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Consultative Meeting on Draft Sub Decree on

The Establishment and Functioning of Sub-National Investment Fund

Ministry of Economy and Finance

29 April 2015

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1. Background2. WhatisSNIF?3. TheMainPointsinDraftSubDecree

Content

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The Royal Government of Cambodia isimplementing National Program for Sub-nationalDemocraticDevelopment(NPSDD).And,thethree-year Implementation plan phase two (IP3-2) hasset establishment of sub-national investmentfacilityasreformtarget.Inthisregard,MinistryofEconomyandFinance,togetherwithNCDD-S,andother relevant stakeholders have prepared draftsub-decree on the new financing mechanism inorder to promote more socio-economicdevelopmentatthesub-nationallevelbyfinancinghigh quality and strategic public investments bySub-NationalAdministrations.

1. Background

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Main Operation in SNIF

Managementmechanism

SNIF ManagementSource of Fund Beneficiaries

Capital/Provinces

D/M

C/S

Investment Budget

SNIF

Capacity Building

Govt

DPs

2. What is SNIF?

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Thisdraftsubdecreehas9chapters,35articlesasfollows:Chapter 1: General Provisions TheSub-DecreeaimstodeterminetheestablishmentandfunctioningofSub-NationalInvestmentFund(SNIF)toachievetwopolicyobjectives(1)Topromotesocio-economicdevelopmentatthesub-nationallevelbyfinancinghighqualityandstrategicpublicinvestmentsbySub-NationalAdministrationsand(2)ToprovideSub-NationalAdministrationswithincentivestoimprovetheiroverallperformanceandpublicinvestmentmanagement.  Thepurposeofthesub-decreeistodefinethelegalframeworkformanagingSub-NationalInvestmentFundinamannerconsistentwiththeNationalProgramforSub-NationalDemocraticDevelopment. Thescopeofthesub-decreeistocoverthemanagementofSub-NationalInvestmentFundofCapital,Provincial,Municipality,District,KhanandCommuneandSangkatAdministrations.

3. Main Points in Draft Sub Decree

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Chapter 2: Sources of FundThesourcesofSub-NationalInvestmentFundinclude:o Contributionsfromtherecurrentrevenueofthenationalbudget(X%)o Contributionsfromdevelopmentpartnersandfinancialinstitutionsundertheframeworkofcooperationfinancingo AnyotherresourcesaspermittedbylawsorregulationsTheresourcesshallbedividedintotwocomponentsasfollow:o PublicInvestmentcomponento GeneraladministrativeoperationcostofSNIFSecretariatcomponent

3. Main Points in Draft Sub Decree (cont)

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Chapter 3 : The Management of Fund SNIFgovernedbySub-NationalInvestmentFundBoard(SNIFBoard)andhadaSNIFSecretariatasitssecretary.SNIFBoardiscomposedof: MinisterofMinistryofEconomyandFinanceChairperson SecretaryofStateofMinistryofEconomyandFinanceDeputyChairperson TheRepresentativeofMinistryofInteriorDeputyChairperson TheRepresentativeofNCDD-SMember TheRepresentativeoftheOfficeoftheCouncilofMinistersMember TheRepresentativeofMinistryofPlanning Member TheRepresentativeofMinistryofRuralDevelopmentMember TheRepresentativeofMinistryofPublicWorkandTransportMember……………………………………………………………………..……………………………………………………………………..

……………………………………………………………………..

3. Main Points in Draft Sub Decree (cont)

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SNIF Secretariat: TheSNIFSecretariatisaccountabletoSNIFBoardwithregardtoestablishmentandfunctioningoftheSecretariat.  TheSNIFSecretariatshallconsistofthreeunits,asfollows:

◦TheFinance&AdministrationUnit◦TheOperations,OutreachandCommunicationsUnit◦TheLegalAffairs,PolicyandMonitoringUnit◦Internalauditor

TheroleanddutiesofeachunitshallbedeterminedbydecisionofSNIFBoard.

3. Main Points in Draft Sub Decree (cont)

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PrincipleFunctions: ToensuretheeffectiveandefficientmanagementoftheSubNationalInvestmentFund. ToprovidetheSNIFBoardwithadministrativeandotherservicesasrequired.

3. Main Points in Draft Sub Decree (cont)

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Duties: Vis-à-vis SNIF Board: Manage and implement the activities of the SNIF in accordance with

the policies, instructions and decisions of the SINF Board and in line with approved SNIF procedures and the SNIF Operation Manual

Prepare, organize and keep minutes of the meetings of the SNIF Board

Provide the SNIF Board with regular progress and financial reports for review and approval

Provide the SNIF Board with other documentation as requested Submit annual work plans, annual investment financing plans and

annual budgets to the SNIF Board for review and approval Submit the SNIF Operational Manual and any revisions and/or

updates to the SNIF Board for review and approval Submit to the SNIF Board for resolution any emerging issues of

policy or strategy regarding the functioning of the SNIF

3. Main Points in Draft Sub Decree (cont)

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Vis-à-vis SNIF (internal): Updating and revising the SNIF Operational

Manual and related procedures. Liaison and coordination with concerned

line ministries/departments, national agencies, provincial authorities and development partners.

Mobilization of external sources of funding. Maintain accounts for all SNIF operations

and activities.

3. Main Points in Draft Sub Decree (cont)

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Vis-à-vis SNAs: Ensure that Sub-National Administrations are fully informed of the SNIF’s

operating procedures, activities and financing decisions. Provide national and sub-national stakeholders with orientations regarding SNIF

objectives and operational procedures. Publicly disclose information about the SNIF and its activities, in accordance with

the Sub Decree on the Establishment, Operations and Administration of the Sub-National Investment Facility.

Organize and coordinate capacity development activities aimed at improving access to and use of SNIF resources on the part of Sub-National Administrations.

Assess and verify the compliance of Sub-National Administrations with SNIF access requirements and select eligible Sub-National Administrations.

Receive and appraise investment proposals submitted by eligible Sub-National Administrations, and maintain communications with these Sub-National Administrations regarding these proposals.

Select acceptable Sub National Administration investment proposals which meet agreed quality criteria.

Manage the release and disbursement of funds to eligible Sub-National Administrations in accordance with the Royal Government’s public finance regulations.

Monitor and evaluate the implementation of sub-national investment projects financed by the SNIF.

3. Main Points in Draft Sub Decree (cont)

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Responsibility: TheSNIFSecretariatissolelyaccountabletoSNIFBoard. TheHeadoftheSNIFSecretariatshallberesponsibleandaccountabletotheSNIFBoardwithregardtofunctioningoftheSecretariat. Intheeventthatthereisanydutyrelatedtopolicyoroverallstrategy,theHeadoftheSecretariatshallrequestadviceandinstructionfromtheSNIFBoard.

3. Main Points in Draft Sub Decree (cont)

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Chapter 4: Receive and Allocation of FundPublicInvestmentcomponentisdividedintotwosubcomponents:coresubcomponentandnon-coresubcomponent. ThecoresubcomponentshallbeimplementedinaccordancewiththeprincipleasdefinedinthisSubDecree. Thenon-coresubcomponentorotherconditionsthatarenotinscribedinthissub-decreeshallbeimplementedbasedonSNIFboarddecision.

3. Main Points in Draft Sub Decree (cont)

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AfterAnnualPerformanceAssessment(APA),eligibleSub-NationalAdministrations(SNAs)willbeinformedpreliminarydrawingrightfromtheSNIF.EligiblecriteriaofSNAsshallbedeterminedbyDecisionofSNIFBoard. TheannualresourceallocationofcoresubcomponentofPublicInvestmentcomponenttoeligibleSNAsshallbebasedonaformulatoensureequityandtransparency.

3. Main Points in Draft Sub Decree (cont)

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ThecoresubcomponentofPublicInvestmentcomponentshallbeallocatedtoeligibleSNAsbasedoncalculationasfollows: USD25,000shallbeallocatedtoeacheligibleSub-NationalAdministration Population:X%oftheremainingresourcesshallbeallocatedtoproportionatetothepopulationofeachSNAbasedontheofficialdatafromtheMinistryofPlanning PovertyIndex:X%oftheremainingshallbeallocatedproportionatetothepovertyscoreofeachSNA(Povertyindextimesnumberofpopulation)basedontheofficialdataoftheMinistryofPlanning

3. Main Points in Draft Sub Decree (cont)

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AfterreceivingtheofficialnoticeoftheannualdrawingrightwhichallocatedfromSNIF,eligibleSNAsshallpreparetheprojectinvestmentproposalswhicharenotmorethantheallocateddrawingright.IncaseSNAsmaymobilizeadditionalfinancingtocomplementtheSNIFFund,SNAsprepareco-financedprojectproposals,andthensubmittoSNIFsecretariattoevaluate.ThecriteriatoevaluatetheSNAprojectinvestmentproposalstoreceivethebudgetcreditfromSNIFshallbedeterminedbyDecisionofSNIFBoard. After3yearsofimplementation,theSNIFBoardwillreviewSNIFoperationmanual(includingcriteriaandprocedureforselectionofSNAinvestment).

3. Main Points in Draft Sub Decree (cont)

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Chapter 5: Transfer and Use of Fund Aftertheinvestmentprojectswereapproved,thefundallocationstoeligibleSNAsformpartoftheSub-NationalAdministration’sannualbudgetplan. ThetransferoffundfromSNIFtoeligibleSNAsshallbebasedonthepaymentscheduleasinstructedinSNIFOperationManual. TheuseofallocatedresourcetoeligibleSNAsprojectsshallbedefinedintheSNIFOperationManual.

3. Main Points in Draft Sub Decree (cont)

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Chapter 6: Procurement Procedure and Payment System

AllprojectinvestmentsfinancedbySNIFshallbeimplementedbasedonthemethodandprocurementproceduredefinedintheLawonPublicProcurementunlessthereisaseparateregulation. AllprojectinvestmentsfinancedbySNIFshallbeimplementedbasedonsystemandpaymentprocedureofSub-NationalAdministrationunlessthereisaseparateregulation. Thefinancialyear’sendingbalanceoftheSNIFFundAccountshallbecarriedovertothesubsequentyear.

3. Main Points in Draft Sub Decree (cont)

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Chapter 7: Audit on SNIF Account and SNIF OperationThepurposeofauditingistoensuretheaccuracyoffinancialdata,evaluationofperformanceandfinancialprocedure,andtheprojectimplementationofSNAs.TheauditreportwhichcombinedthecommentsfromSNAs,SNIFsecretariatandrelevantagenciesshallbedisclosedpublicly.

3. Main Points in Draft Sub Decree (cont)

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Chapter 8: Transitional ProvisionsMinistryofEconomyandFinanceshallcoordinatetoarrangeSNIFBoardmemberswithin30daysafterthissubdecreecomesintoeffect.Chapter 9: Final ProvisionsAnyprovisionsthatcontradictthisSub-Decreeshallbeabrogated.

3. Main Points in Draft Sub Decree (cont)

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