1. Institution / Sector Fiduciary Assessments (IFAs/SFAs) An example – the Croatia Education Sector Fiduciary Assessment (ESFA) Maria Vannari & Ranjan Ganguli, ECSPS February 2005

2. Croatia ESFA Why? What ? How? Results

3. Why (did we do the ESFA)? To support an upcoming Bank-financed SWAp operation, the Croatia Education Sector Support Program (ESSP) A necessary step to implement a SWAp given the goals of a SWAp: –To strengthen an entire sector - It was supportive of the ESSP’s priority to strengthen the education sector’s management and leadership by providing the basis for formulating a concrete plan to strengthen the sector’s fiduciary arrangements –To pool funds & relying on country systems – It provided a basis for assessing and relying on the ESSP’s fiduciary implementation arrangements. The CFAA and CPAR (and other analytics) were not specific enough

4. Terminology – IFA vs. SFA IFA vs. SFA (Institutional vs. Sector assessment) The name probably depends on the situation & sector specifics IFA – when the focus of the assessment is a single institution SFA – when the sector is decentralized or comprises many institutions Don’t get hung up on the terminology – different parts of the same spectrum

5. What (is the ESFA)? It evaluates the education sector’s procurement and financial management systems. By reference to: –acceptable (not best) international practices, standards and codes; –relevant documentation; –compliance or walk-through testing; and –evaluation of the relevant procurement and financial management procedures and controls

6. How (did we sell the ESFA)? The CFAA and CPAR, although invaluable, were not specific enough. (Consider that CFAAs and CPARs are no longer mandatory) It was supportive of the ESSP’s priority to strengthen the education sector’s management and leadership It was supportive of the ESSP’s goal of preparing the education sector for EU accession The ESFA provided a basis for formulating a concrete plan to strengthen the ESSP’s fiduciary implementation arrangements It will help determine how much loan funds the Bank will provide for the program, and when

7. How (did we organize the ESFA)? Read the PCN, CFAA, CPAR and other sectoral and country background information Met with the sectoral project task team and CU to form an idea of the institutions that we would look at during the scoping mission One-week scoping mission - sent a draft report in which we set out the institutions and expenditure systems that we would look at during the final assessment mission as well as the preliminary findings and issues Two-week ESFA mission Drafted the ESFA and distributed within the Bank (ECSPS, the project task team and CU) for discussion – consider peer reviewers for future IFAs Distributed a revised ESFA to the relevant in-country institutions and stakeholders. In-country workshop to discuss and agree on the fiduciary issues – during appraisal mission Devised action plans to feed into either the sector project (for sectoral issues) or relevant country programs (for wider country issues) Fed conclusions of ESFA fiduciary assessment into the final project's fiduciary assessment (in the PAD)

8. How (did we focus the ESFA)? started with looking at where the money on education are spent from different sources, including: MOE budget, MOF/Treasury, other ministries (!), education sector institutions, decentralized levels (counties, municipalities, schools)  Identified who spends the money…  Then made an assumption who would be involved in spending the SWAp funds

9. How (did we do the ESFA)? Institutional analysis –Institutional arrangements and administrative procedures –Accounting and financial reporting –Internal audit –External audit –Procurement systems Systems analysis (based on EU model): –Identification of needs and planning, including budgeting –Tendering –Contract management –Authorization of payments –Execution of payments –Recording of payments FM and Procurement staff worked together (pros and cons)

10. Results 1.Presented the risks; 2.FM Issues / Needs of the sector; 3.Procurement Issues / Needs of the sector; 4.Next steps for capacity-building; 5.Next steps for fiduciary implementation arrangements

11. Results Main institutions and expenditure systems

12. Results FM Issues / Needs of the sector 1.Perform a system-by-system analysis of MOSES’s financial management control framework; 2.Rationalize and integrate the various accounting systems of the MOSES; 3.Establish proper financial management control frameworks at the various education sector institutions; 4.Provide schools with guidance on financial management issues; 5.Simplify the administration of schools’ salaries; 6.Simplify the systems for the payment of salaries of the staff of MOSES. 7.Produce comprehensive sector financial statements; 8.Formulate a strategic plan, risk assessment and audit plan for the internal audit function of MOSES; 9.Establish rules, procedures and internal controls for new, revised and emerging systems

13. Results - Procurement Issues / Needs of the sector 1.Improve organization and management by establishing appropriate organizational structure to house procurement function and address staffing and training needs; 2.Improve efficiency of the system by developing model standard bidding documents (preferably in coordination with the PPO) ; 3.Improve procurement practices and efficiency by developing Users’ (Procurement) Manual; 4.Improve transparency and accountability by introducing public advertisement of contract awards and annual reporting on procurement activities for the past year ; 5.Improve efficiency of the use of the public funds by introducing adequate procurement planning and expanding it beyond one budget year time limit; 6.Introduce periodic procurement audit carried out by an independent experts

14. Results Next steps for capacity-building Establish a core team (within the Ministry) to lead the initiative and to discuss and agree upon: –Benchmarks for improvement (sector) –The action plans for improvement (sector, is broader than what is included in the education project)

15. Results – Next steps for fiduciary implementation arrangements 1.Assign counterparts in MOSES for the ESSP Coordinator for reporting on ESSP expenditures and procurement (Q1, 2005) 2.Agree on ESSP audit arrangements (Q1, 2005) 3.Establish Operational Procurement Unit (Q1, 2005) 4.Prepare procurement plan for first 12 months of ESSP (Q1, 2005) 5.Prepare a procurement manual for the ESSP with a description of agreed procedures (Q1, 2005) 6.Advertisement of upcoming tenders on MOSES website (ongoing) 7.Prepare annual reports on procurement activities for preceding year (starting 2006) 8.Establish TA facility for procurement capacity assessment and training of procuring entities at decentralized levels (Q2, 2005) 9.Establish mechanism for reporting on expenditures incurred for decentralized functions (Q4, 2005)

16. SAR2SAR1 Q1Q1 Q2Q2 Q3Q3 Q4Q4 review planning Jan-Dec Semi-Annual Review 1 (SAR1) -review the progress -financial review -amendments to Annual Development Plan -amendments to procurement plan Semi-Annual Review 2 (SAR2) -Annual Development Plan for next year -budget for next year -procurement plan for next year -financial update Results - Incentives Performance-based disbursements Program review cycle

17. Could do better 1.Joint assessment with borrower; 2.Timing and sequencing; 3.…

18. By the way …. SWAp 1.What is actually the difference (in regard to procurement and fm) between an “old- fashioned” Project and a fashion of the season – SWAp? 1. performance based disbursements 2. procurement – higher thresholds for ICB, less prior review 2.SWAp with reliance on country systems – controversy of the issue