Governance and Fiduciary Issues. An Overview

Transcription

1 Governance and Fiduciary Issues An Overview

2 The Agenda Governance Issues Governance Risks in CDD Projects Key Principles of Project Design Lessons Learned Fiduciary Issues Procurement Financial Management New directions

3 Governance Risks

4 Governance Risks CDD projects are not higher risk, but have a different risk profile from traditional projects: Project activities decentralized, widely dispersed, often in remote and/or insecure areas; Large number of small transactions, with documentation kept at the community level Well designed and properly implemented, CDD Projects can strengthen local governance If not well designed and properly implemented, bad things can happen to project funds, and to the project s development objectives

5 Risks to Project Funds Embezzlement at local government level Diversion of project assets to private use Fraud and corruption in the PIU (e.g., in the administration of training programs) Bribes and kickbacks to project staff Fraud and corruption in the procurement process (in PIU and at the village level)

6 Risks to Development Objectives Patronage/Nepotism in staff selection Elite capture of processes and outcomes Conflicts of interest in sub-project selection Short-changing project quality during construction

7 Key Principles of Project Design Five critical areas to get right :* Project design Financial management/flow of funds Community engagement Sub-project design, approval, implementation Project monitoring, evaluation and oversight In each area, apply the TAP Principles: Transparency, Accountability, Participation *(see Annex I, Risk Management Matrix, in OPCS paper)

8 Lessons Learned: From Portfolio Review Newer CDD projects are more vulnerable to governance risks than follow-on projects, as many of those risks have already been tackled during project implementation Follow-on loans face other risks: challenges of scaling up, and hazards of complacency There are significant economies of scale (and specialization) in the implementation of CDD Projects, so getting to scale can be helpful despite the risks

9 Lessons Learned: From implementation experience Governance arrangements are key to sound project design not just as a means to achieving better results, but an end in itself You cannot eliminate corruption, but you need to build into the project mechanisms for detecting and dealing with it when it occurs Need to build into the project a robust M&E system so that PIU (and Bank) staff know what s going on, and lessons learned can be incorporated into the project in real time

10 Five Key Elements of M&E An MIS system that captures data on project inputs/milestones to monitor progress A Financial Management/Accounting System to capture transactions and the flow of funds An internal and external audit system that goes beyond standard financial audits Independent monitoring by communities, including a robust complaints handling system, as a complement to internal controls Results of completed impact evaluation studies (from recent or current projects)

11 Fiduciary Principles and Objectives

12 Fiduciary Principles Priority is to build on and improve existing capacity and systems Bank rules and guidelines apply (Financial Management, Procurement, Disbursement) Procedures need to be simple, transparent and locally appropriate, with accountability Community involvement in sub-project selection and implementation for greater ownership, oversight, and sustainability

13 Fiduciary Objectives Funds flow smoothly, adequately and regularly to where activities are carried out Funds are managed properly and efficiently Information is available to all Accountability is achieved thru information Capacities of communities to own and manage their activities are strengthened

14 Procurement Guidance Emphasizes flexibility and simplified approaches for sub-project procurement Establishes payment on a sub-project completion basis as the preferred method Includes a specific section on risks, controls and anti-corruption Emphasizes the need for appropriate grievance mechanisms, the importance of ex-post procurement reviews, and using country-based capacity and community involvement to verify quality and results

15 Procurement: Lump-Sum Basis Financing Agreement with community as a contract and as a basis for disbursement Disbursements based on completion of physical activities: outputs/milestones Minimum documentation easy to administer less process control Community incentives for in-built economy and efficiency

16 Simplified Procurement Methods 1. Shopping 2. Local bidding 3. Direct Contracting 4. Off the shelf (low value goods) 5. Community force account (community s own resources for labor, materials, and/or equipment

17 Flow of Funds Factors: geographic coverage, capacity and location of FM entities, local government FM and Accounting regulations, banking arrangements Actors: government, private sector/ngos, or combination # tiers before funds reach end users Size and number of payments

18 Financing Agreements Financing Agreement between community and PIU includes plan, program, budget Sub-project appraisal focuses on plans, basic specifications and estimated budget Simple procurement plan (G/W/S) Total funding, community contribution, payment tranches, and triggers Specifies simplified reporting requirements

19 Payments to Communities Tranches depend on size, implementation period, and community capacity Initial tranche based on approved sub-project and signed financing agreement Subsequent payments typically based on physical and financial progress reports Swift and direct

20 Community Contributions To be agreed at the design stage: Nature: cash, in-kind, or both Level: Reasonable ownership stake, possible An element in sub-project financing plan Track and report community contributions

21 Community Record-Keeping and Accounting Simplicity as primary objective: use of local language, community needs and capacity, as few forms as possible Avoid imposing a new system if one s in place Possible, consistent, reliable, meaningful Verifiable milestones, easy data collection Clear oversight roles & responsibilities at each level

22 A New Paradigm: (It s about their institutions)

23 The nature of the challenge ONE SIZE FITS ALL RISK AVERSION COMPLEXITY INFLEXIBILITY

24 A New Paradigm: Five Key Principles 1. Keeping things simple 2. The flexibility rule 3. Enhancing community empowerment 4. Strengthening Civil Society Organizations 5. Taking advantage of technology

25 Culture eats strategy for breakfast! The Future of Fiduciary

26 What will it take? Leadership within the Fiduciary Community of Practice A more targeted knowledge and learning agenda Development of a CDD/Fiduciary Community of Practice