Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Date ISDS Prepared/Updated: 06-Dec-2012 I. BASIC INFORMATION 1. Basic Project Data INTEGRATED SAFEGUARDS DATA SHEET APPRAISAL STAGE Report No.: ISDSA1869 Country: Malawi Project ID: P130878 Project Name: Financial Reporting and Oversight Improvement Project (P130878) Task Team Pazhayannur K. Subramania Leader: Estimated 09-Nov-2012 Appraisal Date: Managing Unit: AFTME Estimated Board Date: Lending Instrument: 21-Dec-2012 Technical Assistance Loan Sector: Central government administration (70%), Sub-national government administration (30%) Theme: Public expenditure, financial management and procurement (50%), Other accountability/anti-corruption (50%) Financing (In USD Million) Financing Source Amount Borrower 0.00 Malawi Public Finance and Economic Management Reform Prog 19.00 Total 19.00 Environmental C - Not Required Category: Is this a No Repeater project? 2. Project Objectives The project development objective (PDO) is to improve the internal controls, accounting, reporting and oversight of government finances at the central and decentralized levels in Ministries, Departments and Agencies (MDAs) and districts in Malawi. 3. Project Description TThe Government of Malawi (GoM), in close collaboration with development partners, has developed a medium-term Public Finance and Economic Management Reform Programme (PFEMRP). The PFEM RP is designed to further advance the pace of public financial management reforms in Malawi. The PFEMRP covers a broad range of areas that include planning and policy analysis, resource mobilization, budgeting, procurement, accounting and financial management, cash Page 1 of 5
and debt management, parastatal financing, reporting, auditing, and PFEM RP administration. This project is conceptualized to respond to the Government of Malawi's Public Finance and Economic reform Program (PFEMRP) which is aimed at improving GoM s macro-fiscal management, accountability and transparency in public financial management and public oversight through better implementation of the rules and regulations, fuller utilization of Integrated Financial Management System (IFMIS) functionalities and improved service delivery. This project's specific focus will be on IFMIS and oversight (which includes internal and external audit). Accounting and Financial Management (Component 5 of PFEMRP) Sub-component 1- Accounting and IFMIS (Component 5.1 and 5.2 of PFEMRP) This sub-component would assist the Government to improve the efficiency and comprehensiveness of Government accounting and financial management systems, and the comprehensiveness, transparency, and timeliness of fiscal reporting. This is expected to be achieved in three phases to cover: (i) the automatic capture of all Government revenues, expenditures and financing transactions in IFMIS; (ii) automation of central bank account reconciliation; (iii) implementation of an electronic payments system; (iv) devolution of financial management responsibility to MDAs; (v) implementation of Cash Basis International Public Sector Accounting Standards (IPSAS); (vi) implementation of centralized accounts receivable and fixed assets management systems; (vii) rationalization of government financial and technical architectures; (viii) review of annual budgeting, accounting and reporting processes and associated controls to be implemented through subsequent upgrading of IFMIS to a web based version with comprehensive coverage of all relevant modules and interfaces; (ix) roll out of budgeting module to all the MDAs; (ix) getting government's core IFMIS team trained in relevant technical certificate courses, and (x) developing the management skills to run IFMIS effectively. Sub-component 2- Local Government Financial Management (Component 5.4) This sub-component would assist the Government to strengthen Local Government (LG) financial management, resource management, program delivery, transparency and accountability through: (i) implementation of the LG IFMIS at the remaining seven Councils; (ii) enhancement of the technical platform supporting LG financial systems; (iii). enhancement of the knowledge and capacity of the core LG IFMIS implementation team and LG IFMIS systems administrators; (iv) enhancing financial management capacity at all Councils through advanced training in LG financial management, (v) improved capacity in LG revenue policy formulation and tax administration; (vi) implementation of Cash basis IPSAS; and (vii) implementation of HRMIS systems at 34 Councils, and decentralization of responsibility for human resource and payroll management to Local Government. Sub-component 3 Payroll Management (Component 5.1) The Payroll subcomponent would cover: (i) Business processes re-engineering review, follow up and cataloguing of all processes including descriptions of operations and controls; (ii) roll-out of payroll system to the districts; (iii) Improvement of quality of staff through specialized training for system administrators and managers, and user training for users from various MDAs; and (iv) Adequate audit coverage of payroll. This could best be achieved through the cooperation of Department of Public service Management (DPSM) staff and internal auditors in the various MDAs. Component 2 - Internal Audit (Component 5.3) Page 2 of 5
The support for the development of Internal Audit could consist of: (i) Improvement of the governance and legal framework to provide a wider range of internal audit services; (ii) Provision of a competent staff through a range of basic, specia list and professional level skills training; (iii) Establishment of quality assurance arrangements for high quality audits and reports; (iv) Implementation of a system for performance reporting and coordination with stakeholders.. Component 3 - External Audit (Component 9) This component would focus on strengthening the operational capacity of the National Audit Office (NAO) through: (i) Delivery of high quality audit services by re-engineering audit procedures through revision of audit manuals and training staff in new procedures including regularity audit, performance audit, procurement audit and revenue audit; (ii) Providing competent and motivated staff through appropriate conditions of service and training policies, supported by IT software for audit management and conduct; (iii) Provision of vehicles and computers for auditor operations; (iv) Provision of effective communication facilities for improved audit management and reporting arrangements; (v) Increased independence and accountability for the NAO in line with the independence principles of ISSAI 10, annual audit of NAO, and stronger dialogue with stakeholders including PAC and donors. Component 4 - PFEMRP Management (Component 10) The objective of the component is to manage the agreed development program, provide procurement and financial management support to the implementing departments and to monitor the objectives and performance against the indicators. The PFEM unit will also be responsible for the financial management of the overall trust fund program. Capacity building is required both in terms of staff training and also additional appointments to support the main functions of the Unit. Main activities will include; (i) procurement of full complement of professional staff required for the Unit either through transfer from other units or through contract appointment; (ii) purchase of any office equipment urgently required and incremental operating costs; and (iii) training in project management and procurement and/or financial management as required. 4. Project location and salient physical characteristics relevant to the safeguard analysis (if known) The project location is mainly in the capital city of Lilongwe. No physical construction is envisaged in the project except for some minor internal furnishing for computerized sites. 5. Environmental and Social Safeguards Specialists Alexandra C. Bezeredi (AFTSG) 6. Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/ No BP 4.01 Natural Habitats OP/BP 4.04 No Page 3 of 5
Forests OP/BP 4.36 No Pest Management OP 4.09 No Physical Cultural Resources OP/ No BP 4.11 Indigenous Peoples OP/BP 4.10 No Involuntary Resettlement OP/BP No 4.12 Safety of Dams OP/BP 4.37 No Projects on International Waterways OP/BP 7.50 Projects in Disputed Areas OP/BP 7.60 II. Key Safeguard Policy Issues and Their Management A. Summary of Key Safeguard Issues No No 1. Describe any safeguard issues and impacts associated with the Restructured project. Identify and describe any potential large scale, significant and/or irreversible impacts: None 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: None 3. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts. 4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described. Not Applicable 5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. N/A B. Disclosure Requirements Date Technical Assistance Project For a TA project which will finance the preparation of a specific safeguards instrument, please indicate type of document disclosed, if any. If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/ Audit/or EMP. Page 4 of 5
If in-country disclosure of any of the above documents is not expected, please explain why: C. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank's Infoshop? Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included in the project cost? Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? III. APPROVALS Task Team Leader: Pazhayannur K. Subramania Approved By Regional Safeguards Name: Alexandra C. Bezeredi (RSA) Date: 06-Dec-2012 Coordinator: Sector Manager: Name: Patricia Mc Kenzie (SM) Date: 06-Dec-2012 Page 5 of 5