1. Preamble. 2. Principles and objectives

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2 1. Preamble 1.1. This Framework Memorandum (FM) contains the understandings of the Government of Ghana (GoG) and the Development Partners which have signed this FM (hereafter called the signatory DPs), as regards providing sector budget support (SBS) for the design, implementation, monitoring and evaluation of the Natural Resources and Environmental Governance (NREG) programme in Ghana. This FM has been endorsed and approved by the GoG and the signatory DPs and came into force on the date of signature. DPs not yet signatory of this FM, can join this FM by agreement of all signatories and an official exchange of letters between the new signatory and the existing signatories This FM will operate subject to the provisions of the bilateral financing agreements/arrangements between the GoG and the individual DPs, which form the legal basis for the provision of budget support by each of these DPs. This FM is not a binding legal agreement and, in the event of any conflict between the provisions of this FM and the bilateral agreements/arrangements, the provisions of the bilateral agreements/arrangements will prevail. Ultimate approval of the provision of budget support, and the circumstances/conditions under which it is provided, rests with the individual DP. However, DPs will, with due regard to the separate accountability of each DP, endeavour to sign bilateral agreements and maintain financing arrangements that are compatible with the spirit and provisions of this FM. In case of deviations, the signatory DP concerned will inform the GoG and the other signatory DPs of such deviations in writing Signing this FM is a commitment to participate actively in the activities foreseen in this FM, to respect the spirit and provisions of this FM and to provide financial resources for the NREG programme as agreed in the bilateral agreements Initially the NREG programme covers the forestry, mining and environmental protection sectors. The scope of the NREG programme could be expanded at a later date, after mutual agreement between the signatories, with other sectors and sub sectors dealing with natural resources and environmental governance issues When implementing this FM, the signatories endeavour to apply international guidelines as regards budget support, notably to focus the objectives and targets on results. 2. Principles and objectives 2.1. The overall objective of SBS for the NREG programme is providing support to the GoG for achieving the GoG s goals as regards the sectors and sub sectors covered by the NREG programme. The SBS will therefore be based on and embedded in well defined and resultoriented policies and strategies for the (sub) sectors concerned, translated into medium term action plans, medium term expenditure frameworks and annual work plans and budgets. It is acknowledged that not all these prerequisites are in place at the start of the NREG programme, but will have to be further developed and strengthened during the first years of implementation of the NREG programme.

3 2.2. The SBS-NREG consists of (i) transfers of financial resources to the Consolidated Fund of the Treasury of the GoG and (ii) a joint policy dialogue conducted by the GoG and the signatory DPs as regards a number of policy and strategy issues and the targets to be achieved in the (sub) sectors covered by the NREG programme. A progress assessment framework (PAF) will be used for measuring progress towards achieving the sector development goals and the annual targets SBS for the NREG programme is based on the concept of a Sector Wide Approach (SWAp), which implies comprehensive planning, programming, budgeting, reporting, monitoring and evaluation as regards the (sub) sectors involved in the NREG programme, encompassing all sources of funding (treasury funding, Internally Generated Funds, project and programme aid, etc.). This comprehensive planning, programming, budgeting and reporting is the responsibility of the MDAs involved in the NREG programme, and will be one of the subjects of the policy dialogue between the GoG and the signatory DPs The SBS funds to be transferred to the Consolidated Fund of the national Treasury will be taken fully into account by the GoG in the planning, budget and accounting process. They will become part of the national resources of the Treasury and will be managed and spent according to national procedures as regards public finance management. The transfer of funds from signatory DPs is subject to certain disbursement conditions as regards policy measures to be taken and/or performance targets to meet, as mentioned in the PAF (see chapters 3 and 5) In principle the use of the SBS funds will be un-earmarked, which means that SBS funds are not meant to be used specifically for certain budget chapters, budget lines or expenditure items. In stead the GoG will ensure adequate levels of funding made timely available to the (sub) sectors covered by the NREG programme in order that the agreed NREG objectives and targets will be achieved. Funding levels required for the (sub) sectors of NREG will be one of the subjects of the policy dialogue. In specific circumstances a DP could decide to earmark its SBS in accordance with its own policy and procedures The signatory DPs confirm that they will, as far as possible, harmonise and align their policies and procedures as regards providing support to the NREG programme, while at the same time strengthening the ownership of the GoG as regards the design and implementation of the NREG programme. Harmonisation and alignment require: - a joint Progress Assessment Framework (PAF) with clearly defined objectives and targets; - a joint policy dialogue between the GoG and the DPs, and; - a joint regular review mechanism of the PAF - a joint review of the financial audits (see chapter 6) The signatory DPs confirm also that they aim for improving the predictability of donor flows to the Treasury of the GoG through the arrangements agreed in this FM This FM for the SBS-NREG is compatible with the FM for the Multi Donor Budget Support (MDBS) in terms of (i) approaches and procedures, and (ii) division of tasks. In principle the PAF of the MDBS deals with macro and cross sector issues. Those issues will thus not be included in the PAF of the NREG programme. On the other hand, sector related issues covered by the PAF of the NREG programme will not be included in the PAF of the MDBS.

4 Exceptions could be made for some key reform issues, particularly those exceeding the strict boundaries and competences of the NREG (sub) sectors Reliable, transparent and effective Public Finance Management (PFM) is a requirement for each budget support programme. The MDBS policy dialogue reviews regularly the progress with the implementation of the overall action plan for strengthening PFM in Ghana. The NREG policy dialogue will address some PFM issues at the level of the MDAs involved in the NREG programme, including the implementation of overall PFM reforms at the level of those MDAs One of the objectives of the NREG programme is to support the establishment and proper functioning of an inter-ministerial and inter-sectoral coordination mechanism for environmental and natural resource governance. The implementation of the NREG programme will become part of such a coordination mechanism once it has been established. 3. The Progress Assessment Framework and the review process 3.1. The Progress Assessment Framework (PAF) of the NREG programme contains the programme and policy objectives and the annual targets as agreed by the GoG and the signatory DPs. The PAF will be used to assess progress with implementation of the NREG programme. The PAF is a forward rolling three-year planning instrument, containing fixed objectives and targets for the first year, projected objectives and targets for the second year and indicative objectives and targets for the third year The GoG and the DPs agree that the PAF will be limited in size and will be focussed on the most crucial objectives and targets of the (sub) sectors concerned. The policy documents, medium term action plans, MTEFs and annual work plans of the MDAs involved will be broader in scope and more detailed. The PAF is not meant to replace those policy and planning documents of the MDAs concerned. The PAF will be result-oriented and comprise a balanced mix of policy actions/input indicators and result/outcome indicators The signatories of this FM will carry out a joint annual review of the progress achieved as regards the objectives and targets of the PAF. The purpose of that annual review is to assess progress as regards the implementation of the NREG programme, to formulate recommendations for strengthening the implementation of the NREG programme, to inform the decision making process as regards the disbursements of SBS (see chapter 5), and to prepare updating the objectives and targets of the PAF for the following years (see also article 4.3) The annual review will be based on annual reports to be produced by the MDAs involved in the NREG programme. The review will be coordinated by the Chairpersons of the NREG Coordination Committee and the DP-NREG group (see chapter 4) and will be carried out by representatives of the participating MDAs, the NDPC and the signatory DPs. The NREG Coordination Committee and the signatory DPs may wish, at certain occasions, to organise an external review of the NREG programme carried out by independent experts every three years. The results of such an external review will feed into the annual review process.

5 3.5. The annual review as regards the results of a particular year will be carried out before the end of April of the subsequent year, and preferably before the annual review of the MDBS Ideally the targets of the PAF for a particular year should be fixed before the end of September of the previous year in order to be in line with the budget preparation cycle. However, for the first year (2008) of this NREG programme a special arrangement is necessary to phase-in that sequencing. The first NREG-PAF, to be finalised before the end of January 2008, refers to the years and includes fixed targets for 2007 and 2008 and indicative targets for Attainment of the targets of 2007 will be evaluated before the end of January All future NREG-PAFs will follow the MDSB/PRSC timeline for preparation and assessment Notwithstanding differences in disbursement procedures (see chapter 5), the signatory DPs try to reach joint conclusions as regards the holistic assessment of the progress achieved in the (su)sectors on the basis of the PAF targets, as well as regards each target of the PAF individually. 4. Coordination, dialogue and reporting 4.1 The GoG will set up (i) a High Level NREG Steering Committee for the purpose of taking policy and strategic decisions as regards the NREG programme and (ii) a Technical Coordination Committee supported by a Technical Secretariat for the purpose of organising and coordinating the policy dialogue and the annual reviews of the NREG-PAF and for coordinating cross sector and common issues of the MDAs involved in the NREG programme. The High Level NREG Steering Committee will be composed of the Ministers responsible for Finance, Forestry, Mining and Environmental Protection. The Technical Coordinating Committee will be co-chaired by the Chief Directors of the three Ministries involved in the NREG programme. All MDAs involved in the NREG programme, including the Ministry of Finance and Economic Planning (MOFEP), will have a high level representative in the Technical Coordination Committee (chief executive level). The MOFEP will be in charge of the Technical Secretariat. The terms of reference of the Technical Coordination Committee are attached to this FM. 4.2 The DP signatories of this FM will nominate a focal point (one of the DPs having signed this FM), which will be in charge of maintaining contact with the chair of the High level NREG Steering Committee and the chair of the NREG Technical Coordination Committee about all implementation issues concerning the NREG programme. 4.3 The NREG Technical Coordination Committee and the DPs will have at least two joint meetings per year: one in the first semester to discuss the results of the annual review of the NREG-PAF and to update the PAF for the following years, and one in the second semester in order (i) to discuss the execution of the annual work plans and budgets of the MDAs involved in the NREG programme during the first half of the year, (ii) to review the audit reports as regards the previous year (see chapter 6), (iii) to discuss special policy, strategy and reform issues, and (iv) to discuss the budget of the following year. These joint meetings will be co-chaired by the chairperson of the NREG Technical Coordination Committee and the focal point of the signatory DPs. The sector dialogue will take place in the context of the Environment and Natural Resources Sector Group (see also paragraph 4.6).

6 4.4 The annual review of the NREG-PAF will be coordinated by the Chairperson of the NREG Coordinating Committee and the focal point of the signatory DPs. Representatives from Parliament and non-state actors may be invited to participate in the review as observers. Results of the joint assessment of the NREG-PAF will be disseminated to a broader group of stakeholders. 4.5 The annual review of the NREG-PAF will be informed by the budgets, medium term action plans, annual workplans and Annual Progress Reports (APR) of the MDAs involved in the NREG programme and the means of verification (of the targets and triggers) as defined in the PAF. In order to ensure a fully informed dialogue, the GoG will submit that documentation to the signatory DPs at least 3 weeks prior to the annual review. 4.6 Besides coordinating the NREG programme itself, the NREG Technical Coordination Committee will also take care of coordinating the NREG programme with other programmes and projects being implemented within the NREG sectors. However, broader issues of environmental governance and coordination with other projects and programmes in the environment and natural resources sectors (outside the NREG sectors) will be dealt with by the existing Environment and Natural Resources Sector Group and the future intersectoral coordination mechanism for environmental and natural resources governance (see also article 2.10). 4.7 It is acknowledged that the MDBS policy dialogue and coordination structure will be the pivotal point in a network of sector dialogues, guided by the GoG, where cross cutting issues, major policy reform issues and issues with significant budgetary implications can be raised. The MDBS policy dialogue will add value to and will be informed by policy dialogues at sector level. However, the MDBS policy dialogue will not repeat discussions that have been handled adequately at sector level nor will the NREG policy dialogue repeat discussions about macro and cross-sector issues already dealt with by the MDBS policy dialogue. 5. Disbursement mechanisms 5.1. The annual SBS of each DP consists of either one disbursement or two disbursements (a base tranche and a performance tranche). The decision as regards the disbursement conditions is left to the discretion of each individual DP and will be stipulated in the respective bilateral agreements as regards providing SBS for the NREG programme. However, the signatory DPs aim for harmonising their disbursement conditions as far as possible within the framework of guidelines presented in the following paragraphs Both general and sector budget support is only be provided to countries with adequate macro-economic and fiscal policies and an adequate public finance management (PFM) system or a programme aimed at strengthening the PFM system. These preconditions will therefore be part of the disbursement conditions of SBS for the NREG programme, but assessing whether these conditions have been met will be done in the context of the annual MDBS reviews In case of a single annual SBS-NREG disbursement the decision to disburse will be subject to the preconditions mentioned in paragraph 5.2 and a satisfactory assessment of attainment of the NREG-PAF targets. As regards those targets some signatory DPs will focus on a

7 holistic assessment, others will focus on specific targets (then called triggers), or on both a holistic assessment and specific targets (triggers) In case of two disbursements per year, the base tranche will be subject to the preconditions mentioned in paragraph 5.2 and an holistic assessment of attainment of the NREG-PAF targets, while the performance tranche will be based on certain specific targets (triggers) of the NREG-PAF The signatories of this FM agree that triggers (specific disbursement conditions) will be limited in number and will be chosen out of the list of targets mentioned in the PAF In order to improve the predictability of aid flows and to facilitate GoG s budget preparation process, the disbursement of the tranches in year N will depend on assessments made in year N-1 as regards the achievement of the targets of year N-2. The signatory DPs will inform the GoG as soon as possible after the annual review and at the latest before the end of August in year N-1 about the disbursements of the volume and timing of the tranches in year N. Disbursements should preferably take place during the first four months of year N. However special arrangements are needed for the first year (2008) of the NREG in order to phase-in this system (see next article) At the start of the programme the disbursements of 2008 will be based on the NREG-PAF review carried out in January 2008 (which has evaluated the targets of 2007). The following reviews and related disbursements will follow the time schedule of the MDBS. As stipulated in article 5.6 the GoG will be informed about the disbursements to be effectuated in 2009 before the end of august Disbursements will be deposited in a foreign exchange account with Accounts Name: Nat. Res. And Environmental Gov. Budget Support, Accounts No , in the name of the GoG held at the Bank of Ghana (BoG). The BoG will immediately inform in writing the signatory DP concerned and the Ministry of Finance and Economic Planning (MOFEP) as regards the receipt of the foreign exchange funds. Within 48 hours after receipt of the SBS disbursement the BoG will credit the Cedi equivalent to the Central Treasury Account (using the Central Bank buying exchange rate on the date of purchase). The MOFEP will immediately inform in writing the signatory DP and the Chairs of the NREG Coordinating Committee as regards the receipt of the Cedi equivalent. These acknowledgements should be accompanied by documentary evidence of the amount and date of, respectively, the foreign exchange payment received and the amount and date of the deposit of the GH Cedi equivalent in the Central Treasury Account. 6. Audit 6.1. The annual accounts of the MDAs involved in the NREG programme will be audited according to the official regulations of the Government of Ghana as regards auditing MDAs The audits of the Agencies involved in the NREG programme will cover all their sources of income and all their expenditures, including treasury funding, Internally Generated Funds and donor funded projects of which financial management is under the control of the Agencies concerned.

8 6.3. The audit reports mentioned in articles 6.1 and 6.2 will be presented to the signatory DPs within 9 month after the closure of the year and will be reviewed by the NREG Coordinating Committee and the DP-NREG group during their second semester meeting. As far as the audit reports of the ministries are concerned, special attention will be paid to the Departments involved in the NREG programme and the flow of funds towards the Agencies involved in the NREG programme. 7. Responsibilities of the Government of Ghana 7.1. The GoG will maintain an appropriate macro-economic and fiscal framework and will endeavour to further improve the quality of Public Finance Management The GoG will provide sufficient financial resources to the MDAs involved in the NREG programme in order to allow them to implement the agreed NREG programme and to achieve its policy objectives and notably the targets mentioned in the PAF The GoG will further develop (i) the formulation of coherent and result-oriented policies for the (sub) sectors involved in the NREG programme and for environmental governance in general and (ii) the translation of those policies in medium term action plans, result matrices and annual work plans. This will be done during the first years of implementation of the NREG programme The GoG will set up a multi-sectoral coordination mechanism for environmental governance The GoG will develop an effective monitoring, evaluation and reporting systems for assessing progress as regards implementation of the NREG programme in general and the medium term action plans and annual work plans of the MDAs involved in the NREG programme in particular The GoG will assure the set up and effective monitoring of the NREG Steering Committee and the NREG Technical Coordination Committee The GoG will ensure that all the NREG MDAs receive the required support from other relevant governmental bodies in the fulfilment of their objectives and achievement of the PAF targets The GoG will ensure transparency, accountability and probity in the use of public resources The MDAs involved in the NREG programme will perform all procurement in accordance with the official rules guidelines and procedures as regards public procurement The MDAs involved in the NREG programme will be fully accountable and responsible for the implementation of the NREG programme and for the management of all financial contributions provided for funding the programme. The GoG will keep financial records of all financial resources provided in accordance with the accounting standards of the PFM system in Ghana. The DP signatories will not bear any responsibility and/or liability to any third party with regard to the implementation of the NREG programme 8. Anti-corruption clauses

9 8.1. All parties involved in the NREG programme will ensure that their staff and consultants refrain from offering, seeking, accepting or being promised from or by third parties, for themselves or for any other party, any gift, remuneration, compensation or benefit of any kind whatsoever, which could be interpreted as an illegal or corrupt practice Each partie involved in the NREG program will promptly inform the other parties of any instances of corruption as referred to in the previous paragraph. In case of signs of corruption a formal investigation will be carried out and the outcomes shared with the parties concerned. 9. Responsibilities of the Development Partners 9.1. The signatory DPs will work in partnership with the GoG and will provide support for the implementation of the NREG programme as laid down in this FM and the bilateral agreements as regards the NREG programme The signatory DPs will, as far as possible, base their bilateral agreements as regards SBS for the NREG programme, on the principles and procedures enshrined in this FM The signatory DPs will harmonise their policies and procedures as regards providing support to the NREG programme and will align their policies and procedures with those of the GoG as far as possible. This will imply a joint policy dialogue, a joint Progress Assessment Framework (PAF), a joint annual review mechanism and, as far as possible, joint conclusions as regards the evaluation of PAF targets The signatory DPs will promote, facilitate and respect the GoGs responsibility as regards the design and implementation of the NREG programme as well as the GoGs accountability to domestic stakeholders The signatory DPs will inform the GoG before the end of August in a given year as to the level of their planned budget support for the following year, accompanied by indicative figures for the following years The signatory DPs will endeavour to disburse the annual tranches of the approved sector budget support before the end of April of a given year. 10. Consultation, modification and termination Any difference or controversy that arises in relation to the SBS for the NREG programme should be settled by means of dialogue and consultation between the signatory DPs and the GoG Modifications to this FM can be made by way of an exchange of letters in terms accepted by all signatories of this FM The GoG and each DP will promptly inform and consult the other signatories whenever a DP proposes to suspend or terminate, in whole or in part, support to the NREG and/or its membership of this FM Membership of this FM could be terminated by informing the other signatories in writing.

10 10.5. This FM can be denounced in its entirety by the GoG or by a joint decision of the signatory DPs.