Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE Report No: 67901-CM TRANSPARENCY AND ACCOUNTABILITY CAPACITY BUILDING PROJECT (CREDIT NO. 44790 CM) APPROVED BY THE BOARD ON JUNE 24, 2008 TO THE REPUBLIC OF CAMEROON December 11, 2012 POVERTY REDUCTION AND ECONOMIC MANAGEMENT DEPARTMENT AFTP3 AFRICA REGION This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
ABBREVIATIONS AND ACRONYMS CFA FMIS HRM IDA M&E PAD PDO PEFA PFM PIU SDR TACD USD XAF XDR Communauté Financière Africaine Financial Management Information System Human Resource Management International Development Association Monitoring & Evaluation Project Appraisal Document Project Development Objective Public Expenditure & Financial Accountability Public Financial Management Project Implementation Unit Special Drawing Rights Transparency and Accountability Capacity Development United States Dollar Currency Code for the Central African CFA Franc Currency Code for Special Drawing Rights Regional Vice President: Country Director: Sector Manager / Director: Task Team Leader: Makhtar Diop Gregor Binkert Mark Roland Thomas / Marcelo Giugale Alexandre Arrobbio
CAMEROON TRANSPARENCY AND ACCOUNTABILITY CAPACITY BUILDING PROJECT (CREDIT NUMBER 44790 CM, PROJECT NUMBER P084160) 44790 CM P084160 CONTENTS Page A. SUMMARY... 4 B. PROJECT STATUS... 4 C. PROPOSED CHANGES... 5
CAMEROON TRANSPARENCY AND ACCOUNTABILITY CAPACITY BUILDING PROJECT A. SUMMARY 1. The proposed change is a partial cancellation of funds XDR 6.1 million of the Cameroon Transparency and Accountability Capacity Development Project (TACD). In response to a request from the Government, it is proposed to cancel XDR 6.1 million following the suspension of major Project activities after June 30, 2012. The fund cancellation has been requested by the Recipient following a bilateral discussion on country portfolio performance to optimize Cameroon s IDA allocation. 2. With the exception of the change in funding, all other aspects of the Project will remain unchanged. In particular, there are no changes to the Project Development Objective (PDO), the safeguard category, and the main activities of the Project. The cancelled funds are planned to be reallocated to other projects in the IDA portfolio of Cameroon in accordance with Bank rules. B. PROJECT STATUS 3. The credit of SDR 9.3 million (USD 15 million equivalent) was approved by the Board on June 24, 2008 and became effective on June 05, 2009. The objective of the Project is to contribute (i) to enhance transparency and efficiency in PFM and (ii) to strengthen accountability in the use of public resources in Cameroon. The Project comprises the following components: (i) Improving Budget Management including Procurement; (ii) The integration and development of the FMIS including the HRM and Payroll Management systems; (iii) Strengthening External Oversight and M&E; and (iv) Support to the Project Focal Point for PFM reforms coordination. The implementing entities are in full compliance with the Bank s financial management requirements, and there are no overdue audit reports and interim financial reports from these entities. 4. Project implementation and disbursements have been slow since the Board approval in 2008. The Project only became effective one year after Board approval due to a slow setting up of the institutional framework, including the creation of the implementing agency. Disbursements have remained at a low level: the disbursement rate stood at only 24.27 % as of December 6, 2012. The PDO reached its highest rating of Moderately Satisfactory on September 29, 2008 following effectiveness and has since progressively declined to Unsatisfactory. 5. It is expected that the Project will close with an Unsatisfactory rating. Even if executed according to plan, the activities originally scheduled to be implemented from June 30, 2012 to December 31, 2012 would not have enabled the Project to significantly improve its development objective and disbursement rate.
C. PROPOSED CHANGE 6. The proposed change is to cancel XDR 6.1 million, as requested by the Government of Cameroon in its letter received by the Bank December 4, 2012. Following a bilateral discussion on country portfolio performance to optimize Cameroon s IDA allocation, the Recipient proposed to the World Bank to close the Project before the original closing date (see attached copy of the letter of February 22, 2012). During a Bank mission of March 12-20, 2012, the Bank team discussed the implications of advancing the Project closing date from December 31, 2012 to June 30, 2012 with the Client, and it was finally decided that the best option was to stop activities and services after June 30, 2012, to be able to assess the amount of funds to cancel and to reallocate to other IDA projects. 7. The proposed change has no impact on project performance. Its implementation was prepared after the Bank mission in March 2012, and consisted of the suspension of Project activities after June 30, 2012, which implied the following: (i) No new contracts except the final audit were signed after June 30, 2012, and all on-going procurement processes were cancelled; (ii) Signed contracts for which services were delivered by June 30, 2012 were executed and paid as initially planned; (iii) Signed contracts for which execution was planned after June 30, 2012 were subject to cancellation; and (iv) Contract cancellation costs will be paid according to the applicable contract clauses. On the whole, the suspension of activities and the related funds cancellation have little impact on Project implementation and finalization of already planned activities (according to the procurement plan, only a few activities would have been delivered between June 30, 2012 and December 31, 2012). In turn, it will enable the Borrower to negotiate with the World Bank to reallocate the cancelled funds of XDR 6.1 million and optimize its IDA portfolio. 8. With the exception of the fund cancellation, the Project s Objective and Results will remain unchanged and will exit with unsatisfactory ratings. In particular, there are no changes to the Project Development Objective (PDO), the safeguard category, the Project components, the financial management and procurement arrangements, and the institutional arrangements. The financial adjustments to the components and expenditure categories related to the cancellation are presented in Tables 1 & 2 below. 5
9. The canceling amount included a margin for exchange rate risk and liability risk related to the cancellation of contracts. Tables 1 & 2 present the changes in Project financing by component and by expenditure category as a result of the cancellation. The approximate equivalents in XDR, USD, and Francs CFA are indicated for information and were calculated based on the exchange rates in effect on October 30, 2012, because the discussions between the Bank team and the Government on the amount to be cancelled were finalized on that date. 10. Following a principle of prudence, this margin was important, and was not revised by Government when transmitting the request. For this reason, unspent resources are not all included in the canceling. 11. The proposed restructuring package responds to a request from the Government and has received all the required internal clearances. The proposed cancellation of funds responds to a formal request of the Government received by the Bank on December 4, 2012. The proposal is fully supported by the Task Team, the Sector Unit, and the CMU. The clearances of CTRLA and the Sector Manager are attached. 6
Table 1: Changes in Financing and Proposed Cancellations by Component Components/Activities Current in million USD (PAD) Disbursement (occurred + expected incl. Audit) in million USD) Proposed Cancellation (incl. exchange risk margin) in million USD Proposed Cancellation (incl. risk margin) in million XDR 1 Component 1: Improving Budget Management 4.1 2.4 1.7 1.1 including Procurement Component 2: Integration and development of the FMIS including the HR and 5.9 1.2 4.7 3.0 Payroll Management Component 3: Strengthening External Oversight and 1.9 0.8 1.1 0.7 M&E Component 4: Support to the Project Focal Point for 1.5 0.9 0.6 0.4 PFM Reforms coordination Advance PPF 0.7 0.1 0.6 0.4 Contingency Fund 0.9 0.2 0.7 0.5 TOTAL 15.0 5.6 9.4 6.1 1 The amounts in XDR and USD are equivalents based on the exchange rates as of October 30, 2012, i.e. the date at which the discussions between the Bank team and the Government on the amount to be cancelled were finalized: 1 XDR = 1.54 USD. 7
Table 2a: Changes in Financing and Proposed Cancellations by Expenditure Category - Francs CFA (XAF) 1 2 Category services, for the project under Component 1.1 (i), (ii),(iii), (iv)(a), and 1.2; Component 2, Component3 and Component 4, excluding Operating Costs. services for the project under Component 1.1 (iv) (b) Allocated Disbursed Proposed Risk Margin 2 Proposed Cancellation (including risk margin) XAF 3 XAF XAF XAF 5,661,290,323 1,298,828,608 313,386,886 4,049,074,829 217,741,935 0 0 217,741,935 3 Operating Costs 145,161,290 217,949,867 0 (72,788,577) 4 Refund of Project Preparation Advance 290,322,581 47,228,220 0 243,094,361 5 Unallocated 435,483,871 0 102,771,780 332,712,091 TOTAL 6,750,000,000 1,564,006,695 416,158,666 4,769,834,639 Comments The difference is due to overspending and additional financing needs in this category to be verified by the final audit. 2 Including pending bills submitted, and margin with XVISION, SOFRECO, Ikesol, Auditor, and exchange rate risk. 3 The Financing Agreement stipulates that payments are in Euros, and the Disbursement Letter indicates that the Designated Account is in XAF. There is a fixed exchange rate between the Euro and XAF.
Table 2b: Changes in Financing and Proposed Cancellations by Expenditure Category Special Drawing Rights (XDR) 1 2 Category services, for the project under Component 1.1 (i), (ii),(iii), (iv)(a), and 1.2; Component 2, Component3 and Component 4, excluding Operating Costs. services for the project under Component 1.1 (iv) (b) Allocated Disbursed Proposed Risk Margin 4 Proposed Cancellation (including risk margin) XDR XDR XDR XDR 7,800,000 1,665,165 401,778 5,191,122 300,000 0 0 279,156 3 Operating Costs 200,000 279,423 0 (93,319) 4 Refund of Project Preparation Advance 400,000 60,549 0 311,660 5 Unallocated 600,000 0 131,759 426,554 TOTAL 9,300,000 2,005,137 533,537 6,115,173 Comments The PIU calculated the amounts to be cancelled in XAF for subsequent conversion into approximate equivalents in XDR and USD at the exchange rate of October 30, 2012. The difference between the originally allocated XDR, minus disbursements, minus the proposed risk margin compared to the amount indicated in the proposed cancellation column is due to exchange rate fluctuations. Due to these fluctuations, the amounts in XDR in the different columns are not directly comparable. See above. The difference between the originally allocated amount of XDR 300,000 and the proposed cancellation column is due to exchange rate fluctuations. In substance, no additional spending is necessary in this category. The difference is due to overspending and additional financing needs in this category to be verified by the final audit. See comment category 2. 4 Including pending bills submitted, and margin with XVISION, SOFRECO, Ikesol, Auditor, and exchange rate risk. 9
Table 2c: Changes in Financing and Proposed Cancellations by Expenditure Category United States Dollar (USD) 1 2 Category services, for the project under Component 1.1 (i), (ii),(iii), (iv)(a), and 1.2; Component 2, Component3 and Component 4, excluding Operating Costs. services for the project under Component 1.1 (iv) (b) Allocated Disbursed Proposed Risk Margin 5 Proposed Cancellation (including risk margin) USD 6 USD 7 USD USD 12,580,633 2,556,749 616,903 7,970,620 483,870 0 0 428,626 3 Operating Costs 322,580 429,035 0 (143,285) 4 Refund of Project Preparation Advance 645,161 93,245 0 479,956 5 Unallocated 967,741 0 202,909 656,893 TOTAL 15,000,000 3,087,911 821,647 9,389,438 Comments The PIU calculated the amounts to be cancelled in XAF for subsequent conversion into approximate equivalents in XDR and USD at the exchange rate of October 30, 2012. The difference between the originally allocated USD amount, minus disbursements, minus the proposed risk margin compared to the amount indicated in the proposed cancellation column is due to exchange rate fluctuations. Due to these fluctuations, the amounts in USD in the different columns are not directly comparable. See above. The difference between the originally allocated amount of USD 483,870 and the amount indicated in the proposed cancellation column is due to exchange rate fluctuations. In substance, no additional spending is necessary in this category. The difference is due to overspending and additional financing needs in this category to be verified by the final audit. See comment category 2. 5 Including pending bills submitted, and margin with XVISION, SOFRECO, Ikesol, Auditor, and exchange rate risk. 6 The credit amount in the PAD is indicated as USD 15,000, which suggests an exchange rate of 1 XAF = 0.0022 USD. 7 The approximate equivalents in XDR, USD, and XAF are presented for information and were calculated based on the exchange rates in effect on October 30, 2012, i.e. the date at which the discussions between the Bank team and the Government on the amount to be cancelled were finalized: 1 XDR = 1.54 USD = 780 XAF; 1 USD = 0.65 XDR = 508 XAF. 10