world bank document · expected to encompass “high-value” contracts as defined in para. 5 of...
TRANSCRIPT
Kingdom of Morocco
World Bank
Program-for-Results Operation
in support of the National Initiative for Human Development
Phase 2
Fiduciary System Assessment
June 29, 2012
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
ii
TABLE OF CONTENTS
A. EXECUTIVE SUMMARY ....................................................................................................... 1
B. BACKGROUND AND INSTITUTIONAL ARRANGEMENTS ............................................... 2
B.1 SCOPE OF THE ASSESSMENT ............................................................................................................. 2 B.2 INSTITUTIONAL FRAMEWORK .......................................................................................................... 2 B.3 PROGRAM ACTIVITIES ...................................................................................................................... 3 B.4 FIDUCIARY ARRANGEMENTS ............................................................................................................ 4
B.4.1 Procurement arrangements ...................................................................................................... 4
B.4.2 FM arrangements ..................................................................................................................... 6
B.5 PROGRAM BUDGETING ..................................................................................................................... 6
C. PROGRAM FIDUCIARY PERFORMANCE .......................................................................... 7
C.1 TIMELINESS: PROCUREMENT PLANNING AND DISBURSEMENT ........................................................ 7 C.2 COST EFFECTIVENESS: BIDDERS’ QUALIFICATIONS, BIDS EVALUATION, AND CONTRACT AWARD . 7 C.3 COMPETITIVENESS AND COMPLIANCE IN PROCUREMENT PROCESS ................................................. 8 C.4 COMPLIANCE: PROCUREMENT REVIEW AND OVERSIGHT ................................................................ 8 C.5 COMPLAINTS HANDLING MECHANISM ............................................................................................. 9 C.6 STAFFING ....................................................................................................................................... 11 C.7 CONTRACT MANAGEMENT ............................................................................................................. 11 C.8 EFFECTIVENESS OF COORDINATION BETWEEN AGENCIES .............................................................. 12 C.9 PLANNING AND BUDGETING ........................................................................................................... 12 C.10 ACCOUNTING AND FINANCIAL REPORTING .................................................................................... 14 C.11 TREASURY MANAGEMENT AND FUNDS FLOW. ............................................................................... 16 C.12 INTERNAL CONTROLS AND AUDIT .................................................................................................. 16 C.13 PROGRAM AUDIT ........................................................................................................................... 18 C.14 FIDUCIARY PERFORMANCE MONITORING ....................................................................................... 20
D. FIDUCIARY RISK ................................................................................................................. 21
D.1 OVERALL RISK ............................................................................................................................... 21 D.2 RISK MITIGATION MEASURES ......................................................................................................... 22
E. GOVERNANCE, ANTI-CORRUPTION AND ACCOUNTABILITY .................................... 24
E.1 FM AND PROCUREMENT ................................................................................................................ 24 E.2 ARBITRATION AND MEASURES TO FIGHT FRAUD AND CORRUPTION ............................................. 25 E.3 IMPROVEMENT OF PROGRAM SYSTEMS TO FIGHT FRAUD AND CORRUPTION ................................. 26 E.4 TRANSPARENCY ............................................................................................................................. 26 E.5 ACCOUNTABILITY .......................................................................................................................... 27
F. INPUTS TO IMPLEMENTATION SUPPORT PLAN ........................................................... 27
G. APPENDICES ........................................................................................................................ 28
G.1 APPENDIX 1: IMPROVEMENTS IN THE NEW DRAFT PPD ................................................................. 28 G.2 APPENDIX 2A: KEY PROCUREMENT PERFORMANCE INDICATORS ................................................ 29 G.3 APPENDIX 2 B: KEY FM PERFORMANCE INDICATORS ................................................................... 31
iii
ACRONYMS AND ABBREVIATIONS
CDC Cour des Comptes
CDG Caisse de Dépôt et de Gestion
CLDH Comité local de Développement Humain
CN Coordination Nationale
CPDH Comité Provincial de Développement Humain
CRDH Comité Régional Développement Humain
DAS Division de l’Action Sociale
DBM Division du Budget et du Matériel
DLI Disbursement-Linked Indicator
FCC Fiduciary Coordination Committee
IGAT Inspection Génerale d’Administration Territoriale
IGF Inspection Génerale des Finances
INDH National Initiative for Human Development
KFSPI Key Fiduciary Statistic Performance Indicator(s)
PAP Program Action Plan
PFM Procurement and Financial Management
RFI Results Framework Indicator(s)
TGR General Treasury of the Kingdom
1
A. EXECUTIVE SUMMARY
1. In preparation of the Program for Results operation supporting the second phase of the National
Initiative for Human Development (INDH2) in Morocco, a Program Fiduciary System Assessment1 was
conducted which covered the INDH institutional framework, the fiduciary management capacity and
implementation performances including a sample of executing agencies. This Fiduciary System
Assessment was undertaken based on current knowledge of Moroccan Public Procurement and Financial
Management systems, previous diagnostics2, and the fiduciary performance of INDH 1 completed by a
field assessment over a sample of procuring entities. Morocco has launched an ambitious PFM reform
program that is leading to improved alignment of the Moroccan public procurement and financial
management system with international practices. Overall, public procurement and financial management
systems are considered as having experienced a very positive development over the past decade.
2. The main deficiencies raised by previous diagnostics, and INDH 1 implementation experience that
could affect the Program are the following: (i) the lack of an independent procurement appeals system and
clear process for handling complaints; (ii) quality and timeliness of annual audited financial statements;
(iii) weak effectiveness of internal audit function and follow-up of audit recommendations, (iv) a heavy
reliance on Management Information Systems (MIS) for DLIs verification protocol, (v) low capacity of
small or remote entities procurement staff which often leads to low quality of technical specifications,
ToR, and bidding documents; (vi) lack of thoroughness of bid evaluation linked to choice of criteria or
scoring system; and (vii) occurrences of questionable quality of works, goods or services delivered to
small or remote entities. The procedures and control framework are adequate, but the risks persist
because of the large number of small contracts and sponsors, often with low capacity, dispersed over
more than 20 000 activities or locations.
3. Under INDH 1, the large number of sub-program /projects sponsors inexperienced in fiduciary
matters was a risk factor. This risk will increase in INDH 2 with the significant extension of its scope to
increase the number of beneficiaries/sponsors new to the Program. Consequently the mitigation
measures described below are proposed.
4. Most of the country-level weaknesses will be addressed under ongoing reforms and new legislation
including the Organic Law to be enacted and the public procurement reform in progress (including draft
laws or decrees currently under preparation). The new public procurement decree currently under
preparation will apply to local Governments; introduce an improved complaint handling mechanism and
e-procurement procedures. In the meantime, specific measures to deal with these issues in relation to
INDH are going to be built into the Program as agreed with the Government of Morocco (GoM), such as
an improved Grievance Redress Mechanism (GRM) to be implemented at all levels of the Program
(including the decentralized level) and which will include features contributing to handle procurement-
specific complaints.
5. The main proposed mitigating measures to address identified risks are to: (i) design and implement
a capacity building program (Program action Plan (PAP)#10), (ii) improve Program oversight and internal
audit function,(iii) develop and disseminate new simplified fiduciary Guide and guidance tools for
bidding documents preparation and contract templates, and measure percentage of project sponsors
mastering the procedures (see fiduciary Result Fiduciary Indicator(RFI) # 13 and 16),( iv) revise Program
Audit TORs; (v) reflect Audit recommendations in yearly provincial Action Plans, and ensure that
priority audit recommendations are implemented (see the two fiduciary DLIs 7 and 8). (vi) ensuring that
1 This assessment was done according to the draft PforR Financing Guidance Notes (dated January 3, 2012)
2 2010 UCS Pilot review report, 2009 PEFA and 2007 CFAA
2
the MIS is robust and effective so that quick disbursement is not jeopardized and it will enable better
procurement reporting (RFI #12); (vii) monitoring KPSI during implementation support and Audits, (viii)
improving assurance framework, (ix) expanding audit reviews with TORs covering procurement; (x)
providing new guidance tools for bidding documents preparation and contract templates and verify that
commissioned infrastructure projects comply with technical specifications (RFI #13 and #6); (xi)
implementing a fiduciary training program; (xii) establishing a Fiduciary Coordination Committee to
oversee fiduciary performance (see PAP#12); (xiii) strengthening grievance mechanisms procedures
which include the handling of procurement-related complaints (PAP #8); and (xiv) providing formalized
technical support through a customized clause in project sponsor agreements (see RFI#13).
B. BACKGROUND AND INSTITUTIONAL ARRANGEMENTS
B.1 Scope of the Assessment
6. In preparation for the Program for Results operation in support of the second phase of the National
Initiative for Human Development (INDH 2), a Program Fiduciary Assessment was conducted. The
assessment covers the INDH institutional framework, the fiduciary management capacity and
implementation performances including site visits to a sample of 20 executing agencies and procuring
entities. The findings outlined in this report are based on the results of the site visits, the current
knowledge of Moroccan Public Procurement and Financial Management systems (as documented in the
2010 Use of Country System Piloting Program report, 2009 PEFA and 2007 CFAA), and on the fiduciary
performance of phase one of the INDH, referred to as INDH 1.
7. This report begins with a presentation of the institutional arrangements under INDH 2, followed by
the performance of the Program’s fiduciary setup according to specific topics. Based on those findings, a
section on fiduciary risks presents the overall and specific risks, and although the entire report touches
upon the areas of Governance, Anti-Corruption and Social Accountability throughout, a special section is
dedicated to these issues. The final sections cover the inputs to the implementation support plan and the
supporting annexes.
B.2 Institutional framework
8. The INDH institutional structure connects the central government to the lowest levels of
administration which involves hundreds of entities across all levels (i.e., central, regional, provincial, and
municipal / neighborhood or community).
9. The Steering Committee responsible for the Program is chaired by the Prime Minister and its
membership is composed of the INDH National Coordinator and the Ministers of Interior, Finance, and
Social Development. This committee oversees progress in overall INDH 2 implementation and reports to
the Strategic Committee.
The Ministry of Interior, through its INDH Coordination Unit, is ultimately accountable for meeting the
objectives of INDH. This INDH Coordination Unit provides technical support to the various levels of
committees (regional, provincial and local) as well as other stakeholders that participate in the program.
Importantly, it oversees the execution of procurement and financial management and centrally gathers all
technical and financial data related to the program as a whole, which it uses to prepare consolidated
reports for monitoring program implementation. Additional institutional and technical support is
provided by various line ministries and government agencies.
10. From a financial perspective, the Head of the Government has overall responsibility for the INDH
special revenue account (SRA, Compte d’affectation special). As such, he allocates funds to the eligible
executing agencies (Ministry of Interior, “Walis” of regions and governors of provinces/prefectures)
3
based on an annual disbursement schedule by program. These funds are then executed according to
applicable public expenditure regulations, either through partnership agreements with project sponsors or
through direct payments to providers of goods and services.
B.3 Program activities
11. The INDH program is implemented through a decentralized and participatory process wherein sub-
projects are undertaken by project sponsors (such as municipalities, NGOs and community associations)
or by the decentralized executing agencies (Walis or governors) themselves. Some activities such as
studies or technical assistance can also be carried out at the central level by the eligible executing
agencies (i.e. Head of Government office, Coordination Nationale). The Program will be implemented
using the same institutional arrangements as INDH 1.
12. INDH 2 is implemented by hundreds of implementing agencies, many of them inexperienced in
fiduciary activities and located in remote rural or difficult to access municipalities. INDH 2 essentially
follows the same structure and activities as INDH 1 but with an enhanced scope that increases both the
financing amount and the number of beneficiaries. Therefore, the typical types and values contracts under
INDH 2 are expected to be similar to those under INDH 1 and will include two main types of
expenditures: (i) small value contracts for social infrastructure (construction, rehabilitation, extension or
improvement of road and street infrastructure, electricity or water supply, sanitation or solid waste
services, schools, local health centers or community centers, public gardens, sports or other public
facilities, etc.), and (ii) financial support for developing small and local businesses with regard to
improved organization, product quality, or marketing, business training as well as activities allowing for
the participation of INDH target population in infrastructure or service projects (e.g. local household
waste collection, water management, and recycling management) that generate revenues for the local
communities. As under INDH 1, the subprograms of INDH 2 which the Bank will support are not
expected to encompass “high-value” contracts as defined in para. 5 of BP9.00.
13. Based on the information furnished during the preliminary assessment, in INDH 1 works contracts
represented more than 75% of the cost of all contracts awarded, followed by goods contracts with about
15% of the total cost. Consultant contracts represented less than 5%. Though the number of contracts
awarded through open national competitive bidding (ONCB) and shopping procedures are both about
equal, the corresponding amounts are dramatically different: the value of ONCB contracts represents
more than 90% of the total amount.
14. Therefore, the typology /procurement profile of the INDH phase 2 could be roughly extrapolated
on the basis of the data furnished for INDH1, as follows (purely indicative orders of magnitude):
Total amount of subprojects to be financed would be approximately $2 billion and the part used
to finance Works, Goods and Services contracts to be procured in an amount (excluding the
territorial upgrading component and non-contract related AGRs amounts) of $900 million to $1
billion corresponding to nearly 40 000 contracts, including approximately $700 million in the
aggregate for Works contracts, $120-$150 million in the aggregate for Goods contracts, and less
than 50 million USD for Consultants contracts. About 18,000 to 20,000 procedures would be
NCB –National Competitive Bidding (average estimated cost for each contract procured under
NCB in the range of 40,000 to 50,000 USD), and the estimated number of Shopping processes3
(or “Purchase Orders”), is approximately 20,000 with an average amount of approximately 5,000
USD each.
3 (*The threshold, i.e. upper limit for use of the Shopping procedure “for similar items” was set in INDH first phase
at the level of 200 000 MAD (< 25 000 USD). This threshold comes from article 75 of the current PPD.)
4
B.4 Fiduciary arrangements
15. The “Walis” and governors are responsible for the management of INDH funds including
implementation. They may delegate their authority to the project sponsors they select (i.e., municipalities,
NGOs and associations). If the “Walis” or governors decide that the project sponsors do not possess
adequate capacity to implement the project, it would instead be implemented using the provincial services
(DAS, DBM and Division Technique), although the vast majority of the projects will be implemented at
the decentralized level.
16. Authority delegations for procurement and FM activities granted by the Walis/governors were
decided during INDH 1 without prior formal capacity assessments of the municipalities and NGOs
undertaking implementation. Under INDH 2, systematic and benchmarked assessments of the fiduciary
capacity of project sponsors will be implemented before Walis/governors decide whether their
procurement activities will be delegated to provincial services.
17. The executing agencies manage delegated funds by programming activities, which results in
allocating funds under budget lines defined jointly by the accounting department and the Division of
Social Action (DAS). This programming exercise results from a strategic planning process described in
the operations manuals which involves the population and the decision-making entities (CLDH, CPDH
and CRDH). These funds are executed according to the decree no 2-05- 1017 of July 19, 2005 which
offers more flexibility than traditional public expenditure procedures.
18. The execution of the INDH is based on administrative structures and existing communal and
associations will be involved. Responsibilities within the administrative services and municipalities are
clearly defined but less so in NGOs. Regarding new implementing agencies and procuring entities (those
not involved before in the Program, small or remote, NGOs, and associations), fiduciary capacity is a
serious concern and would require intensive intervention.
19. The involvement and role of each administrative entity or project sponsor in the INDH is defined
in the Operational Manual that will be updated, simplified and reviewed for the sections linked to
fiduciary aspects by the Fiduciary Coordination Committee and issued as a Fiduciary Guide under INDH
2.
20. The fiduciary innovation team which was put in place for INDH 1 is potentially a good mitigation
measure but unfortunately it did not work efficiently during the first phase, partly because it was not
empowered to enforce its proposals and partly because it was not permanent and faded out in the last
years. The new Fiduciary Coordination Committee envisaged to be piloted by CN, would be instituted
under INDH2 and would include representatives from TGR, IGF and IGAT. The CN will chair the
committee and manage the secretariat. The Committee would be permanent and would have clear;
detailed TORs reviewed by the Bank as well as a mission letter. Its role would include the
review/elaboration of (i) Fiduciary Guide, (ii) standard documents and other tools, (iii) fiduciary capacity
building plans, (iv) oversight of fiduciary activities under the Program, and (v) Key Statistic Fiduciary
Indicators (KSFPI) generated by the improved program Information System/MIS.
B.4.1 Procurement arrangements
21. The procurement arrangements under INDH 1 largely followed the GoM’s national procurement
procedures with small modifications made to compensate for important differences between the national
law and Bank procedures (these changes were introduced through list of provisions in the legal
agreement, known as the “NCB List”. Compliance of standard Bidding Documents with these provisions
was mandatory under INDH1). As INDH 2 is anticipated to use the Bank’s PforR instrument,
5
procurement will not be subject to the Bank’s Procurement Guidelines and instead will be executed in
accordance with the GoM’s procurement procedures and regulatory framework.
22. The award of contracts under INDH 1 as well as for all other departments of the administration
(including local authorities indirectly) is governed by the Moroccan public procurement decree (PPD) No.
2-06-388 of 05 February 2007. State-owned enterprises (SOE) are not automatically subject to the PPD
and may establish and apply their own procurement rules once the rules are adopted by their respective
Boards and approved by the Ministry of Finance. The GoM is currently preparing a new PPD that makes
several improvements to and expands the scope of the 2007 PPD. Once the new PPD is enacted, it will
be applicable to the INDH 2 as well. This enactment is currently expected to happen before end of year
2012. In addition to the short discussions of improvements in the new PPD contained throughout this
document, a summary of the major changes introduced in the PPD is included in Annex 1.
23. As mentioned in para. 13, the two main procurement methods expected to be used under INDH 2
for Goods and Works contracts are Open National Competitive Bidding (ONCB), and Shopping (for
purchase orders).
24. Controls and oversight of Evaluation Committees. The PPD lays out various methods for the
control and oversight of evaluation committees, as they are involved in one of the most critical aspects in
the procurement process. The first control is outlined in Article 34 of PPD and provides for an ex-ante
review by a Moroccan “Controleur des Engagements” (controller) who represents the MoF/TGR and is
responsible to check compliance with the provisions of the PPD, especially in terms of bid opening. After
the evaluation is completed (in which the controller is not involved), the report and the draft contract are
submitted for the controller’s review and approval/formal clearance (“Visa préalable”) which is required
before a contract can be signed. Although contracts awarded by associations / NGOs are not subject to
the controller’s review, the PPD includes other provisions to mitigate risk in such contracts including (i)
requiring the tender committee to include a representative of DAS and another from the relevant INDH
committee (ii) subjecting the last payment (10%) to the physical inspection (final acceptance) by a
commission chaired by a representative of Wali / Governor in accordance with standard financing
agreement to be signed by project owner and (iii) the ex-post audit by the joint IGF/IGAT as described
below.
25. A second control is an annual audit that was established for all INDH activities performed by
implementing agencies in all provinces (77/83 provinces are under financed subprograms) on a
representative sample of 20 to 30 % of the contracts in each province. This audit covers a review of
procurement procedures and contract management and is conducted jointly by the General Inspectorate of
Finance (IGF) under the Ministry of Finance and the General Inspectorate for Territorial Administration
(IGAT) under the Ministry of Interior. Summaries of the annual audit reports are published on the website
of the INDH.
26. Finally, all entities implementing Program activities are also subject to review on regularity,
economy, and efficiency by the Supreme Audit Institution (Cour des Comptes).
27. Record Keeping and Document Management Systems. In general, procurement documentation
is kept in all public entities including rural municipalities. At the provincial level, procurement documents
are managed by three different services: (i) "service des marchés", (ii) the accounting service under
“Division du Budget et du Matériel", and (iii) the accounting service under the "Division de
l'Equipement". Associations and NGOs do not always have space of their own, which makes it difficult
for them to maintain the documentation. (Such an issue would be one of the factors for the proposed
Wali/governor’s new systematic assessment for delegation as a mitigation measure under INDH 2
described in in para. 16). Centrally, CN has recently added a contracts/procurement module named
"Marchés" in the existing information system that is reportedly being further improved to streamline the
6
data entry and report generation processes. The expected improvements including more user friendly and
exhaustive data acquisition as well as customized output generation (of KSFPI, program wide aggregates)
are scheduled to be in place by the beginning of INDH 2 and are anticipated to provide a substantial
improvement to collecting information and to enable the production of customized aggregated statistic
fiduciary data, indicators and reports
B.4.2 FM arrangements
28. A Special Purpose Account (Compte d’Affectation Special- CAS) was introduced by the Decree of
19 July 2005 for the purpose of INDH1 with budget sub-headings for each component. The NGOs and
cooperatives also pay their contribution from funds transferred to them by the CAS. The CAS is a special
account, separated from the general budget for the line ministries, but fully transparent within the budget
law and ruled by the same financial regulations as for the general budget. The expenditures of INDH 2
CAS, as for INDH 1, are authorized by the Head of the Government (authorizing officer, ordonnateur
principal), the Deputy authorizing officers (sous- ordonnateurs) being the Governors of the provinces.
Provincial authorizing officers have provided during INDH 1 the bulk of the implementation of the
program because of the low capacity of the communes. To this regard, the use of CAS by the local
municipalities has been below initial expectations
B.5 Program Budgeting
29. PFM reform. A new organic budget law has been drafted and should be submitted to parliament
before the end of 2012 according to authorities. Its implementation will be phased over five years, starting
with pilot testing in the most advanced ministries in 2013. This reform will introduce a programmatic
budget structure with corresponding performance objectives, indicators and reports. This would improve
the transparency of budget allocations to the government’s policies and programs and increase
accountability on their outcomes, both internal (within the administration) and external (towards the
parliament and the public). The administration’s performance will be reviewed by the Government, the
Parliament and subjected to performance audits.
30. The budget comprehensiveness should be improved by including in the finance law all public
sector entities relying on transfers from the budget and by subjecting them to the same performance
management approach. Furthermore, the special treasury accounts will be consolidated in the budget to
improve transparency. The revision of the accounting rules and the adoption of modified accrual
accounting will further improve financial information. The authorities are currently finalizing the
evaluation of the State’s assets, which is necessary for the adoption of accrual accounting.
31. Budget classification, predictability and composition. As described in the Technical
Assessment, expenditure monitoring is supplemented by an economic and functional classification
system. This classification system is detailed, stable and viable, and consistent with GFMS 2001.
Investment programming system in Morocco includes a sophisticated multi-year budgeting including a
multi-year commitment authorization (autorisations d’engagement) consistent with an annual payment
system (crédits d’engagement). Regarding the predictability of donors’ aid, Government is targeting a
total contribution of external (bilateral) donors of 7% (Bank contribution is counted towards the General
Budget share).4 At the moment only the EU has pledged a contribution of 20 million euro with the
possibility of increasing it in the context of a new PIN. Additional contributions from other donors are
likely. Overall, funding appears adequate to achieve the Program objectives and is likely to be sustained.
It is expected to reach US$2.1 billion, up from US$1.2 billion during INDH I. About 55 percent of the
4 The team will review if donors, involved in INDH, provide complete budget estimates for disbursement of project aid at stages
consistent with the Government’s budget calendar and with a breakdown consistent with the Government’s budget classification.
7
total funding is expected to come from central government (down from 60 percent), 38 percent from local
governments (up from 20 percent) and 7 percent in grants from international donors (down from 18
percent). Contributions from central and local governments have been secured. Due to high level and
widespread ownership of INDH 2, funding is expected to continue over the years. The proposed Bank
loan of US$ 300million over four years (2012-2015) will contribute to the Central government's funding
share. However, despite the increase in resources from INDH I to INDH 2, INDH 2 funding will remain
at roughly 3% percent of GOM’s total social investments. The economic and financial reports annexed to
the draft budget bills introduced to Parliament, along with the Budget Directorate’s activity reports,
provide details of overall targets and achievements of special government programs, and targets and
allocations for the current year. For INDH, the reports indicate the quantified goals for the year including
employment, literacy etc.
C. PROGRAM FIDUCIARY PERFORMANCE
C.1 Timeliness: Procurement Planning and disbursement
32. The PPD requires all national implementing agencies to publish provisional procurement plans that
include all contracts planned to be launched under the budget. The plans are made available no later than
the end of the first quarter of each fiscal year in at least two national newspapers (one in Arabic and one
in foreign language) and on the procurement electronic portal.
33. In INDH 1, which is a CDD type program this publishing requirement was followed at central
level but not at the decentralized levels. However, even when published the details of the contract
information included were not always sufficient for potential bidders. For example, descriptions of
contracts in these provisional plans were sometimes vague and included neither the size nor estimated
cost of the contract. In addition, the lack of sufficient information in the plans made it impossible to
assess the timeline taken for procurement procedures under INDH 1.
34. Under INDH 2, elaboration of more detailed procurement plans would become mandatory for all
including local governments thanks to the new PPD currently under preparation. In addition,
improvements to the information system would allow to track key fiduciary statistic performance
indicators (KFSPIs) of the procurement process that will allow a more in-depth analysis of the timeliness
of procurement activities. (A full list of the KFSPIs related to procurement can be found in Annex 3 of
this document.)
C.2 Cost effectiveness: Bidders’ qualifications, bids evaluation, and contract award
35. The PPD states that bidding documents (DAO) must state the qualification criteria of bidders
("eligibilité") and bid evaluation criteria ("classement des offres"). However, it is not explicitly stated
that the bid evaluation criteria, other than price, must be expressed in monetary terms. Such practices can
decrease the level of transparency in procurement processes as they allow the potential for procurement
processes to unjustifiably favor a specific candidate and therefore affect negatively thoroughness of bid
evaluation.
36. The potential negative impact on the INDH 1 of these practices was limited given the
standardization of bidding documents, although in some cases the rating/scoring system was also used for
qualification. To further mitigate this risk, the GoM has prepared guides and made them available in the
public procurement portal that explain the preparation of bidding documents, however inexperienced staff
may need more details than is provided in the guides. For example, in the sites visited, the team noted that
standard bidding documents are used in a very mechanical manner due to lack of fiduciary skills or
8
training (implementation strictly following ”word for word” the Standard Forms rather than procurement
principles) even if it lead to some inconsistencies.
37. In INDH 2, this risk will be mitigated in part by increasing the knowledge of responsible
stakeholders through a large capacity building initiative including (i) dissemination of simplified and
updated manuals for procurement, (ii) availability of other documentation tools (electronic web based
etc.); and (iii) implementation of provincial fiduciary capacity building plans.
38. In addition, technical support of external services (provided by provincial, line ministries, or SOEs
such as ONE or ONEP etc.) to project sponsors to assist with bidding documents and specs preparation,
TOR design, project preparation and works supervision during implementation will be systematically
formalized and customized through a specific clause in the partnership contracts/agreements (see RFI #
13).
C.3 Competitiveness and compliance in Procurement process
39. The PPD requires that public procurement announcements of specific bidding opportunities be
advertised in at least two newspapers (one in Arabic and other in foreign language) and on the public
procurement portal. In all sites visited, this requirement was enforced except in some rare cases in rural
communes where the publication is limited to newspapers due to the difficulty or impossibility of
accessing to the Internet. As stated earlier, the new PPD will also increase exposure to bidding
opportunities by requiring all levels of government (including the local level) to publish procurement
plans.
40. One potential way of limiting competition is to split larger contracts into smaller ones to allow the
use of less competitive procurement methods. In Morocco, the practice of splitting of contracts is
difficult because the PPD limits the use of shopping method (one of the least competitive methods) to
200,000 DH (<25,000 USD) per empowered person, by fiscal year and by type of expenditure (see further
the corresponding reference of PPD article). As part of the INDH, this rule has been softenedlaxed to
allow for increased flexibility and the threshold is applied to type of expenditure only instead of including
the empowered person and fiscal year. Currently, the lack of details in the annual procurement plans does
not allow an analysis to identify possible procurement processes to merge together to increase efficiency
and competition.
41. Bidding documents are free of charge and can be downloaded from the online procurement portal.
Bids opening sessions are public. Although the PPD allows administrative and financial envelopes to be
opened at different times, in most cases these openings are held on the same day and during the same
meeting due to the simplicity of related operations. This was not an issue in INDH 1 as the simultaneous
opening of envelopes was required in the aforementioned “NCB List.” The list of attendees during bid
opening is not systematically established.
42. In INDH 2, this risk would be mitigated by having the Program’s bidding documents requiring
simultaneous bid opening.
C.4 Compliance: Procurement review and oversight
43. As explained in para. 24, public contracts executed by the administrative departments or municipal
services are subject to systematic ex-ante control by the regional services of the TGR. An exception is
made for contracts awarded by municipalities in the INDH which limits the scope of the review to only a
verification of the availability of funds.
44. Although the governance body set-up proved generally effective under INDH1, there was scope to
improve accountability, reduce persisting fraud and corruption risk, and avoid elite capture.
9
45. An earlier section of this assessment covered the controls and oversight mechanisms in place for
contracts awarded by the associations/NGOs and the joint audits of the IGF / IGAT. The Governors and
Walis as INDH managers are the recipients of audit interim reports and they have a time given to respond
before finalization of the report. CN annually forwards the joint audit recommendations to the entities
responsible for implementing the Program (“Lettre d’orientation”). Nevertheless, it is noteworthy that
auditors highlighted a list of recommendations that remained recurrent from year to year. This indicates a
lack of close monitoring and follow-up of auditors' recommendations under INDH 1.
46. It is also worth noting that the findings of ex-post reviews by the World Bank and the independent
review conducted for INDH overlap substantially with and corroborate IGF / IGAT’s joint audit findings.
The main findings for INDH 1 were in general caused by weakness of staff capacities in small or remote
procuring entities as evidenced by (i) unclear or imprecise technical specifications and ToRs, (ii) poor
quality of bid evaluation reports due to poor quality of bidding documents; (iii) non-compliance with
contract terms, (iv) additional work not formalized contractually; (v) short-lists including unqualified
bidders.
47. As indicated earlier, in INDH 2, a formal clause in the partnership agreement providing for
technical support in various areas (technical and bidding document creation, works supervision, etc.) will
be included which will help to mitigate these risks.
48. The other main issue identified in previous Bank’s diagnostics that could affect the Program is the
lack of an independent procurement appeal system and a clear process for handling complaints, which is
discussed in the following section. The GoM is taking action on this weakness in the ongoing public
procurement reform process through new laws or decrees currently under preparation as well as through
the procurement complaints handling component of an improved Program Grievance Redress Mechanism
(GRM) for INDH2.
C.5 Complaints handling mechanism
49. The existing PPD provides a basic complaint mechanism relating to public procurement
procedures. According to the PPD currently in force, (Décret n° 2-06-388 du 16 Moharrem 1428 (5
février 2007, article 95), a bidder who wants to raise a complaint must do so first with the contracting
authority (i.e., the official procuring entity). If the response received is not satisfactory, the bidder may
only address it to the Minister and, if not satisfied with his answer, to the Secretaire General du
Gouvernement. The latter can (but not “shall”) transmit the request to the Commission des Marches
which would render a simple advice without any means for enforcement. In comparison to international
best practices, this complaint mechanism for procurement procedures lacks three vital elements: (1) No
independent bodies to which an appeal can be made, (2) No provision guaranteeing processing time or
granting the power to suspend the process pending the closing of the complaints, and (3) No publishing of
information arising from complaints, even in redacted form.
50. In the sites visited, very rare cases of complaints to the contracting authority had been reported
(but not beyond this first level), and in each case, the complainant received a response letter from the
contracting authority. (Under INDH1, no complaints were recorded at the central level.) There is no
system in place to track complaints managed by entities that implement contracts or at the National
Coordination level, and the systematic recording of procurement complaints and tracking their resolution
is not a common practice.
51. The proposed new public procurement decree which is expected to be enacted before end of year
2012 contains significant improvements to the complaints handling system by introducing: (i) direct
referrals to the Contract Review Committee and a direct response to the complainant, and (ii) power to
freeze procurement process and award proceedings pending closing of the complaint. These
10
improvements are nevertheless dependent on the reform transforming the Central Procurement Board
(CPB) (Commission Centrale des Marchés) from an ad-hoc committee composed solely of representatives
of different administrations into a permanent, more independent and powerful “Commission de la
Commande Publique” which will give it the level of independence required. The GoM is preparing the
draft decree to reform the CPB which aims at (i) reinforcing the representation of the public procurement
key stakeholders (local governments, ministries, SOEs and private sector), (ii) enhancing the authority of
the CPB with regards to administrative complaints handling procedures, (iii) setting time limits for
complaints treatment, (iv) providing the possibility for complainants to address their complaints directly
to the CPB and (v) defining the minimum professional and ethical qualification criteria for members of
the CPB. Once the new PPD and CPB decrees are passed, Morocco will have laid the groundwork for a
modern complaints handling mechanism based on good international practices.
52. In the interim, procurement complaints under INDH 2 will be addressed through an agreed-upon
broader cross-sectoral Program Grievance Redress Mechanism, of which procurement complaints are a
part.
53. Grievance redress related to the Program takes place through a variety of institutions, and it is
convenient to refer to is as a Grievance Redress System (GRS). At the National Level the National
Integrity and Anti-Corruption Agency (NIAA), the Ombudsman Office, and the National Council of
Human Rights can all receive any allegation, grievances notice and complaint related to the Program from
any actor or simple citizen. Additionally, both IGAT and IGF have internal grievance redress procedures.
54. Specifically for INDH, the IGAT has developed a system whereby it can receive complaints from
INDH implementing agencies, associations, private sector actors, or simple citizens. Complaints relating
to the INDH are dealt with by IGAT’s Audit Pole. If the complaint has a more general nature, the
complaint is dealt with by the Pole Inspection’. INDH related complaints are dealt with as follows: a) if
the complaint lacks sufficient backing information but seems to require further investigation, an
inspection commission is tasked with following up and collecting additional information; b) If the
information backing the complaint is sufficient, but the substance does not require to be addressed as a
matter of priority, its treatment is planned in the context of the audit missions with a view to increasing
efficiency; c) if the complaint has an urgent character, IGAT Audit Pole launches an inspection mission in
concertation with the Inspection Pole.
55. At Program level, the internal regulation of INDH governance bodies as described in the
Program’s Operational Manuals includes mechanisms for receiving and addressing grievances with a
view to enabling the mediation mandate of these bodies.5 Local level mechanisms tend to vary, reflecting
the decentralized nature of INDH. However, common elements include: -The Social Action Division at
Provincial level includes a Grievance office charged with receiving and addressing complaints, including
F&C allegations:
- At provincial level a complaint unit is set up reporting directly to the governor;
- At commune level INDH set up ‘complaints box’ allowing for anonymity of the plaintiff;
- The presence of CSO representative within the Governance bodies, together with technical
services and elected members, allows for addressing F&C allegations brought to the knowledge of
CSO representatives;
56. Only a few provinces today have performing internal GRMs. Therefore the Program introduces
elements in order to improve the effectiveness and reliability of INDH grievance redress mechanisms to
5 For example, the INDH1 Rural subprogram OM states that ‘local authorities are tasked with ‘receiving complaints,
address them and attempt to resolve them
11
be implemented during INDH 2 (see Program Action Plan # 6). The goal is to enable a more systematic
application of processes and procedures within Governance bodies starting from the provincial level
DASs and reinforcing the capacities of the actors in charge of receiving and following up on complaints.
Technical assistance will be provided during Implementation Support (see Annex 9) to the provincial and
local levels to design a practicable system that will then be written up in the Operational Manual and
generalized. GRM data will be integrated within the overall MIS so that findings can be used for
supervision by the CN and for oversight and control by governance and audit functions. The Program
Annual Report will be the vehicle to report on grievances submitted under the Program.
C.6 Staffing
57. In general, at the provincial level, there is sufficient staff with relatively good experience. The
procurement workload at the provincial level justifies the number and the qualifications of their staff
(engineers, technicians with various specialized skills and highly graduated staff). Urban communities
faced with insufficient human resources generally often obtain needed support from nearby provinces and
prefectures due to their close proximity. The staffing in rural communities is more challenging, as the
number and skills of those involved in procurement or preparation of technical sections of bidding
documents, and supervision of works are in most cases not sufficient. Procurement staff members’
recruitment, salaries, and careers are identical to those of any other staff of government and municipal.
Associations and NGOs rarely have dedicated staff and instead rely primarily on volunteers.
58. During INDH 1, local Governments procurement staff in general benefited from training sessions
on procurement, but these sessions seem to have been focused on all key aspects of the INDH 1 , and less
focused on fiduciary aspects. However, the General Treasury of the Kingdom (TGR, part of MoF) has
conducted several more focused fiduciary training campaigns using its own provincial network
throughout the country. The Interior Ministry is conducting a major effort to train local government staff
and local communities and INDH 1 has contributed greatly to this effort. Despite these initiatives, the
provision of training for local authorities remains insufficient in comparison to the needs, with the
exception of large cities that have ample training budgets. Therefore, those responsible for procurement
within rural communities have rarely benefited from training in this area and most are forced to learn on
the job without a mentoring system.
59. Under INDH 1, the Bank worked on improving the FM and Procurement capacity of the
implementing agencies staff and systems. There are signs of improvement however there is still room for
further improvement under INDH2. Regarding new implementing agencies (those not involved before in
the Program), capacity is a serious concern for many of them (e.g., NGOs and associations, rural staff)
and would require intensive intervention. With this structural weakness, the lack of a clear matrix
structure of the institutional arrangement constitutes another risk. For INDH 2, capacity building
programs will be elaborated and implemented “per province”, including fiduciary modules covering
procurement. In addition, a formal agreement providing technical support to those who need it will be in
place.
C.7 Contract management
60. At provincial, prefectural and urban municipal levels, contract management is done without much
difficulty thanks to the availability of various skill sets and resources, including access to the private
sector resources (consultants). This can be generalized to rural communities easily accessible from the
provinces. For remote rural municipalities and associations in these zones, an acute capacity problem for
monitoring contracts execution arises. Due to the remoteness, accessibility issues, and to the low volume
of activity that does not justify provision of permanent staff, monitoring contracts at different stages of
implementation is very difficult. The support services available in the provinces are generally limited to
the start-up of contract execution and to receiving/commissioning works.
12
61. In general, however, the INDH 1 experience showed that implementing agencies are largely
respectful of formal contract clauses: delays are justified by documented works suspensions; cost
extensions are also usually justified, etc. However, these examples cannot be extrapolated to infer that the
quality of works is acceptable and ensured given the lack of regular follow-up.
62. For INDH 2, the formalized and systematic technical support clause to be included in the project
sponsors’ agreements, will, in conjunction with the capacity building provincial programs, contractually
provide for acceptable quality of works design studies and for technically skilled supervision and
commissioning of works (RFI #13).
C.8 Effectiveness of coordination between agencies
63. At the national level, CN coordinates the budget allocation, supervision and monitoring of
activities execution. However, there is no hierarchical relationship between CN and the provinces that are
under the authority of their Governor.
64. There is a relative lack of effectiveness in the “convergence” approach to coordination with the
sectoral ministries such as Education, Health, and Public Works etc. In this regard the role of
Coordination Nationale is weak in procurement, even in terms of monitoring and evaluation, a domain
where its role is in fact limited to collecting information, and no analysis was performed during INDH 1.
The planned improvement of the Program MIS (see R.I # 12 in PAD, annex 2) and of its functionalities
more particularly the fiduciary modules (with production of specific KFSPIs as outlined in Annex 2) at
the beginning of INDH 2 should contribute to the mitigation of this weakness.
C.9 Planning and budgeting
65. The Morocco PFM system lies on well-organized planning and budgeting functions. The budget is
built on a credible macrofiscal framework in line with government policies. The budget preparation
procedure provides for due regard to line ministries’ requests as assessed by the 2007 CFAA and 2009
PEFA (indicator PI 11, rated A). Moreover, the authorities have begun implementing a program-oriented
budget framework to more than 30 eligible ministries in 2011 after a period of testing during the previous
years. A set of various performance indicators with related objectives has been developed accordingly.
However, the level of program appropriations (budget heading) has still to be fixed at a higher level of
aggregation following a recommendation of the 2007 CFAA. In addition, the budgeting at the
deconcentrated/decentralized level remains of concern for some appropriations, especially for capital
expenditures, due to delays is issuing the budget sub-allotments (delegations de credit) and despite recent
improvements due to the automation of the budget system (GFMIS). Such delays were observed during
the beginning of the INDH 1 program in 2006 but were quickly improved subsequently.
66. Budget classification. According to the Art. 29 of the Organic Finance Law of November 26, 1998,
budget expenditures are classified under three aggregate-type headings of the general budget (operating
costs, investment, and public debt). Expenditures are then classified by chapters, articles, paragraphs and
lines according to their economic purpose (payroll, supply costs, miscellaneous, and investment). An
administrative classification is also cross-cutting expenditures according to the level of the administrative
authority by which expenditures are implemented (ministry, central or deconcentrated/decentralized unit,
regional and provincial). A third classification, derived from the two other classifications, provides for
functional classification in line with COFOG norm. Overall, the budget classification is very detailed,
stable, viable, and consistent with GFSM 2001. A comprehensive coding system entails this classification
enabling a proper fit with the GFMIS’ requirements for the accounting classification included in the Chart
of accounts. Further upgrade of this classification is planned in order to facilitate direct monitoring of
priority programs implementation, as part of amendments that may be made to the Organic Finance Law.
In any event, the budget coding allows for such monitoring. Budget classification has been rated A by
2009 PEFA (PI-5).
13
67. Budget transparency. The transparency of information disclosed with the budget proposal was
assessed by the 2009 PEFA and rated B. Among the 9 required criteria, 6 were fulfilled, but 3 were not,
namely: no disclosure of value of financial assets of agencies; no systematic disclosure of in-year
reporting in the same format than the proposal making comparisons uneasy; and presentation of out-turns
budget for the current year but in a different format that the one for the budget proposal. It is to be noted
that the implementation of an accrual accounting system in the near future will automatically resolve the
first weakness. Regarding the two other criteria, they do not impact the Program.
68. Budget Calendar. The budget preparation is framed under a clear and detailed annual budget
calendar for each step of the procedure providing line ministries with a clear schedule for formulating
their budget requests in a predictable way. The calendar provides ministries; departments and agencies
with reasonable delays for meaningfully complete their detailed estimates. However, in practice some
delays are often experienced. (Rated B by 2009 PEFA, PI-11, dimension (i)). Furthermore, the guidance
provided to line ministries for establishing their budget requests is in line with core best practices (rated A
by 2009 PEFA, Pi-11, dimension (ii)). The approval of the budget by the Parliament is timely (Rated A
by 2009 PEFA, PI-11, dimension (iii)). Regarding the budget execution calendar, delays for budget
allotments to deconcentrated and other local units remain of concern despite recent improvements (see
below “Flow of Funds”).
69. Medium-term budgeting. Investment programming system in Morocco includes a sophisticated
multi-year budgeting including a multi-year commitment authorization (autorisations d’engagement)
consistent with an annual payment system (crédits d’engagement). Such procedure should greatly
facilitate any further introduction of multi-year forecasting. However, the link between multi-year
sectoral estimates and their subsequent annual budget ceilings is to be improved. (Rated C+ by 2009
PEFA).
70. Budget execution. The Organic Finance Law of November 26, 1998 includes a certain number of
adjustments possible during the execution. These adjustments frequently account for a quarter of the total
expenditures, including a number of sub-adjustments at the lowest level. However, these are operated in
transparency vis à vis the Parliament, especially the monthly reports and mid-term progress report. These
procedures have been rated B or C by the 2009 PEFA. It is important to note that regarding INDH1, no
funds have been diverted, as confirmed by the audit report.
71. Sectoral Strategies. The statement of budget spending allocated to sector strategies indicates that
these funds are monitored under the existing budget classification system by ministry. The economic and
financial reports annexed to the draft budget acts, along with the Budget Directorate’s activity reports,
provide details for some of these programs on new budget allocations and funds spent since their launch,
in comparison to the overall program funding initially pledged. The most notable of these are programs
supporting INDH with a series of quantified goals. Procurement planning. As has been previous
discussed in this assessment report, there was a lack of procurement planning in some areas under Phase
1. The new Public Procurement Law/Decree (PPD) in the pipeline to be enacted (draft “Dahir” recently
signed by the new Minister of Finance) will address this deficiency by making the elaboration and
dissemination of procurement plans mandatory for all Local Governments (“collectivites territoriales”)
which will fall under the realm of this new PPD. The updated Operational Manuals should also include,
and from early start of INDH2, the preparation of Procurement Plans as a mandatory first step in the
procurement cycle. (A standard model of Procurement Plan should be provided in the Fiduciary guide.
14
Strengths Areas for improvement
Most funds transfers to regional and local governments
are governed and effected through transparent
arrangements and following defined rules6
The economic and financial reports annexed to the
draft budget acts, along with the Budget Directorate’s
activity reports, provide details for some of the INDH
on new budget allocations (dotations) and funds spent
since their launch, in comparison to the overall
program funding initially pledged.
Delayed projects’ execution due to late release of
spending authorization
Carried forward credit not notified on time ( by
the end of May 2010 for FY10)
Unpredictable availability of funds
C.10 Accounting and financial reporting
72. Delays and quality. Accounting and reporting are primarily handled by the General Treasury of
the Kingdom (TGR) in relationship with the line ministries. ) The TGR “send a monthly report to the
Finance Ministry presenting a statement of budget transactions, special account transactions, and cash
flow transactions for the month,” accompanied by statements for previous periods (Art. 124 of the
General Accounting Regulation (Order No. 330-66 of April 21, 1967). TGR summarizes this data in its
“Monthly Statistical Bulletin for Public Finance,” published on its website. Through this TGR’s
statement, line ministries have access to detailed data on the execution of their budgets and main
ministries use this information to prepare a quarterly update of budget execution. Since GFMIS has been
rolled out, line ministries have now access to most data on their budget execution on a real time-basis.
73. At the end of the year, line ministries, in conjunction with the Budget Directorate, prepare each a
budget execution report on their expenditures. These reports indicate the budget commitments and the
related signed payment orders issued by budget chapter, article, paragraph and line. These reports, called
administrative accounts (compte administratif), are sent to the Court of Accounts for their report on the
budget review act. On the other hand, the TGR issues the set of accounts reflecting the commitments and
payment orders signed and registered for payment by the accounts (comptable assignataire). This set of
accounts also reflects the accounting centralization of the financial transactions of all central and local
entities through the treasury network all over the country. These accounts, called treasury accounts,
provide for statements of general ledgers on the basis of a monthly reconciliation. The recent roll-out of
GFMIS allows now for automated daily reconciliations. It is to be noted that the final financial statements
can take into account transactions for regularization until March 31 of the next budget year (période
complémentaire) at the initiative of the budget authorizing officers (ordonnateurs) and regional
treasurers.
74. The quality and timeliness of in-year reporting was reviewed by the 2009 PEFA, PI-24 with its
three dimensions (scope, timeliness, and quality) rated respectively A,B, and A. Since GFMIS has been
rolled-out, the timeliness of the budget reports should now most probably be upgraded to A. This is also
confirmed by audit reports produced in the country. Regarding the quality of accounting for INDH 1, the
audit report of the CAS, May 17, 2011 has highlighted the necessity to strengthen the accounting team at
the Prime minister level in order for him to produce more timely the consolidated financial statements
(compatibilité administrative consolidée de l’ordonnateur) that may be reconciled with the accounts of
the TGR.
6 PEFA 2009
15
75. TGR’s organization. The organization of the TGR’s network and centralization of financial and
accounting data are as follows:
Local government level (municipality): a treasurer, public sector accounting officer and TGR
staff member, approves the commitments, and controls and executes the related payment orders,
records and books the transactions, and holds the accounting.
Regional level: each treasurer, TGR affiliated, receives from the regional representative of the
regional branch of the central bank a daily statement of debit and credit transactions for the single
treasury account where all public funds are hold and from which all expenditures are paid (and
resources collected). On this basis, the regional treasurer reconciles all expenditures made by his
regional office and on behalf of accounting office down the line; only the regional treasurer is
authorized to debit the single treasury account held at the central level at the central bank. The
regional treasurer operates the same kind of reconciliation for revenues.
Central level: the TGR centralizes the monthly statements of debit/credit transactions made by the
regional treasurer posts with the regional branch of the BAM. Until 2007, there was no proper
consolidation of public sector financial statement. Since then, the TGR has launched a program
for meeting such objective, in particular for consolidating local government expenditures.
76. Accounting system. The INDH 2 accounting system is based, as the INDH 1, on the same General
Accounting Regulation (Order No. 330-66 of April 21, 1967) than described above. Line ministries and
executive agencies of the INDH sub-programs will proceed in the same way for the bulk of the budget
expenditures. The executing agencies and accountants will maintain separate accounting systems, i.e.,
administrative accounting and treasury accounting, as described above. All these data will then be
recorded and reported in details and aggregated level in the INDH’s special purpose account (compte
d’affectation spéciale). As indicated above, there is no rigidity in the chart of accounts that would prevent
addition of new codes to keep track of program-related transactions (the codification includes a functional
and programmatic classification), nor major difficulties for keeping track of expenditures of main service
delivery units (Indicator PI-23 was rated B in 2009 PEFA). Regarding the ability of the accounting
system to issue accounting main documents in line with international standards, it is to be noticed that
Government accounts are not presented according to IPSAS or equivalent national standards. However,
the public sector chart of accounts refers to national standards approved by the National Accounting
Council adopted in 2002. In addition to that, the implementation in the next future of an accrual
accounting would comply with IPSAS. The related indicator of PEFA (PI-25, (iii)) was rated in 2009 C.
77. However, the financial certification of the INDH 1 aggregated account (Compte d’affectation
Speciale, CAS) by the General Inspection of Finances (2005-2008) stipulated that the regulations for
producing consolidated financial statements of the CAS needed to be improved, while no irregularities
were raised by the audit.
Strengths Areas for improvement
Reliability of CAS INDH financial statements Timeliness of information to Provinces and
Communes
Reliability of consolidated local government
expenditures
Adherence to international standards
16
C.11 Treasury management and funds flow.
78. A Special Purpose Account (Compte d’Affectation Special- CAS) was introduced by the Decree of
19 July 2005 for the purpose of INDH1 with budget sub-headings for each component. The NGOs and
cooperatives also pay their contribution from funds transferred to them by the CAS. The CAS is a special
account, separated from the general budget for the line ministries, but fully transparent within the budget
law and ruled by the same financial regulations as for the general budget. The expenditures of INDH2
CAS, as for Phase 1, are authorized by the Prime Minister (authorizing officer, ordonnateur principal),
the Deputy authorizing officers (ordonnateurs secondaires) being the Governors of the provinces.
Provincial authorizing officers have provided during Phase 1 the bulk of the implementation of the
Program because of the low capacity of the communes. To this regard, the use of CAS by the local
municipalities has been below initial expectations.
79. Regarding more specifically the predictability of funds for commitments for the Program
expenditures, there is:
No specific cash problem in Morocco that would prevent INDH disbursements to be made on
time. The treasury single account provides for the required funds in due time. Cash forecasts are
reconciled on a daily basis with the Treasury account balances at the central bank and at least on a
weekly basis with the balances of others local government or public enterprises (the indicator PI-
16, (i) of 2009 PEFA was rated A);
No specific obstacles that would hamper the spending units to commit for their expenditure
within a reasonable horizon in advance in accordance with their budget appropriations. The
indicator PI-16, (ii) of 2009 PEFA, has evaluated this horizon at 6 months in advance, which
equals a rate A.
Strengths
Areas for Improvement
Robustness of CAS financial regulations and practices. Lack of trained bookkeeper and treasurer for
communes NGOs
Unpredictability of funds availability
C.12 Internal controls and audit
80. The Morocco PFM system is based on:
An internal ex ante control by both the financial controller and the accountant, both affiliated to
the TGR, but each under specific statute for warranting their independence from the authorizing
officer.
An internal audit both at MoF and line ministry level, respectively the General Inspection of
finance (IGF) and General Inspection of Interior (IGAT).
An external audit, performed by the Auditor General (Court of Accounts, Cour des Comptes) who
operated as a judicial institution.
17
81. With respect to audit and control, INDH is submitted to some specificity:
TGR: since 20097, the ex ante control of expenditures of local governments is still performed by
the TGR but only on a limited scope (availability of appropriations and classification of the
expenditure) and the bulk of the control is made by the authorizing officer under the ex post
control by the Court of Accounts. Furthermore, since 20088 a major PFM reform is the gradual
adoption of an ex post control system tailored to the capacity of the commitment officers to
implement it (controle modulé de la dépense). Several ministries have been assessed to
implement this risk-based approach and the reform is on-going.
Provincial Internal Auditors. During Phase 1, provincial internal auditors have been recruited
and deployed to improve the control framework. However those internal auditors have not been
appointed in all provinces due to resources constraints. In some cases, internal auditors perform
incompatible tasks such as procurement specialists and merely do not use professional audit
methods, including risk assessment techniques.
Effectiveness of internal control to prevent or detect serious irregularities, misuse, and
inefficient use of Program funds. The indicator PI 20, first dimension (i) was rated A, especially
for its efficient commitment control system, however the two other dimensions, (ii) for other
procedures of control than those for processing and recording transactions, meaning procedure
for management control, performance control/audit and assets safeguards, and (iii) for
procedures of control of simplified or emergency situations were rated C. Overall, the indicator
was rated C+. Since the PEFA has been issued, an important reform of the internal control has
begun to be implemented consisting in some devolution of ex ante control to line ministries
according to their capacity (controle modulé de la dépense). Moreover, for the INDH
specifically, some upgraded procedures of control have been put in place, in particular the joint
audit of the IGF and IGAT with proper performance-oriented procedures. Both these evolutions
should lead to improve the rate C of the second dimension of the PEFA indicator PI-16
mentioned above.
Capacity of the internal audit to provide assurance on the robustness of and compliance with
internal controls. The indicator PI-21 which measures this ability was rated B for its first
dimension, especially for the ability to perform at least 50 % of systemic audit and its
compliance with international standards. The two other dimensions, related to the distribution of
the audit reports and follow up by management, were rated C.
Strengths Areas for Improvement
INDH regulations have introduced a significant
measure of flexibility at the commitment stage of
expenditures: approval by the controller cannot be
withheld unless funds are not available and the
qualified approval cannot entail suspension of these
disbursements.
Comprehensive expenditure commitment controls are
in place and effectively limit
commitments to actual cash availability and approved
budget allocations
A few budget authorization units (Ordonnateurs) have
prepared a risk matrix
Internal auditors have not been appointed in all
provinces due to resources constraints
Appointed internal auditors perform
incompatible tasks such as procurement
specialists and do not use professional audit
methods, including risk assessment techniques
Audit recommendations are not always
followed-up
7 February 18, 2009 local Finance Act
8 Decree November 4, 2008 related to financial control of expenditure
18
C.13 Program Audit
82. The Court of Accounts and the Regional Courts of Account established in 2004 are the main
institutions in charge of external audit within the Morocco PFM system. The scope of their mission was
broadened to include management audit by the promulgation of the Code of Financial Jurisdictions on
June 13, 2002 (Law. No. 62-99). The Courts’ audit officers are granted with a judicial statute (magistrats)
and tasked with jurisdictional audit under the 1996 Constitution. They also have the requisite
prerogatives and independence in the performance of their extra-judicial powers that are specified in
INTOSAI and IFAC international standards.
83. The CDC includes 9 regional Court of Accounts to ensure the control of accounts and management
of the “territorial communities” (Collectivites territoriales i.e Local Governments) and their affiliated
public entities.
84. The Court of Accounts’ audit reports on central government’s general account, which form the
basis for the draft budget review act, may be prepared only after the Secretary General of Government
(SGG) has handed over the account details as drawn up by the Finance Minister (TGR). The 2009 PEFA
(indicator PI-25, ii) reviewed the significant delays, more than 18 months after the end of the fiscal years,
in issuing the audited annual financial statements for 2004, 2005, and 2006. These delays were mostly
imputable, at the time, to the difficulties of the MoF in issuing the annual financial statements. Delays
have improved since then, though still insufficiently (12 months), and do not put at question the quality of
the audit work of the Court. The quality of audit work and methodology of the Court was rated by the
2009 PEFA (indicator PI-26 dimension (i)) as B, which is a good rating, and has improved since then.
CDC reports are available to the public on their website. Their quality is satisfactory, with respect to the
application of international standards and the scope of their missions. The CDC goal is to no longer focus
control on compliance but to review the regularity, efficiency, economy, efficiency, and ethics. Even
though the CDC has indicated that it cannot express a separate opinion on the Program or any other Bank-
financed project but also that INDH falls under its scope and could be audited in the context of its work
program. The Bank will continue country level dialogue with the CDC to explore their involvement in the
external audit oversight of the Program which would complement internal audit function.
85. IGAT and IGF: IGAT and IGF conducted audits for INDH I. An audit charter, signed by these
two entities, defines the objectives and methods of the joint audit that covers FM and procurement. IGAT
and IGF are not independent from the executive but have proven their credibility. Overall, these audits
have been accepted by the Bank and the same arrangement will be maintained. Audit reports have
identified the main shortcomings in the implementation of INDH I and have made relevant
recommendations. However IGF and IGAT TORs will be reviewed, in collaboration with the Bank, IGF
and IGAT, in line with ISA international audit rules applicable to the Program, in order to address the
need to: a) issue a consolidated audit on the Program Financial Statements; b) including coverage of
Procurement activities with sufficient details; c) identify priority recommendations.
86. IGAT and IGF. During Phase 1, transactions and programs of INDH1 were audited and certified
by IGAT and IGF. An audit Charter, signed by these two entities, defined the objectives and methods of
the joint audit. Furthermore, a manual of audit of the account of the special assignment has been
developed. Its methodology ensures that: (i) the financial statements of the programs financed by the
"CAS- INDH" comply with the laws, regulations and accounting repository that are applicable, and (ii)
the audit provides reasonable assurance that these financial statements do not contain significant
anomalies. The audit arrangements included (i) Annual audit of INDH accounts, (ii) Ex-post controls of
sub-projects, (iii) Annual performance audit.
19
87. In reality, IGAT/IGF issued the following reports:
Opinion on Program financial statements of each implementing (provinces and prefectures)
Summaries of the executing entities annual audit reports published on INDH website.
Report on internal controls
Opinion on the Special Purpose Account (CAS-INDH)
88. From 2005 to 2010, the audit opinions of executing agencies can be classified as the following:
Year Number of Executing
agencies
Unqualified
Opinion
Qualified
Opinion
Adverse
Opinion
Disclaimer
2005 69 54 15 0 0
2006 70 56 14 0 0
2007 70 67 3 0 0
2008 70 67 3 0 0
2009 70 64 6 0 0
2010 83 74 8 1 0
89. In 2010, qualified opinions were mainly due to ineligibility of sub-projects, the adverse opinion
was motivated by a conflict of interest between CPDH, CLDH and a beneficiary in one prefecture.
90. It is to be noted that these audits demonstrated candid and independent assessment of the
program. However the audit performance needs improvement in the following areas:
The opinion on the main SRA account at the Central level was not issued timely. The reports
covering 2009 and 2010 were shared with the Bank in May 2012. The delay is also caused by the
late completion of the CAS financial statements Main activities that will be covered by these
reports are studies, technical assistance and capacity building activities managed at the Central
level.
Capacity to conduct a Program Financial Statements audit and provide an overall opinion on the
program instead of 83 opinions for each Program’s implementing entity
Lack of prioritization and follow-up of audit findings and recommendations
Synergy with Provincial Internal Auditors
91. The Bank has taken several steps to resolve this non-compliance including formal communication
to the Borrower and the receipt of the report as negotiation condition
92. To ensure that such noncompliance does not occur under INDH2, the Bank is working with
IGAT/IGF to define clear guidance and standard s on Program Financial Statements Audit, Technical
audit, and to include the coverage of Procurement activities with sufficient details.
20
93. To improve the implementation of audit recommendations, the auditors will identify priority
recommendations which should be addressed urgently. These include, inter alia: (i) internal controls are
lacking or not applied regularly, (ii) Major shortcomings lead to significant risk of errors, (iii)
irregularities or fraud, (iv) The risk could jeopardize the reliability of Program’s financial information,
efficient and economic use of funds for intended purposes and (v) compliance with laws and regulations
including loan agreement.
Strengths Areas of Improvement
The SAI (Cour des Comptes) also has the
requisite prerogatives and independence under the
Constitution in the performance of their extra-
judicial powers that are specified in INTOSAI
and IFAC international standards.
Moreover, since 2005, the Regional Courts of
Account have been auditing local governments
and their local public enterprises
9 Regional Courts had 153 staff of which 99 are
auditors
The scope of CDC was broadened to include
management audit
Not in line with national accountability
legal framework
Audit reports are submitted to the legislature
more than 12 months from the end of the
period covered (for audit of financial
statements from their receipt by the
auditors); audited financial statements are
presented to Parliament more than 12
months following the receipt of the
statements by the external audit body
C.14 Fiduciary performance monitoring
94. In order to monitor properly fiduciary performance, each indicator should have its baseline
information known at the beginning of Program implementation. The considered fiduciary indicators and
their baselines are as follows (related Program Action Plans (PAPs), results indicators and DLIs from
PAD and Annexes 2-4 are in brackets). In addition, an important improvement of the program systems
has been discussed with the CN during appraisal, which is the new systematic and periodic production by
the Information System (MIS) under INDH2 of Key Fiduciary Statistic Performance Indicators (listed in
Appendix 2), among which consensus was reached for a selection of 12 most significant and
representative procurement performance indicators extracted from the national TGR Data Base for
homogeneity and comparability with the national system. Among the FM ones, three would be produced
by MIS, the others, more qualitative than statistically measurable, would be included in Audit reports.
(i) Availability of a credible program and /or decentralized level complaint mechanism: Baseline :
no (provincial/central) database for monitoring complaint mechanism is in place at the end of
INDH1 (PAP #8);
(ii) Procurement and financial management capacity building: Baseline : capacity assessment
template to assess project sponsors /procuring entities capacity does not exist; provincial capacity
building plans are not developed (PAP #10; )
(iii) Documentary tools to simplify preparation of bidding documents and contract management
(simplified manuals, standard contracts, guides, templates, forms, etc.) Baseline: the tools are not
available nor prepared for INDH2 version (RFI 13)
(iv) Expansion of Audit TORs t cover procurement aspects with more details, and Development of
effective and timely follow-up/implementation mechanism for audit recommendations (DLI 7 and
8). Baseline: see DLIs
21
(v) Effectiveness of the external audit function
(vi) Technical Support : Use of technical design studies for each works contract (construction, rural
roads, water supply, power grids etc..) as a prerequisite to contracting or systematic possibility to
rely on technical support of provincial /external services contractual clause (% in partnership
contracts). Baseline: No formalized technical support clause in partnership agreements. (RFI #13)
(vii) Involvement of external services in developing (or reviewing) CPS (Cahier des Prescriptions
speciales) as improvement of BDs/quality and technical supervision of works contracts. Number
of completed infrastructure contracts complying with technical CPS specification. (RFI # 6 and
RFI # 13). Baseline: see RFI #6
(viii) Improvement of the former Fiduciary Innovation ad-hoc team replaced with permanent and
strengthened Fiduciary Coordination Committee (FCC) with clear TORs, role and responsibilities
to oversee and monitor fiduciary performance, and review manuals, guides and reports. Baseline:
Fiduciary Innovation Team intervened punctually and faded out/was dissolved before end of
INDH1 (PAP # 12).
(ix) Systematic production and periodic review of Key Fiduciary Statistic Performance Indicators
(KFSPI) and aggregate on 77/83 provinces, see Appendix 2. Baseline: At the end of INDH1, the
new MIS could not produce representative and exhaustive statistic aggregated procurement
performance indicators (less than 45 provinces data available).Therefore, the operational baseline
will be the first set of KFSPI produced at the beginning of INDH2 implementation for the
aggregate of 77/83 provinces. (They will be reflected in the yearly activity report and reviewed
during Bank supervision missions and in each joint Audit –see new expanded Audit TORs-). (RFI
#12, third target for year 2012)
D. FIDUCIARY RISK
D.1 Overall risk
95. The overall fiduciary risk for INDH 2 is rated “substantial”. Risk mitigation, capacity building
activities and other mitigation measures have been proposed as described earlier and below, notably those
inserted in the Program Action Plan or annexes 2-3 to address identified risks.
96. The findings of this assessment highlight firstly the national procurement system related risk, those
related to the capacity of implementing agencies, and finally those related to the organization of the
Program. Identified risks include the following:
The contractual imbalance of power between partners (employers - bidders) and lack of
transparency in the procurement process due to lack of independence of the entity to which
complaints and claims are made, the lack of monitoring of complaints and the non-disclosure of
their outcomes.
Implementing agencies are relatively respectful of formal rules of procurement. Control is also
restricted to formal compliance. The risk is mainly related to the capacity of staff to execute
procurement properly, and this capacity is often low especially in remote rural or difficult to
access communities and Associations / NGOs.
Matrix structure of the institutional arrangement under INDH1: the Coordination Nationale did
not have any power in terms of procurement control or oversight; and procurement technical
oversight was under the responsibility of Ministry of Finance (TGR and IGF). The Fiduciary
22
Innovation Team which was put in place for INDH-1 was a good mitigation measure for this risk
but unfortunately it did not work efficiently for the first phase, partly because it was not
empowered to enforce its proposals and partly because it was not permanent and faded out in the
last years of INDH1. Hence the improvements to be brought in the creation of the INDH2
permanent “Fiduciary Coordination Committee” (see above its roles, provision for TORs and
mission letter, and composition).
The main risks are due to: (i) the lack of an independent procurement appeals system and clear
process for handling complaints; (ii) quality and timeliness of annual audited financial
statements; (iii) effectiveness of internal audit function and follow-up of audit recommendations,
(iv) a heavy reliance on Management Information Systems (MIS) for DLIs verification protocol,
(v) low capacity of small or remote entities procurement staff which often leads to low quality of
technical specifications, ToR, bidding documents, infrastructure works; (vi) lack of thoroughness
of bid evaluation linked to choice of criteria or scoring system; and (vii) occurrences of
questionable quality (not timeliness) of works or services delivered to small or remote entities
often due to lack of local technically skilled supervision. The procedures and control framework
are adequate, but the risks persist because of the large number of small contracts and sponsors,
often with low capacity, dispersed over more than 20 000 activities or locations.
D.2 Risk mitigation measures
97. General Risk mitigation and capacity building activities have been proposed to address the main
identified risks. Mitigations measures that should be addressed include (i) improving audit TORS, (ii)
providing clear guidance and standard s on Program Financial Statements Audit, procurement, and
Technical audit, in order to improve assurance framework. Additional measures are (i) ensuring that the
MIS is robust and effective so that quick disbursement is not jeopardized and which will enable better
procurement reporting; (ii) monitoring KFSPI during implementation support, (iii) mainstreaming anti-
corruption efforts by strengthening the borrower’s systems by creating a central system data base for
allegations collection and follow-up, with periodic reviews; (v) disseminating a revised and simplified
procurement Operational Manual; (vii) providing new guidance tools for Manuals, bidding documents
preparation and contract templates; (viii) implementing fiduciary training program (s); (ix) establishing a
Fiduciary Coordination Committee to oversee fiduciary performance; (x) strengthening grievance
mechanisms procedures which include the handling of procurement-related complaints; and (xi)
providing formalized technical support through a systematic clause in project sponsor partnership
agreements.
98. Specific measures will be as follow:
Planning and budgeting. A critical risk is delays in project implementation. A set of measures
has been taken by the Ministry of Finance to improve the transfer to spending units. There was a
lack of procurement planning under Phase 1. The new Public Procurement Decree will address this
deficiency by making the elaboration and dissemination of procurement plans mandatory for Local
Governments. Under the INDH 2 Program, the updated Operational Manual will also mandate the
completion of Procurement Plans as the first step of procurement cycle.
Bidding and contracting. Mitigation measures include one specific to technical quality of
preparation, BDs, and technical works supervision Formalized technical support will become
systematically available through a standard and customized clause in project sponsors partnership
agreements. This measure is described in RFI # 13 – see PAD, Annex 2-3.
23
Program accounting and financial reporting. The current Program information system has been
developed to optimize the use of financial information; however it does not provide adequate
standard procurement and fiduciary reporting. The ongoing upgrade of the INDH information
system would allow better functionality of the tool, provide regular reports on procurement and
contract progress, and provide the ability to extract customized synoptic data including selected
Key fiduciary statistic performance indicators (KFSPI). The IS upgrade is tracked by RI 12 – see
PAD, Annex 2.
Internal controls and internal audit. The ex ante control of expenditures of local governments is
still performed by the TGR but only on a limited scope (availability of appropriations and
classification of the expenditure) and The Coordination Nationale plays a facilitating role vis-à-
vis the DAS with respect to procurement control or oversight. The technical procurement oversight
is under the responsibility of Finance Ministry (TGR). The mitigation measures will be to: (i) set-
up Fiduciary Coordination Committee (FCC) that will provide Program oversight, and develop
standard tools and documents, and (ii) design and implement a capacity building program. This is
Program Action Plan # 10 and # 12– see PAD, Annex 4.
Technical supervision of works contract: Technical design and technical supervision by external
services are not used systematically for works contracts. Under Phase II, the revised procurement
OM will provide for systematic use of (simplified) technical design studies for each works
contract, and technical review and supervision by external services or consultants will be required.
The Bank will monitor the system performance.
Provincial Internal Auditors (PIT). During Phase 1, Provincial Internal Auditors have been
designed and deployed to improve the control framework. However PITs have not been appointed
in all provinces due to resource constraints. In some cases, they perform incompatible tasks such
as also acting as procurement specialists, or do not use professional audit methods, including risk
assessment techniques. Under Phase II, the capacity of these auditors will be built into the
provincial action plans. This is Program Action and RFI 14 – see PAD, Annex 4. To improve
fiduciary performance monitoring of the Program, the multidisciplinary Fiduciary Coordination
Committee will be reinstated with clearer TORs, scope and authority.
Program Audit. During Phase1, the synergy with PIT, prioritization, follow-up and monitoring of
those recommendations were not optimal. Under Phase II, acceptable action plans will be developed
following IGF/IGAT audits (see DLI #7 RI #14 in PAD, Annexes 2- 4). Follow up and
implementation of key audit recommendations will be tracked by indicators (see RI #14 & #15, DLI
#8 in PAD, Annexes 2 and 3).
Improvement of Program fiduciary systems linked to RFI/DLI indicators and Program Action
Plan: During preparation, consensus was reached with Moroccan counterparts on the following:
- On the principle of two fiduciary DLIs : (i)DLI No 7 (RFI# 14), formalizing the gradual
elaboration by provinces of Action Plans reflecting Audits recommendations, and (ii) DLI No
8 (RFI #15), measuring yearly implementation of (priority one) audits recommendations or
incorporation of longer term ones in implemented action plans
- On two other specific fiduciary results framework indicators: (i) RFI No 13: related to
elaboration and dissemination of updated simplified procurement and fiduciary manuals, and
to contractual institutionalization of technical support by administrative services to project
sponsors through incorporation of a special clause in partnership contracts/agreements, and (ii)
RFI No 16 focused on procurement capacity and yearly measuring fiduciary capacity of
project sponsors.
24
- Fiduciary sub-set of improvements will also be incorporated into cross-sectoral indicators
and multi-disciplinary actions of PAP: (i) One set of procurement complaints handling set
measures/mechanisms in the GRM Grievance Redress Mechanism/indicator (see paras. 54-
57) and (ii) two fiduciary modules (procurement and FM) including the systematic and
periodic production of key fiduciary statistic performance indicators (KFSPIs) – which are
detailed in Appendix2- in the improvement of the Program Information System.
99. Implementation Support. During Program implementation, a tripartite Assurance Framework
will be instated and ramped up, with adequate balance between controls and support provided by:
The client ( financial controllers, IGF, IGAT, Provincial Internal Auditors, the Court of
Accounts);
Third parties e.g. social accountability mechanisms9, EU audit reports on rural activities
The Bank through fiduciary implementation support with FM, PR and other technical
specialists associated in supervision missions.
100. The Key Fiduciary Statistics Performance Indicators (KFSPI’s) will be produced and monitored,
including monitoring of payment related complaints and end use audits (see Appendix2).
E. GOVERNANCE, ANTI-CORRUPTION AND ACCOUNTABILITY
E.1 FM and Procurement
101. The Bank is currently supporting IGF to build its capacity with respect to Fraud and corruption. A
first training was provided by MNAFM in collaboration with INT. The Bank will continue to provide
support to improve IGF performance in monitoring F&C.
102. The existing PPD provides the list of standard evaluation committee’s permanent members: three
representative of the project owner, one representative of TGR and one representative from Ministry of
finances if the amount of contract is above 30 million MAD. The committee must invite a representative
of Ministry of commerce if contract amount is above one million MAD per the decree’s provision for
increased transparency and to double check fairness of access to contracts complying with bilateral or
multilateral trade agreements signed by Morocco.
103. The “statute of civil servants” (Governments staff regulation) contains general provisions on the
obligations of officials and civil servants and stipulates penalties for misconduct. Accountability for
decision-making and disclosure of financial information is detailed in the Law on responsibilities of
authorizing officers and public accountants. The consequences for misconduct are of administrative or
criminal liability nature.
104. The PPD clearly describes the decision process for the award and contract management. Open
competitive bidding is the default procurement method; all other methods are exceptional. Procurement
processes allowed by the PPD are well known by the administrative staff. It is very often the case in the
municipalities.
9 Social accountability tools have been developed to monitor rural and urban program (participatory M&E)
25
105. For NGOs / associations there is rarely a formal organization and responsibilities are not defined
clearly. All procurement related laws and regulations are publicly available as they are published on
TGR's public procurement portal. They are also available (paper version) in the services of the provinces /
prefectures and in most municipalities. The simplified procurement manuals and training programs under
INDH2 would ensure dissemination of appropriate procedures to other small procuring entities such as
remote communities, NGOs and associations.
E.2 Arbitration and measures to fight Fraud and Corruption
106. The arbitration system is required by law but has not been reflected in the existing General
Contract Conditions (GCCs). GCCs for Goods contracts, which are the ones missing, should be prepared
and disseminated under the program at the beginning of implementation of INDH2, as part of the
Fiduciary guide if the up to date National GCCs are not yet ready.
107. Past experience has justified in the ongoing reforms to include measures to fight fraud and
corruption in the new Constitution, which is an enhancement very few countries have enacted to date.
However until the new anticorruption framework included in the new Constitution will trickle down with
the elaboration and enactment of the full set of necessary decrees and regulations, old behaviors and
malpractices will persist, including bidders behaviors akin to fear of retaliation which are reflected in the
very low number of complaints filed, and low frequency of whistle blowing or red flags signaling by
other actors (see para.109)
108. In addition, the country has taken a number of measures to promote ethics and fight against fraud
and corruption including the creation of an institution for the prevention of fraud and corruption (Central
Institution for the Prevention of Corruption - ICPC) and an agency to fight against money laundering. The
ICPC has established an electronic system of anonymous reporting of corruption and fraud, although no
mechanism of investigation or sanction, other than judicial, is in place. In the spirit of the new
constitutional reform, the ICPC should see an evolution of its independence and be in charge of new
missions to enhance the fight against these scourges (investigations, sanctions etc.) with new powers
which will be enforceable once the set of corresponding law/decrees is enacted.
109. The number of anonymous whistle blowing cases declared by ICPC is still small even after the
launch of the secured electronic site (about 100 allegations on national level over the first year). During
the implementation of INDH I, no fraud and corruption case was declared at all. In certain cases, auditors
reported situations of conflict of interest and several contracts awarded to the same firm. These red flags
had not stimulated any complaint. It is therefore more likely that the absence of complaint and the limited
number of whistle blowing cases is a sign of lack of bidders’ confidence in the systems with regard to
appeal mechanisms or judicial process, and of their fear to be penalized. More generally, the fear of
retaliation is so deeply entrenched in Moroccan contractors’ minds that very few cases of corruption are
signaled, flagged or raised to attention. This is most probably because in the current system complaints
have to be filed with the same procuring authority which carries out the procurement process, and not
with an independent authority which would have the power to suspend the ongoing procurement
procedure (This body will be created as “Commission de la Commande Publique” within the above
mentioned second decree under preparation), and the judicial decision, when courts are involved, is
usually made after contract execution. Moreover the judicial system, which is currently considered for
reform with support from the Bank under a DPL, and is still characterized by very lengthy and dubious
outcome practices, is not really trusted by bidders who are victims of flawed or biased award processes.
26
110. The existing Public Procurement Decree provides that any entity engaged in fraud may be
excluded from award of contracts with a given department or from all public contracts procured by the
State by decision of the concerned minister in the first case and of the Head of Government in the second
case. In both cases the decision must be submitted to the opinion of the national Central Procurement
Tender Board (CPB).
E.3 Improvement of program systems to fight fraud and corruption
111. The Program mainstreams a range of measures at fiduciary and technical design level to mitigate
fraud and corruption risks. Key measures include: a) the strengthening of the control framework through
the introduction of prioritization of audit recommendations and provincial action plans for IGAT-IGF
audits; b) the establishment of a Fiduciary Coordination Committee, replacing the previous Fiduciary
Innovation Team (Equipe d’Innovation Fiduciaire –EIF) to provide oversight to the Program fiduciary
system; c) the strengthening of the INDH Grievance Redress Systems through the upgrading of local level
GRM and the introduction of a central database for monitoring the submission and treatment of
complaints and facilitating reporting d) the enhancement of the existing MIS in order to produce relevant
and representative procurement related information enabling to assess performance; e) the introduction of
peer selection of CSOs representatives within the Governance bodies, which will increase transparency of
decision making within INDH governance bodies; f) the introduction of social accountability processes at
local level, in order to enhance scrutiny of decisions and mitigate the risk of elite capture; g) the
clarification of procedures for validation of the ILDH by provincial authorities, to increase transparency
and reduce patronage risks. Lastly, in addition to the internal control framework, the Program is subject to
external audits by other financial partners such as the EU.10
112. The Government: (i) will use its own systems to the fullest extent in order to take all appropriate
measures to prevent F&C in connection with the Program; and (ii) has agreed to use the PforR
Anticorruption Guidelines (ACGs), including giving the Bank the rights to access information in a non
intrusive way. The Government has developed experience on this with the EU Anti Fraud Office (OLAF).
Given the nature of INDH2 activities, involving mostly local and national contractors, compliance with
the Bank debarment list is not expected to pose significant problems. The INDH National Coordination
will notify Program’s executing entities of the persons and entities debarred by the Bank, and verify
periodically that such persons and entities do not participate in the Program, through the M&E
arrangements and Program’s audit, and with Bank information provided through permanently updated
debarment list on the web site. Reporting to the Bank on allegations occurring under the Program and
their handling will be carried out by CN through the annual reports on Program implementation. The
Government will collaborate with the Bank on the investigations of allegations which the Bank intends to
pursue. Program participants (including executing entities, suppliers, contractors and subcontractors) will
be notified of the potential to be subjected by an investigation of their books and accounts through a
standard clause inserted in the bidding documents and contracts.
E.4 Transparency
113. Transparency and information disclosure: Bidding documents are free of charge and they can
be downloaded from the procurement portal. The bids opening sessions are public, but the openings of
administrative and financial envelopes are not simultaneous. However, in most cases, these openings are
held on the same day (same meeting) because of the simplicity of related operations. Under INDH2, both
the INDH website as well as the national procurement portal maintained by the TGR should be used for
publishing of advertisements and awards disclosure.
10
The Technical Assessment, Environmental and Social Assessment and the Fiduciary Assessment all contain
extensive treatments of mitigating measures to address Fraud and Corruption risk, as well as a description of the
Government anti-corruption framework.
27
114. As outlined earlier, procurement plans when available and bidding opportunities are well
advertised. Bidding documents are free of charge and they can be downloaded from the procurement
portal and bid opening sessions are public. The list of attendees during bid-opening is not systematically
established ("because it is not required by the decree" according to interviewees), however publishing the
results of the award is made by posting and sending letters to all candidates. They often are invited at the
same time to come to withdraw their bid securities. Among the improvements of MIS under INDH2, the
number of participants in each bidding process will be measured within the KFPI indicators.
E.5 Accountability
115. Program execution is based on administrative structures and existing provincial or municipal staff
and associations or NGOs will be involved. Responsibilities within the administrative structures are
clearly defined.
116. The involvement of each administrative office and each project in the INDH is defined by the
Manual of Procedures. Project implementation is delegated to the Governors who may delegate to the
decentralized services of the state, municipalities or NGOs / Associations whenever the entity has the
management capacity. But the level of capacity required is not defined anywhere and no evaluation
mechanism is established. In the INDH2, systematic assessment of fiduciary capacity will be undertaken
to trigger specific training and mentoring programs/actions as well as provincial services support.
117. FM risk management measures will be enhanced during this second phase to include measures to
detect error and possible misuse of funds and review: (i) the fiduciary guide will clarify procedures
related to segregation of duties in order to minimize conflict of interest of job functions, (ii) history of
complaints to assess if there is a systemic risk and ensuring that FM relate controls are tightened in
response, (iii) history of complaints to assess if they relate to possible wrong doing and referring them to
INT.
118. Public procurement decree provides the list of evaluation committee’s permanent members: three
representative of the project owner, one representative of TGR and one representative from Ministry of
finances if the amount of contract is above 30 million MAD. The committee should invite a representative
of Ministry of Commerce if contract amount is above one million MAD.
F. INPUTS TO IMPLEMENTATION SUPPORT PLAN
119. In providing Implementation Support, the fiduciary team will monitor overall performance
(improvement) of financial management and procurement systems. Specifically the team will: (i) check
progress of the fiduciary reform at country level, (ii) assess the efficiency of fiduciary oversight system,
(iii) support design, implementation and evaluation of fiduciary capacity building plan, (iv) provide
technical assistance and training complaints mechanisms (v) check implementation in the Program
grievance redress initiatives, (vi) assess the impact of the introduction of the Organic Budget Law, and
(vii) monitor achievement of key fiduciary DLIs.
120. Key Performance Indicators (KPI’s) in Annex 2-3 will be used to monitor fiduciary performance.
KPIs will be checked and analyzed by the Bank twice a year during implementation support missions and
appropriate follow-up will be undertaken when red flags arise from analysis of these indicators.
28
G. APPENDICES
G.1 Appendix 1: Improvements in the new draft PPD
121. Many improvements remain to date conditional upon the enactment of the new PPD. Examples
of these improvements include:
Procurement regulation would be extended to local governments’ contracts.
Reform of the Procurement Regulatory Body (Commission Supérieure des Marchés) would
provide more autonomy and independence from the Ministries, and would improve
participation with the inclusion of representatives from the private sector and civil society;
Reinforcement of integrity in public procurement (internal control, fight against fraud and
corruption).
Amendment of the “General Conditions of Contracts (GCC)” for Works and preparation of
GCC for Goods and services for public sector contracts consistent with national requirements
and, when applicable, international requirements to harmonize the performance of public
contracts.
Some additional improvements are still needed to make the administrative review of bidders
‘complaints more independent and efficient. The procedures for complaint are enumerated by
the draft new decree for the “Commission Supérieure des Marchés” which would become an
enhanced “Commission de la Commande Publique” with more powers and independence,
however this draft, has not been modified or updated since 2010.
122. Moreover, some potential improvements might already be obsolete to a certain extent because of
the new requirements imposed by the Constitution enacted in July 2011.
123. Audit and oversight: The new Constitution enumerates the functions of the “Cour des Comptes”
and “Cours Regionales des Comptes” as the main bodies in charge of controlling the management of
public funds. According to articles 149 and 150 they will be in charge of sanctioning any misuses of
public funds however a new law is required to specify their attributions. Other provisions reiterate the
necessity to oversee public funds’ management by Public Services and a dedicated “Charte of the Public
Services” will be enacted to organize their obligations. It is therefore of great importance that the
Procurement activity will be also targeted by these controls and their mandatory publication (which is not
the case in the current draft Procurement decree).
124. On the anti-corruption policy, the new Constitution may require to go further than what was
initially accepted by the Government in the draft Decree. The latter contains only one article against
Conflict of Interests and Fight against Corruption with a rather imprecise definition, and no specific
individual sanction attached to these cases other than annulment of the decisions taken by the award
Box 1. Fiduciary inputs to Implementation Support Plan
Support and monitor achievement of the two key fiduciary DLIs # 7 and # 8 and of actions mentioned
between brackets twice a year (DLI 7 and 8 with ref. to verification procedure, RFI #13-16, PAP # 8, 10
and 12).Monitor overall financial management and procurement systems including KFSPIs, RFI
#13(during each supervision mission).Check progress on the fiduciary environment at country level (in
procurement reform and in program missions).
Check effects on the Program of anti-corruption and grievance redress initiatives (during program
supervision missions).
Assess the impact of the introduction of the Organic Budget Law. (legal expert/FM mission).
29
commissions. According to article 36 of the new Constitution a Law will be needed to establish the
sanctions to reprimand misconducts occurring before or after the award of the contract, during its
performance, and a new Anti-Corruption body (Instance Nationale de la probité et de lutte contre la
corruption) will replace the current ICPC -Instance Centrale de Prevention de la Corruption-, aiming to
cover anti-competitive behaviors as well. However issues including debarment of convicted companies
and individual sanctions of fraud or conflict of interests remain only partially addressed in the current
draft Procurement decree.
G.2 Appendix 2A: Key Procurement Performance Indicators
Procurement
Stage
Reference of
Indicators Indicators Definitions
Preparation
IC10 Number of invitations to bid
or calls for proposals or
requests for quotation, with
contract awarded
Number of invitations to bid or calls for proposals
or request for quotations that ends up with award
of contract
IC12 Total amount for bidding
processes resulting in
contract award
Total amount of awarded contracts after
invitations to bid or calls for proposals or request
for quotations - that end up with award of
contract-
IC14 Number of bidders having
submitted an offer
Number of bidders that submitted their bids
(average= Number of bidders that submitted their
bids/ Number of invitations to bid or calls for
proposals or requests for bids or quotations, with
bids opened and contracts awarded)
IC18 Time period for award of
contract following an
invitation to bid/ a call for
proposals/ a request for
quotations
Time period for award of contract following an
invitation to bid or a call for proposals or a
request for quotations ([Sum of (award date- bid
opening date)] / Number of invitations to bid or
calls for proposals or requests for quotations, with
bids or proposals or quotations opened and
contracts awarded)
Award/ contract IC19 Time period for contract
commitment
Time period for contract commitment
([Sum of (arrival date of draft contract – Approval
date)] / Number of request for commitment
related to call for proposals or request for
quotations, with bids opened and contracts
awarded)
IC27 Number of contracts awarded
on direct contracting basis
Number of contracts awarded on direct
contracting basis
IC28 Total amount for direct
contracting
Total amount for direct contracting
IC33 Number of contracts
completed and closed
Number of contracts completed and closed
IC44 Ratio of contracts (awarded
following a call for
proposals, an invitation to
bid or request for quotations)
in compliance with the time
frame set in the provisions of
procurement regulatory
framework
Ratio of contracts awarded in compliance with
time frame set in the provisions of procurement
regulatory framework
30
Payment
IC58 Time period for payment of
invoice
Time period for payment of invoice
IC59 Time elapsed between
submission of evaluation
report and contract signature
Time elapsed between submission of evaluation
report and contract signature
IC63 Delay measured between
planned and actual dates of
contract completion
Delay measured between planned and actual dates
of contract completion
31
G.3 Appendix 2 B: Key FM Performance Indicators
Description
INDH111
INDH2
1. Variance: Budget expenditure vs. actual expenditure 37% (2011)
2. Quality of information received from the service delivery
unit: quality is defined by timeliness, completeness and
accuracy of the financial reports
3. Financial statements of the provinces prepared within 60
days of the end of the fiscal year
4. Financial statements of the Program prepared within 90
days of the end of the fiscal year
5. Unqualified opinions rendered for Provinces
6. Unqualified opinion rendered for the Program
7. Audited financial statements for the Program received
within 6 months of the end of the fiscal year
8. Audit reports accepted by the Bank and National
Coordination
9. Controls over fixed end-users
10. Number of audit recommendations that have been
implemented
11
Available KPI data is reflected in sections B, C, and D of this assessment. Quantitative baseline will be
established during the first year of implementation, following first IGF/IGAT audit mission.