2. The Bank FM team is helping countries in the Africa region to increase reliance on their country FM systems for project implementation. Aware of the inconsistency between reality on the ground and FM policy, the Bank’s CMUs conducted innovative assessments of the readiness of country PFM systems to manage the Bank’s investment projects. The methodology of the assessment was based on Bank policies, knowledge of the local situation, and examples from other regions.

3. This innovative methodology was piloted in Mozambique, which ranks near the top in the region for its public financial management capabilities. The evaluation determined that shifting to the country’s own financial management systems would not increase the Bank’s overall fiduciary risk In fact, doing so would serve to reduce these risks in some areas, provided that mutually–agreed technical arrangements were implemented, including: Arrangements to roll over unused project funds at year-end, Improving the timeliness of issuance of audited project financial statements, and Developing modalities of collaboration between private sector auditors and the supreme audit institution

4. All new investment projects in the country make use of the country’s own financial management systems, with interim supplemental measures in specific areas where there are weaknesses. This represents a shift from the PIU model to reliance on government ministries charged with project implementation. The Government has welcomed the Bank’s proactive stance. It perceives clear benefits in terms of increased cash flow (IDA funds flow into the Treasury instead of commercial banks), comprehensiveness and timeliness of budget execution data, and reduction of transaction costs. In Mozambique, the Bank is now clearly in the lead among development partners in using country FM systems, and the initiative has attracted extensive interest from bilateral and multilateral partners.

5. This assessment was rolled out to several countries in the region, including Kenya, Tanzania, Ghana, Togo, Cote d’Ivoire, and Cameroon and in the FY11, the region continued implementation of the recommendations of the such UCS Assessments. It is clear that progress is being made in this regard, with most of the PFM systems of larger portfolio countries already partially being used for investment lending projects.

6. In Mozambique, FM and Procurement teams of the Bank with the support of CMU took the agenda forward by holding a series of consultations with all donors using the country systems and related government agencies in order to better manage the challenges being faced in scaling up the use of country systems. The interaction brought all the stakeholders together and facilitated discussions and thinking on all issues in a structured manner. There had been a very close engagement with the chairs of various PFM working groups to ensure that it remains a multi-donor joint initiative. Government-led, Bank supported, and multi-donor efforts will continue to define this process going building upon this success in Mozambique, and elsewhere.