct an external review of the project activities and financial flows.

External Audit

134.The project accounts will be audited by the Auditor General, with the support of the Audit Advisor, with terms of reference satisfactory to the Association. The audit of project accounts will include an assessment of the: (a) adequacy of the accounting and internal control systems; (b) ability to maintain adequate documentation for transactions; and (c) eligibility of incurred expenditures for Association financing. The audited annual project financial statements will be submitted within six months of the close of fiscal year. All agencies involved in implementation and maintaining records of expenditures would need to retain these as per the IDA records retention policy. Specifically for the CAO implemented activities, for any year for which the Administrator so determines, the GOA will prepare separate financial statements for the CAO’s implemented activities which shall be audited by independent auditors acceptable to the Bank (other than the CAO) and these audited financial statements will be furnished to the Administrator jointly with the project financial statements.

135.The following audit reports will be monitored each year in the Audit Reports Compliance System (ARCS):

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Responsible Agency Audit Auditors DateMOF SOE, Project Accounts and

Designated AccountAuditor General Sep 22

MAF CAO Component M O F I n t e r n a l Auidt Dept.

I n y e a r 3 o f project.

136.The Bank-funded projects already or currently being implemented by MOF (PFMRP I, FSSP, EMOISP, MFSPRP & ECMTFP) have no overdue audit reports. The key issues raised in these projects’ audit reports up to Solar Year 1387 have been resolved satisfactorily. Similarly, with respect to Solar Year 1388, the Bank recently communicated the issues to the client and the responses have been received and are being reviewed by the Bank.

Financial Reporting 137.Financial Statements and Project Reports will be used for project monitoring and supervision. Based

upon the FM arrangements of this project, Financial Statements and Project Reports will be prepared monthly, quarterly, and annually by the RIMU. These reports will be produced based on records kept on Excel spreadsheets after due reconciliation to expenditure statements from SDU (as recorded in AFMIS) and bank statements from DAB.

138.The quarterly Project Interim Unaudited Financial Reports will show: (i) sources and uses of funds by project component, and (ii) expenditures consolidated and compared to governmental budget heads of accounts, the project will forward the relevant details to SDU/DBER with a copy to IDA within 45 days of the end of each quarter. The government and IDA have agreed on a pro forma report format for all Bank projects; a final customized format for project reports will be agreed prior to project negotiations.

139.The annual project accounts to be prepared by SDU from AFMIS after due reconciliation to records maintained at the RIMU, will form part of the consolidated Afghanistan Government Accounts for all development projects. This is done centrally in the Ministry of Finance Treasury Department, supported by the Financial Management Advisor.

Disbursement Arrangements

140.ARTF financing of the project will be 100%, inclusive of taxes. Table 1 below shows the allocation of ARTF proceeds in a single, simplified expenditure. The single category for “goods, non-consulting services, consultancy services, training and workshops and incremental operating costs” is defined in the financing agreement to facilitate preparation of withdrawal applications and record-keeping. The closing date of the project will be December 31, 2014 with a final disbursement deadline six (6) months after the closing date.

141.During this additional 6-month grace period, project-related expenditures incurred prior to the closing date are eligible for disbursement or documentation against advances to the designated account. Disbursement procedures set out in the Bank’s “Disbursement Handbook for World Bank Borrowers” (October 2005) are applicable to this project.

Table 1: ARTF Financing by Category of Expenditure (US$ million)

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Expenditure CategoryAmount of the

Grant AllocationsFinancing Percentage

(1) Goods, non-consulting services, consultants’ services, training and workshops and Incremental Operating Costs

73,000,000 100 %

Total 73,000,000 100%

142.Summary Reports. Summary reports in the form of Statements of Expenditure will be used for expenditures against contracts for i) goods valued at less than US$200,000 equivalent per contract, ii) consulting services by firm valued at less than US$100,000 equivalent per contract; iii) individual consultants valued at less than US$50,000 equivalent per contract; all training programs and workshops and incremental operating costs. Payments for contracts against goods and consulting services above the aforementioned thresholds will require full documentation.

143.Designated Account. A single designated account will be opened at DAB (or in a local commercial bank if approved) in US dollars for a ceiling of advance up to four (4) months’ worth of eligible expenditures to be paid out of the funds in the designated account. The SDU in MOF will manage both payments from and new advances/replenishments to this account.

144.Cash advances may be issued from the Designated Account to be held and managed by RIMU (MOF). This agency’s internal controls, cash handling accounting, and preparation of Statement s of Expenditures (SOEs) have been assessed as satisfactory.

145.New cash advances will only be made when all other prior cash advances have been justified through submission of SOEs to the SDU. The designated account will be replenished on a quarterly basis.

146.Direct Payments. Third-party direct payments will be permitted for amounts exceeding 20 percent of the advance in the Designated Account. All such payments require prescribed supporting documentation.

147.Preparation of Withdrawal Applications. RIMU/MOF will prepare summary expenditure reports and forward these reports to the SDU/MOF for further processing into withdrawal applications. The SDU will review withdrawal applications for quality and conformity to Treasury procedures, and then obtain authorized signatures. Selected RIMU (MOF) finance staff will be registered as users of the World Bank Web-based Client Connection system, and play an active role in managing the flow of disbursements.

Financial Management Covenants

148.Financial covenants will include:149.MOF shall submit audited financial statements for the project within six months of the end of each

fiscal year. The Project’s audit report will cover the financial statements, the Designated Account, and SOEs, in accordance with terms of reference agreed with the Association. Specifically for the CAO implemented activities, for any year for which the Administrator so determines, the GOA will

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prepare separate financial statements for the CAO’s implemented activities which shall be audited by independent auditors acceptable to the Bank (other than the CAO) and these audited financial statements will be furnished to the Administrator jointly with the project financial statements.

• Un-audited project interim financial reports will be submitted by RIMU (MOF) on a quarterly basis to the World Bank and a copy to SDU-MOF within 45 days after the end of each quarter.

• The components implementing entities will ensure that key FM staff of the Project Support Units are retained throughout the duration of the project in order to ensure smooth project implementation.

Regular Supervision Plan

150.During project implementation, the Bank will supervise the project’s financial management arrangements. The frequency will be bi-annual at a minimum and may be increased based on the needs of the project and the risk factors. The team will:

• Review the project’s quarterly un-audited interim financial reports as well as the project’s annual audited financial statements and auditor’s management letter.

• Review the project’s financial management and disbursement arrangements (including a review of a sample of SOEs and movements on the Designated Account and bank reconciliations) to ensure compliance with the Bank's minimum requirements.

• Review agencies’ performance in managing project funds to ensure that it is timely, accurate, and accountable. Review Internal Audit reports. Particular supervision emphasis will be placed on asset management and supplies.

• Review of financial management risk rating, compliance with all covenants, and follow up on the action plan.

Conclusion

151.The FM arrangements, including the systems, processes, procedures, and staffing are adequate to support this project - subject to implementation of the items listed in the action plan.

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Annex 6: Procurement Arrangements

AFGHANISTAN: Public Financial Management Reform Project - II

COUNTRY CONTEXT

152.The Bank has gained substantial experience and understanding of the procurement environment in Afghanistan through its involvement in the interim procurement arrangements put in place under the Emergency Public Administration Project (2002) and though working with the institutions currently responsible for procurement functions, including the Afghanistan Reconstruction and Development Services. As part of the broader review of Afghanistan’s Public Finance Management (PFM) system, the Bank carried out two assessments, in June 2005 and September 2007, of the procurement environment in the country based on baseline and performance indicators developed by a group of institutions led by the World Bank and OECD/DAC.

153.The first key issue identified through the procurement assessments was lack of ownership and lack of a procurement champion in the Government, which is a serious impediment to reform and to inter-ministerial dialogue. A second, related issue is the lack of capacity in the line ministries, as evidenced by their inability to define and communicate effectively their desired functional specifications/terms of reference in their procurements. The lack of capacity is also evident in the local private sector—while the number of bids is reasonably high, there is a lack of understanding about how to apply public procurement rules.

GOVERNMENT REFORMS

154.A new Procurement Law (PL) was adopted in November 2005 that radically transforms the legal and regulatory framework. In accordance with the law, GOA established a Procurement Policy Unit (PPU) under the Ministry of Finance to provide oversight for the PL’s implementation. PPU has issued several circulars regarding implementation of the PL including “Rules of Procedures for Public Procurement” (Circular: PPU/C005/1386 of April 12, 2007) and “Procurement Appeal and Review Mechanism” (Circular: PPU/N001/1385 of March 18, 2007). PPU and MOF have developed several standard bidding documents (SBDs), standard requests for proposal (SRFPs), standard requests for quotation (RFQs) for national and international procurement of goods/works and consulting services following national procedures as per the PL’s Glossary of Procurement Terms in English and Dari. MOF has now mandated the use of: (i) SBDs for Goods and Works (Circular PPU/C024/1388 of June 10, 2009); (ii) SRFQs (Circular PP/C026/1388); and (iii) SRFPs (Circular PPU/C029/1388 of January 13, 2010). A Procurement Management Information System (PMIS) has been developed and is being piloted in three line ministries. In addition, a PPU Web site will facilitate publication of procurement notices and contract awards in addition to

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similar action being done under the ARDS-Web site and the Web sites of the line ministries, as applicable.

155.In the absence of adequate capacity to manage procurement activities effectively, a central procurement facilitation unit (ARDS–PU) has been established under Ministry of Economy to support line ministries and project implementing agencies. The Bank and the Government have agreed on a program for country-wide procurement reform and capacity building, leading to the transition from centralized to decentralized procurement services. The above was implemented by an international consultant under the supervision of PPU/MOF and financed under the Public Administration Capacity Building Project (PACBP) and the Public Finance Management Reform Project (PFMRP). The consultant has conducted several basic, intermediate, and advanced level training programs. The implementation of the procurement reform component of the PACBP/PFMRP should be considered with due priority to ensure that fiduciary standards are further enhanced and that capacity is developed in the Government to maintain these standards.

156.The Procurement Law has been revised in July 2008 and amended in January 2009 and issued as a new Law by the Ministry of Justice and was published in the Official Gazette Number 957, 29.10.1387 (18 January 2009). The revised “Rules of Procedures for Public Procurement” have been issued as circular PPU/C027/1387 of November 18, 2009.

GENERAL PROCUREMENT FOR PFMR II

157.Procurement for the project will be administered in accordance with the World Bank’s Guidelines: Procurement under IBRD Loans and IDA Credits dated January 2011 Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated January 2011, and the provisions stipulated in the Financing Agreement. In addition, the World Bank’s Guidelines on Preventing and Combating Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants dated October 15, 2006 and revised January 2011 has been shared with the recipient. The World Bank’s Standard Bidding Documents, Requests for Proposals, and Forms of Consultant Contract will be used. Goods following National Competitive Bidding (NCB) procedures shall be procured using the agreed Standard Bidding Documents (SBDs) for Afghanistan. It has been agreed by both parties that in the event of a conflict between IDA Procurement/Consultant Guidelines, as per Article 4 (2) of the Procurement Law July 2008 (Amendments in January 2009 incorporated) of the GOA, the IDA Procurement/Consultant Guidelines shall prevail.

Procurement of Work

158.There are no civil works envisaged under the project.

Procurement of Goods and Non Consulting Services

159.Goods to be procured under this project will include procurement of vehicles, office furniture and IT equipment (servers, desk tops and lap top computers, printers, etc.).

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160.Procurement of the goods will be done using Bank’s SBD for Goods for all contracts following International Competitive Bidding (ICB) procedures. National SBDs agreed with IDA, or satisfactory to IDA, will be used for the procurement of goods following National Competitive Bidding (NCB) procedures. Shopping shall be in accordance with paragraph 3.5 of the Bank’s Guidelines. Any contract estimated costing more than US$ 200,000 shall be procured following ICB procedures. Any contract estimated to cost more than US$ 50,000 equivalent and less than US$200,000 shall be procured following NCB procedures. Any contract estimated to cost less than US$50,000 equivalent shall be procured following shopping procedures. Goods that meet the requirements of paragraph 3.7 of the World Bank Procurement Guidelines may be procured following direct contracting procedures with prior agreement with IDA. The client may with prior agreement with IDA consider using Framework Agreements in accordance with paragraph 3.6 of Bank’s Procurement Guidelines.

Selection of Consultants

161.The proposed grant would finance several consultancy assignments for both individuals and firms.

Firms

162.The following major assignments are to be financed under the project for different departments and units under MOF and MOE: (a)Internal Audit Department (IAD): (i) CAT/IT/English to support internal audit training; (ii)IT Application Training; (iii)Supply and Installation of LAN; (b)Treasury Department: (i)Continuation of Direct Operations Support to Treasury (Financial Management); (ii) Continuation of Free Balance software Support; (iii) Continuation of CAT/ACCA Training; (iv) Continuation of Line Ministry Capacity Assessments; (c) Controllers Audit Office (CAO): (i)Continuation of Audit Consultancy: and (d) ARDS/MOE: (i) Continuation of Procurement Facilitation support. There will be several training assignments. MOF will continue to conduct the Procurement Capacity Building in association with Afghanistan Civil Service Institute.

163.Consistent with OP 8.0 and based on the need for continued support and the performance of the consultants some of the above assignments where the initial selection was done following competitive procedures may be hired following Single Source Selection procedures and contract negotiated on the basis of the initial contract.

Individual Consultants

164.The project will finance hiring of a considerable number of individual consultants to work as staff at the RIMU and other implementing units. The contracts of the staff already providing the services shall be extended based on the need and the performance of the consultants for the remaining period of the project.

165.Short lists of consultants for services estimated to cost less than US$100,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. The selection methods applicable for consultants are QCBS, QBS, CQS, LCS, FBS, and SSS for firms as per Section V of the

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Bank’s Guidelines for Individuals. The threshold for CQS will be less than US$200,000 equivalent per contract.

Operating Costs

166.The cost which would be financed by the project would be procured using the implementing agency’s administrative procedures, which were reviewed and found acceptable to the Bank. The operating costs will include operations and maintenance of equipment and vehicles, hiring of vehicles, office rent, costs of consumable, fuel, office utilities and supplies, Bank charges, and advertising expenses, training fees for individuals with prior agreement with IDA for professional development, operating expenditure for conducting training at the Afghanistan Civil Service I but exclude any salaries and allowances of civil servants.

Staff Development

167.The client’s staff shall participate at international and regional training programs to enhance capacity and knowledge. The staff of the PPU and ARDS may undertake both short/long term programs focused on procurement and contract management related subjects. The client shall prepare a training plan for the duration of the project and agree with IDA to prior to implementation/initiation. Such plan may be modified based on the need with agreement of IDA.

ASSESSMENT OF THE AGENCY’S CAPACITY TO IMPLEMENT PROCUREMENT

168.MOF will have the overall responsibility for all procurement under the project.

169.An assessment of the capacity of MOF to implement procurement actions for the project has been carried out by Arun Kumar Kolsur, Procurement Specialist in January / February 2011. The assessment reviewed the organizational structure for implementing the project and interactions.

170.During the procurement capacity review it was revealed that the procurement department of MOF does not have sufficient capacity to handle procurement under the project. The procurement department of the MOF is staffed with one Procurement Manager and eight Procurement Officers under the Procurement and Service Director. They do not have experience in carrying out procurement under Bank financed projects. Even though the unit will be responsible for carrying out small value procurement, the procurement risk is assessed as “high”.

171.To mitigate the risk the following measures are under process by MOF.

172.MOF will hire the services of two competent procurement specialists/officers to assist MOF procurement unit to carry out the procurement activities related to the project considering that proposed contract values are small. This will be carried out in year 1 of the project in line with the project implementation plan of sub-component 1.2 -Temporary Capacity on Procurement to the Line Ministries. However for all large value contracts as per the government directive shall be carried out in consultation with the procurement unit of the ARDS under MOE. ARDS –PU is currently manned by an International Procurement Firm.

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173.With the above arrangements in place, the risk is rated as “Medium”.

Table 1 Procurement Risk Mitigation Monitoring Plan

S NoProcurement Process/step

Process Indicator

Sources of Information and

means of verification

Use of information for risk mitigation

Performance target to be

achieved

1General Procurement Notice

GPN Published Documentary evidence filled in MOF/RIMU

To ensure GPN is widely published to increase transparency

100%

1General Procurement Notice

Number of responses received against GPN

Existence of updated responses registration file in MOF/RIMU

To increase competition. 100%

2

REOI/Invitation for Bids/Quotations and Bidding process

REO/IFB Published

Copy to be available in the file. 10% of the procurement files will be verified

To ensure SPN/REOI is widely published to increase transparency

100%

2


Minimum bidding time provided : reasonable time for shopping;[4 weeks in NCB and RFP and 6 weeks in ICB and RFP with complex assignments]

Deviations to be collected from procurement files

To ensure competition

100%

2


Attention of the firms/individuals who expressed interest against GPN while issuing REOI/SPN was called


To ensure competition 100%

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Process Indicator





achieved

Quotations and Bidding process

Number of Bid Documents sold and Number of firms confirmed participation against RFP issued

Sale of bid documents register and confirmation from consultants about receipt of RFP. 10% procurement files will be verified

To ensure competition

100%

Quotations and Bidding process

Clarifications/addendums issued


To ensure transparency 100 %

3

Preparation of Bid Documents/RFPs

Cleared by IDA without seeking clarifications/comments

Number of cases to be collected from procurement files

Capacity building measures initiated by international procurement specialist

Continued progress

4Bid Submission

Bid opening minutes sent to all bidders

Timeliness to be verified from procurement files10% of the procurement files will be verified

To ensure transparency 100%

Formation of bid/quotation evaluation committee before bid/quotation closing.

Deviations to be collected from procurement files

To expedite finalizing of bids/proposal evaluation.

100%

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Process Indicator





achieved

5

Bid/quotation Evaluation/REOI and proposal evaluation

Timeliness of Evaluation: (a) 5-7 working days following shopping procedure; (b) 15-20 working days following NCB/ICB procedures; (c) 10 working days for individual consultants; and (d) 15 working days for firms for REOI evaluation, 21 working days for TER and 20 working days to conclude the contract negotiations after commencement of contract negotiations.

Deviations to be collected from Procurement Activity Schedule

Finalizing of bids/proposal evaluation in timely manner.

Compliance and continuous

improvement for reduction in timelines for all

activities

5

Bid/quotation Evaluation/REOI and proposal evaluation

Number of Re-bids

Procurement files

continuous improvement

for reduction in number of re-

biddings

6

Bid Evaluation Report and Technical Evaluation Report

Cleared by IDA without seeking clarifications/comments

Data to be collected from procurement files

To improve procurement process.

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Process Indicator





achieved

7 Contract Award

Contract award within the original bid/quotation validity

Deviations to be collected from Procurement Activity Schedule


100%

7 Contract Award

(a) Contract award published within 14 days of NOA

1. ( b ) Av e r a g e t i m e taken for publication o f award

(c) Number of cases award not published


To ensure transparency 100%

8Delivery/ Completion

Delivery time: Percentage of Contracts completed/ delivered within the original schedule as mentioned in Contract



8Delivery/ Completion

Liquidated damage: Percentage of Contracts having liquidated damage imposed for delayed delivery/completion



60%

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Process Indicator





achievedCompletion rate: Percentage of Contracts fully completed and accepted



90%

9 Payment

Average number of days taken to release payment



15 days

9 Payment

Late payment: Percentage of cases (considering each installment as a case) with delayed payment



20%

10 Complaints

Procurement complaints pending over 60 days

Complaint register To ensure transparency 90%

10 Complaints

Resolution of complaints resulted in modification of contract award

Complaint register and Procurement files

To ensure transparency

0%

10 Complaints Resolution of complaints within 15 working days

Complaint registerTo ensure transparency 70%

10 Complaints

Complaints forwarded to MOF for independent review

Complaint register To ensure transparency

100%

11Contract dispute resolution

Unresolved Disputes over 60 days

Procurement files To ensure transparency

10%

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Process Indicator





achieved

12Procurement Capacity Building

Number of procurement staff trained in Civil Service Institute

Procurement training plan


80% staff to be trained during first year and

100% by second year.12

Procurement Capacity Building Number of staff

trained outside Afghanistan

Procurement training plan


One staff during first 18

174.Governance and Accountability agenda: All the contract opportunities and contract awards will be widely published in the internet, ARDS website, PPU/MOF website and when required in UNDB and Bank’s external website.

Procurement Plan

175.The Borrower, at appraisal, developed a Procurement Plan for project implementation that provides the basis for the procurement methods. This plan has been agreed between the client and the IDA Task Team on February 28, 2011 and is available at the MOF offices. It will also be available in the Project’s database and on the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

FREQUENCY OF PROCUREMENT SUPERVISION

176.In addition to the prior review functions the Bank’s procurement specialists will carry out two supervision/implementation support missions per annum.

177.Procurement Audit: Bank staff or Bank appointed consultant will carry out post procurement audits once a year or during supervision missions.

PROCUREMENT PLAN

General

1. Project Information:

o Country: Islamic Republic of Afghanistan

o Project Name: Second Public Financial Management Reform Project

o Implementing Agency: MOF and other Units

o Grant No: XXXX

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o Bank’s approval Date of the Procurement Plan [Original:]

o Date of General Procurement Notice:

o Period covered by this procurement plan: minimum 18 months

Attachment 1 – Details of Procurement Arrangements Involving International CompetitionGoods and Non Consulting Services

2. List of contract packages which will be procured following ICB and Direct Contracting procedures:

There are no packages envisaged which will follow ICB or Direct contracting procedures at this point of time.

A. Goods and Non-Consulting Services

(a) List of contract Packages that will be procured following ICB, NCB and direct contracting:

Table 2 Procurement Method and Threshold

Procurement Method Threshold for Methods (US$)

Comment

1. ICB (Goods) 200,000 Equivalent or more2. NCB (Goods) 200,000 Equivalent or less3. Shopping (Goods ) 50,000 Equivalent or less4. ICB (Non-Consultant Services) 200,000 Equivalent or more

3. Prior Review Threshold: Procurement Decisions subject to Prior Review by the Bank as stated in Appendix 1 to the Guidelines for Procurement:

Procurement Method Prior Review Threshold US$

Comments

1. ICB (Goods & non consulting services)

All Contracts

2. NCB (Goods) 200,000 Equivalent or more 3. Direct Contracting (Goods) All regardless of value

Procurement Method Prior Review Threshold Comments1. ICB (Goods & non consulting

services)All Contracts

2. NCB (Goods) 200,000 Equivalent or more

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3 Direct Contracting (Goods) All regardless of value

Prequalification: NIL

Procurement Packages with Methods and Time Schedule

Goods:RIMURIMURIMURIMURIMURIMURIMURIMURIMURef No Package ID No Description Estimated

Cost in USD

Procurement Method

Pre- Qualification

Banks Review

Expected Date

Remarks

1

MOF//PFMRII/ Goods/006

Equipment, furniture and video conference set for HRMD

30,000 Shopping NO

Post Mar-11 for 2 HR training

centers in the region

and for HRMD in

HQ2

MOF//PFMRii/ Goods/007


33,000 Shopping NO Post

Mar-12 for 2 more HR training centers in the region

and for HRMD in

HQ3

MOF//PFMRII/ Goods/008


36,300 Shopping NO Post

Mar-13 for 2 more HR training centers in the region

and for HRMD in

HQ4

MoF/PFMR II/Good 009 2 laptops and

2 printers

3,000 shopping No Post

April 2011For training and M&E specialists

IADIADIADIADIADIADIADIADIADRef No

Package ID No

Description Estimated Cost in USD

Procurement Method

Pre- Qualification

Banks Review

Expected Date

Remarks

75

1

IAD/002G/11

Laptop, P.Copier, Printers, Scanner, Flash Disks, UPS, Projector, etc. (IT Equipments) for Project Office (ATP offices)

50,000 Shopping

NO Post Apr-11

Required for Project offices

2

IAD/003G/11

Laptops, P.Copier, Printers, Scanner, for DG Office (IAD)

23,000 Shopping

NO Post May-11 Required for DG IAD

office

3

IAD/004G/11

Laptops, Cabinet, Voice recorder, Vedio tiny Cameras, Cell Phones, Scanner, External HDD, Digital Camera, HD Printer & Copier, Briefcases. (For FRAUD INVESTIGATION Dept)

49,000 Shopping

NO Post Jul-11

For Strengthening

FIU Department with modern equipments

4

IAD/006G/1102 Split Air Conditioner for Project Office. (Cool/Hot)

1,400 Shopping

NO Post Apr-11Required for ATP Project

office.

Ref No

Package ID No


Procurement Method

Pre- Qualification

Banks Review

Expected Date

Remarks

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5

IAD/007G/11 3 Vehicles (Van) 120,000 NCB

NO Post May-11 2 for FIU Investigators & 1 for IAD Advisors /

staff movement between

Ministries and other

organizations. MoF had

provided one but they took it back saying they them self

need it.

PPUPPUPPUPPUPPUPPUPPUPPUPPURef No

Package ID No Description Estimated Cost in USD

Procurement Method

Pre- Qualification

Banks Review

Expected Date

Remarks

1

FRQ/PPU/04/89

Procurement of 26 Laptop Computers and 26 Pcs of Printers for PSs

32,500 Shopping

NO Post Feb-11 Will be purchased

for 26 Procureme

nt Specialists

2

FRQ/PPU/05/89

Procurement of a vehicle for PPU Office

25,000 Shopping

NO Post Mar-11 Will be purchased

for PPU office after obtaining WB NOL

ARDSARDSARDSARDSARDSARDSARDSARDSARDSRef No

Package ID No


Procurement Method

Pre- Qualification

Banks Review

Expected Date

Remarks

1 ARDS-PU-062

Electrical Equipment

5,556 Shopping NO Post Dec-11 PFMRPII

2 ARDS-PU-065

Laptop Computers

(20)

26,667Shopping NO

Post Jan-12 PFMRPII

77

3

ARDS-PU-066

Office Furniture and Fixture (Desks, Chairs, Filing Shelves, Drawer etc)

5,556

Shopping NO

Post Jan-12 PFMRPII

4ARDS-PU-067

Printers, Copiers,

Scanners & other IT

equipment.

33,334

Shopping NO

Post Jul-11 PFMRPII

5 ARDS-PU-068

Internet connection

44,445 Shopping NO Post Nov-11 PFMRPII

CAO CAO CAO CAO CAO CAO CAO CAO CAORef No

Package ID No Description

Estimated Cost in USD

Procurement Method

Pre- Qualification

Banks Review

Expected Date

Remarks

1CAO/Dev/8/10

Furniture for new building

91,000 ShoppingNO Post Mar-11 PFMRPII

Selection of Consultants

Table 3: Selection Methods and Thresholds

Selection Method Threshold Comments1. CQS for Firms US$ 200,000 equivalent or less2. QCBS,QBS, FBS, LCS depending on the nature and complexity

of assignment

2. Prior Review Threshold: Selection decisions subject to Prior Review by World Bank as stated in Appendix 1 to the Guidelines Selection and Employment of Consultants:

Selection Method Prior Review Threshold Comments1. Competitive Methods (Firms) $100,000 or more2. Competitive methods

(individuals)$50,000 or more

3 Single Source (Firms)/Individuals

All regardless of value

78

4. Short list comprising entirely national consultants: Short list of consultants for services, estimated to cost less than US$100,000 equivalent per contract, may comprise entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

Table 4 List of Consulting Assignments with Shortlist of International Firms or Individuals

(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD

S/NPackage ID No Description of

Services Est Cost ( in USD)

Proc. Method

WB Review

Expected Award Date

Expected Completion Date

Present Status

1 ARDS/MoF/798

CAT/IT/English Training ( Consultancy Services to support internal audit training.) Original contract amended to include Treasury Staff English training.

180,900CQS Prior July-08 July-11 Contract is Under PFMR

3 MoF/LAN/110

Consultancy Services for Supply & Services for Installation of LAN in IAD

400,000QBS Prior May-11 July-11Installation of Local Area Network in IAD

4 MoF/ATP2/120Consultancy Services to support internal audit training. (ATP-2)

500,000QBS Prior May-11 May-12 PFMRII

5 MoF/CAT2/130

CAT / IT/ English Training ( Consultancy Services to support internal audit training) 200 ppl


6 MoF/MIS/140Consultancy Services for Internal Audit System Application

500,000QBS / SSS Prior November-11 October-11 PFMRII

8 MoF/IAD/Eng/160Consultancy Services for English Language training to the senior level staff of IAD / MOF

50,000CQS / LCS Post April-11 April-12 PFMRII

(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury

S/NPackage ID No

Description of Services Est Cost ( in

USD)Proc. Method

WB Review

Expected Award Date


Present Status

79

1 MOF-1Treasury Systems Development & Rollout & Direct Operations Support to Treasury

1,140,000SSS Prior March-11 August-11Extension Proposed For 6 months

2

Treasury Systems Development & Rollout & Direct Operations Support to Treasury(Financial Management Consultant)

10,368,000LCS/SSS Prior inception report by 30- sep-11 May-14

may be extended following SSS under PFMRII based on the consultant's performance

3 FreeBalance Dedicated Support Center 660,000SSS Prior December-11 31-Feb-14

contract to be signed up to December 2013 with potential for extension for another 2 months to Feb. 2014

6 CAT / ACCA Training 1,240,000QCBS Prior NA NA PFMRII

7 Conversion Training for Afghan Professors 750,000QBS/IC Prior NA NA PFMRII

8 Consultancy on Line Ministry PFM Capacity Assessments

1,240,000SSS Prior NA NA PFMRII

(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO

S/N

Package ID No

Description of Services

Est Cost ( in USD)

Proc. Method

WB Review

Expected Award Date


Present Status

1 CAO 705 Audit operations consultant 4,000,000QBS/SSS Prior November-08 November-11

Contract is Under PFMRP May be extended following SSS based on the performance of the consultant

(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS

80



Proc. Method

WB Review

Expected Award Date


Present Status

1 MoEc/ARDS/002/QCBS Central Procurement Facilitation 4,000,000QCBS Prior August-11 September-13 PFMRII

81

82

PFMRP II Procurement PlanPFMRP II Procurement PlanPFMRP II Procurement PlanPFMRP II Procurement PlanPFMRP II Procurement PlanPFMRP II Procurement PlanPFMRP II Procurement PlanPFMRP II Procurement PlanPFMRP II Procurement PlanA: Consultancy Services (Individuals & Firms)A: Consultancy Services (Individuals & Firms)A: Consultancy Services (Individuals & Firms)A: Consultancy Services (Individuals & Firms)A: Consultancy Services (Individuals & Firms)A: Consultancy Services (Individuals & Firms)A: Consultancy Services (Individuals & Firms)A: Consultancy Services (Individuals & Firms)A: Consultancy Services (Individuals & Firms)

S/N Package ID No Description of Services

Est Cost ( in USD)

Proc. Method

WB Review

Expected Award Date


Present Status

(ii) Individual Consultants RIMU(ii) Individual Consultants RIMU(ii) Individual Consultants RIMU(ii) Individual Consultants RIMU(ii) Individual Consultants RIMU(ii) Individual Consultants RIMU(ii) Individual Consultants RIMU(ii) Individual Consultants RIMU(ii) Individual Consultants RIMU

1 RIMU/002/PFMR Project RIMU Coordinator 147,000SSS Prior April-10 December-13

Contract is on Going and will be switched to PFMR ii

2 RIMU/006/ PFMRII Project Procurement Analyst 64,800SSS Prior March-11 December-13

Contract is on Going as Procurement Assistant . To be changed in PFMRII

3 RIMU/007/PFMR Project

Development Budget Officer 64,800SSS Prior March-11 December-13

Contract is on Going as Development Budget Assistant. To be changed in PFMRII

4 RIMU/008/ PFMRII Project

Financial Management Analyst 64,800SSS Prior March-11 December-13

Contract is on Going as Finance Assistant to be changed in PFMR II


Senior Departmental HR Coordinator 85,360Indv Post October-09 December-13 Contract is

Under PFMR


Departmental HR Coordinator 58,200Indv Post August-10 December-13 Contract is

Under PFMR


Departmental HR Coordinator 65,960Indv Post June-10 December-13 Contract is

Under PFMR


HR Policy Analysis & Development Coordinator

104,760Indv Post July-10 December-13 Contract is Under PFMR

9 RIMU/013/ PFMRII Project Training Specialist 90,000Indv Post March-11 December-13 PFMRII

10 RIMU/014/ PFMRII Project M&E Consultant 90,000Indv Post March-11 December-13

Post is Vacant and will be Hired in PFMRII

(ii) Individual Consultants ARDS(ii) Individual Consultants ARDS(ii) Individual Consultants ARDS(ii) Individual Consultants ARDS(ii) Individual Consultants ARDS(ii) Individual Consultants ARDS(ii) Individual Consultants ARDS(ii) Individual Consultants ARDS(ii) Individual Consultants ARDS

S/NPackage ID No


USD)Proc. Method

WB Review

Expected Award Date


Present Status

1 ARDS-PU-020 Director ARDS 173,800SSS Prior April-11 December-13 Contract is Under

PFMR

2 ARDS-PU-021

Procurement Liaison Officers (12 Positions) 813,334Indv Post May-11 December-13 Contract is Under

PFMR

3 ARDS-PU-022 Admin/Finance Manager 100,000Indv. Post October-11 December-13 Contract is Under

PFMR

4 ARDS-PU-023 IT Manager 73,334Indv. Post May-11 December-13 Contract is Under

PFMR

5 ARDS-PU-024 Admin Assistant 34,800Indv. Post August-11 December-13 Contract is Under

PFMR

6 ARDS-PU-025 Public Relations Officer 33,334Indv. Post October-11 December-13 Contract is Under

PFMR

7 ARDS-PU-026 Translator 48,000Indv. Post January-11 December-13 Contract is Under

PFMR

8 ARDS-PU-027 Procurement Officer 30,000Indv. Post May-11 December-13 Contract is Under

PFMR

9 ARDS-PU-028 Receptionist 22,400Indv. Post 23Agust2011 December-13 Contract is Under

PFMR

10 ARDS-PU-031 MIS Advisor 120,000SSS Prior June-11 December-13 Contract is Under

PFMR

11 ARDS-PU-032

Contract Management Specialist (CMS) 160,000SSS Prior June-11 December-13 Contract is Under

PFMR

12 ARDS-PU-033

Senior Procurement Advisor 780,000SSS/ IC Prior 15Agust2011 December-13 PFMRII

13 ARDS-PU-034 Archive Keeper 26,667Indv Post NA December-13 PFMRII

14 ARDS-PU-035 MIS Assistant 28,000Indv Post March-11 December-13 PFMRII

(ii) Individual Consultants PPU(ii) Individual Consultants PPU(ii) Individual Consultants PPU(ii) Individual Consultants PPU(ii) Individual Consultants PPU(ii) Individual Consultants PPU(ii) Individual Consultants PPU(ii) Individual Consultants PPU(ii) Individual Consultants PPU

S/NPackage ID No


USD)Proc. Method

WB Review

Expected Award Date


Present Status

1 PPU/108 National Procurement Advisor 150,282SSS Prior March-10 December-13 Contract is Under

PFMR

2 PPU/101/2 Procurement Policy Specialist 159,000SSS Prior May-10 December-13 Contract is Under

PFMR

3 PPU/106/3 Procurement Policy Analyst 111,339SSS Prior January-11 December-13 Contract is Under

PFMR

4 PPU/137 Proc. Appeal and Review Associate 43,200Indv. Post April-10 December-13 Contract is Under

PFMR

5 PPU/110 Procurement Controller 47,520SSS Post November-10 December-13 Contract is Under PFMR



83

S/NPackage ID No


USD)Proc. Method

WB Review

Expected Award Date


Present Status

8 PPU/114/1 Procurement Controller 47,520SSS Post November-10 December-13 Contract is Under PFMR














22 PPU/133/1 PC Coordinator 63,360SSS Post November-10 December-13 Contract is Under PFMR


24 PPU/128/1 Procurement Controller 47,520SSS Post November-10 December-13

Contract is Under PFMR


26 PPU/124 Procurement Controller 47,520Indv. Post December-10 December-13 Contract is Under PFMR

27 PPU/129 Procurement Controller 47,520Indv. Post December-10 December-13 Contract is Under PFMR

28 PPU/134 PMIS Manager 120,960SSS Post January-10 December-13 Contract is Under PFMR

29 PPU/135 web Developer Assistant 58,905SSS Post January-10 December-13 Contract is Under PFMR

30 PPU/105/2 Procurement Liasion Officer 82,197Indv. Post January-10 December-13 Contract is Under

PFMR

31 International short term Experts for PPU 405,000Indv. Post April-10 December-13 PFMRII

32 PPU/104/3 Procurement Assistant 28,800Indv. Post April-10 December-13 Contract is Under PFMR

84

S/NPackage ID No


USD)Proc. Method

WB Review

Expected Award Date


Present Status

33 PPU/141 Procurement Controller 43,200Indv. Post June-10 December-13 Contract is Under PFMR

34 PPU/107/3 Procurement Monitoring Officer 64,800Indv. Post August-10 December-13 Contract is Under

PFMR

35 PPU/143 Procurement Appeal and Review Officer 72,000Indv. Post October-10 December-13 Writen Exam Has

Taken


Taken


Taken

38 PPU/146-172 26 Procurement Specialists 2,340,000Indv. Post March-11 December-13

26 PSs will hired for LMs in 1390

39 PCBC/PPU/01 Procurement Coordinator 99,000SSS Post January-11 December-13 Contract is Under PFMR

40 PCBC/PPU/02 Procurement Trainer 89,100SSS Post January-11 December-13 Contract is Under PFMR

41 PCBC/PPU/04 Procurement Trainer 89,100SSS Post January-11 December-13 Contract is Under PFMR

42 PCBC/PPU/05 Admin Assistant 31,680SSS Post January-11 December-13 Contract is Under PFMR

43 PCBC/PPU/06 Procurement Trainer 63,360Indv. Post January-11 December-13 Contract is Under PFMR

44 PCBC/PPU/07 Project Manager 118,800Indv. Post January-11 December-13 Contract is Under PFMR



47 PCBC/PPU/11 IT Officer 36,000Indv. Post February-11 December-13 Will hired for PCBC/ACSI

CMO/001/PFMR Project

CMO Procurement Officer 43,200SSS Prior November-10 December-13 Contract is Under

PFMR

49 CMO/002/PFMR Project

CMO Procurement Officer 45,000SSS Prior November-10 December-13 Contract is Under

PFMR


CMO Procurement Assistant 30,600SSS Prior November-10 December-13 Contract is Under

PFMR


CMO Procurement Assistant 30,600SSS Prior November-10 December-13 Contract is Under

PFMR

52 CMO/005/PFMR Project CMO Manager 122,400Indv. Post February-10 December-13 Contract is Under

PFMR

53 PPU/174/PFMR-II

International Consultant for Situational Analysis/Assessment for Social Accountability Measures.

180,000Indv. Prior May-11 May-12 PFMRPII

85

S/N

Package ID No

Description of Services

Est Cost ( in USD)

Proc. Method

WB Review

Expected Award Date


Present Status

54 PPU/173/PFMR-II

Awareness/Campaign Officer 72,000Indv. Post April-11 December-13

This position was vacant under PPU structure under the title of PLO and PPU decided to change it as Awareness Officer

(ii) Individual Consultants Internal Audit (IAD)(ii) Individual Consultants Internal Audit (IAD)(ii) Individual Consultants Internal Audit (IAD)(ii) Individual Consultants Internal Audit (IAD)(ii) Individual Consultants Internal Audit (IAD)(ii) Individual Consultants Internal Audit (IAD)(ii) Individual Consultants Internal Audit (IAD)(ii) Individual Consultants Internal Audit (IAD)(ii) Individual Consultants Internal Audit (IAD)



Proc. Method

WB Review

Expected Award Date


Present Status

1 MoF/009/IA ATP Administrator 50,103Indv. Post October-10 December-13 Contract is Under PFMR

2 MoF/002/IA Project Coordinator / Asst. DG IAIE 106,701SSS Prior June-10 December-13 Contract is

Under PFMR

3 IA/001/PFMR DG Internal Audit 80,952SSS Prior May-10 December-13 Contract is Under PFMR

4 IAIEGD/04/09 Translator/Interpreter 39,420Indv. Post February-10 December-13 Contract is Under PFMR

5 IAIEGD/05/09/ZF Translator/Interpreter 39,420Indv. Post March-10 December-13 Contract is Under PFMR

6 IAIEGD/06/09/AQ Finance Officer 49,545Indv. Post July-10 December-13 Contract is Under PFMR

7 MoF/007/IA Project Office Asst. 22,269Indv. Post October-10 December-13 Contract is Under PFMR

8 MoF/003/IA Translator/Interpreter 40,638Indv. Post December-10 December-13 Contract is Under PFMR

9 MoF/013/IAD Internal Audit On the Job Trainer 360,000Indv. Prior January-11 December-13 Contract is

Under PFMR

10 MoF/014/IAD Internal Audit On the Job Trainer 360,000Indv. Prior January-11 December-13 Contract is

Under PFMR

11 MoF/015/IAD LAN / WAN Administrator 79,200Indv. Post April-11 December-13

To be recruited at least 1 month prior to installation of LAN

12 MoF/016/IAD LAN / WAN Asst. Administrator 54,000Indv. Post April-11 December-13

To be recruited at Least 1 month prior to installation of LAN



Proc. Method

WB Review

Expected Award Date


Present Status

86

13 MoF/017/IAD Information Systems Audit Specialist 72,000Indv. Post August-11 December-13 PFMRII

14 MoF/018/IAD Database Administrator 72,000Indv. Post August-11 December-13 PFMRII

15 MoF/IAD/019 Asst. ATP Administrator training projects 36,000Indv. Prior May-11 December-13 PFMRII

16 MoF/IAD/020 Asst. Procurement Officer / Store Keeper 36,000Indv. Prior May-11 December-13 PFMRII

(ii) Individual Consultants Treasury(ii) Individual Consultants Treasury(ii) Individual Consultants Treasury(ii) Individual Consultants Treasury(ii) Individual Consultants Treasury(ii) Individual Consultants Treasury(ii) Individual Consultants Treasury(ii) Individual Consultants Treasury(ii) Individual Consultants Treasury

S/NPackage ID No


USD)Proc. Method

WB Review

Expected Award Date


Present Status

1 HRCP/PFMR/004

Project administrative assistant 41,400Indv. Post 8-Apr-09 December-13

Existing Contract Extended for one more year

2 AFMIS Systems Manager 63,000Indv. Post 1-Feb-10 December-13 Contract is Under PFMR

3 HRCDP-MOF-01

Cash Management Specialist 63,000Indv. Post 3-Feb-10 December-13

The position was verbally approved by WB. Needs written approval for the TOR and cost estimates together with interview report

4 HRCDP-MOF-02

English Language Instructor 32,400Indv. Post 16-May-10 December-13 Contract is Under

PFMR

5 HRCDP-MOF-05 Training Coordinator 71,790Indv. Post 11-Dec-10 December-13 Contract is Under

PFMR

6 HRCDP-MOF-04 Program Coordinator 75,000Indv. Post 1-Feb-11 December-13 PFMRII

7 HRCDP-MoF-06 Curriculum Developer 75,000Indv. Post 1-Feb-11 December-13 PFMRII

8 HQ - Treasury Trainees (27 Positions) 84,645Indv. Post NA December-13 PFMRII

9 Mustofiat Regional Trainers (6 Positions) 259,200Indv. Post 1-Feb-11 December-13 PFMRII

S/NPackage ID No


USD)Proc. Method

WB Review

Expected Award Date


Present Status

87

10 Mustofiat - Treasury Trainees (64 Positions) 214,017Indv. Post NA December-13 PFMRII

11

International Advisor: Capacity Development, Curriculum, Contract Management

68,333Indv. Prior 1-Apr-11 31-Mar-12 PFMRII

12 Committee Coordinator 90,000Indv. Post NA NA PFMRII

13 National Twins (2 Positions) 240,000Indv. Post NA NA PFMRII

14 Translation Services 270,000Indv. Prior NA NA PFMRII

15 International Adviser on Education 1,200,000Indv. Prior NA NA PFMRII

16 International Adviser on Regulations 1,200,000Indv. Prior NA NA PFMRII

(ii) Individual Consultants CAO(ii) Individual Consultants CAO(ii) Individual Consultants CAO(ii) Individual Consultants CAO(ii) Individual Consultants CAO(ii) Individual Consultants CAO(ii) Individual Consultants CAO(ii) Individual Consultants CAO(ii) Individual Consultants CAO

S/NPackage ID No


USD)Proc. Method

WB Review

Expected Award Date


Present Status

4 CAO/1046/SSS Senior Adviser to Auditor General 525,000SSS Prior March-10 December-13 Contract is

Under PFMR

5 NA National Translator 37,800Indv. Post April-10 December-13 Contract is Under PFMR

6 CAO/C10 Budget Development Officer 36,000Indv. Post October-10 December-13 Contract is

Under PFMR

7 CAO/C16 Finance Supervisor 43,560Indv. Post December-09 December-13 Contract is Under PFMR

8 International Relation Supervisor 25,200Indv. Post April-10 December-13 Contract is

Under PFMR

9 Project Coordinator 90,000Indv. Post September-10 December-13 Contract is Under PFMR

10 Assistant to AG 36,000Indv. Post October-10 December-13 Contract is Under PFMR

11 Office Assistant 10,800Indv. Post September-10 December-13 Contract is Under PFMR

S/NPackage ID No


USD)Proc. Method

WB Review

Expected Award Date


Present Status

12 CAT Trainer for CAO Staff (30) (Int.) for 2 years

144,000Indv. Post June-10 December-13 Contract is Under PFMR

88

13 National Translator 55,440Indv. Post May-10 December-13 Contract is Under PFMR

14 National Translator 27,360Indv. Post May-10 December-13 Contract is Under PFMR

15 National Translator 40,500Indv. Post August-10 December-13 Contract is Under PFMR

16 Grands Dept Advisor 21,600SSS Prior August-10 December-13 Contract is Under PFMR

17 IT Officer 45,000Indv. Post March-11 December-13 PFMRII

(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD(ii) Firms IAD



Proc. Method

WB Review

Expected Award Date


Present Status

1 ARDS/MoF/798

CAT/IT/English Training ( Consultancy Services to support internal audit training.) Original contract amended to include Treasury Staff English training.

180,900CQS Prior July-08 July-11 Contract is Under PFMR

2 MOF-IAD-001/SSS/2

Consultancy Services for IT Application Training - II

98,000SSS Prior February-11 September-11

As per the desire of DG IAD, 2nd round for 40 ppl after completion of 1st cycle & be continued with the same consultant because of excellent result & well resource availability.

3 MoF/LAN/110

Consultancy Services for Supply & Services for Installation of LAN in IAD

400,000QBS Prior May-11 July-11Installation of Local Area Network in IAD

4 MoF/ATP2/120Consultancy Services to support internal audit training. (ATP-2)


S/N

Package ID No Description of Services Est Cost

( in USD)

Proc. Method

WB Review

Expected Award Date


Present Status

89

5 MoF/CAT2/130

CAT / IT/ English Training ( Consultancy Services to support internal audit training) 200 ppl


6 MoF/MIS/140Consultancy Services for Internal Audit System Application

500,000QBS / SSS Prior November-11 October-11 PFMRII

7 MoF/FIU/150 Consultancy Services for FIU Training 50,000CQS Prior May-11 August-11 PFMRII

8 MoF/IAD/Eng/160Consultancy Services for English Language training to the senior level staff of IAD / MOF

50,000CQS / LCS Post April-11 April-12 PFMRII

(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury(ii) Firms Treasury

S/NPackage ID No


USD)Proc. Method

WB Review

Expected Award Date


Present Status

1 MOF-1Treasury Systems Development & Rollout & Direct Operations Support to Treasury

1,140,000SSS Prior March-11 August-11Extension Proposed For 6 months

2

Treasury Systems Development & Rollout & Direct Operations Support to Treasury(Financial Management Consultant)

10,368,000LCS/SSS Prior inception report by 30- sep-11 May-14

may be extended following SSS under PFMRII based on the consultant's performance

3 FreeBalance Dedicated Support Center 660,000SSS Prior December-11 31-Feb-14

contract to be signed up to December 2013 with potential for extension for another 2 months to Feb. 2014

4 National Firms: Training Providers - Kabul 630,000QCBS Prior inception report

by 31- Jul-11 June-13 PFMRII

5 National Firms: Training Providers - Provinces 62,670CQS Prior April-11 March-12 PFMRII

6 CAT / ACCA Training 1,240,000QCBS Prior NA NA PFMRII

7 Conversion Training for Afghan Professors 750,000QBS Prior NA NA PFMRII

8 Consultancy on Line Ministry PFM Capacity Assessments

1,240,000SSS Prior NA NA PFMRII

90

(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO(ii) Firms CAO

S/NPackage ID No


USD)Proc. Method

WB Review

Expected Award Date


Present Status

1 CAO 705 Audit operations consultant 4,000,000QBS/SSS Prior November-08 November-11

Contract is Under PFMRP May be extended following SSS based on the performance of the consultant

(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS(ii) Firms ARDS



Proc. Method

WB Review

Expected Award Date


Present Status

1 MoEc/ARDS/002/QCBS Central Procurement Facilitation 4,000,000QCBS Prior August-11 September-13 PFMRII

5. Capacity Building: The following programs are proposed to enhance the knowledge of the staff directly involved in procurement actions.

Expected outcome/Activity Description

Estimated Cost

Estimated Duration Start date Comments

Familiarity of MOF/PCU staff in procurement of goods following shopping procedures/selection of consultants

Bank Budget 2 days

Bank staff has already conducted a one day workshop English/Dari

Participation at Basic/Intermediate level training conducted at ACSI

PPU under the Project

The implementing units to nominate staff

91

Familiarity of staff with Procurement under Bank Financed Projects

US$ 30,000 Two weeks TBD

One RIMU procurement staff and two procurement directorate staff will receive training under PPU/MOF and then those staff will be sent to NIFM or ASCI for advance training to India

6. Agreed Procedures for National Competitive Bidding:

i. Standard bidding documents approved by the Association shall be used.

ii. Invitations to bid shall be advertised in at least one (1) widely circulated national daily newspaper and bidding documents shall be made available to prospective bidders, at least twenty eight (28) days prior to the deadline for the submission of bids.

iii.Bids shall not be invited on the basis of percentage premium or discount over the estimated cost.

iv.Bidding documents shall be made available, by mail or in person, to all who are willing to pay the required fee.

v. Foreign bidders shall not be precluded from bidding.

vi.Qualification criteria (in case pre-qualifications were not carried out) shall be stated on the bidding documents, and if a registration process is required, a foreign firm determined to be the lowest evaluated bidder shall be given reasonable opportunity of registering, without any hindrance.

vii.Bidders may deliver bids, at their option, either in person or by courier service or by mail.

viii.All bidders shall provide bid security or a bid security declaration form as indicated in the bidding documents. A bidder’s bid security or the declaration form shall apply only to a specific bid.

ix.Bids shall be opened in public in one place preferably immediately, but no later than one hour, after the deadline for submission of bids.

x. Evaluation of bids shall be made in strict adherence to the criteria disclosed in the bidding documents, in a format, and within the specified period, agreed with the Association.

xi.Bids shall not be rejected merely on the basis of a comparison with an official estimate without the prior concurrence of the Association.

xii.Split award or lottery in award of contracts shall not be carried out. When two (2) or more bidders quote the same price, an investigation shall be made to determine any evidence of collusion, following which: (A) if collusion is determined, the parties involved shall be

92

disqualified and the award shall then be made to the next lowest evaluated and qualified bidder; and (B) if no evidence of collusion can be confirmed, then fresh bids shall be invited after receiving the concurrence of the Association;

xiii.Contracts shall be awarded to the lowest evaluated bidders within the initial period of bid validity so that extensions are not necessary. Extension of bid validity may be sought only under exceptional circumstances.

xiv.Extension of bid validity shall not be allowed without the prior concurrence of the Association (A) for the first request for extension if it is longer than four (4) weeks, and (B) for all subsequent requests for extensions irrespective of the period in case of prior review contracts

xv.Negotiations shall not be allowed with the lowest evaluated or any other bidders.

xvi.Re-bidding shall not be carried out without the Association’s prior concurrence in case of prior review contracts; and

xvii.All contractors or suppliers shall provide performance security as indicated in the contract documents. A contractor’s or a supplier’s performance security shall apply to a specific contract under which it was furnished

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Annex 7: Implementation and Monitoring ArrangementsAfghanistan: Second Public Financial Management Project

Governance Structure:178.The project would be implemented under the authority of the Finance Minister. The Project

Steering Committee (PSC), chaired by Finance Minister or his delegate, is established tor oversee project implementation, maintain focus on results, coordinate components, take decisions on the project issues and approve project annual implementation plans. Members of the Steering Committee are Heads of the Departments of the implementing units: Director General Treasury, Director General Internal Audit, Auditor General or his representative, Head of Procurement Policy Unit (PPU), Head of Afghanistan Reconstruction & Development Services (ARDS) and the Reform Implementation Management Unit (RIMU) Coordinator. The SC meetings would be held on quarterly basis, or when required and proposed by MOF or the World Bank. Secretariat services to PSC are provided by the RIMU. The Committee would be a successor to the PFMR Project Steering Committee. The PSC reports on progress and results to Standing Committee of the Governance Cluster, National Priority Program for Finance and Economic Reform, where the progress is reviewed both by government and donors. The Standing Committee presents its reports to the ANDS Joint Coordination & Monitoring Board (JCMB).

Specific Implementation Arrangement:179.The implementing units for the components would be as follows: (i) Procurement Reform

implemented by PPU and ARDS, (ii) Financial Management Reform implemented by Treasury Department, (iii) Audit Reform & Performance implemented by Internal Audit Department (IAD) and Control and Audit Office (CAO) and (iv) Reform Management implemented by RIMU. Each implementing unit has a coordinator/head that manages overall implementation of its component and reports to the Department Director directly and to Project Steering Committee. However, overall responsibility lies with the Departments Directors.

180.Implementing units would develop their annual budgets, implementation and procurement plans and send them to RIMU for consolidation and submission to PSC and the Bank. They would develop these plans a quarter prior to the beginning of next fiscal year and present them to PSC for approval. They ensure their timely execution to effectively realize the project’s set of annual benchmarks.The implementing units would have their own finance, procurement and other technical project staff. The number and terms of reference for these positions would depend on the component outputs and activities for which the implementing unit is responsible.

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PFRM IIImplementation Units by Component (Table 1 )

Components ResponsibleComponent 1: Procurement Reform PPU & ARDS1.1 Procurement Facilitation ( ARDS) ARDS1.2 Capacity Building in LM and Provinces (IARCSC) PPU 1.3 Institutional Development (PPU/ACSI) PPU

Component 2: Financial Management ReformTreasury

Dept2.1. Treasury Operations and Systems Development - Continued consultancy support including FreeBalance system Dedicated Support Center (includes Equipment of IT Backup for AFMIS of $2.2) “ 2.2 Human Resources Capacity Development –Support for capacity development and Communications “2.3 Professional Accountants Organisation Development - “2.4 Line Ministry PFM Assessment “Component 3: Audit Reform and Performance Internal Audit

and CAO3.1 Internal Audit Capacity Development Internal Audit3.2 Internal Audit Institutional Development “3.3 Internal Audit Information Technology Support “3.4 Direct Audit Support – Grant Audits (External Audit) CAO3.5 Direct Audit Support – Line Ministries(Qatia) “3.6 Policy Advice to the Auditor General and Coordination (External Audit) “3.7 Training Support - under MoU with CAG of India ( External Audit) “3.8 Infrastructure Support (External Audit) “3.9 Public Accounts Committee Strengthening (External Audit)

Component 4. Reform Management4.1 Strengthening Monitoring and Evaluation RIMU 4.2 Strengthening MOF Human Resources Management Department “4.3 Project Executive Management “4.4 Other Institutional Strengthening and Capacity Building “

Project Coordination 95

181.The Reform Implementation & Management Unit of MOF would be responsible for overall coordination of the project, daily operations support, monitoring and evaluation of the results and reporting. It would serve as the Project Coordination Unit. In this regard, RIMU’s specific activities will include: (i) preparation of the project annual budget, (ii) preparation of the project implementation plan, (iii) preparation and updating of the project procurement plan, (iv) monitoring progress, evaluating intended results and reporting to Steering Committee and Bank and (v) preparation of project financial monitoring report. Specific deliverables will include: Project Annual Budget and Implementation Plan, Project Procurement Plan & Report on Semi-annual Basis, Project Financial Monitoring Report on Quarterly Basis, Project Progress Monitoring Report on Semi-Annual Basis and Asset Registration on Quarterly Basis. These support activities cover the entire project including components/sub-components implemented by MoEc and CAO. RIMU shall serve as a one-point contact between the PSC, Bank and the project components.

Monitoring and Evaluation182.RIMU would be responsible not only for the monitoring & evaluation of the project but also

of the MOF strategic plan, reforms and technical assistance (TA) to MOF. It has already established a results-based M&E system for the MOF strategic plan and the PFMR Project. The system integrates implementation based M&E system (inputs, activities, outputs) with results based indicators and mostly focuses on the results i.e. outcomes and impact of the interventions. The M&E specialist at RIMU would continue to conduct monitoring and evaluation of the MOF strategic plan, TA and the project with focus on institutionalization of the system and creating a permanent M&E Unit within the MOF. RIMU would report to MOF top management on strategic plan progress and to PSC and Bank on the project progress. The main activities would be: (i) MOF strategic plan monitoring and evaluation, (ii) project monitoring and evaluation and (iii) TA monitoring and evaluation.

MOF Strategic Plan Monitoring & Evaluation183.MOF’s strategic plan’s M&E framework was developed for the monitoring of the strategic

plan and reform of the plan’s activities. A M&E network has been created and maintained throughout the MOF comprising focal points in each department and is coordinated by the M&E specialist at RIMU. Data flow from departments to RIMU where it’s analyzed and reported to MOF management.

184.To institutionalize the system, RIMU would work on development of a permanent M&E Unit within MOF under the project. This Unit would be responsible for MOF strategic plan and PFM Road Map monitoring & evaluation supported by the already established M&E network. RIMU M&E specialist would provide technical support and capacity building to the mentioned unit. Besides maintaining the already established results-based monitoring and evaluation system and practices, the specific activities would include: (i) carrying out an assessment of the MOF need for a permanent M&E Unit, (ii) developing the M&E Unit ToR covering its objectives and activities, (iii) in line with the ToR, developing an organization structure for the unit integrated in MOF organization chart, (iv) assisting MOF in filling the positions and (v) providing technical assistance and capacity building to the unit. Once this

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permanent M&E Unit is established, RIMU would gradually transfer its M&E operation role of MOF strategic plan and reform to the Unit and will focus on developing the capacity of it.

PMFR II Project Monitoring & Evaluation185.For the project, the results or monitoring & evaluation framework has been developed with

specific number of outputs, outcomes and impact indicators associated with project activities. Each indicator is linked with a baseline and annual benchmarks against which progress is monitored and results are evaluated. As the project is a successor to the PFMR project and follows mostly the same path and objectives, the baseline information was already available, which helped a great deal in developing the monitoring and evaluation framework. RIMU, being the coordination body for the project, would be responsible for the M&E of the project. The M&E specialist at RIMU would maintain and strengthen its link with the project component coordinators who would provide progress data on project indicators to RIMU. The data shall be consolidated, analyzed and reported to the PSC and the Bank. The frequency of data collection, analysis and reporting would be bi-annually before each Bank supervision missions. Specific activities would include: (i) review and update the project monitoring matrix and results-framework annually, (ii) conduct periodic monitoring of the project progress based on the project results-framework and indicators, (iii) evaluate intended results, (iv) report periodically to the Bank and the Steering Committee on progress and achievements, (vi) provide recommendations for improvement and (vii) follow up on implementation of approved recommendations.

Project Management Information Systems and Record Keeping186.Each implementing unit would maintain a proper filing system and keep up-to-date all

project related documents both hard and electronic copies in their respective units. These documents shall be used by the Bank Supervision Mission to review progress of the project and by internal and external auditors of the project. However, the project consolidated plans and reports shall be kept with RIMU. RIMU will maintain the project information systems which comprises the procurement plan, contract contracts, physical progress records and financial reports by component and for the project as a whole. The permanent, detailed and formal record of the project financial operations is found in the Afghanistan Financial Management Information System (AFMIS) which has been established in all budgetary entities and provinces. AFMIS would be used for extracting data on national budget outturns associated with MOF strategic plan result indicators. Timely, reliable and accurate data can be taken from AFMIS for the project on–line by any unit and by RIMU.

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Annex 1: PFMR II Project Governance and Implemenation

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PFMR II Steering CommitteeChaired by: Finance Minister or His RepresentativeDG IAD, DG Treasury, Auditor General, PPU Head, ARDS Head, RIMU Coordinator and the World Bank

RIMUProject Coordination Unit

Headed by: RIMU Coordinator

Treasury Department Component 2: Financial

Management ReformHeaded by DG Treasury and assisted by

project component coordinator

PPU & ARDS Component 1: Procurement

ReformHeaded by: PPU and ARDS

Heads

CAO and IAD DepartmentComponent 3: Audit Reform &

PerformanceHeaded by DG Internal Audit for Internal Audit and by Auditor General for External Audit and assisted by project component

coordinators

ANDS/JCMB

Governance

Governance Cluster Standing CommitteeNPPs, members: government agencies and

donors

Coordination

Implementation

Annex 8: Governance and Accountability PlanAfghanistan: Second Public Financial Management Project

Introduction187.The PFMRII Project would be implemented in a high risk environment. However, the very

outputs of the project include: timely, reliable reporting on all operations under the budget ,including all investment operations like the PFMRII, centralized oversight of all non-security procurement over a modest threshold and external audit done to a high standard of all IDA and ARTF investment operations. Similarly, the expansion of effective internal audit and capacity building of the CAO add depth to these arrangements. These measures contribute to good governance by improving both management’s oversight and improving transparency while at the same time acting to reduce corruption by reducing the opportunities for financial leakages and procurement corruption which are the two forms of that threaten donor funds directly2. Moveover, the Government of Afghanistan (GOA) is fully committed to the Project and its proper and most effective implementation considering that sound PFM performance and further reforms which are also central to fiscal discipline and transparency, principal goals leading to funneling more development assistance through the budget.

188.The project operations are concentrated in Kabul where supervision has not been affected by the security concerns affecting provinces and the nature of the transactions are not articularly prone to corruption as the history of the prior operations would indicate. Nevertheless, to mitigate and guard against governance, corruption and fraud risks and improve transparency and accountability in implementation of PFMRII Project several measures have been incorporated in the implementation and monitoring arrangements for the Project. These measures are included in the Governance and Accountability Plan (GAAP) to identify and mitigate critical risks in achieving the development objectives. The GAAP measures include:• Implementation arrangements for PFMRII Project that build upon the

lessons learnt from PFMR • Fiduciary processes including FM and Procurement which respond to the

risk• Enhanced monitoring and evaluation arrangements.

(a) Arrangements under PFMR189.Governance Structure. The project is implemented under the authority of the Finance

Minister. The Project Steering Committee (PSC), chaired by Finance Minister or his

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2 The forms of corruption which drive the Transparency International perception index would include bribery, extortion, grand corruption and patronage which are not direct threats to donor funds on-budget and are not constrained by the PFM Framework.

delegate, is responsible for overseeing project implementation, maintain focus on results, coordinate components, take decisions on the project issues and approve project annual implementation plans. The PSC reports on progress and results to Standing Committee of the Governance Cluster, National Priority Program for Finance and Economic Reform, where the progress is reviewed both by government and donors. The Standing Committee presents its reports to the ANDS Joint Coordination & Monitoring Board (JCMB).

190.Project Coordination. The RIMU of MOF would be responsible for: overall coordination of the project, daily operations support, monitoring and evaluation of the results and reporting and as the Project Coordination Unit which would carry out the preparation of the project annual budget, project implementation and procurement plan and monitor progress. RIMU shall serve as a one-point contact between the PSC, Bank and the project components.

191.Specific Implementation Arrangement. Each implementing unit has a coordinator/head that manages overall implementation of their component and reports to his/her Department Director directly and to PSC and Bank through RIMU. However, overall responsibility lies with the Departments Directors. The implementing units have their own finance, procurement and other technical project staff. The number and terms of reference for these positions depend on the component outputs and activities for which the implementing unit is responsible.

192.Project Management Information Systems and Recording Keeping. Each implementing unit would maintain a proper filing system and keep up-to-date all project related documents both hard and electronic copies in their respective units. These documents are accessed by the Bank Supervision Mission to review progress and by internal and external audit of the project.

Improved Implementation Arrangements for PFMRII.193. The implementation arrangements for the PFMRII Project incorporates lessons from

PFMR Project and introduce additional steps to mitigate the risk of not achieving the intended development outcomes due to poor governance.

• Enhanced role of RIMU in coordination and control. The overall oversight and policy guidance was provided by the Project Steering Committee (PSC) chaired by the Minister of Finance. The SC comprises representatives of all the implementing units and is supported by the RIMU of MOF which also is the coordination unit for the project. RIMU will take a more pro-active role in coordination and will be the focal point for the review of all request for no-objections, will maintain the consolidated procurement plan and follow procurement process and the execution of major contracts. Their oversight will lead to questioning of any protracted procurement, red flags for corruption, or poor or undocumented execution of deliverables.

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• Audit of the CAO component. Specifically for the CAO implemented activities, which were not audited under PFMR because of the lack of independence of the CAO of its own implemented activities, for any year for which the Administrator so determines, the GOA will prepare separate financial statements for the CAO’s implemented activities which shall be audited by independent auditors acceptable to the Bank (other than the CAO) and these audited financial statements will be furnished to the Administrator jointly with the project financial statements.

• In the predecessor projects the CAO components were not been subject to external audit since the CAO itself is the external auditor. Under PFMRII, the counterparts agreed that the Internal Audit Department of the MOF will in year 3 of the project carry out an audit of the CAO implemented sub-compontent under the same TORs as the grants audits.

• Formal review and approval of each year’s budget submission by the SC. To ensure alignment with the annual budget instructions and reliable planning the estimates for each year’s disbursements to be used in the national budget will be submitted and discussed by the SC.

• ITC specialist in the team. The significant share of ITC investment, complexity of the work involved and role in the outputs of the PFMRII do require that the project team include more robust skills so for the full life of the operation the project team will include an ITC specialist.

• Project launch workshop which will focus on procurement and contract management in a high risk environment. A workshop for project staff of all implementing will be organized to review the procurement provisions for the project but focused on the governance, coordination and control framework for the project as well as the use of corruption red flags to assist the team manage the corruption risk.

• All procurement over a modest threshold will be published on the ARDS web-site and the MOF corruption hot-line will be available for the public to report any cases of abuse.

• The GAAP will be reviewed during various stages of PFMRII Project implementation and an update will be prepared in consultation with MOF, CAO, ARDS and SC.

194.The RIMU will be responsible for monitoring physical progress and collation of progress reports. The PCU will: (i) collaborate with the M&E units throughout the MOF, in the CAO and Ministry of Economy; (ii) maintain the overall project management information system (PMIS); (iii) monitor and evaluate progress in the provision of critical project inputs and activities; and (vii) submit periodic (monthly and quarterly) progress reports to PSC and the

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World Bank on the Project. These reports would include, inter alia: (a) up-to-date physical and financial progress compared to annual and end-of-project targets; (b) updated indicators of project performance compared to annual and end-of-project targets; and (c) successes and problems encountered during the reporting period with suggested remedial actions.

195.RIMU would be responsible not only for the monitoring & evaluation of the project but also of the MOF strategic plan, reforms and technical assistance to MOF. It has already established a results-based M&E system for the MOF strategic plan and the PFMR Project. The system integrates implementation based M&E system (inputs, activities, outputs) with results based indicators and mostly focuses on the results i.e. outcomes and impact of the interventions. For the MOF strategic plan, reform monitoring and evaluation, the MOF strategic plan M&E framework was developed based on which the M&E of the strategic plan and reform is conducted. An M&E network has been created and maintained throughout the MOF comprised of focal points in each department. This network is coordinated by the M&E specialist at RIMU. Data flow from departments to RIMU where it is analyzed and reported to MOF management.

The Governance and Accountability Action Plan196.The above mentioned measures are included in the project design as specific steps not only

improve implementation of the project but also directly mitigate the governance and accountability risks. The Governance and Accountability Action Plan (GAAP) presented in the following table incorporates these risks and the respective mitigation measures.

Areas Identified for Monitoring Risks Proposed Mitigation Measures

Implementation ArrangementsImplementation Arrangements

Low capacity at implementing units for procurement planning and contract control.

Enhanced role of RIMU in coordination and control. RIMU would take a more pro-active role in coordination and would be the focal point for the review of all request for no-objections, would maintain the consolidated procurement plan and follow procurement process and the execution of major contracts. Their oversight would lead to questioning of any protracted procurement, red flag for corruption, or poor or undocumented execution of deliverables.

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Areas Identified for Monitoring Risks Proposed Mitigation Measures

CAO component never subject to independent review.

The counterparts commit to have an audit done by the Internal Audit Dept of the MOF of the expenditures under the CAO’s component thereby addressing this gap in independent review.

National budget does not reflect accurate planning of project activities.

Formal review and approval of each year’s budget submission by the PSC. To ensure alignment with the annual budget instructions and reliable planning the estimates for each year’s disbursements to be used in the national budget will be submitted and discussed by the PSC.

Team strength should reflect complexity of investment activities.

ITC specialist in the team. The significant share of ITC investment, complexity of the work involved and role in the outputs of the PFMRII do require that the project team include more robust skills so for the full life of the operation the project team will include an ITC specialist.

New staff may not be adequately familiar with Bank Guidelines and FM covenants.

A workshop for project staff of all implementing would be organized to review the procurement provisions for the project but focused on the governance, coordination and control framework for the project as well as the use of corruption red flags to assist the team manage the corruption risk.

Enhanced Monitoring and EvaluationEnhanced Monitoring and Evaluation

Strengthening the M&E system

RIMU would monitor physical progress and collate progress reports. The RIMU will also collaborate with regional offices and the M&E unit; maintain the overall project management information system (PMIS); monitor and evaluate progress in the provision of critical project inputs and activities; and submit periodic progress reports to PSC and the World Bank.

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Annex 9: Project Preparation and Appraisal Team MembersAfghanistan: Second Public Financial Management Project

NAME TITLE / FUNCTION

Public Financial ManagementPublic Financial ManagementPaul Sisk Task Team Leader, SARFMRonald Points Accounting and Treasury Specialist - ConsultantPublic AuditPublic AuditMichael Jacobs Public Auditing Specialist- ConsultantPublic Sector Administration and Reform ManagementPublic Sector Administration and Reform ManagementRobert Crown Public Administration Specialist - ConsultantITCITCAli Hashim Information Technology Specialist - ConsultantFinancial Management and disbursementsFinancial Management and disbursementsKenneth Okpara Senior Financial Specialist SARFMChau-Ching Shen Senior Finance Officer CTRFCChau-Ching Shen Senior Finance Officer CTRFCProcurementProcurementDeepal Fernando Senior Procurement Specialist SARPSRahimullah Wardak Procurement SpecialistArun Kolsur Senior Procurement SpecialistLegalLegalMartin Serrano Senior CounselWandipa Pearl Tshambani CounselTeam SupportTeam SupportWali Ahmadzai Financial Management Analyst SARFMNaqibullah Musa Team Assistant, SARFM

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Annex 12: Documents in Project Files

AFGHANISTAN: Second Public Financial Management Reform Project

1. Identification Mission Aide Memoire and Management Letter –March 30, 20102. Project Concept Note and Decision Note, September 23, 20103. Pre-Appraisal Mission Aide Memoire – January 30, 20114. Afghanistan PEFA – 20085. Public Financial Management Roadmap – Government of Afghanistan – Ministry of Finance

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