| Grant Profile: |
| Project Title: |
Public Financial Management Capacity Building for Somalia |
| PCF/LICUS/SPF: |
LICUS |
Status: |
Open |
| File Number: |
86
| Region: |
AFR |
| Sector: |
Finance |
Country: |
Somalia |
| FY approved: |
2009 |
Grant Theme : |
Economic management |
| Keyword(s): |
Public expenditure, financial management and procurement |
Approved Amount: |
$1,600,000.00 |
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Grant Recipient:
World-Bank executed project |
Grant Purpose:
The Public Financial Management (PFM) Capacity Building project is the Bank’s contribution to a broader Somalia PFM reform program that is designed to establish the legislative framework, institutions, systems and procedures that are necessary to provide essential public services to the Somali people in a timely, transparent and sustainable manner.
The objective of this program is to establish a sound foundation for transparent public financial management primarily in Somaliland and possibly in Puntland and South Central regions (working with the Transitional Federal Government) depending on circumstances/security situation, through the development of Public Financial Management legislation and financial management policies and procedures as well as the training of staff. The following aspects of PFM will be covered: revenue management, custom and tax reforms, budgeting, accounting, financial reporting, procurement, internal audit, external audit and Parliamentary Oversight by the Economic Management and Budget Committee, as well as Public Accounts Committee. Strengthening the PFM system will help to improve the government systems for service delivery in key sectors such as education and health.
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Grant Activities:
The Public Financial Management Capacity Building project has three main components designed to support Somaliland and eventually Puntland and South-central Somalia. It will strengthen the technical capacity of state institutions in the areas of establishing a public financial management framework; staff training; and customs and tax system reforms and revenue generation using technical experts/consultants. These technical experts/consultants are expected to be based in Hargesia, Somaliland. However, if the security situation does not permit, especially after the recent bombings in Somaliland and Puntland, the placement of technical experts can be adjusted flexibly depending on the UN security status/classification (e.g. they could be relocated to a nearby country such as Djibouti or Kenya from where they can conduct their work whilst making visits to Somaliland and the other two regions). The details in regard to the three components are:
(1) Public Financial Management Framework (PFM)
The public financial management framework component will focus on strengthening PFM systems in the Ministry of Finance, Ministry of Planning, Auditor General, Accountant General, Parliamentary Committee on Economic Management & Budget and Parliamentary Public Accounts Committee. Focus on these key PFM institutions would help build a solid foundation for good PFM and would have positive impacts on practices in ministries, departments and agencies (MDAs) and local governments that will be supported under the aforementioned comprehensive PFM and State Building activities program. The PFM reform will cover the following functions: budgeting, accounting, financial reporting, procurement, internal auditing, external auditing and Parliamentary Oversight committees. It will include the development of a robust PFM legislative framework, including:
(i) Public Financial Management legislation that will cover the functions related to budgeting, accounting, financial reporting and internal audit;
(ii) Audit legislation that will cover the external auditing functions and the Office of the Auditor General;
(iii) Procurement legislation that will cover public procurement functions and regulatory arrangements.
To facilitate the implementation of these legislations, the following PFM procedures and guidelines/manuals will be developed:
(i) Procedures/Guidelines in budgeting;
(ii) Treasury Accounting Instructions that will cover accounting and financial reporting on acceptable accounting standards e.g. International Public Sector Accounting Standards;
(iii) Internal Audit Manual based on the principles laid out by the Institute of Internal Auditors;
(iv) Procurement guidelines/procedures;
(v) External Audit Manual based on acceptable auditing standards e.g. International Standards on Auditing and INTOSAI Auditing Standards;
(vi) Parliamentary Rules of Procedures for the Economic Management & Budget Committee and the Public Accounts Committee.
Technical experts will be hired to:
(a) prepare these legislations and financial management policies and procedures in consultation with government counterparts,
(b) develop appropriate organizational structures for the institutions dealing in PFM mentioned above.
Emphasis will be placed on hiring PFM Legislation, Procurement, External Audit, Internal Audit and Accounting & Financial Reporting experts that will work closely with the UNDP hired Expenditure advisor.
(2) Staff Training
This will focus on all the PFM areas, i.e. budgeting, accounting, financial reporting, procurement, internal auditing and external auditing, with the aim of strengthening the capacity of government staff to implement legislation and procedures/manuals/guidelines and improve PFM practices in Somaliland (and later, Puntland and South Central depending on the security situation). Training will be conducted by the Senior UNDP PFM expert and specialized training experts/consultants. This will include the provision of technical expertise to the training institutions in Somaliland and later to Puntland and South Central so that they can conduct this training on a regular and sustainable basis. On-the-job training will also be conducted by the Technical Experts to ensure PFM staff have all the requisite skills to perform their assignments. PFM affiliated training institutions will be encouraged to develop and provide deeper technical training of a longer term basis in areas such as technician/professional accounting, auditing and tax courses. The project will build on and take advantage of the financial management training that was provided under the framework of the previously implemented Capacity Building for Somali Planners Program. This nine-month basic course in financial management training (based on the UK’s Association of Certified Charted Accountants curriculum) was provided via distance learning, utilizing six university-based distance learning centers established by a grant from the Post Conflict Fund.
(3) Customs and Tax System Reforms and Revenue Generation
This component will focus on designing a tax system consistent with ensuring adequate control and management of government revenues and providing a favorable environment for the private sector to operate. Technical assistance will be provided to create a tax base that is as broad as administratively possible, while keeping the tax rates low. Tax and customs reforms will be carried out to strengthen the capacity of Customs and Excise Departments and Inland Revenue Departments in Somaliland and later in Puntland depending on the security situation. The Technical Expert may also be called upon to advise on the development of appropriate customs, tax and revenue systems for the Transitional Federal Government depending on the security situation. This will involve adopting Harmonized System of Tariff Classification of the World Customs Organization. Specific measures to be implemented include comprehensive valuation mechanisms, introduction of Automated Customs Data System (ASYCUDA); and identification of new or potential tax sources. Technical support will be provided to the Inland Revenue Department to establish comprehensive and transparent tax collection systems at central, regional and district levels. In addition to customs and tax reforms, technical assistance will be provided in the area of legal framework for revenue collection and management to produce Tax legislation and tax policies and procedures. These tax improvements should improve tax collections at the ports and borders points e.g. with Ethiopia.
The implementation approach is client-centered, participatory and knowledge-based. This approach will be guided by a conceptual framework modeling the main channels through which Bank assistance can influence reform outcomes (i.e. policy dialogue, technical assistance and analytic work) to strengthen government policy and institutional capacity. Regarding training, a variety of technical approaches and materials, including on-site or distance learning, will be used. The PFM Donors Working Group will support the task team at various stages of the implementation of this project. For example, the Working Group will serve as a sounding board for discussing approaches to building PFM systems in Somalia, and as a forum for discussing relevant aspects of the PFM activities that has been detailed in the work plan. This forum will complement the Somali national task force.
The first year the grant will finance activities related to institution building and establishment of legal framework and PFM systems (policies and procedures in all the aforementioned areas). The second year the support will focus mainly on implementation arrangements, sustainability of reform programs and capacity building (staff training).
An independent evaluation of the Public Financial Management (PFM) Capacity Building project will be conducted and an evaluation report produced. The evaluation will involve the hire of 4 technical consultants to cover all the PFM areas in order to ensure that products are delivered that comply with existing Public Financial Management good practices.
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