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FINANCIAL MANAGEMENT IN
WORLD BANK OPERATIONS:
ANNUAL REPORT FOR FY09
Financial Management Sector Board
Operations Policy and Country Services
March 31, 2010
ABBREVIATIONS AND ACRONYMS
AFR Africa Region
ARCS Audit Reports Compliance System
CAS Country Assistance Strategy
CFAA Country Financial Accountability Assessment
COSO Committee of Sponsoring Organizations of the Treadway Commission
CPAR Country Procurement Assessment Report
CSR Controller’s Strategy and Resource Management
DPO/DPL Development Policy Operation/Loan
EAP East Asia and the Pacific Region
ECA Europe and Central Asia Region
FM Financial Management
FMSB Financial Management Sector Board
FY Fiscal Year
GAC Governance and Anticorruption
IASB International Accounting Standards Board
IBRD International Bank for Reconstruction and Development
IDA International Development Association
IDF Institutional Development Fund
IFAC International Federation of Accountants
IFRS International Financial Reporting Standard
IMF International Monetary Fund
INT Department of Institutional Integrity
INTOSAI International Organisation of Supreme Audit Institutions
JET Joint Evaluation Team
LCR Latin America and Caribbean Region
LOA Loan Department
MDB Multilateral Development Bank
MNA Middle East and North Africa Region
MoU Memorandum of Understanding
MTEF Medium-term Expenditure Framework
NGO Nongovernmental Organization
OCCEFS Organization for the Superior Audit Institutions of Central America
OECD–DAC Organisation for Economic Co-operation and Development – Development Assistance
Committee
OP/BP Operational Policy/Bank Procedures (statements)
OPCFM Financial Management Unit, OPCS
OPCS Operations Policy and Country Services
PEFA Public Expenditure and Financial Accountability Program
PER Public Expenditure Review
PFM Public Financial Management
PFM-SCDI Public Financial Management Staff Capacity Building Initiative
PREM Poverty Reduction and Economic Management Network
PRIMA Portfolio Risk Management System
ROSC A&A Report on the Observance of Standards and Codes – Accounting and Auditing
SAI Supreme Audit Institution
SAR South Asia Region
SWAp Sectorwide approach
FINANCIAL MANAGEMENT IN WORLD BANK OPERATIONS:
ANNUAL REPORT FOR FY09
CONTENTS
Executive Summary ..................................................................................................................... iii
I. Introduction ................................................................................................................................1
II. The FM Sector: At Work in Partner Countries.....................................................................2 A. Regional FM Efforts ......................................................................................................3
B. Audit Oversight ............................................................................................................11
C. Helping Partner Countries Improve Their Financial Management ..............................12
III. The Sector Board and Anchor: FY09 in Review ...............................................................14 A. Supporting and Guiding Regional Efforts ...................................................................15
B. Global Partnerships and Activities ...............................................................................17
IV. The FM Sector: FY09 Institutional Agenda .......................................................................19 A. Financial Management Strategy....................................................................................19
B. Staff Development.........................................................................................................20
V. Looking Forward: FY10 Priorities and Challenges.............................................................21
Boxes
Box 1. Supporting Skills Upgrading—Africa’s PFM Staff Capacity Development Initiative .............. 3 Box 2. Building Country FM Systems: Mozambique .............................................................................. 4
Box 3. Internal Audit Capacity Building in East Asia and the Pacific .................................................... 5 Box 4. Strengthening Armenia’s PFM ....................................................................................................... 6 Box 5. First Programmatic Technical Assistance in Turkey .................................................................... 7
Box 6. PFM Capacity-Building Efforts in the LCR Region..................................................................... 7 Box 7. Audit Firms’ Capacity in the MNA Region .................................................................................. 8 Box 8. Capacity-Building in the MNA Region ......................................................................................... 9
Box 9. Supporting Quality of FM work in Investment Lending in India ............................................. 10 Box 10. Building Country FM Systems: Afghanistan ............................................................................ 11 Box 11. Supporting PFM Reform ............................................................................................................ 13 Box 12. Regional Experiences with Professional Capacity Development ............................................ 14
Box F1. Mainstreaming GAC: ECAFM Team Trains Task Team Leaders ......................................... 34
Tables
Table 1: Timeliness of Audit Reports due in FY09 and FY08 ........................................................ 12 Table 2: FM Sector Staffing ......................................................................................................... 20 Table 3: FM Sector Formal Learning Activities, FY09 ................................................................ 20
Annexes
Annex A. FM Economic and Sector Work, FY09 .................................................................................. 23 Annex B. FM Institutional Development Fund Grants, FY09 ............................................................... 25
Annex C. FIRST Initiative Grants, FY09 ................................................................................................ 27 Annex D. ROSC Accounting and Auditing Status Report, FY09 ......................................................... 28 Annex E. FM Sector Board Committees and Working Groups ............................................................. 31 Annex F. Promoting Information Sharing: Internal and External Learning Activities ...................... 33
FINANCIAL MANAGEMENT IN WORLD BANK OPERATIONS:
ANNUAL REPORT FOR FY09
EXECUTIVE SUMMARY
1. The objective of the World Bank’s work in the Financial Management (FM) Sector is to
support the achievement of development results by providing reasonable assurance on
borrowers’ use of Bank funds and by helping partner countries improve their financial
management. FY09, a year marked by the global financial crisis, underscored the importance of
FM and its oversight role, as development efforts cannot be effective in reducing poverty without
sound country financial management systems and the fiduciary assurance that funds are used for
their intended purposes.
2. Delivering Quality Services. FM Sector Staff are fully integrated into Bank project teams
supporting over 1,600 active investment operations representing a total commitment of about
US$136 billion. In response to the financial crisis, the World Bank more than doubled its FY08
lending commitments to nearly $50 billion. FM staff rose to the challenge and provided
increased levels of implementation support. During the year, to strengthen portfolio quality, the
FM Sector made progress towards updating the FM Manual1--a principles-based manual aligned
to the key directions of IL Reform, continued implementing IDA14 Internal Controls Review
recommendations, and started to upgrade the FM management information systems. The Sector
also supported Senior Management by providing corporate reviews of selected programs and
operations as well as input to the investment lending reform effort.
3. Building Partner Countries’ FM Capacity. Working collaboratively with other sectors,
the FM Sector continued to help partner countries implement public financial management
(PFM) reform initiatives through analytic work, stand-alone technical assistance, components of
investment projects and sectorwide approaches, and development policy lending. It promoted
accountancy reform, supported the greater use of country FM systems and, with the International
Organization of Supreme Audit Institutions (INTOSAI) and other donors, signed a Memorandum
of Understanding that provides for a coordinated effort in supporting the capacity-building
initiatives of supreme audit institutions2.
4. Global Partnerships. The Bank continued to lead and participate in several international
groups: the OECD-DAC Task Force on PFM, the MDB FM Harmonization Working Group,
and the PEFA Program. The Sector continued its participation in strategic partnerships with the
International Federation of Accountants (IFAC), INTOSAI and the International Accounting
Standards Board; raised awareness of FM development issues in their activities; and facilitated
partner countries’ adoption of internationally recognized standards, codes and practices. Also,
although the FM Sector worked with IFAC and other donors in supporting the establishment and
development of the accountancy profession in partner countries, considerably more needs to be
done going forward.
1 The Financial Management Manual for World Bank-Financed Investment Operations was issued by the
Financial Management Sector Board in February 2010 and became effective from March 1, 2010. 2 The Memorandum of Understanding (MOU) which was signed in Brussels in October 2009 culminated a
consultative process that began in Mexico in November 2007.
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5. Institutional Agenda. To maintain a structure and activities that support carrying out the
Sector’s mandate, the Sector sponsored a range of development and learning activities on topics
of interest to the FM community: PFM, governance and anticorruption (GAC), corporate
finance, trust funds and Bank operations.
6. Priorities and Challenges. During FY10—and well into the future—the Sector expects to
give particular attention to the following areas.
FM Sector Strategy. The strategy, which will provide a cohesive implementation
platform for FY11-13, will focus on three priorities: (a) delivering quality services,
including support for IL Reform and fragile states; (b) building partner countries’ FM
capacity; and (c) promoting global public goods.
Quality and internal controls. Following finalization and issuance of the FM
Manual, the Sector will continue to implement the recommendations of the IDA14
Internal Controls Review; implement Phase II of the Joint CSR/OPCS Evaluation of
Quality Arrangements; and strengthen its management information systems, ARCS
and PRIMA—which is being developed as an institutional system.
FM guidelines. The FM Manual will be rolled out in FY10, along with a range of
guidance notes and supplementary reference material. Guidance on the treatment of
FM in Country Assistance Strategies will also be updated.
Use of country systems. The Sector will continue its work to deepen and accelerate
the use of country FM systems; will continue collaborating with other Bank groups in
providing follow-up support for PFM reforms; and will monitor the use of country
systems.
Private Sector Accounting and Auditing. The FM Sector will continue to work with
partner country institutions to assess and implement accountancy reforms based on
recommendations in Reports on the Observance of Standards and Codes—
Accounting and Auditing (ROSC A&A). A review of lessons learned from these
assessments will identify good practices and inform the future conduct of the
program.
Governance and anticorruption. The FM Sector will continue its GAC work by
contributing to building country FM capacity, developing and disseminating guidance
on GAC issues in project preparation and supervision.
Global partnerships. The FM Sector will continue to engage and take leadership in
global partnerships with bilateral and multilateral donors, helping ensure that policy
and operational issues affecting FM are coordinated and that agreements related to
FM under the global aid effectiveness initiative move forward.
Learning and career development. The 2010 Fiduciary Forum, a broad-scale joint
Financial Management and Procurement learning event that brings together staff from
the Bank, borrowers, and development partners to learn and share experiences, was
hosted during March 1 – 5, 2010, attended by over 600 participants. The Sector will
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continue to provide knowledge sharing and learning opportunities for its highly
decentralized staff, identify skills gaps, match staff to demand, and develop practices
and procedures to attract and retain staff with the appropriate skills. Moreover, the
Sector will continue to foster rotations, development assignments, and regional cross-
support.
FINANCIAL MANAGEMENT IN WORLD BANK OPERATIONS:
ANNUAL REPORT FOR FY09
I. INTRODUCTION
1. The objective of the Bank’s work in the Financial Management (FM) Sector is to support
the achievement of development results by providing reasonable assurance on borrowers’ use of
Bank funds and by helping partner countries improve their financial management, capacity, and
performance. In carrying out this mandate in FY09, the FM Sector continued its focus on quality,
and on supporting partner countries to implement measures to enhance their financial
management capacity and performance, while also positioning itself to address the challenges of
the coming years.
2. Expectations for the Year. The Annual Report for FY083 described a wide range of
activities through which the FM Sector had carried out its mandate. For FY09, the Sector
identified the need to enhance the quality of its work by focusing on several key areas.
FM and PR strategy. The joint strategy, to be finalized during FY09, was expected to
focus on optimizing the two Sectors’ joint contribution to the efficient and effective
use of public resources.
Quality and internal controls. A particularly strong focus on quality and internal
controls was expected to support the finalization and dissemination of the FM
Manual; implementation of the Joint Evaluation of Quality Arrangements being
carried out by Controller’s Strategy and Resource Management (CSR) and Operations
Policy and Country Services (OPCS); and oversight of FM information systems,
including ARCS and PRIMA—which is being developed as a corporate system.
Use of country systems. To deepen and accelerate the use of country FM systems,
the FM Sector planned to finalize and disseminate detailed guidance to help FM staff
in assessing the adequacy of country FM systems for use in Bank-supported
operations. The Sector would also continue collaborating with other Bank groups in
providing follow-up support for public financial management (PFM) reforms.
Private Sector Accounting and Auditing. The FM Sector would continue to work
with partner country institutions to implement accountancy reforms based on
recommendations in Reports on the Observance of Standards and Codes—
Accounting and Auditing (ROSC A&A), including promoting compliance with
international standards.
Learning and career development. Building on the positive results from field staff on
the 2007 Staff Survey, the Sector would continue to foster rotations, developmental
assignments, and Regional cross-support. The Sector would also continue to provide
3 See Financial Management in World Bank Operations, Annual Report for FY08 (SecM2009-0029), January 30,
2009.
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innovative learning opportunities for its highly decentralized staff, identify skills
gaps, match staff to demand, and develop practices and procedures to attract and
retain staff with the appropriate skills.
Governance and anticorruption. The FM Sector planned to continue intensifying its
governance and anticorruption (GAC) work by developing guidance for identifying
and handling GAC ―red flags,‖ guidance on project design and supervision, and
enhanced audit and assurance techniques to address corruption risks in projects. The
Sector would work with the Department of Institutional Integrity (INT) to extract
lessons from INT’s experience of dealing with corruption cases and to conduct joint
training sessions.
CAS guidelines. Work on updating guidance on FM participation and contribution to
Country Assistance Strategies (CASs) was expected to be completed in FY09.
Global partnerships. The FM Sector would continue to engage with and take
leadership in partnerships with bilateral and multilateral donors to help ensure that
policy and operational issues affecting FM were coordinated and that agreements
related to FM under the global aid effectiveness initiative moved forward.
The Sector successfully carried out activities in all these areas4, establishing a strong basis for
growing and adapting to meet the future needs of the Bank and of client countries.
3. Purpose and Structure of Paper. This paper reports on the FM Sector’s FY09 activities
to enhance the quality of its work and promote development effectiveness. Section II summarizes
the work done by FM staff in and with partner countries; Section III describes the activities of
the FM Sector Board and Anchor; Section IV discusses some of the knowledge-sharing activities
the Sector conducted or sponsored; Section V describes the Sector’s institutional agenda; and
Section VI sets out the FM priorities and challenges for FY10.
II. THE FM SECTOR: AT WORK IN PARTNER COUNTRIES
4. FM Sector staff are fully integrated into Bank project teams, providing preparation
support to approximately 300 new investment IBRD/IDA operations (with a commitment value
of close to $50 billion) and implementation support to a portfolio of over 1,600 active operations
representing net commitments of about $136 billion.5 In FY09, as in every year, these staff
worked to provide assurance that the funds provided by the Bank were being used as intended. In
addition, in collaboration with other Bank staff and with other development partners, they helped
partner countries build their financial management systems and capacity. This section
summarizes the work of FM staff in the Regions.
4 Due to work program commitments and constraints, it was not possible to proceed with the Joint FM and
Procurement Sectors Strategy at this particular juncture. However, an FM Sector Strategy is under preparation
and is expected to be finalized by the end of FY10. 5 See World Bank Annual Report 2009.
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A. Regional FM Efforts
5. In FY09 the global financial crisis dominated the news and required significant attention
by many Bank staff and others who work in development. Responding to the crisis, the World
Bank more than doubled its FY08 lending commitments to nearly $50 billion. For many FM
staff this meant considerably increased workloads and the need to work innovatively to meet
borrowers’ greater demand for Bank-support. Alongside these efforts, the Sector carried out
economic and sector work, undertook country systems’ capacity building efforts and led
operational components and grant-financed operations in support of capacity building. Annex A
lists the FM Economic and Sector work the Regions carried out in FY09, while Annexes B and C
respectively list institutional development funds (IDFs) and FIRST Initiative6 grants managed by
FM.
1. Africa Region
6. The Africa Region’s FM team actively supported several partner countries in improving
their PFM systems,7 using analytic work, investment operations, technical assistance, training,
policy dialogue, and development policy operations (DPOs). To scale up the use of country FM
systems, the team integrated capacity-building measures into project design. In Kenya, for
example, the team supported the Internal Audit Department, National Audit Office, and other
institutions, and actively involved them in Bank-financed projects. The team completed the
development of an initiative to build the capacity of PFM staff in partner countries, i.e. the PFM
Staff Capacity Development Initiative (PFM – SCDI). Box 1 highlights a particular aspect of the
Region’s capacity building work.
Box 1. Supporting Skills Upgrading—Africa’s PFM Staff Capacity Development Initiative
A major factor constraining the development of PFM systems in Africa is the very low number of qualified
personnel. The PFM Staff Capacity Development Initiative, developed in collaboration with partner countries and
regional professional associations, aims to help improve the human resource skill base in PFM, accounting, and
auditing. The program is designed to:
a. Enable access for individuals, through employers and/or professional institutes and training institutions, to
accredited PFM professional qualification and training programs;
b. Assist capacity development of professional institutes and training institutions delivering accredited PFM and
private sector accounting and auditing professional qualification and training programs; and
c. Disseminate good PFM practice, targeted on gaps identified through PFM diagnostic work.
7. Use of Country Systems. The FM Sector held structured dialogues in various countries8
with the aim of integrating the use of country FM systems into operations. Under this approach,
6 The Financial Sector Reform and Strengthening (FIRST) Initiative is a multi-donor grant facility providing
technical assistance (TA) to promote financial sector strengthening. Further information available at
http://www.firstinitiative.org/ 7 PFM support is being provided to Benin, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad,
Congo Brazzaville, Côte d’Ivoire, the Democratic Republic of Congo (DRC), Ethiopia, Gambia, Ghana,
Guinea-Bissau, Kenya, Lesotho, Liberia, Malawi, Mozambique, Madagascar, Mali, Nigeria, Niger, Rwanda,
Swaziland, Sierra Leone, Senegal, Sudan, Tanzania, Uganda, Zambia, and through regional institutions like the
West African Economic and Monetary Union (WAFMU). 8 The structured approach to advancing the use of country systems is being applied to seven countries: Benin,
Burkina Faso, Ghana, Mali, Malawi, Mozambique, and Uganda.
4
staff assess the FM-related risks and integrate appropriate mitigating measures; identify the
system elements that are adequate and those that need improvement; and discuss relevant actions
to improve systems with the government and other development partners. The team engaged
with partner countries and relevant stakeholders in several countries to continue strengthening
private sector accounting and auditing. Box 2 describes the experience in Mozambique.
Box 2. Building Country FM Systems: Mozambique
To scale up the use of recipient countries’ FM systems while ensuring adequate fiduciary assurance, the AFR FM
team developed a methodology to systematically assess the fiduciary risks of using country systems, to identify both
the areas in which the country systems could be used and the capacity-building and performance-improvement
measures that would be needed. This approach was pioneered in Mozambique in July 2008. The conclusion was that
the Bank would use the country’s FM system for investment projects, provided the authorities implemented some
cross-cutting measures: roll over unused project funds at year-end, improve the timeliness of issuance of audited
project financial statements, and develop satisfactory modalities of collaboration between private sector auditors and
the supreme audit institution.
Bank projects approved in Mozambique since the review are using the country FM system, with interim
supplemental measures in specific areas where there are weaknesses—five projects in sectors as diverse as private
sector development, health, telecommunication, decentralized finance, and rural development. The Bank is actively
supporting the development of PFM capacity, particularly in the area of internal and external oversight, to facilitate
the full transition to use of country systems.
The Government has welcomed the Bank’s proactive stance. It perceives clear benefits in terms of increased cash
flow (IDA funds flow into the Treasury instead of commercial banks), comprehensiveness and timeliness of budget
execution data, and reduction of transaction costs. In Mozambique, the Bank is now clearly in the lead among
development partners in using country FM systems, and the initiative has attracted extensive interest from bilateral
and multilateral partners.
8. Quality Assurance. The Region updated its quality assurance arrangements to factor in
lessons from implementation of the previous ones. It paid rigorous attention to improving audit
and interim financial reporting compliance. FM staff intensified country-level efforts to
strengthen controls and implementation, invoking remedies as appropriate. The Region
decentralized the entry of data into ARCS to the field offices, and trained additional country
office ACS staff to support these functions. Moreover, FM staff were held accountable through
the regular monitoring of results-oriented operational FM performance indicators. The outcome
has been a robust quality framework, as some of the monitored indicators highlight. A notable
achievement during the year was completion of updating audit reporting information in the
ARCS system. Information is now kept up to date and regularly monitored.
2. East Asia and Pacific Region
9. EAPFM focused on enhancing quality assurance arrangements, including improving
audit and interim financial reporting compliance. FM staff collaborated with colleagues from the
Poverty Reduction and Economic Management Network (PREM) to support countries’
implementation of a number of PFM reform initiatives, including enactment of PFM legislation,
roll-out of integrated financial management information systems, and capacity building for the
adoption of international financial reporting standards.
5
10. Use of Country Systems. The extent to which the Bank relies on country systems in the
Region is varied: countries such as China and the Philippines have used their national supreme
audit institutions (SAIs) to audit Bank- and other foreign-financed projects for many years, while
others, such as Mongolia, depend largely on private audit firms because of the low capacity of
their SAIs. To help build capacity in the Mongolian National Audit Office, the EAP FM team
facilitated a South-South exchange in which China’s National Audit Office staff trained 10
Mongolian staff on foreign funds auditing, management systems, and audit quality assurance. In
addition, two education projects in Vietnam have been designed to strengthen reliance on
country systems, with funding channeled through the Treasury and budget and allocation aligned
to the Government’s cycle.
11. Portfolio Reviews. Country and sector-level reviews of the FM performance of projects
were carried out—often jointly with Procurement and the Loan Department (LOA)—in four
countries: Cambodia, Indonesia, Lao, and Philippines. In each case, proposed remedies for
identified issues were closely aligned with efforts to strengthen the country’s systems.
12. Internal Audit Capacity Building. Dialogue with our client countries has been ongoing
for the last few years, culminating in various interventions to support Internal Audit. Our vision
is that the region will, in the medium-term, have a well functioning and effective public internal
audit; and an efficient value added control framework in the public sector. Box 3 provides some
examples.
Box 3. Internal Audit Capacity Building in East Asia and the Pacific
Vietnam. The Internal Audit Capacity Building IDF Grant supports the Inspectorate of the Ministry of Finance in
Vietnam in improving its effectiveness through enhanced capacity, mainstreaming modernized audit methodology,
greater use of technology and strengthening of the audit profession. This initiative is well aligned with the Country
Partnership Strategy and Vietnam’s 10th
Socio-Economic Development Plan that aims to improve the business
environment in the country, strengthen social inclusion, enhance management of the environment & natural
resources and improve governance systems.
Philippines. The Strengthening Capacity of Public Sector Internal Audit IDF Grant in the Philippines is directed
mainly to support two areas: (i) the establishment of systems and mechanisms for the internal audit framework, and
(ii) capacity building work that ensures the internal audit operations run effectively. This support will contribute to
ensuring continuity to the challenging reforms in the critical Public Financial Management area and assist the
government to implement its strategy on reforming the internal audit. This operation fits squarely in the 2009
Country Assistance Strategy broad objective of strengthening the Public Financial Management to a level that the
business community and other stakeholders will begin to perceive the positive change in the control environment,
leading to greater efficiency in use of public resources and delivery of services to the public.
Indonesia. The IDF Grant to support the State Development Audit Agency (BKP) on the pilot implementation of
the COSO (Committee for Sponsoring Organizations) Framework in Indonesia has facilitated the roll-out of the
COSO framework adopted by the government. The process also attempts to determine suitable approaches to
implementing the framework.
13. Strengthening Supreme Audit Institutions. The EAPFM team aims to address some of
the challenges in the downstream PFM reforms such as helping to strengthen Supreme Audit
Institutions in the region. An Institutional Development Fund (IDF) grant under implementation
supports the Pacific Regional Audit Initiative (PRAI) with the objective of strengthening
capacity of Supreme Audit Institutions (SAIs). It also aims to raise public auditing practices to
uniformly-higher standards across the Pacific sub-region, which in turn is expected to improve
6
transparency and accountability in management and use of public resources. The backlog of
public audit will be reduced significantly if not eliminated by year 2013 and the less developed
SAIs will begin to produce high quality audit reports. The impact of this outcome will enhance
skills acquisition by members through mutual knowledge sharing; as well as leading to high
quality and timely services to citizens.
3. Eastern Europe and Central Asia Region
14. The global financial crisis severely affected many countries in ECA—including recently
graduated IBRD countries such as Hungary and Latvia, which returned to the Bank requesting
crisis-response financing in the form of DPOs. Since the Bank had very little lending and non-
lending activity in these graduated countries, there was no stock of current analytic work on PFM
to support the new requests for DPOs. Therefore, the FM team had to obtain information on the
adequacy of the country’s PFM systems by reviewing all previous Bank and IMF analytic work
and analyses completed by external organizations such as the Organisation for Economic Co-
operation and Development (OECD), European Union, nongovernmental organizations (NGOs),
and local ―think tank‖ institutions, complementing their findings with recent information on such
discrete PFM aspects as medium-term expenditure frameworks, implementation of performance-
based budgeting, budget classification, and IT systems. The crisis provided an opportunity for
the Bank to re-engage with several graduated member countries; but it also made clear the need
for countries to continue to fully implement PFM reforms, many of which had been deferred, not
considered as critical issues during the recent decade of economic prosperity.
15. Capacity Building. The ECA FM team increased its capacity-building efforts by leading
or contributing to diagnostic studies for guiding PFM development, helping countries develop
PFM improvement programs, and supporting implementation with advice, capacity-building
assistance, and knowledge sharing on PFM (Box 4 describes an example).
Box 4. Strengthening Armenia’s PFM
The Public Financial Management and Corporate Accounting and Auditing Project, currently under preparation,
covers many elements of Armenia’s PFM system that were initially supported through IDF grants, analytical work
and technical assistance. The project aims at coordinating the development of the interrelated elements of the PFM
system into a new level of improved accountability, operational efficiency, and fiscal discipline; and to help
establish modern corporate accounting and auditing framework at the national level. It will support (a) public sector
accounting; (b) internal controls and internal audit; (c) non-commercial enterprise accounting, reporting, and
monitoring; (d) implementation of the GFMIS; (e) update corporate sector accounting standards; (f) corporate sector
auditing; (g) public sector external auditing; and (h) e-procurement.
16. The ECA FM team also supported governments in strengthening their own institutional
arrangements for preventing and detecting corruption, specifically supporting key government
agencies responsible for the management and control of corruption risks—Ministries of Finance,
SAIs, and legislative oversight bodies. In this context, ECA FM was responsible for the task
management of 18 trust funds. FY09 was a year of firsts for the team: it managed its first-ever
investment loan in Azerbaijan; led its first-ever Public Expenditure and Financial Accountability
(PEFA) assessment in Montenegro, with the support of other development partners and the
Government; and provided the first programmatic technical assistance in Turkey (see Box 5).
7
Box 5. First Programmatic Technical Assistance in Turkey
The Programmatic Public Expenditure Review is designed to combine the Bank’s traditional diagnostic work (PER report
and PEFA assessment) with a diverse range of activities such as grants to support PFM report implementation, symposia,
trainings, and workshops to support and complement the Turkish Government’s efforts in implementing its PFM reform
agenda. One of the main deliveries in the program’s first year was the preparation of the first volume of a Public Financial
Management Performance Assessment based on the PEFA methodology, a study that was made jointly with Government
counterparts and Bank experts. The second volume will be a detailed assessment that will focus on the implementation
status of PFM reform at the line-agency level. The country office team is also launching a website for PFM in Turkey
(www.turkeypfm.org), to be managed by the Government.
17. Portfolio Quality. Consistently high ratings by the Quality Assurance Group confirmed
that ECA continues to have a robust risk-based quality assurance framework and a solid portfolio
and risk monitoring system.
4. Latin America and Caribbean Region
18. During FY09 the Bank introduced a strategic approach to FM work and enhanced
portfolio monitoring and quality assurance by adopting integrated fiduciary reviews in high-risk
environments. In capacity building, some of the highlights of FY09’s deliverables include the
first two PEFA assessments in LCR middle-income countries—Peru and Colombia—as well as
the completion and dissemination of three Brazil state-level assessments carried out with the
District of Brasilia (Box 6 highlights other capacity-building work in the Region). To share the
experience with global partners, the LCR FM team prepared a synthesis note on subnational
PFM frameworks, pointing to strengths and weaknesses that are common across subnational
entities in Brazil, and describing good practices.
Box 6. PFM Capacity-Building Efforts in the LCR Region
Supporting Regional SAIs. The IDF grant to the Central America Organization of Supreme Audit Institutions
(OCCEFS), having met its objectives and achieved satisfactory results, has given way to a follow-up grant designed
to respond to the organization’s continued demand for Bank services related to the collection of best practices and
recommendations on social audits and the SAIs’ work. To help improve the quality and timeliness of fiduciary
oversight conducted by SAIs in the Caribbean, the LCR FM team continued to support CAROSAI through an IDF
grant, with a view to creating large spill-over learning effects in small countries that have limited human and
institutional capacity.
Supporting the Implementation of PFM Reforms in Peru. The Bank delivered a Fiduciary Workshop for Peru’s
project implementing entities, which involved the active participation of officials from the Ministry of Finance
Budget and Accounting Directorates as well as the SAI, enhancing participants’ understanding of recent government
reforms in PFM (e.g., new budget classifications, new chart of accounts, and audit). In addition, the World Bank,
IMF, and US Treasury joined in providing a Cash Forecasting Seminar, helping different public sector actors who
are involved in the implementation of the Treasury Single Account to enhance their knowledge and understanding of
the importance of inter-institutional information-sharing to support a modern and efficient cash management.
19. Governance. To enhance governance at the country level and pilot innovation in
fiduciary work, the Bank made greater use of holistic approaches to address systemic portfolio
issues and gave increased attention to country-level fiduciary matters. Among other things, the
team (a) designed the Honduras Country Fiduciary Strategy, which covers policy, sectoral, and
portfolio fiduciary actions and is integrated with the overall country governance strategy; (b)
carried out portfolio ―sweep supervision‖ (in Guyana, Haiti, Jamaica, the Organization of
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Eastern Caribbean States, and St. Lucia), and intensified joint FM-Procurement supervision
activities; (c) piloted the FM Red Flags for Fraud and Corruption Tool in the Argentina Health
Sector and provided recommendations for strengthening the overall governance framework for
the Sector.
20. Knowledge. The Bank prepared two publications: (i) Accounting for Growth in Latin
America and the Caribbean: Improving Corporate Financial Reporting in Support of Regional
Economic Development; and (ii) Accountability in Public Expenditures in Latin America and the
Caribbean: Revitalizing Reforms in Financial Management and Procurement9. Together with
development partners, the Bank supported knowledge and capacity-building through the Global
Distance Learning Network (GDLN) Series ―Europe meets LAC‖—to take stock of and
disseminate experiences in financial reporting and accounting.
21. Donor Coordination and Harmonization. The Bank deepened client engagement by
advancing harmonization with development partners and the use of Country Systems at national
and sub-national levels. The World Bank working jointly with the Inter-American Development
Bank (IADB) supported Honduras’ adoption of the UEPEX financial reporting module for its
entire portfolio, as well as in the Dominican Republic. Thus, allowing projects to report
financial information directly from budgetary execution, enhancing the control framework and
reliability of project reporting. In addition, other activities which have strengthened this agenda,
include: use of provincial IFMIS in Argentina; use of the Single Treasury Account in Costa
Rica— resulting in the full adoption of a discrete element of country system for project flow of
funds; and joint audit TOR’s with the IADB for the audits carried out by the Office of the
Controller General – Federal Accounting Council in Brazil.
5. Middle East and North Africa Region
22. The MNA FM team continued to implement a risk-based approach that focused on results
and regular progress monitoring. Country-level work included carrying out institutional FM
capacity assessments and contributing to the GAC agenda by performing special-purpose
reviews of selected high-risk projects in the Egypt portfolio. Partnership with key national and
regional institutions, as well as inclusion of FM issues in countries’ economic development,
continued to be high priorities. Box 7 describes a specific effort by the FM team.
Box 7. Audit Firms’ Capacity in the MNA Region
As the timeliness of audits for Bank-funded projects improves, the MNA FM team is directing its attention to the
quality of audit reports received from borrowers, conducting special-purpose reviews to identify areas in which the
Bank and development partners can help strengthen audit capacity in the Region. The team performed audit quality
reviews of two audit firms that perform 95% of the Iraq and Lebanon portfolios’ audits. The objective of the quality
review was to ascertain whether the audits comply with international standards, in terms of quality and scope and
whether the Bank can rely on the auditor’s opinion when assessing portfolio riskiness. The assessment findings
recommended actions to enhance the quality process at both firms.
9 Accountability in Public Expenditures in Latin America and the Caribbean: Revitalizing Reforms in Financial
Management and Procurement was published jointly with the Brookings Institution Transparence and
Accountability Project. For further details visit: http://intresources.worldbank.org/INTLAC/Resources/257803-
1252614034299/EBOOK.pdf
9
23. Differentiated Approach Towards Sustainable FM Systems. The team tailored
diagnostic tools and advisory contributions to meet country expectations, differentiating and
adapting to the needs of middle-income, fragile, post-conflict and oil-rich economies—including
assessing diagnostic fiduciary risks in West Bank and Gaza; furthering the use of country
systems in Egypt and Morocco; and using dialogue and capacity strengthening to support Iraq’s
SAI. The region also continued its support to client countries through building sustainable
systems supported by grants. Within the ROSC reform plan, MNAFM, through an IDF,
supported Egypt’s Capital Market Authority to enhance it capacity to enforce implementation of
International Standards. In Lebanon, IDF-support financed the establishment of sustainable
training tools on modern PFM topics. Through supplementary PCF-support, managed by
MNAFM, the Ministry of Finance in Lebanon was able to develop a monitoring and reporting
system to follow on the extra-budgetary allocations and donor-financing made available to
rebuild the country.
24. Portfolio Monitoring. Continuous efforts to monitor portfolio performance and FM
project risk through the Project Status Report (PSR) has yielded positive results. The MNA FM
team has been communicating the progress met on the PSR on a quarterly basis to the region;
and has facilitated the follow-up process with the sectors, regarding compliance—addressing the
disconnect between the FMS ISR FM ratings and the PSR rating. In addition, the region
conducted Special Purpose Reviews on selected high risk projects within the Egypt portfolio.
This comprehensive review is not limited to transaction verification, but also assessed areas of
risks and internal control weaknesses, covering 17% of the disbursements made using Statement
of Expenses (SOE) method. The review identified some weaknesses in the control framework
under two projects resulting in the disbursement of ineligible expenditures. Under one of the two
projects, such ineligible expenditures were reimbursed to the Bank, and follow-up actions have
been underway under the second. The outcome of this robust process has resulted in
strengthened FM quality for the MNA portfolio. Box 8 outlines capacity building efforts in
support of portfolio implementation issues.
Box 8. Capacity-Building in the MNA Region
The MNA FM team jointly with Disbursement colleagues, scaled-up capacity-building efforts and conducted 13
training workshops targeting auditors and project financial management staff, providing guidance on portfolio
implementation issues. These training workshops covered all of the active partner countries in the Region: Djibouti,
Egypt, Iraq, Iran, Jordan, Lebanon, Morocco, Tunisia, West Bank and Gaza, and Yemen.
25. Growth. Responding to the large growth in the portfolio as the global financial crisis
increased the demand for Bank services, the MNA FM team re-energized their practice by
recruiting six new talented and skilled professionals.
6. South Asia Region
SARFM introduced fiduciary reviews to enhance the focus on fiduciary risks, quality, and results
(see Box 9).
10
Box 9. Supporting Quality of FM work in Investment Lending in India
Maintaining Quality of Supervision. In a large country like India, it would be prohibitively expensive for the Bank
to supervise the funding of decentralized expenditures across all states and districts. It is also not cost-effective for
the Government to maintain separate records for the Bank-provided funds or get a separate external audit for these
expenditures and provide the audit reports. However, the decentralized activities (staff, mobility cost, and training),
accounting for about 15% of overall project costs, were critical to achieving project objectives. It was agreed that
selected decentralized activities would be funded through predetermined standard costs (the standard costs were
derived from a list of planned expenditures by districts and states, reviewed by Bank for reasonableness, and agreed
during negotiations). Instead of requiring audit reports for such expenditures, the Bank agreed that the fiduciary
assurance for such decentralized expenses would be obtained through integrated implementation-cum-fiduciary
reviews to be conducted by an independent consultant, who would determine if the activities are being executed, if
they are delivering planned outputs, and if the actual expenditure is broadly comparable with the standard costs.
Fiduciary Review of the National Highway Authority. During FY09 the SAR FM team carried out a drill-down
fiduciary review of two projects implemented by the National Highways Authority of India. The objectives were to
(a) achieve last-mile fiduciary assurance on the recently closed loans and ensure that the total Bank disbursement
had been audited, and (b) uncover the critical corruption and leakage risk areas for Bank operations through a
simultaneous review of historical internal audit reports, transactions, and historical statutory audit reports. The
results of the exercise led the team to suggest (a) restructuring of internal audit for Bank project implementation
units to address corruption risks and elicit lucid and articulate comments from internal auditors about the likelihood
of such risks; (b) historical financial statements audit for ongoing projects to replace the audit based on statements of
expenditure, to distance Bank-funded operations from the multitude of repeated qualifications on the entity audit
report; (c) restructuring of the terms of reference for the statutory audit to incorporate critical elements of financial
statements audit to achieve complete linkage between statements of expenditure and books of account; and (d)
enhancement of systems capability and transparency through the use of ERP type systems. The Highways Authority
has agreed to all Bank suggestions. The likely outcomes of the suggested interventions include (a) stronger
assurance on use of Bank funds through restructured financial statements audit with auditor reporting in prescribed
formats, (b) establishment of early warning signals through crisper and unambiguous internal audit, and (c)
transparency in National Highway operations through the use of better software that will provide for hard controls
on transactions and ready availability of back-up documents.
26. Pakistan’s Use of Country Systems. In Pakistan, besides using country systems in a
number of projects being managed under the auspices of autonomous and state-owned
enterprises, during FY09 the Bank agreed to the full use of government systems in two
performance-based sector investment loans—the Punjab and Sindh Education Projects. The
Bank is also taking actions to mitigate the risks of the challenges Pakistan faces: (a) the lack of
an internal auditing function in government; (b) delayed legislative scrutiny and oversight on
public expenditures; and (c) the fact that the country’s IT-based PFM system has yet to be fully
rolled out in one of the country’s four provinces, limiting the capacity to support the full
integration and mainstreaming of projects within government.
27. Bhutan’s Use of Country Systems. Bhutan’s small size and good governance make it a
good candidate for increasing the use of country systems, and a good potential beneficiary of the
Bank’s simplification agenda. Accordingly, the default position in designing the FM
arrangements for Bank-financed projects in Bhutan has increasingly been to use the country’s
own accounting and financial reporting systems to meet the Bank’s requirements.
28. In supporting the use of country systems, SAR, like other Regions, is approaching clients
through a differentiated approach that reflects their level of readiness (see Box 10).
11
Box 10. Building Country FM Systems: Afghanistan
At the outset of the Bank’s reengagement in Afghanistan, FM arrangements for project investments were fully
mainstreamed in the Treasury and the Auditor General. This meant that implementing agencies throughout the
Government could work without project implementing units—at least to the extent that FM was concerned.
The benefits were clear and undisputed: accurate and timely disbursements, and reliable year-end reporting with
audits meeting international standards. This was no small feat, given the capacity constraints of a post-conflict
country with a weak accounting profession and PFM system, as well as limited banking facilities. Ancillary benefits
included the capacity of the Government to control investment operations and report through the national budget on
them—an important benefit, given the significant share of public finances supported by the World Bank.
The challenges initially came in two forms: (a) risk to the entire portfolio if the centralized systems failed; and (b)
poor management reporting to the implementing units, including difficulty in preparing reliable, robust in-year
unaudited financial reports. The first risk was dealt with through training and guidance to help develop capacity in
the Treasury Department. The second took more time and was resolved by intensive involvement by the FMS in
Kabul who supported the investment projects.
The effort continues to face constraints. Dependence on Treasury for advisory services to maintain, develop, and
operate the centralized systems is expensive and undermines the development of local capacity; it has been agreed
that this support will continue while capacity is developed. In addition, the service projects are only as well served
as the line ministries and thus they suffer from all the shortcomings of the national budget process; however, they
are improving, and Afghanistan disbursement ratios are better than Regional and Bankwide averages.
29. Legislative Oversight Committees. The Region has created the SAR Legislative
Oversight Community of Practice to allow members of legislative oversight committees to share
information and good practices.
30. Partnering Cross-Sectorally to Address Operational Issues. To address commonly
faced fiduciary and operational issues in SAR’s growing portfolio, SARFM in partnership with
the South Asia Urban Unit, organized a joint Round Table and produced a guidance note in
support of providing greater clarity to the design and supervision of decentralized operations.
This has been followed by SARFM taking the lead in preparing an Operations Guide for Local
Governance projects in partnership with the Procurement and Safeguards Units in SAR.
B. Audit Oversight
31. The FM Sector uses three measures of project audit oversight:
Compliance. The FM Sector monitors compliance with legal covenants pertaining to the
submission of audited financial statements and audit reports. Table 1 shows the
proportion of audits of loans, credits, and recipient-executed trust funds received during
the year. Since FY08, EAP, MNA and LCR have made substantial improvements in
project audits received on time for IBRD/IDA operations. Audit delays remain a
challenge and the FM Sector is focused on improving this area, as outlined in paragraph
32.
12
Table 1: Timeliness of Audit Reports due in FY09 and FY08
Type of auditor. As in 2008, approximately 33 percent of project audits were carried
out by countries’ SAIs. The Sector supports increased reliance on SAIs.
Audit opinions. Of all audit reports, 85 percent had clean opinions (up from 82% in
FY08). Of the audits with qualifications, the highest proportion was for
―exceptions‖—13 percent for FY09, compared to 17 percent in FY08, and 22 percent
in FY07.
32. Audit Improvements. The FM Sector continued giving rigorous attention to improving
audit and interim financial reporting compliance by closely monitoring ARCS and PRIMA.
Under the guidance of Regional FM Managers, FM staff intensified country-level efforts to
strengthen controls and implementation, including invoking remedies as appropriate. At the same
time, Regional ARCS coordinators are working collaboratively with the FM Anchor to improve
compliance in these areas and resolve issues. A notable achievement during the year was
completion of updating audit reporting information in the ARCS system. Information is now kept
up to date and regularly monitored by the ARCS Coordinating Team, led by OPCFM and the
regions, thus ensuring that system issues are promptly addressed.
C. Helping Partner Countries Improve Their Financial Management
33. One of the major areas of responsibility for the Bank’s FM Sector is helping partner
countries enhance the quality of their financial management—that is, their ability to
appropriately use and account for all of their funds, both their own and those they receive from
development institutions. When PFM systems are considered adequate, the Bank and other
donors should be able to rely on them for project financial management. Indeed, the Bank’s
Operational Policy (OP) 10.02, Financial Management, provides that Bank-supported operations
should use the country’s own PFM system, when circumstances permit, as the default option for
project financial management; and internationally, the Bank has committed through the Accra
Agenda for Action to making further progress in this area. During FY09 the FM Sector
collaborated with other Bank groups—particularly PREM and the Procurement Sector—in
providing follow-up support for PFM reforms through stand-alone technical assistance,
components of investment projects and sectorwide approaches (SWAps), and development
policy lending linked to PFM reform actions (see Box 11).
(percentages)
Region
Received on time
Received during FY
FY09
FY08
FY09
FY08
IBRD/
IDA
Trust
funds
IBRD/
IDA
Trust
funds
IBRD/
IDA
Trust
funds
IBRD/
IDA
Trust
funds
AFR 74 61 77 59 91 85 92 75
EAP 74 65 60 58 89 73 87 79
ECA 60 67 61 71 70 76 78 84
LCR 53 42 46 43 75 52 65 59
MNA 54 50 41 50 83 67 77 54
SAR 16 23 27 29 70 61 89 83
Bankwide 59 54 60 54 84 73 85 73
Source: Business Warehouse—ARCS.
13
Box 11. Supporting PFM Reform
East Africa: Working jointly with the donor community, the Bank is providing leadership through Chairing / Co-
chairing PFM basket funds in Kenya, Uganda and Tanzania. These basket funds vary in size from US$ 30 m. to
US$ 110 m. and provide support for whole of government PFM reform activities - including support for the
accountability committees of Parliament, the Ministry of Finance, Line Ministries, and Local Governments. The
results are encouraging. For example, Parliamentary accountability committees have been empowered, their
members have received extensive capacity building, they now have the funding for field visits, produce incisive
reports and hold open meetings accessible to the media and the public.
Burkina-Faso: A comprehensive approach to strengthen the PFM system. AFTFM has taken a lead role in
strengthening the PFM performance of Burkina Faso and contributing to transform this small landlocked West
African country into a leader in PFM reforms within Francophone Africa. This evolution resulted from a holistic
approach that combined analytic work (AFTFM co-led the PER and led an analysis of key bottlenecks for effective
public sector reform), development policy lending (key reforms spanned the whole PFM cycle from budget
preparation to oversight) and non-lending technical assistance (e.g. support to the newly formed High Authority for
State Oversight and the SAI). AFTFM also provided assistance to the Finance Commission of Parliament, in order
to strengthen the demand side of the accountability chain.
Mexico: Accounting Harmonization Nonlending Technical Assistance. The Bank provides on-demand, just-in-
time advisory services to Mexico’s Ministry of Finance on the implementation (and at a previous stage, the design)
of the new government accounting law. The Bank contributed to the country’s ongoing program to develop
government accounting standards and systems, with the goal of increasing quality and harmonization (across
different levels of government) of budget reporting and government’s financial statements. The technical assistance
was complemented by FM and PREM-Public Sector collaborating in a performance budgeting federal loan and
subnational fee-based advisory services.
Timor-Leste Post-Conflict: Harmonization and Alignment in PFM. The PFM Capacity Building Project, funded
by a multidonor trust fund under the guiding principles of ensuring harmonization and alignment, has integrated all
similar bilateral agency projects under its umbrella. Its innovative governance arrangements include (a) strategic
management through the Ministry of Finance’s senior management committee, chaired by the Minister of Finance;
(b) regular World Bank oversight and supervision; and (c) overview by the joint donor supervising committee
chaired by the Minister of Finance.
Bangladesh. Aiming to improve aid effectiveness, a Multi-Donor Trust Fund (MDTF) for capacity building in
Public Financial Management has been set up to strengthen: Public Expenditure Management, the Office of the
Auditor General, and Parliamentary Oversight Committees. The MDTF is jointly managed by SAR’s FM and
PREM teams.
34. Accountancy Profession. During FY09, the FM Sector completed 13 ROSC A&A
reviews, bringing to 100 the total number completed (see Annex D) and to 79 the number
published. The FM Sector worked with partner country institutions to implement accountancy
reform and development action plans; modernize the statutory framework for accounting and
auditing; strengthen the institutional capacity of national professional accountancy bodies; put in
place high-quality education and training, including practical training in international standards;
and develop independent monitoring and enforcement arrangements to ensure compliance with
applicable standards (see Box 10). In addition, IDF grants were used to establish and strengthen
FM institutions (Annex B lists IDF grants for FM institutional reforms as of June 30, 2009).
14
Box 12. Regional Experiences with Professional Capacity Development
III. THE SECTOR BOARD AND ANCHOR: FY09 IN REVIEW
35. The Financial Management Sector Board (FMSB) has overall responsibility for financial
management in Bank operations, including the FM Sector Strategy and related operational
policies, procedures, and guidance to staff; the quality of operational work; human resources
management; knowledge, learning, and outreach; and internal and external partnerships. The
FMSB, which is chaired by the Chief Financial Management Officer, is made up of the six
Regional FM Managers and representatives from the Loan Department, Procurement Group,
Public Sector Group, and Legal Operations Policy. The FMSB is supported by two Standing
Committees: the Human Resources Committee, which is responsible for human resources
management, and the FM Operations Review Committee, which responds to requests for advice
and policy interpretations on FM aspects of Bank-supported operations, and also provides
clearances for specific decisions. The FMSB is also supported by two other Committees and
three Working Groups (see Annex E). The FM Anchor, which is based in Operations Policy and
AFR. To increase the number of professionally qualified accountants and improve corporate financial reporting in
support of private sector-led growth, the Bank is supporting the establishment of professional accountancy bodies
in some countries (e.g. Ethiopia, Mozambique and Rwanda) and supporting the strengthening of the profession in
several other countries (e.g. Benin, Botswana, Nigeria, Senegal, etc). The Bank is also adopting a regional
approach in a number of areas. These efforts include an IDF grant provided to the Association of Accountancy
Bodies in West Africa (ABWA), under which member bodies have: (i) adopted the IFAC Ethical Code for
Professional Accountants and developed an enforcement mechanism; (ii) a common Audit Monitoring and Quality
Assurance Review Manual; and (iii) developed a Uniform Curriculum and Professional Examination Scheme
which is under implementation in Nigeria, Ghana and Liberia with a planned roll-out to other countries. ABWA
has also began publishing on its website journals and technical research papers on new and emerging
developments in accounting, auditing and finance.
EAP. EAP held a regional ―Training the Trainers Program‖ in International Financial Reporting Standards (IFRS)
using e-learning and GDLN, in partnership with the Institute of Chartered Accountants in England and Wales. The
pilot involved 135 participants from academia, government, and practice sectors from China, Indonesia,
Mongolia, Philippines, Thailand, and Vietnam. It aimed to (a) facilitate capacity building in IFRS across the
region, and (b) create a ―community of interest and expertise‖ and appropriate networks for ongoing knowledge
sharing. The program used a blended learning approach: self-study using IFRS learning materials; facilitated
GDLN-based workshops; and tutorial support through ―webinars‖ or ―clinics.‖ By identifying and developing
―key trainers‖ in each jurisdiction, the Bank will achieve greater leverage on the initial investment, and in turn
promote enhanced capabilities in IFRS knowledge and skills.
ECA. ECA’s corporate sector financial reporting activities are hosted in the Vienna Centre for Financial
Reporting, which is aligned to the Region’s evolving business model. It seeks to expand (a) the delivery of fee-
for-service activities through the SECO program for new EU-member states, and (b) multidonor trust-fund-
financed advisory services for country- and regional activities through the Road to Europe Program for
Accounting Reform and Institutional Strengthening Program. The Centre has recently signed fee-for-service
contracts with Slovenia and Estonia, and agreements with Latvia and Poland will be finalized in FY10.
SAR. In Bangladesh, following up on the recommendations of the ROSC report, the Bank facilitated a twinning
arrangement between the Institute of Chartered Accountants of Bangladesh (ICAB), Institute of Chartered
Accountants in England and Wales (ICEAW) and Chartered Institute of Management Accountants (CIMA) aimed
at improving ICAB’s training of professional accountants. In Sri Lanka, the Bank is supporting the capacity
building of the Accounting and Auditing Standards Monitoring Board (SLAASMB), the country’s regulator for
the compliance of private sector accounting and auditing standards.
15
Country Services (OPCFM), serves as Secretariat to the FMSB and its Committees and Working
Groups, and supports implementation of their work program. It also provides operational
guidance and support to FM staff, including targeted cross-support to the Regions.
A. Supporting and Guiding Regional Efforts
36. This section describes the wide range of activities through which the FMSB and the
Anchor have supported Regional staff in their FM work.
37. IDA14 Internal Controls Review and Action Plan. The 2008 IDA14 Internal Controls
Review exercise, an independent assessment of the internal controls over IDA operations and
compliance with the Bank’s charter and policies,10 concluded that while quality assurance
arrangements have been put in place to oversee the FM arrangements for the use of IDA
financing, the quality and documentation of these arrangements is inconsistent and does not fully
comply with the FM Practices Manual, particularly during project implementation. It identified
issues in three areas: (a) documentation related to the review of audited financial statements by
an FM specialist and management oversight of ARCS reports; (b) inconsistent quality
arrangements for the documentation of FM supervision work, including planning, reporting, and
follow-up on FM action items; and (c) inconsistencies and gaps in quality arrangements for
Regional FM managers’ oversight and monitoring of FM work during project supervision.
During FY09, the FM Sector continued to make progress toward addressing these issues,
monitoring quarterly progress reports.
38. Evaluation of FM Sector Quality Arrangements. The CSR/OPCS Joint Evaluation, an
assessment of FM Sector quality arrangements by a Joint Evaluation Team (JET), was
established during FY09. It focuses on the following dimensions of FM work: (a) compliance—
whether the Regions’ quality arrangements and FM work are consistently being implemented as
designed and in accordance with the FM Practices Manual; (b) quality—whether the judgments
being made are properly supported by evidence; and (c) efficacy—whether the FM work being
carried out is sufficiently robust that CSR can rely on it as one element of its plans to reduce its
ex-ante disbursement requirements and simplify disbursement processes. The results of the
review are intended to support the Controller in making an assertion in the Bank’s annual COSO
report with respect to the adequacy of arrangements to ensure that loan funds are used for
intended purposes. The JET will issue a report on its work program following completion of all
regional reviews, in the latter part of FY10.
39. PRIMA. PRIMA11 is currently being developed as a corporate system for recording and
monitoring critical compliance aspects of FM work. This new system, collaboratively developed
with the Information Solutions Group (ISG), will include improved functionalities, streamlined
application across Regions, and full integration into the Bank’s SAP Project Portal.
10
See IDA Internal Controls Review: Review of Quality Arrangements for Financial Management of IDA
Operations, OPCS/CSR, May 28, 2008. The assessment focused on the design and operational effectiveness
of controls over IDA operations at the transaction level, and on entity-level controls and the overall
effectiveness and efficiency of the internal controls framework for operations. It involved management self-
assessment; review by the Internal Audit Department; and an evaluation of the overall process by the
Independent Evaluation Group. 11
Portfolio Risk Management System.
16
40. Corporate Reviews of High-Risk Operations. The FM Sector continued to provide support
to corporate review of selected operations e.g., OC/ROC reviews, with OPCFM providing comments
and inputs into these operations. During 2009 an internal review carried out by OPCFM highlighted
some of the main issues. It noted a consistent relationship between the level of FM risks and weak
country PFM systems and observed that severe capacity constraints make it difficult to address FM-
related risks in the short to medium term, and in many cases implementing agencies had to use
outside technical assistance to bridge the capacity gap. It identified common mitigating measures
included in project design: (a) ring-fenced FM arrangements, sometimes combined with capacity
building; (b) capacity building through technical assistance and training; (c) strengthened
independent monitoring arrangements, including internal audit, more frequent external audits, and
special audits; and (d) development of social accountability mechanisms, especially for decentralized
projects. A web-based database featuring good practice examples was also developed.
41. Policies, Procedures, and Guidance. The FMSB and Anchor continued their practice of
providing up-to-date guidance to assist and support FM staff in carrying out their work.
Particularly notable in FY09:
Review of the Financial Management Manual. Work on revising the FM Manual
began with extensive consultation among FM staff, including a survey and discussion
at the 2008 Fiduciary Forum. As a result of this process, a revised, principles-based
Manual was finalized and issued in March 2010. The new Manual will be supported
by reference material, to be available on the FM website, that provide detailed
guidance on the key topics in the Manual and elaborate on the FM control framework.
Audit Quality. The Sector also developed an Audit and Assurance Toolkit to guide
FM Specialists in using financial statements audits, internal audits, and special-
purpose audits more effectively to help safeguard against corruption risks. The toolkit
provides advice to FM specialists, task team leaders, and others on how to use
financial and special-purpose audits more effectively to mitigate GAC-related risks.
PFM Practices. To share the good practices on PFM across different country
contexts, the FM Sector has created a PFM Good Practices Database, which provides
country cases, guidance, reference models, and other reference materials.
Interim Guidance Note on Assessment of Fiduciary Risk in the Use of Country FM
Systems. In July 2009, the FM Sector issued an interim guidance note12 to help FM
staff assess the risks in the use of a country’s PFM system in Bank-supported
operations. The Guidance will be updated in light of lessons learned.
Review of Financial Management Issues in CASs. During FY09, OPCFM carried
out a retrospective review13 of FM issues in country assistance strategies. Overall, the
review shows satisfactory coverage of the fiduciary environment for DPOs through
Country Financial Accountability Assessments and other analytic work related to
12
See “Assessment of Fiduciary Risks in the Use of Country FM Systems in Bank-Financed Investment Projects –
Interim Guidance Note to Staff”, OPCFM, July 2009. 13
See “Review of Financial Management Issues in Country Assistance Strategies (FY06-07)”, OPCFM,
November 2008.
17
PFM. In addition, it assessed the harmonization of PFM analytic and capacity-
building work and of the GAC agenda as satisfactory or good practice in 88 percent
and 78 percent of cases, respectively. Finally, the review indicated that there is room
for improvement in CASs’ discussion of fiduciary risks in the Bank’s portfolio,
measures to mitigate fiduciary risks, use of country systems, and auditing and
accounting. Drawing on the findings of this review, OPCFM prepared a good practice
note14 to update the 2001 Interim Guidance Note. The good practices note includes
broader coverage of FM issues, with attention to harmonization, use of country
systems, GAC, accounting and auditing, and a differentiated approach to CASs in
fragile and conflict-afflicted states.
DPL Retrospective. As a contribution to the Bankwide DPL review, OPCFM
reviewed the treatment of PFM and fiduciary issues in 121 DPOs approved between
April 2006 and June 2008.15 The report showed that PFM actions in DPOs have
delivered tangible results. In fact, PFM prior actions featured in a substantial majority
of DPOs, covering the full range of PFM issues. In most core DPOs, the PFM
analysis and program content were adequately documented. In almost all cases,
relevant PFM assessment reports were referenced in the Program Document, and
some rationale was provided for the PFM content of the operation.
Dealing with Governance and Corruption Risks in Project Lending. The note16
explains how to tailor FM work during the design and preparation of investment
projects to mitigate risks of fraud and corruption, especially in higher-risk
environments. Since standard FM work is already concerned with ensuring that Bank
funds are used for intended purposes, this note identifies what is incremental in
respect of (a) FM assessment work; (b) fiduciary risk mitigation measures, including
capacity building; (c) enhancing the effectiveness of external audit and assurance; and
(d) project readiness and supervision planning. Work is underway to develop a note
providing guidance on mitigation of risks during implementation support.
External and Internal Websites. The FM Sector has updated and reorganized its
internal and external websites to give them a more user-friendly navigation system. In
addition, it has undertaken a quality review to ensure that information is up to date and
in compliance with information security safeguards, and that it poses no institutional
reputational risk.
B. Global Partnerships and Activities
42. The FM Sector also works on the international level. Through partnerships with bilateral
and multilateral donors, it helps ensure that policy and operational issues affecting FM are
coordinated and that agreements related to FM under the global harmonization initiative move
forward. And through partnerships with global accounting and auditing institutions and relevant
14
See “Country Assistance Strategies: Good Practices in Financial Management”, OPCFM, June 27, 2009. 15
See 2008 Development Policy Retrospective: Public Financial Management and Fiduciary Issues, OPCFM,
May 21, 2009. 16
See “Dealing with Governance and Corruption Risks in Project Lending: Emerging Good Practices”, OPCS,
February 2009.
18
standard-setting bodies, it promotes inclusion of PFM development issues in their activities and
facilitates partner countries’ adoption of internationally recognized standards, codes, and
practices.
43. Strengthening SAIs. Many SAIs face a range of development challenges, from limited
budgets to the lack of strategic plans. To support capacity-building initiatives, the World Bank
worked with the UK’s Department for International Development, the Canadian International
Development Agency, and a Task Force of the International Organization of Supreme Audit
Institutions (INTOSAI) to draft a Memorandum of Understanding (MoU) that was prepared in
FY0917. The MoU brings together like-minded donors and the SAI community in a common
approach to development support, with the overarching goal of accelerating the strengthening of
audit capacity in partner countries and improving domestic accountability. Donor support will be
provided through a hierarchy of activities, principally at the country level—where SAIs will
receive substantial support to help design and implement strategic development plans—but also
at the regional and global levels. Work under the MoU begins with the first Steering Committee
meeting in February 2010.
44. OECD-DAC Task Force on Public Financial Management. The Task Force (formerly
the Joint Venture on Public Financial Management), cochaired by Malawi and the World Bank,
is one of five task forces under the OECD-DAC’s Working Party on Aid Effectiveness. The Task
Force’s work program comprises four areas: (a) using country systems; (b) assessing country
systems; (c) effective capacity for reform; and (d) accountable and results-driven country
systems. Activities under way include work on assessing country systems and the preparation of
guidance on strengthening and using country systems and on parliamentary and SAI oversight.
45. Multilateral Development Banks Financial Management Harmonization Working
Group. The Bank has provided leadership to the MDB FM Harmonization Group for a number of
years. The group has made good progress in harmonizing FM policies and practices at the inter-
institutional level, the global and regional levels, and the country level: for example, common
formats for FM reporting, common approaches for selecting external auditors, joint approaches for
assessing fiduciary risks, and joint standards for auditing and financial reporting; joint publications;
and joint analyses of country PFM systems. The group has taken up GAC issues: members have
shared their approaches, and the Bank has shared its good practice note on project preparation
and draft note on project supervision. The World Bank has offered support to the African and Asian
Development Banks for strengthening staff capacity, by proposing staff training and arrangements
for exchange; and for purposes of knowledge exchange, the World Bank invited the MDBs to join
the Fiduciary Forum, held on March 1-5, 2010. During the latest meeting (Tunis, December 2009),
the MDBs agreed to strengthen collaboration in such strategic areas as: (i) implementation of the
MoU between INTOSAI and development partners; (ii) the dialogue with IFAC to support
developing and transitional countries in developing the accounting profession; (iii) efforts to
accelerate and deepen the use of country systems in designing and implementing programs/projects;
(iv) sharing of experiences across areas of mutual interest; and (v) development of terms of
reference for comprehensive auditing, including financial and performance auditing.
17
This Memorandum of Understanding (MOU) was signed in Brussels in October 2009, culminating a preparation
process that began in Mexico in November 2007.
19
46. Public Expenditure and Financial Accountability. Since 2003 the Bank has participated
in the PEFA program, a partnership of seven donors and multilateral development
organizations18
that aims to support integrated and harmonized approaches to assessment and
reform in PFM. The FM Sector is represented on the PEFA Steering Committee, endorsing the
―Strengthened Approach to PFM Reform,‖ which emphasizes country leadership of PFM
reforms, coordinated development partner analytics and aligned support, and joint monitoring
through the PEFA framework. As of October 2009, some 147 assessments in 106 countries have
helped to identify the strengths and weaknesses of countries’ PFM systems. With this
information, countries can work with donors to prepare an action plan for strengthening their
systems. Furthermore, over time repeated assessments will be able to document progress.
Meeting in December 2009, the PEFA Steering Committee agreed to (a) develop clear
methodological guidance on how to use PEFA assessments for PFM reform formulation; (b)
fine-tune the performance measurement framework; (c) ensure that the Monitoring Report for
2009 would include as a key recommendation that PEFA assessment reports disclose, as a
standard, a statement on resource use in implementing the assessment; and (d) finalize guidance
on carrying out repeat PEFA assessments.
47. Professional Institutions and Standard-Setting Bodies. The FM Sector continued its
strategic partnerships with key international accounting and auditing organizations (such as
IFAC and the International Accounting Standards Board, or IASB) to promote (a) the
development of high-quality accounting and auditing standards, taking due account of
developing country concerns and issues; (b) wide dissemination and adoption of these standards
by more partner country governments; and (c) support for training and capacity-building
initiatives to foster the skills and aptitudes required for successful implementation of the
standards. Although some progress has been made, substantially more needs to be done in order
to support the establishment and strengthening of the accountancy profession in partner
countries.
IV. THE FM SECTOR: FY09 INSTITUTIONAL AGENDA
48. The FM Sector has a broad internal responsibility to maintain a structure and activities
that support staff in carrying out the dual mandate to provide reasonable assurance on the use of
Bank funds and to help partner countries improve their FM performance. This section
summarizes the Sector’s internal activity in FY09.
A. Financial Management Strategy
49. In FY09 the FM Sector began articulating a strategy for carrying out its objective of
supporting the achievement of development results by providing fiduciary assurance on the use
of Bank funds and by helping partner countries improve their financial management. Work on
the FM Sector Strategy included consultations with key internal (OS, FM, and Regional
management, Procurement, PREM, IAD, INT and CSR) and external partners (IFAC,
IASB, and IFAC’s International Public Sector Accounting Standards Board). Strategic
18
World Bank, IMF, European Commission, UK's Department for International Development, Swiss State
Secretariat for Economic Affairs, French Ministry of Foreign Affairs, and Royal Norwegian Ministry of Foreign
Affairs.
20
priorities identified in this process included (a) delivering quality FM results in Bank operations;
(b) building partner countries’ FM capacity; and (c) promoting global public goods. The
Strategy is focused on results, identifying relevant monitoring indicators, and is expected to be
finalized by the end of FY10.
B. Staff Development
50. FM staff levels increased from 167 at end-FY08 to 174 at end-FY09 (see Table 3). FM staff
are fully integrated into task teams, and 62 percent of Regional FM staff are based in country offices.
Table 2: FM Sector Staffing
(as of June 30, 2009)
Location AFR EAP ECA LCR MNA SAR OPCFM LOA Others* Sector
Washington 6 3 11 9 3 4 9 18 3 66
Country offices 27 20 12 14 5 29 0 1 0 108
Total 33 23 23 23 8 33 9 19 3 174
Note: Does not include staff on developmental assignment or secondment.
* Others = SDN and IAD.
Source: PeopleSoft.
51. Staffing. To enhance skills and reenergize staff through greater mobility, the FM Sector
provided FM staff opportunities to gain experience in other Regions and the FM Anchor.
Overall, 5 staff were rotated through a sectorwide management exercise, 4 were promoted to
level GH, and 3 staff took on substantive cross-support responsibilities. During FY09, two FM
Managers moved to positions outside of FM, signaling demand for FM skills outside of the
Sector. FY10 will provide substantial opportunities for upward mobility, particularly as three of
the six Regional manager positions need to be filled. During FY10 the Sector will continue to
focus on (a) filling staffing gaps—and work to meeting the institutional gender-balance goals;
(b) making greater use of staff rotation, developmental assignments; (c) facilitating cross-support
among Regions and departments; and (d) managing emerging talents.
Table 3: FM Sector Formal Learning Activities, FY09
Area of focus* 52. Knowledge, Learning, and Outreach. As Table 3 shows, to help meet the training
needs of Bank and counterpart staff, the FM
Sector—all six Regions, the Anchor, and
LOA—delivered a total of 74 learning events,
reaching an audience of over 3,600
participants. (Annex F describes some of the
internal and external learning activities in
which the Sector was involved).
Region
or department
Total
learning
events
FM PFM Other
AFR 16 11 4 1
Anchor 12 3 3 6
EAP 7 6 1 0
ECA 8 2 2 4
LCR 14 7 11 1
LOA 13 13 0 0
MNA 7 7 3 1
SAR 9 5 3 1
Total 86 54 27 14
Trainings may have multiple areas of focus, as such the total number of
events may be smaller than the combination of areas covered.
21
53. FM Sector News. Other knowledge, learning, and outreach activities during FY09
included four editions of the FM Sector News, a quarterly newsletter than provides FM Sector
staff with updates on the latest toolkits, guidance, policy revisions, trainings, and good internal
practices in the Regions. This newsletter also offers Regional staff opportunities to share the
latest developments and features summaries of the policy direction of the FM sector and the
institution.
54. Administering the SAI Framework. The FM Anchor has been facilitating information
requests by World Bank Group members’ SAIs in accordance with the SAI Framework19 since
2008. Five requests for audits by supreme audit institutions were processed between November
2008 and December 2009. In September 2009 OPCFM reported to the Board’s Audit Committee
on these activities.20
V. LOOKING FORWARD: FY10 PRIORITIES AND CHALLENGES
55. As this report has shown, during FY09 the FM Sector continued to make substantial
progress in the wide range of activities with which it carries out its mandate, increasingly
focusing on improving quality and enhancing aid effectiveness. Looking forward, the Sector
expects to see changes in the amounts and nature of its work: for example, increased demands
for implementation support as the Bank’s lending commitments remain high; and increased
involvement in risk identification and mitigation as the Bank proceeds with investment lending
reform. Accordingly, during FY10 and beyond, the FM Sector will focus on the following areas.
56. FM Sector Strategy. Drawing on extensive consultations and on the analytic work
OPCFM carried out during FY09, the FM Sector Strategy will be finalized in FY10 and rolled
out during FY11. The strategy will provide a cohesive implementation platform for FY11-13,
will focus on three priorities: (a) delivering quality services, including support for IL Reform and
fragile states; (b) building partner countries’ FM capacity; and (c) promoting global public
goods.
57. Quality and Internal Controls. The revised FM Manual has been finalized and issued on
March 1, 2010. The FM Sector will disseminate the FM Manual and associated reference
material for staff; continue to monitor its quality arrangements to ensure their robustness;
develop a monitoring/compliance framework on quality and results FM indicators; upgrade and
ensure alignment of FM Systems (PRIMA and ARCS); complete Phase II of the ongoing
OPCS/CSR joint evaluation work; complete IDA Controls Review Retesting Process; and
monitor the implementation of the IDA14 Controls Review Action Plan.
58. Use of Country Systems. To deepen and accelerate the use of country FM systems, the
FM Sector will continue to implement ongoing capacity building initiatives, including carrying
out focused and structured dialogue on efforts towards strengthened country systems and
19
See A Framework for Audits by World Bank Group Members’ Supreme Audit Institutions: A Joint Policy
Framework for IBRD, IDA, IFC and MIGA (R2006-0129/2, IDA/R2006-0142/2, IFC/R2006-0200/2,
MIGA/R2006-0038/2), October 6, 2006. 20
See Retrospective Review of Audits by World Bank Group Members’ Supreme Audit Institutions, September 30,
2009.
22
promoting their usage. Efforts will also include: (a) expert/ peer reviews, guidance and hands-on
support on UCS work in specific countries; (b) extensive sharing of the various regional and
country experiences; and (c) peer-to-peer learning. The Sector will also continue collaborating
with other Bank groups in providing follow-up support for PFM reforms.
59. Private Sector Accounting and Auditing. The FM Sector will continue to work with
partner country institutions to implement accountancy reforms based on ROSC A&A
recommendations, including promoting compliance with international standards. A review of
lessons learned from ROSC A&A assessments will identify good practices and inform the future
conduct of the program.
60. Governance and Anticorruption. The FM Sector will continue its GAC work by
contributing to capacity building in FM; strengthening governments’ own institutional
arrangements for preventing and detecting corruption; and supporting the implementation of the
GAC Strategy. The Sector will provide further guidance to staff e.g., on issues relating to GAC
aspects of FM implementation support and a Red Flags Toolkit. In addition, it will roll out GAC
training to task teams and will work with INT on processes for referral and follow-up on GAC
issues. Finally, it will develop a GAC database to capture good practices across the Bank.
61. Global Partnerships. The FM Sector will continue to engage and take leadership in
global partnerships with bilateral and multilateral donors to help ensure that policy and
operational issues affecting FM are coordinated and that agreements related to FM under the
global aid effectiveness initiative move forward. The partnership with INTOSAI will move to
implementation during 2010, helping to strengthen country fiduciary systems, SAIs, and their
regional associations. Moreover, although some progress has been made in supporting the
establishment and strengthening of the accountancy profession in partner countries, substantially
more needs to be done.
62. Learning and Career Development. The biennially hosted Fiduciary Forum that brings
together fiduciary staff and development partner colleagues was hosted in March 1 - 5, 2010.
Themed ―Fiduciary Innovations for Development Effectiveness‖, its main focus was on
investment lending reform, the GAC agenda, use of country systems, and future directions of the
accountancy profession. The Sector will continue to provide knowledge sharing and learning
opportunities for its highly decentralized staff, identify skills gaps, match staff to demand, and
develop practices and procedures to attract and retain staff with the appropriate skills. Moreover,
the Sector will continue to foster rotations, development assignments, and regional cross-support.
23
ANNEX A. FM ECONOMIC AND SECTOR WORK, FY09
Region Country Activity
AFR Benin ROSC A&A
Burkina Faso PER
Cote d’Ivoire ROSC A&A
Democratic Republic of Congo ROSC A&A
Mali ROSC A&A
Niger ROSC A&A
Sudan Country Integrated Fiduciary Assessment (CIFA)
The Gambia Country Financial Accountability Assessment (CFAA)
Uganda PEFA
With other sectors Botswana PER
Ghana PER / PFM Review
Liberia PEMFAR
Mali PEMFAR
Niger PEMFAR
Tanzania PEFAR
Togo PEMFAR
EAP Laos ROSC A&A
Vietnam ROSC A&A
ECA Belarus ROSC A&A
Montenegro Integrative Fiduciary Assessment (IFA)
Tajikistan ROSC A&A
Turkmenistan ROSC A&A
Uzbekistan ROSC A&A
With other sectors Belarus PEFA
Bulgaria PFM Update
Turkey Public Expenditure & Financial Management Study
LCR Colombia Integrative Fiduciary Assessment (IFA)
Peru PEFA (led by the EU)
SAR Afghanistan ROSC A&A
Bhutan ROSC A&A
Pakistan PEFA
Pakistan Provincial Financial Management and Accountability
With other sectors Afghanistan Anti-Corruption Study: Vulnerability to Corruption in PFM
Source: Business Warehouse Report of Economic and Sector Work/Analytic and Advisory Assistance
25
ANNEX B. FM INSTITUTIONAL DEVELOPMENT FUND GRANTS, FY09
As of June 30, 2009
Region Country Activity
Amount
(US$)
AFR Africa SADC Public Sector Accounting Standards 499,000
Africa Institutional Strengthening of SAIs in English-Speaking Africa 927,000
West Africa Association of Accountancy Bodies in West Africa (ABWA) 676,000
West Africa Improving Public Sector in FM in FAAGWA Countries 665,000
Benin Support to Benin Accountancy Profession 365,000
Botswana Strengthening Financial Management Training and Accreditation in Botswana
486,300
Burkina Faso Strengthening Public Sector Control Institutions 378,000
Cape Verde Institutional Strengthening of the Cape Verdean Supreme Audit Institution 333,000
Ghana Support to Ghana Audit Services (SAI) 245,000
Ghana Support to Internal Audit Agency 498,000
Guinea Support to the Accountancy Profession 309,000
Lesotho Lesotho Institute of Accountants - Capacity Development 435,500
Mali Support to the Audit Institutions 484,000
NBA Capacity Building for NBA Procurement and Financial Management Capacity 499,000
Nigeria Enhancing the Quality of Accounting Practice 186,000
Senegal Support to the Accountancy Profession ONECCA 265,000
Swaziland Strengthening Public Expenditure Management 479,000
EAP Cambodia Strengthening the National Audit Authority 211,000
Cambodia Improving Corporate Financial Reporting 249,918
China Strengthening the Capacity of Provincial, Municipal and County Auditors 250,000
China Improving Management over Special Purpose Transfer Payment in China 300,800
Indonesia Strengthening Forensic Audit Capacity of State Audit Board (BPK) 300,000
Indonesia Strengthening Accountability for and Auditability of Disaster-Related Aid 300,000
Indonesia Improving links between Government Financial Reports & Sources of Funding 152,020
Lao PDR Project Standard Operating Procedures 200,000
Lao PDR Strengthening Financial Accountability in Private Sector 250,000
Philippines Strengthening the Capacity and Effectiveness of the Commission on Audit 300,000
Thailand Strengthening OAG Institution and Performance in Public Audits 335,000
Vietnam Capacity Strengthening for the Vietnam Association of Certified Public Accountants
227,940
ECA Armenia Piloting Fiduciary Control for Non-Commercial Organizations 425,000
Armenia Strengthening Capacity and Supporting Reform in the Public Sector Internal Audit System
196,700
Armenia Implementation of IPSAS Strategy 320,000
Armenia Building Government Capacity to Implement Government Financial Management Information System (GFMIS)
310,000
Croatia Enhancing Corporate Financial Reporting in Croatia 350,000
Georgia Strengthening the Institutional Capacity of the newly expanded Ministry of Environment
388,000
Kosovo Capacity Building in Kosovo's Public Sector Accounting 160,000
Kyrgyz Republic Institutional Capacity Enhancement for the Public Expenditure 315,000
26
Region Country Activity
Amount
(US$)
Management
Kyrgyz Republic Strengthening Local Government Capacity to Implement Intergovernmental Fiscal Reforms
384,000
Kyrgyz Republic Capacity Building for Public Sector Auditing 370,000
Macedonia Capacity Building in Macedonia's Public Sector Accounting 160,000
Moldova Capacity Building in Moldova's Public Sector Accounting 160,000
Serbia Enhancing Corporate Financial Reporting in Serbia 285,000
Tajikistan Strengthening Capacity in the Tax Service 496,000
LCR Argentina Fiscalia de Investigaciones Administrativas 232,000
Belize Building Institutional Capacity of Auditor General and Improving Quality of Public Procurement
350,000
Bolivia Strengthening Aid Coordination and Management Capacity for Effective Monitoring of Official Development Assistance
170,000
Bolivia Strengthening of the Bolivian Representatives Chamber of the Congress 212,000
Brazil Capacity Building for Management of Public Infrastructure Projects in Brazil's Federal Government
400,000
Brazil Enhancing Operational Capacity of the Controller General of Brazil 378,000
Caribbean Strengthening Fiduciary Oversight in the Caribbean through Caribbean Audit Institutes
436,500
Colombia Institutional Strengthening of the Legal Claims Management System 479,000
Dominican Republic Institutional Strengthening of the DPCA 319,956
El Salvador Strengthening Fiscal Management and Public Sector Transparency 401,800
LCR OECS: Strengthening Institutional Capacity for Project Implementation 403,450
LCR Strengthening of Andean SAIs 489,900
Mexico Fiscal Transparency 500,000
Mexico Municipal Capacity Building Strategy 352,850
Mexico Strengthening of the Federal Institute for Access to Information 477,000
Peru Strengthening Congressional Budget Oversight Capacity 493,500
MNA Egypt Enhancing Capital Market Authority Monitoring Capacity 309,000
Lebanon Developing Capacity Building Tools for Sustainable Governance 338,000
SAR Bhutan Improving Public Financial Management 287,000
India Andhra Pradesh Pub. Financial Management Strengthening 430,000
India Uttar Pradesh Capacity Building in the Finance Department 167,000
India Strengthening Internal Audit and Revamping of the Accounts Training Schools of the Government of Madhya Pradesh
250,000
Maldives Institutional Development and Capacity Building of the Auditor General's Office
496,000
Sri Lanka Capacity-Building of the Sri Lanka Accounting and Auditing Standards Monitoring Board
291,000
Sri Lanka Strengthening Parliamentary Oversight Committees 494,000
Source: Business Warehouse Report 2b1. List of Approved Projects (Lending and IDF)
27
ANNEX C. FIRST INITIATIVE GRANTS, FY09
As of June 30, 2009
Region Country Activity Approval Date
Amount
(US $ 000)
AFR Ghana Capacity Building - Accounting Association November 09 310
Botswana Establishing Accounting Oversight Board December 07 88
Malawi ROSC A&A Country Action Plan November 07 86
Tanzania Updating Accounting and Auditing Legislation April 06 360
EAP Thailand SEC Audit Assessment Capacity June 09 275
Philippines ROSC Accounting and Audit September 07 245
ECA Montenegro Accounting and Auditing ROSC Follow-Up November 08 207
Georgia Development of Country Strategy & Action Plan August 06 89
LCR El Salvador IFRS Implementation July 08 246
Honduras Roadmap for Strengthening Accounting and Auditing February 08 478
Peru Strengthening Private Sector Accounting and Auditing February 08 200
28
ANNEX D. ROSC ACCOUNTING AND AUDITING STATUS REPORT, FY09
As of June 30, 2009
No. Country Completed Published
AFR
1 Benin Mar-09 Apr-09
2 Botswana May-06 Jun-06
3 Burundi Jun-07 Nov-08
4 Cameroon May-06
5 Cote d'Ivoire Jun-09
6 Democratic Republic of Congo Jun-09
7 Ethiopia Feb-08 Feb-08
8 Ghana Jun-04 Aug-06
9 Kenya Nov-01 Jan-02
10 Madagascar Jun-08 Aug-08
11 Malawi Jun-07 Sep-07
12 Mali May-09
13 Mauritius Apr-03 Apr-03
14 Mozambique Jun-08 Nov-08
15 Niger May-09
16 Nigeria Jun-04 Dec-04
17 Rwanda Jun-08 Nov-08
18 Senegal Jun-05 Aug-05
19 Sierra Leone Jun-06 May-08
20 South Africa Apr-03 May-03
21 Tanzania Jun-05 Sep-05
22 Uganda Jun-05 Sep-05
22 Zambia Jun 07
EAP
24 Cambodia May-07 Sep-07
25 Indonesia Jan-06 Sep-06
26 Korea Jun-04 Nov-04
27 Lao PDR Jan-09 May-09
28 Mongolia Apr-08 Jul-08
29 Philippines Dec-01 Jan-02
30 Philippines May-06 Jun-06
31 Thailand Apr-08 May-08
32 Vietnam Jun-09
ECA
33 Albania Jun-06 Nov-06
34 Armenia Jun-08 Apr-09
35 Azerbaijan May-06 Sep-06
36 Bosnia and Herzegovina Jun-04 Feb-05
37 Bulgaria (1) Dec-02 Jun-03
38 Bulgaria (2) Jun-08 May-09
39 Croatia (1) Jun-02 Jul-02
40 Croatia (2) Jun-07 Feb-08
41 Czech Republic Jun-03 Aug-03
42 Estonia May-04 Sep-04
No. Country Completed Published
43 Georgia May-06 Jan-07
44 Hungary Jun-04 Sep-04
45 Kazakhstan Jun-06 Jun-07
46 Kosovo Jun-06 Jan-07
47 Kyrgyz Republic Jun-08 Nov-08
48 Latvia Jun-05 Sep-05
49 Lithuania (1) May-02 Jul-02
50 Lithuania (2) Jun-07 Jun-09
51 Macedonia, FYR Jun-03 Dec-03
52 Moldova Jun-04 Oct-04
53 Montenegro Jun-07 Nov-07
54 Poland (2) Jul-02 Aug-02
55 Poland (2) Jun-05 Sep-05
56 Romania (1) Jun-03 Sep-03
57 Romania (2) Jun-08
58 Russia Jan-03
59 Serbia Jun-05 Dec-06
60 Slovak Republic Nov-01 Feb-02
61 Slovenia Jun-04 Sep-04
62 Tajikistan Jun-09
63 Turkey Jun-05 Jun-07
64 Turkmenistan Jun-09
65 Ukraine (1) Aug-02 Feb-03
66 Ukraine (2) Jun-08 Jun-09
67 Uzbekistan Jun-09
LCR
68 Argentina Jun-07 Jun-09
69 Brazil (1) Jul-02
70 Brazil (2) Jun-05 Sep-07
71 Chile Jun-04 Dec-04
72 Colombia Jul-03 Mar-04
73 Dominican Republic (1) Feb-05 Nov-05
74 Dominican Republic (2) Jun-09
75 Ecuador Mar-04 Feb-05
76 El Salvador Jun-05 Oct-06
77 Guatemala Jun-06
78 Haiti Dec-07 Oct-08
79 Honduras Jun-07 Dec-07
80 Jamaica Jun-03 Jun-04
81 Mexico Dec-03 Mar-04
82 OECS Countries Jun-08 Nov-08
83 Panama Jun-09
84 Paraguay Jun-06 Jan-07
85 Peru Jun-04 Jan-06
86 Uruguay Jun-06 Jan-07
29
No. Country Completed Published
MNA
87 Algeria Jun-03
88 Egypt (1) Aug-02 Jun-03
89 Egypt (2) Jun-08
90 Jordan Jun-04 Jun-05
91 Lebanon May-03 Jun-04
92 Morocco Jul-02 Aug-02
93 Tunisia Jun-04 Jan-07
94 Yemen Jun-04
SAR
95 Bangladesh May-03 Jan-04
96 Sri Lanka May-04 Jun-04
97 India Dec-04 Jun-05
98 Pakistan Jun-05 Dec-05
99 Afghanistan Mar-09
100 Bhutan Apr-09
Regional Coverage Completed Published
AFR 23 17
EAP 9 8
ECA 35 30
LCR 19 15
MNA 8 5
SAR 6 4
Total Regions 100 79
31
ANNEX E. FM SECTOR BOARD COMMITTEES AND WORKING GROUPS
1. The FM Sector’s delivery of the activities described in this report was greatly facilitated
by the active contribution and support of the FM Sector Board’s Committees and Working
Groups.
2. Quality and Results Committee. This Committee focuses on one of the FM Sector’s key
strategic priorities—delivering quality services. In achieving this objective, during FY09, its
main deliverables have included: (a) the revision of the FM Manual through a detailed process of
consultation, and the preparation of guidance to be rolled out in parallel; and (b) quarterly
reporting on the implementation of the IDA14 Internal Controls Review Action Plan. In addition,
the FMSB worked closely with CSR in reviewing and updating the failed controls
documentation to better align with the requirements of the FM Practices Manual and finalized
plans to retest controls that failed in the IDA14 Review.
3. Knowledge, Learning, and Outreach Committee. The Committee focused on organizing
and delivering a training program in areas identified as growing business lines for the FM
Sector—GAC, PFM, and corporate financial reporting—in addition to the on-going learning
program on Bank operations and trust funds. Other key accomplishments included the redesign
of the internal website, with a streamlined navigation and structure and reorganization of content,
to facilitate searches; and a review of the Bank’s external website to update its web security and
ensure against any potential reputational risk.
4. PFM Capacity Building Working Group. This Working Group promoted the preparation
of detailed draft guidance to help FM staff assess the adequacy of country FM systems for use in
Bank-supported operations; completed the first phase of preparation of the PFM good practices
database; and continued to engage with IFAC’s International Public Sector Accounting
Standards Board. In addition, it enhanced the dialogue with SAIs by participating at key
INTOSAI meetings on capacity building and standards. Finally, the Internal Audi Strategy is
currently being developed, and will be rolled-out during FY10.
5. Corporate Financial Reporting Working Group. This Working Group (a) updated the
ROSC A&A Diagnostic Tool, following recent changes in the accounting and auditing standards
that are used as benchmarks in the assessments; (b) supported and strengthened international
partnerships—including carrying out initial discussions with IFAC on enhanced cooperation,
through an MOU, to support accountancy development in member countries, greater alignment
and cooperation in support of member country reforms, and development action plans based on
the ROSC A&A program and the IFAC Compliance Program; (c) began work to enhance its
website, and created a separate website for Private Sector Accounting and Auditing, to improve
sharing of knowledge on corporate financial reporting and practices; (d) rolled out the corporate
financial reporting brochure globally, translating it into Arabic, Spanish, and French; and (e)
completed 100 ROSC A&A reports as of June 30, 2009 (see Annex D).
6. Governance and Anticorruption Working Group. This Working Group developed two
key pieces of guidance for FM staff on dealing with fraud and corruption risks at the project
level: a good practice note for FM specialists on dealing with GAC issues in project design, and
an audit and assurance toolkit to enhance the effectiveness of audit as a tool for combating fraud
32
and corruption. The Working Group organized a series of brown bag lunches during the year to
share good practices. It further developed the FM web-pages on GAC; they now include an
extensive projects database featuring good practice projects with GAC-related features, with
summary write ups on each of the projects and links to the project portal.
7. Operations Review Committee. This Committee considers requests from outside the
sector at the request of senior management, or where it judges that the issue is one that cuts
across two or more regions, relates to a network, or is a matter not covered by the current policy
framework. Decisions requiring FMORC clearance include exemptions from audit requirements
for operations with a value in excess of US$500,000 equivalent.
8. Human Resources Committee. This Committee is responsible for management of
human resources issues, in particular ensuring that unit managers have available to them staff
with the skills needed to meet their unit business objectives; that overall corporate skills and staff
profile targets are met; and that all staff are provided with appropriate career development
opportunities. The Committee addresses overall skills planning and allocation; and recruitment,
promotions, and separations. During FY09, there was a focus on managing the GG-level
rotations, through which 5 staff were successfully deployed to enhance their skills across other
departments in the Bank. During FY10 the Sector will continue to focus on (a) filling the
management positions and any resulting staffing gaps and will also pay attention to meeting the
institutional gender goals; (b) making greater use of staff rotation, developmental assignments,
and secondment to/from external institutions; (c) facilitating cross-support among Regions and
departments; and (d) managing emerging talents.
33
ANNEX F. PROMOTING INFORMATION SHARING: INTERNAL AND EXTERNAL
LEARNING ACTIVITIES
63. During FY09 the FM Sector sponsored a range of conferences and learning events to
allow FM practitioners both inside and outside the Bank to share knowledge, experience, and
best practices in enhancing the quality of their work.
64. PFM Reform. In December 2008, the International Consortium on Governmental
Financial Management organized their Annual Conference. The Bank’s FM and PREM Sectors
assisted in the design of the program and in the dissemination of good global practices. The
theme—―Country Perspectives on Advancing Public Financial Management Reform – What
Really Works?‖—attracted parliamentarians, ministers of finance, and representatives from
SAIs, donor agencies, and other organizations from 32 countries.
65. Building Institutional Capacity. In May 2009, the Eastern Caribbean Central Bank,
CARTAC, and the World Bank jointly hosted a dissemination workshop for the OECS ROSC
A&A, a study published by the Bank in June 2008. The 60 participants included accountants and
auditors, regulators, academics, and representatives from Guyana and Trinidad and Tobago. The
event represented an important step in developing a country-driven regional strategy and detailed
action plan, requiring the adoption of international accounting and auditing standards,
strengthening the accounting profession, and enhancing the oversight of statutory bodies. In
addition, to help build client capacity and promote greater use of country FM systems, the Bank
organized fiduciary workshops in the entire Caribbean sub-region, Argentina, Haiti, Jamaica,
Paraguay, Uruguay, Dominican Republic, Brazil, Colombia, Honduras, often in collaboration
with the IADB.
66. Fostering Sound Accounting and Auditing Practices. During FY09 the Bank undertook
the preparation of the Third CReCER Conference, inviting approximately 1,000 participants
from 32 countries, including policymakers, senior civil servants, financial sector regulators,
standard-setters, academics, accountants and auditors, private sector stakeholders, and the
international donor community. The conference aimed to take stock of accounting and audit
practices at the regional and country level, and share good practices and innovative approaches
to corporate and public sector financial reporting. The Conference held in September 2009,
which was a big success, will be reported in FY10.
67. Governance and Anticorruption. Drawing on the Bank’s Governance and Anti-
Corruption Strategy, the FM Sector developed and adopted a GAC FM strategy and
implementation plan to integrate GAC into its country-level work, under the leadership of the
GAC Working Group. Within the Bank, the FM Sector organized several learning events on
GAC for FM staff, including workshops on project design and supervision, and a series of brown
bag lunches on practical tools operational staff can use to address these issues in the project cycle
including—the Red Flags Toolkit being developed and piloted by LCR and SAR; use of social
audits in India; and e-procurement/e-governance. The FM Sector also developed extensive web-
based information and guidance for staff covering project design and supervision, country-level
diagnostic and capacity-building work on GAC, and information about corruption vulnerabilities
and mitigation measures. GAC guidance for project preparation and design, Dealing with
Governance and Corruption Risks in Project Lending, was published in February 2009, and
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similar guidance for supervision will be finalized in FY10. The FM Anchor has also taken the
lead role in coordinating the Bankwide GAC-in-Projects Working Group and Peer Learning
Network.
Box F1. Mainstreaming GAC: ECAFM Team Trains Task Team Leaders
ECAFM, working with the ECA Procurement team, developed a regional Fiduciary GAC training module for TTLs
as a complementary to the ECA GAC 101 course. The module was piloted in December and then repeated in a face-
to-face classroom environment both in Washington and in the field. The exit/entrance questionnaire and the WBI
evaluations showed that participants considered the module to be highly relevant to their work. The region has
proposed to offer this module more broadly in FY10.
68. Regional Fiduciary Fora. The FM and Procurement Sectors organize a Bankwide
Fiduciary Forum every other year; during non-Forum years, Regions organize learning events for
FM staff. This section notes some highlights of these events in FY09.
Africa Region’s Fiduciary Week (June 8-12, 2009, Ouagadougou). The 93 attendees
included participants from the FM Sector and representatives from the African
Development Bank and the Canadian International Development Association. With the
theme of ―Strengthening operational FM quality to improve the results of Bank
operations,‖ the event aimed to (a) develop steps to further enhance the quality of FM
work; (b) advance innovative FM arrangements in such areas as use of country systems
and GAC; (c) identify ways to help client countries advance their capacity building
agenda; and (d) enhance the FM group’s efficiency and effectiveness in working as a
team.
East Asia FM Retreat (May 4-8, 2009, Bangkok). At this retreat, 24 staff from across
the Region and OPCFM came together to discuss an enhanced supervision model and
a strengthened risk identification and management methodology from a hands-on,
practical perspective.
ECA FM Retreat (May 17-22, 2009, Salzburg). A total of 32 staff from a dozen
country offices, the Vienna Centre, and OPCFM and other Washington offices
considered ways for all FM staff to go beyond ―FM business as usual‖ and increase
the development impact of FM work.
Middle East and North Africa FM Peer Learning Week (June 15-19, 2009, Beirut).
The 36 staff of MNAFM reflected on past achievements and future opportunities to
increase their corporate relevance. The agenda included discussions on policy
updates, corporate priorities, and sharing of good practices, as well as a field visit to
the Baalback Cultural Heritage Project site.
South Asia Joint Procurement and Financial Management Learning Event (June 22-
25, 2009, Kathmandu). The 102 participants included a mix of sectoral, country team,
and OPCFM staff. The event aimed to (a) expose participants to operational areas where
fiduciary work could be combined to support development outcomes; (b) scale up the
fiduciary staff’s efforts to address issues of governance, controls, and project
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effectiveness; and (c) increase collaborative efforts and improve working relationships.
Participants focused on issues relating to working together in today’s Bank environment.
Latin America and the Caribbean Financial Management Learning Event (April 2009,
Washington, DC). A one-week staff training event took place providing twenty-four FM
staff and ACS from Country Offices the opportunity to practice the new quality
framework, share knowledge and find solutions to everyday challenges on the ground.
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