document of the world bank - documents & reports - all ... · assessment of outcomes ... pdo...

Document of

The World Bank

Report No: ICR1324

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IDA-H2980)

ON A

GRANT

OF SDR 22.1 MILLION

(US$ 33.4 MILLION EQUIVALENT)

TO

THE ISLAMIC REPUBLIC OF AFGHANISTAN

FOR A

PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT

January 31, 2012

South Asia Region Financial Management Unit

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

(Exchange Rate Effective December 2011)

Currency Unit = Afghani (AFN)

AFN 1.00 = US$ [0.21]

US$ 1.00 = [48.33] AFN

FISCAL YEAR

March 21 - March 20

ABBREVIATIONS AND ACRONYMS

AFMIS Afghanistan Financial Management Information System

ANDS Afghanistan National Development Strategy

ARDS Afghanistan Reconstruction and Development Services

ARTF Afghanistan Reconstruction Trust Fund

APR Annual Performance Review

CAO Control and Audit Office

CSR Civil Service Reform

DFID Department for International Development (UK)

EPAP Emergency Public Administration Project

FBS Fixed Budget Selection

FM Financial Management

GOA Government of Afghanistan

HRM Human Resources Management

IARCSC Independent Administrative Reform and Civil Service Commission

I-ANDS Interim – Afghanistan National Development Strategy

IDA International Development Association

ISA International Standards of Auditing

MIS Management Information System

M&EU Monitoring and Evaluation Unit

MOE Ministry of Economy

MOF Ministry of Finance

MTFF Medium Term Financing Framework

NGO Non Governmental Organization

PACB Public Administration Capacity Building

PAR Public Administration Reform

PEFA Public Expenditure and Financial Accountability

PFEM Public Finance and Expenditure Management

PFM Public Financial Management

PFMR Public Financial Management Reform

PMIS Procurement Management Information System

PPU Procurement Policy Unit

PRGF Poverty Reduction and Growth Facility

PRR Priority Reform and Restructuring

PSIB Programmatic Support for Institutional Building

RIMU Reform Implementation Management Unit

SBD Standard Bidding Documents

Vice President: Isabel M. Guerrero

Country Director: Nicholas J. Krafft

Sector Manager: Jennifer K. Thomson

Project Team Leader: Paul Edwin Sisk

ICR Team Leader: Paul Edwin Sisk

THE ISLAMIC REPUBLIC OF AFGHANISTAN

PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT

CONTENTS

Data Sheet

A. Basic Information ............................................................................................................ 1

B. Key Dates......................................................................................................................... 1

C. Ratings Summary............................................................................................................. 1 D. Sector and Theme Codes ................................................................................................. 2

E. Bank Staff ........................................................................................................................ 2

F. Results Framework Analysis ............................................................................................ 2 G. Ratings of Project Performance in ISRs .......................................................................... 6

H. Restructuring ................................................................................................................... 7

I. Disbursement Profile ........................................................................................................ 7

1. Project Context, Development Objectives and Design ...................................................... 8

2. Key Factors Affecting Implementation and Outcomes ........................................................... 13

3. Assessment of Outcomes ........................................................................................................ 17 4. Assessment of Risk to Development Outcome ....................................................................... 23

5. Assessment of Bank and Borrower Performance ................................................................... 24

6. Lessons Learned ..................................................................................................................... 27

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ......................... 29

Annex 1. Project Costs and Financing ........................................................................................ 30

Annex 2. Outputs by Component ................................................................................................ 31 Annex 3. Economic and Financial Analysis .............................................................................. 36

Annex 4. Bank Lending and Implementation Support/Supervision Processes ........................... 37

Annex 5. Beneficiary Survey Result .......................................................................................... 38 Annex 6. Stakeholder Workshop Report and Results ................................................................ 38

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR .................................... 38

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ...................................... 59

Annex 9. List of Supporting Documents ..................................................................................... 60

1

A. Basic Information

Country: Afghanistan Project Name: PUBLIC

FINANCIAL

MANAGEMENT

REFORM PROJECT

Project ID: P099980 L/C/TF Number(s): IDA-H2980

ICR Date: 10/19/2009 ICR Type: Core ICR

Lending Instrument: TAL Borrower: GOVERNMENT OF

AFGHANISTAN

Original Total

Commitment:

XDR 22.10M Disbursed Amount: XDR 21.59M

Environmental Category: C

Implementing Agencies: Ministry of Finance/MISFA

Cofinanciers and Other External Partners:

B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 12/12/2006 Effectiveness: 07/11/2007 07/11/2007

Appraisal: 03/02/2007 Restructuring(s):

Approval: 05/29/2007 Mid-term

Review:

03/02/2009 04/20/2009

Closing: 12/31/2010 12/31/2011

C. Ratings Summary

C.1 Performance Rating by ICR

Outcomes: Satisfactory

Risk to Development Outcome: High

Bank Performance: Satisfactory

Borrower Performance: Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Satisfactory

Quality of Supervision: Satisfactory Implementing

Agency/Agencies:

Satisfactory

Overall Bank

Performance:

Satisfactory Overall Borrower

Performance:

Satisfactory

2

C.3 Quality at Entry and Implementation Performance Indicators

Implementation

Performance Indicators

QAG Assessments

(if any) Rating

Potential Problem

Project at any time

(Yes/No):

No Quality at Entry

(QEA):

None

Problem Project at any

time (Yes/No):

No Quality of

Supervision (QSA):

None

DO rating before

Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Central government administration 96 97

Sub-national government administration 4 3

Theme Code (Primary/Secondary)

Administrative and civil service reform 17 10

Gender 17

Other public sector governance 17

Other trade and integration 16

Public expenditure, financial management and

procurement

33 90

E. Bank Staff

Positions At ICR At Approval

Vice President: Isabel M. Guerrero Praful C. Patel

Country Director: Nicholas J. Krafft Alastair J. McKechnie

Sector Manager: Jennifer K. Thomson Robert J. Saum

Project Team Leader: Paul Edwin Sisk Paul Edwin Sisk

ICR Team Leader: Paul Edwin Sisk

ICR Primary Author: Sati Achath

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document)

The objectives of the project were to: (i) develop an efficient and effective public financial

management system; and (ii) develop the human resource capacity of the MOF and CAO to

ensure better operation of public financial management.

3

Revised Project Development Objectives (as approved by original approving authority)

The objectives were not revised.

(a) PDO Indicator(s)

Indicator Baseline

Value

Original Target

Values (from

approval

documents)

Formally

Revised

Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Coherence of budget, treasury and revenue estimates with ANDs priorities and

MTFF.

Value

quantitative

or

Qualitative)

At risk Approval by

donors at annual

evaluation of

treasury results

( expenditure and

revenue) vis a vis

ANDS and MTFF

framework.

MTFF now aligned with ANDS

Date

achieved

12/04/2006 12/31/2010 11/30/2011

Comments

(incl. %

achievement)

Indicator 2 : Timeliness of budget, treasury and revenue preparation and execution

Value

quantitative

or

Qualitative)

Irregular and

Moderate

Annual cash plan

realized to within

80% of forecast.

Monthly cash plans provided to

stakeholders with accuracy of

85% on monthly projections.

Date

achieved

12/04/2006 12/31/2010 11/30/2011

Comments

(incl. %

achievement)

Indicator 3 : Level and perception of good governance in PFM operations

Value Moderate 15 % increase of

share of donor

The total amount of the donor

assistance has increased through

4

quantitative

or

Qualitative)

funds through Core

Budget from SY

1385 (base year).

core budget, but the external

budget hasn’t been reported by

the budget department for the

1390 to assess the percentage.

Date

achieved

12/04/2006 12/31/2010 11/30/2011

Comments

(incl. %

achievement)

Indicator 4 : Number of ministries/agencies performing assigned treasury functions

Value

quantitative

or

Qualitative)

Zero ministries

with access.

6 Line Ministries

with online access

for payment

requests and

recording

allotments directly

in AFMIS.

None. The capacity of line

ministries to manage

independently with accountability

the PFM functions remains weak

to delegate them additional PFM

functions for independent

implementation. Line ministries

cannot yet conduct

comprehensive financial

management. High rejection rate,

outsourcing of core functions to

consultants, and lack of adequate

internal audit in line ministries are

examples of this. All line

ministries currently have access to

prepare operating budget Expense

vouchers (EVs) in AFMIS (temp

save). Allotments, commitments,

and payments are posted in a

centralized manner in the

Treasury and provincial

Mustofiats.

Date

achieved

12/04/2006 12/31/2010 11/30/2011

Comments

(incl. %

achievement)

Indicator 5 : Number of line ministries conducting stand alone procurement.

Value

quantitative

1 7 line ministries Institutional development and

capacity assessment for

standalone procurement of six

line ministries; (Public Health,

5

or

Qualitative)

Rural Rehabilitation and

Development, Agriculture,

Education, Energy & Water,

Public Works and Finance) was

done out of which Ministries of

Education, Agriculture and Public

Health only in Consultancy

Services were certified for

standalone procurement. During

3rd Quarter of 1390, Ministry of

Agriculture was re-assessed for

capacity certification and report is

under process.

Also, the institutional

development of seven more line

ministries (Transportation,

Communication and IT, Counter-

Narcotics, Higher Education,

Urban Development, Mines and

Commerce) is under process. All

seven line ministries have

submitted their report on current

procurement structures with

proposed procurement structure

and budgetary information as was

required. PPU has worked and

finalized Institutional

Development report for Ministry

of Communication and IT and the

rest are under finalization stage.

Furthermore, capacity assessment

of these ministries will be done

for standalone procurement after

their institutional development in

addition to those which were not

certified as mentioned in the first

paragraph.

Date

achieved

12/04/2006 12/31/2010 11/30/2011

Comments

(incl. %

achievement)

Indicator 6 : Reliance on international technical assistance diminishing

Value Number of

international

In PFM at 50% of

levels of 1385.

The number of international TA

consultants has decreased and

6

quantitative

or

Qualitative)

advisors in

Treasury,

CAO and

RITEs.

shows a reduction of 30% in all

over MOF. In July 2008, there

were 80 international TA,

whereas in June 2011, it reached

to 56.

Date

achieved

12/04/2006 12/31/2010 11/30/2011

Comments

(incl. %

achievement)

(b) Intermediate Outcome Indicator(s)

Indicator Baseline

Value

Original Target Values

(from approval

documents)

Formally

Revised Target

Values

Actual Value Achieved

at Completion or

Target Years

Indicator 1 : Number of Mustofiats which have implemented restructuring and new processes

of Mustofiat Reform program

Value

(quantitative

or

Qualitative)

Nil 6 Moustoufiats Achieved: All

mustofiats completed

Date

achieved

12/04/2006 12/31/2010 11/30/2011

Comments

(incl. %

achievement)

G. Ratings of Project Performance in ISRs

No. Date ISR

Archived

DO IP Actual Disbursements

(USD millions)

1 11/26/2007 Satisfactory Satisfactory 0.00


7







H. Restructuring (if any)

Not Applicable

I. Disbursement Profile

8

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

Country and Sector Background: Afghanistan is a poor country ravaged by a quarter of century

of conflict and political instability. The country had achieved much since December 2001, when

the Afghanistan Interim Administration (AIA) was inaugurated in Kabul. By the time of

Appraisal in 2007, the country had achieved respectable economic growth, with the real value of

non-opium Gross Domestic Product (GDP) increasing by 29 percent in 2002/03, 16 percent in

2003/04, 8 percent in 2004/05, a drought year, and 14 percent in 2005/06. The Government of

Afghanistan (GOA) had also maintained a stable macroeconomic framework as evidenced by the

successful completion of all quarterly reviews under the International Monetary Fund (IMF)

Staff-Monitored Program (SMP, from March 2004 to March 2006) and the first review of the

Poverty Reduction and Growth Facility (PRGF) program. Monetary policy was restrained,

supported by the adherence to strong fiscal discipline and a “no overdraft” rule that prohibited the

Central Bank from financing a deficit.

Achievements in Public Financial Management (PFM). Since 2002 the GOA had made progress

in establishing a functioning public financial management system under the direction of the

Ministry of Finance (MOF). The World Bank assessment of Afghanistan’s public financial

management and procurement performance1

conducted under the auspices of the Public

Expenditure and Financial Accountability (PEFA) program (November 27, 2005), concluded that

while there were weaknesses that threatened longer term sustainability of the MOF performance

and exacerbated the disconnect between public expectations and the actual delivery of services,

the strong achievements in terms of fiscal discipline, cash control, and aggregate transparency

have contributed to macroeconomic stability, as well as to sustained external assistance”

Sector Issues. In order to strengthen the capability and sustainability of the PFM system, MOF

and the Control and Audit Office (CAO) had recognized that it will have to address several

organizational and capacity constraints:

(i) Incomplete re-organization of MOF. While all main departments within MOF had

undergone restructuring under the Priority Reform and Restructuring (PRR) program,

the MOF still required restructuring of its remaining functions to assure that all of its

departments worked as an integrated whole.

(ii) Concentration of Responsibility. A high degree of accountability in financial

management decisions had been achieved by concentrating them in the hands of the

ARTF, Afghanistan Reconstruction and Development Services (ARDS) and in MOF

departments, in a closely monitored “transaction-based” system. However, this has

also the effect of lowering accountability for procurement and financial management

decisions on the part of line ministries and agencies and actually increased the

governance risk of operations.

(iii) Inadequate Human Resources Numbers, Capacity and Management. Engaging

international firms and local consultants to perform basic treasury, budget, audit and

procurement functions had been a default strategy, considering the inadequate

1 Afghanistan: Managing Public Finances for Development; November 27, 2005; conducted under the

auspices of the PEFA Program.

9

technical capacity of the civil service and inadequate incentives to the few who were

qualified to remain in government service.

(iv) Anti-corruption and Maintaining Accountability and Transparency while Reforming.

The control environment on which Afghanistan’s PFM formal controls rested was

undermined by corruption in its various forms and manifestations. This was

increasingly seen as one of the most important threats to Afghanistan’s entire state-

building and to delivering public services.

(v) Maintaining Good Coordination and Momentum in Reform. With several sources of

assistance going to the MOF, there is a risk of disconnects between the programs,

agendas, timing and standards that would impair the smooth functioning the MOF as

the GOA’s apex public finance management organization. Moreover, staff could be

subject to declining motivation and performance (“reform fatigue”) as the process

extended over time.

Rationale for Bank assistance: The project was one element of a wider public administration

reform agenda that had been developed by the government, with the Bank/ARTF support to

contribute to a more effective state through better PFM performance and by building capacity to

sustain this performance. In the same projects that had contributed to maintaining sound PFM, the

Bank had also provided major support for the restructuring of agencies and ministries and

rationalizing the functions and job descriptions of public sector employees in order to pursue

operational efficiencies of service delivery that led to improved developmental outcomes from

public expenditures.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

The objectives of the project were to: (i) develop an efficient and effective public financial


ensure better operation of public financial management.

Key Indicators were:

Coherence of budget, treasury and revenue estimates with ANDS priorities and MTFF

Timeliness of budget, treasury and revenue preparation and execution

Level and perception of good governance in PFM operations

Number of ministries/agencies performing assigned treasury functions

Number of line ministries conducting stand alone procurement

Reliance on international technical assistance diminishing

Number of Mustofiats which have implemented restructuring and new processes of

Mustofiat Reform program

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and

reasons/justification

The objectives were not revised.

1.4 Main Beneficiaries,

The beneficiaries of the project included:

Major departments within MOF and the CAO which would benefit in terms of

developing and implementing the structures, procedures and systems required to carry out

10

their mandates under the new PFM legal framework. The project would also benefit: (i)

the Treasury Department because of systems development; and (ii) MOF in terms of

finishing the procedures for procurement.

Staff in the MOF, line ministries, and CAO who would benefit from training

opportunities and materials for the development of their skills.

Human Resources Management (HRM) Department which would be strengthened to

position it to perform new personnel management functions being developed under the

GOA civil service reform strategy.

Afghan public and international donors who would be assured that government resources

and donor funds are subject to appropriate budget and expenditure controls.

1.5 Original Components (as approved)

The project consisted of four components as follows:

Component 1. Institutional Development (US$ 11.4 million)

1.1 Procurement Institutional Development and Social Accountability. The project would

provide institutional support for the newly created regulatory body (PPU), which required direct

assistance to carry out its functions listed in the Procurement Law. The project would include

funds for the PPU to: (i) retain consultants to create more Standard Bidding Documents (SBDs), a

procurement manual and guidance notes; (ii) develop the website and interactive MIS; and (iii)

assist the PPU for publication, analysis and dissemination of review panel procedures,

documentation and decisions.

1.2 Treasury Systems Development and Roll-out. The project would engage a firm of consultants

to acquire, install, and train national staff on the use of the following modules from FreeBalance

in order to complete the expanded financial management functions in AFMIS – Procurement,

Fixed Assets, and Accounts Receivable. The project would support the roll-out of the AFMIS so

that transaction processing and payment authorization may be decentralized but that payment

processing would remain centralized within Treasury and the Mustofiats. This component would

assist the government in rolling out AFMIS to five or six line ministries which accounted for the

majority of public sector non-military and non-policing functions as well as six Mustofiats.

1.3 Internal Audit Work Practices. The project would support implementation of the expanded

MOF responsibility through development of improved audit methodology and training. The

project would also finance further development and roll-out of internal audit procedures and plans

to the line ministries and provinces, and to improve the capacities of the internal audit staff

through on the job training. The component would also assist with establishing a fraud

investigation unit (FIU) in the MOF’s Internal Audit Department, developing and launching its

basic operational skills, and preparing a roadmap for developing specialist fraud investigation

processes in Afghanistan.

1.4 Support for External Audit

1.4.1 Advisory Services: The project would finance the services of a senior audit advisor for

policy guidance which had been ongoing since 2006 and strengthening of the CAO which would

allow the direct operations advisor firm to concentrate on delivering audit services.

1.4.2 External Audit - Development of Physical Infrastructure. The project would finance

improved physical infrastructure including the Information Technology Center, office furnishings

and on-line access to AFMIS.

1.4.3 External Audit - Parliamentary Oversight. The project would support operationalizing

the decision to establish the Parliamentary Oversight Committee function, and reinforce and

reinvigorate the accountability of the Executive in the management of public finances to the

11

legislature through a timely, comprehensive, and methodical review of audit reports and audited

accounts of the government.

Component 2. Human Resources Capacity Development (US$ 5.0 million)

2.1 Human Resource Capacity Development in Procurement. The training activities of the

procurement capacity building contract outlined in sub-component 1.1 would be delivered under

this sub-component and would be rolled-out more widely, especially to local government entities

as well as to specialist audiences such as decision makers and auditors.

2.2 Human Resource Capacity Development in Financial Management. This sub-component

would assist the MOF Treasury Department and the administration departments of selected line

ministries in developing staff capacity in financial management functions.

2.3 Human Resource Capacity Development in Audit. The project would complete the

classroom training in introductory accounting and auditing that began under the PACB Project for

the first batch of internal auditors of the MOF and staff of the CAO. Additionally, a stream of

internal auditors and CAO auditors intended to provide leadership and more expert skills will be

financed for advanced training.

Component 3: Reform Management (US$ 1.0 million)

3.1.1 Targeted Restructuring of Internal MOF Business Arrangements. The RIMU would assure

that the various functions and relationships between targeted MOF departments were organized to be

mutually supporting in providing efficient PFM. It would draw on the support being offered through

the IARCSC (being supported by an IDA grant supporting reforms in the civil service) to rapidly

review and revise, as needed, decisions made under the PRR for the allocation of functional

responsibilities, lines of authority and reporting, and the level and types of staffing required to exercise

these functions. The IARCSC with financing of the CSR project would assist the MOF/RIMU to

acquire the services of an internationally recognized expert in the operations of macro-level public

finance institutions such as ministries of finance, treasury boards, central banking institutions to

diagnose intra-institutional organizational issues in the MOF, propose solutions and support their

implementation over a period of about 36 months. The RIMU would then work with department

heads and staff to implement any restructuring that is recommended.

3.1.2 Staff Re-grading under the GOA Pay/Grading Policy. The RIMU would arrange with the

IARCSC for applying the new grade and pay policy of the government with support provided

through the CSR project. The IARCSC Pay and Grade Unit would work with the RIMU and

MOF HR Department to re-map the revised job descriptions into the new 8-grade system, and

complete the task of defining new job descriptions to correspond to the new 8-grade system

where this was required.

3.1.3 Support for the Human Resources Management (HRM) Department. The RIMU would

facilitate the strengthening of the HRM Department to perform new personnel management

functions being developed under the GOA civil service reform strategy. It would arrange with the

IARCSC to train and mentor MOF/HRM staff to apply new operational procedures and manuals

as they were developed under the CSR project.

3.1.4 Preparation of New Human Resources Management Initiatives. The MOF aimed to

make three major strategic decisions to sustain the effects of training, pay reform, and improved

personnel management:

Initiating “schemes of service” to permit the MOF to be competitive in recruiting and

retaining professionals in selected professional streams considered critical for the long term

performance of PFM functions within the framework of the new grading and pay system.

12

Reducing the reliance on internationally recruited technical assistance in line

functions of the MOF for establishing the longer term sustainability of Afghanistan’s public

financial management system.

Introducing gender-sensitive personnel practices. The MOF would initiate: (i) a

baseline survey to develop intelligence on the numbers and status of women currently employed

and diagnose issues that impeded their productive contributions; and (ii) design actions that could

be implemented within current legal constraints to remove obstacles and promote further

participation of women in the MOF workforce.

3.1.5 PFMR Project Coordination and Administration. The RIMU would coordinate the

implementation of the components of the project. It would also coordinate through the use of the

annual work plan for MOF, the implementation of the PFMR project with the projects being

financed in parallel, for example the DFID support to the Budget Department.

3.1.6 Monitoring and Evaluation of Results.. The RIMU would temporarily incorporate the

MOF Monitoring and Evaluation Unit (M&EU) to assure coherence between monitoring and

evaluation of results and the development and re-development of reform work programs.

Component 4: Direct Operational Support for PFM Functions (US$ 16.0 million)

4.1 Direct Operations Support for Procurement. Six line ministries were targeted for de-

concentration of procurement following the training and certification under the capacity building

of Component 1. The team leader of the consultants’ team would be located at the ARDS and all

other key staff would be located at the line ministries.

4.2 Direct Operations Support to Treasury Operations. Activities under this sub-component

would include: operational support and on-the-job training in accounting and reporting, cash

management, payroll processing, grant management, and payment processing as well as

maintenance and operation of AFMIS.

4.3 Direct Operations Support to External Audit. This sub-component would first finance the

consultant services to conduct with the CAO the external audit of donor projects. An important

objective is achieving compliance with the International Standards of Auditing (ISAs).

1.6 Revised Components

The components were not revised.

1.7 Other significant changes

There were no changes in the project’s design, scope and scale, funding allocation, and

implementation arrangements. However, there was a change in the project’s schedule as

mentioned below:

The closing date of the project was extended by one year from December 31, 2010 to December

31, 2011. This was because the late mobilization of two key contracts pushed back the

implementation closing date of these key contracts by about one year beyond the project’s

original closing date. Sourcing of these contracts was drawn out over security concerns of

international firms; in both cases a second round of call for proposals was necessary and

negotiations took longer than expected as the cost of security provisions was not set in the

financial proposal and required time for the client to analyze and consider. Additional activities

for the procurement of goods and local individual consultant contracts which were dependent on

outputs of these major contracts were similarly behind the original plan.

13

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

Project Background. The Public Financial Management Reform (PFMR) Project was the fourth

World Bank operation to support public financial management performance and reforms in the

Afghanistan public sector. This series of IDA grants has contributed to the enactment of a

modern, robust legal framework for public financial management, timely and reliable processing

and reporting of transactions under the budget and establishing systems for public sector budget

implementation.

Together with the Civil Service Reform (CSR) Project, PFMRP envisioned to strengthen core

business practices within government, namely human resource and financial management –

through appropriate regulatory, organizational and technical reforms. Reforms in these areas

would provide the supporting organizational environment within which more sector-specific

reforms could be effective. Both projects supported the achievement of specific triggers under

PSIB as well as benchmarks under the Afghanistan Compact. Both projects also supported the

Government’s anti-corruption strategy through identifying and addressing areas that were

vulnerable to corruption and through promoting a rules-based culture within government.

Soundness of background analysis. As part of project preparation, sector background was

studied, main sector issues were analyzed in depth, and government strategies to deal with these

issues were also considered.

Lessons of earlier operations taken into account. A number of lessons learned from

Afghanistan’s previous projects, including EPAP 1, EPAP II, and PACB project were

incorporated into the project design. Some of the lessons included were the following:

For an emergency operation to be effective in a severely damaged post-conflict

environment, intensive Bank supervision is essential.

Contracts for direct operations support need to be separated from capacity building

activities to ensure that both are performed simultaneously.

The expectations for capacity building and institutional strengthening need to be closely

aligned with the availability and skill levels of the government counterparts.

The government needs to continue to engage the services of advisors for as long as it

takes to build sufficient, demonstrable capacity in core public administration areas even

as the roles of the advisors become increasingly transitional.

Risks Assessment. The Technical Annex had identified several risks and mitigation measures as

deemed appropriate at that time were taken during the preparation stage. The table below shows

these risks and mitigation measures along with an assessment of the risks by the ICR team.

Risk Mitigation Measure

ICR Assessment of the

Risks

Lagging training and capacity

development that will limit pool

of qualified personnel

Create new and additional civil

society and university-led

options for professional training

and certification

Duty specific training on-

going in Treasury and

MOF IA so civil service

skills rising but staff are

moving out of civil

service for higher pay.

14

Low recruitment and/or retention

rates for trained personnel that

will slow rate of transfer of

responsibilities to civil service

Complete pay and grading

reform in MOF; explore new

grading options for certified

PFM and procurement

professionals

All Moustoufiats have

gone through restructuring

and pay and grading.

Intensive training used as

incentive for MOF IA

and Treasury civil

servants.

Resistance of staff to reforms Adopt a participatory and

change management approach to

build in-house ownership of

reform

New personnel policies

for the civil service being

developed and supported

by the Independent

Administrative Reform &

Civil Service Commission

(IARCSC)

are properly integrated

into the MOF’s own

Human Resources

Management Department

Incomplete donor coordination

creating reform program gaps

and inconsistencies

Adopt pro-active donor

coordination and mobilization

action within RIMU

Donors in PFM have kept

the general division of

coverage in place at

beginning of PFMR;

moreover GIRA

introduced a PFM

Roadmap which donors

agreed to and which sets

the reform program for

GIRA. Donor consultant

group is working on the

basis of this plan.

Non responsive reform

programming, missing

opportunities and repeating

errors

Manage reform through annual

performance evaluations and

follow-on budget and work

programs by RIMU with

stakeholders

GIRA’s PFM Roadmap

has been agreed to by

donors at the Kabul Donor

Conference July, 2010.

Objectives could be undermined

by pervasive petty and

procurement corruption

Emphasize the social

accountability and greater

disclosure on procurement

Procurement oversight by

ARDS is still in place and

the Bank’s low thresholds

for prior review – no

significant procurement

corruption on WB projects

detected.

15

Reliance on country systems for

project financial management

and procurement implementation

and not on project specific and

project controlled arrangements

The country systems will be

aided by the same project

outputs and monitored by the

project team and the PSIB

supervision

The FM consultant

contract for Treasury

support continued in

place and systems

performed well.

No tradition of accountability or

institutional framework to

support de-concentration

Support to Parliament to

encourage due process applied

for malfeasance and support for

building fraud investigation

capacity

Oversight by Parliament

improved year on year

with close scrutiny of both

budget and audit reports.

2.2 Implementation

Midterm Review. The Bank conducted a Midterm Review (MTR) in April 2009. The objective of

the MTR was to review the overall project implementation status and the advance toward

development objectives. Specifically the MTR reported that: (i) overall project progress was

satisfactory and all the plans and resources were in place to attain the project development

objectives; (ii) on-the-job training with the Treasury Operations Advisor needed to be more

focused and supported by an comprehensive training plan; (iii) Internal audit continued to be

weak because the suspension of Article 61 of the PEFM Law limited the purview of the Internal

Audit of the MoF; and (iv) the draft external audit law then in the Ministry of Justice did not

provide key provisions for the establishment of an independent and modern external audit

function.

The following factors affected project implementation:

Factors outside government control or implementation agency

The continuity of the Task Team, including the TTL and other key sector specialists, from project

inception through completion was a favorable factor which helped project implementation. This

continuity engendered consistency, depth and follow-up in the dialogue with the government and

provided expertise to help the government analyze issues and implement actions as they emerged

during supervision. Further, having the TTL on the ground in Kabul was strongly positive, given

weak implementation capacity and thus the need for Bank assistance in drawing up the TORs for

various consultancies (including: treasury systems development and roll-out; external audit

advisory services; and direct operations support to treasury), and assisting the government in the

contracting process.

Factors subject to government control or implementation agency

(i) Procurement Administration. There were several delays in initiating the procurement actions

with regard to procurement of goods as agreed in the procurement plan because of the lack of

coordination between RIMU and other agencies. One reason was that some key activities were

continuing from the predecessor PACBP.

(ii). The CAO did not accept MOF Internal Audit mandate, under the PEFM Law, to conduct

internal audit in ministries outside the MOF. They used the prevailing CAO Law to support their

own role in internal audit which conflicts with the PFM Law Article 61 which gives IA of MOF

16

the right to conduct internal audit across government. The CAO campaigned against MOF IA 's

right to do its work and interfered with this with instructions to the line ministries not to

cooperate. This led to IA shortfall in its component objectives.

(iii). A major assumption of the PFMR project was that there would be new CAO (Audit Law).

This law was a commitment of the GIRA from 2002 and is still pending - the current legal

framework is inadequate and inappropriate since the CAO is not independent and is tasked with

internal audit functions.

(iv). Serious delays by the Ministry of Telecommunications to provide the means to transmit data

for the AFMIS led to a decision to use private services and this enabled the Treasury to extend

AFMIS real time access to all provincial offices (as well as all line ministry HQs in Kabul). Once

these services were in place Treasury quickly rolled-out the training and began on-line processing

through AFMIS for all budget transactions thereby improving the integrity of all budget and

financial information. This on-line processing contributed to timely in-year budget execution

reporting and full compliance with end of year financial statement presentation to the Parliament.

(v). During the life of the project GIRA amended the Procurement Law and lost key transparency

provisions. This rendered much of the implementation guidance and training material already

developed useless. After considerable discussion the law was again reformed but implementation

guides and training material had to be redone and given again. Fortunately, the both the

performance of the PPU and its consultant firm led to the completion of the legal framework and

implementation guides as well as a best practice approach to deliver training through the Afghan

Civil Services Institute.

(vi). After serious delays in contracting the TA to assist the CAO with project audit the SY 1387

audits came in nine months late but GIRA performance on audit compliance for SY 1388

( 100%) and 1389 ( only one audit not on time) were the best in the Bank for a portfolio of this

size.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

M&E design. Monitoring and evaluation was based on a set of specific monitoring indicators

that were critical for achieving the project objectives and were clearly linked to results. Specific

benchmarks were agreed between the government and technical assistance providers early on, in

implementation so as to measure specific progress in meeting capacity building objectives.

Intensive supervision by the Bank during the first half of the project period was planned to ensure

that any implementation issues were dealt with promptly. At a minimum, a full supervision

mission was planned twice a year, comprising appropriate specialists from each of the component

areas. The RIMU’s Monitoring and Evaluation Unit (MEU) had introduced a new monitoring

methodology including monitoring the achievement of annual benchmark results, in addition to

the more conventional monitoring of the execution of activities that were agreed in annual work

programs.

M&E implementation. The MEU had led the monitoring and evaluation process and established

a network of M&E focal point persons in each major operating line unit of the ministry.

Implementation data were collected on a regular basis, and Annual Performance Reports were

prepared using a results-based M&E performance framework. Good data was made available

except for donor information of off budget operations.

17

M&E utilization. Appropriate data collected from Annual Performance Reports was evaluated

and used to inform decision-making on certain activities. For example, these data contributed to

the design of the follow-on project, PFMRP II.

2.4 Safeguard and Fiduciary Compliance

Safeguard Compliance. N/A

Fiduciary Compliance. There were no significant deviations or waivers from the Bank’s fiduciary

policies and procedures during the implementation of the project.

2.5 Post-completion Operation/Next Phase

(a) Transition arrangements. PFMR Project II which became effective in August 2011 and is

currently under implementation, has ensured a smooth transition for continuing the project's

future operation.

(b) Monitoring and evaluation. RIMU would be responsible for the monitoring &

evaluation of the project as well as that of the MOF strategic plan, reforms and technical

assistance (TA) to MOF. It has already established a results-based M&E system for the MOF

strategic plan and the PFMRP. The system integrates implementation based M&E system

(inputs, activities, outputs) with results based indicators and mostly focuses on the results i.e.

outcomes and impact of the interventions. The M&E specialists at RIMU would continue to

conduct monitoring and evaluation of the MOF strategic plan, TA and the project with focus on

institutionalization of the system and creating a permanent M&E Unit within the MOF.

(c) List of performance indicators. Indicators developed under PFMR II Project will be monitored

during its implementation. Some of the Indicators are the following:

Donors shift 20% of their off-budget official development assistance to Afghanistan to

on-budget

PEFA ratings for internal audit (P-21) improve to B.

PEFA ratings for external audit (P26) improve to B.

At least 50% of procurement under the budget is done by line

Increased number of functions carried out by regular ministry staff that were previously

carried out by contracted staff.

(d) Future Impact Evaluation. It will be important to conduct an impact evaluation after three

years of project closing in order to assess the sustainability of the project’s achievements. This

evaluation could be done at the end of PFMRP II.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

Satisfactory. The objectives are still, relevant, and important to Afghanistan’s economic

development. They are timely and appropriate to the current needs of the country's public

financial management sector. After several decades of wars and civil strife, building an effective

state - one that can provide security and services to the people - has been at the heart of the

18

reconstruction effort in Afghanistan. The government has made remarkable progress in many

areas such as primary education, basic health services, irrigation rehabilitation, and rural

development. However, the country remains extremely fragile; and security remains a serious

obstacle to the delivery of reconstruction assistance and implementation of reconstruction

programs. Afghanistan’s poverty and social indicators remain among the lowest in the world.

Government capacity is weak despite improvements and the pace of implementation of

reconstruction programs has been short of popular expectations. In particular, strengthening the

country’s public financial management to accelerate aid utilization, provide faster and better

services to Afghan people, and ensure transparency and accountability of public expenditure is a

top priority for the government in taking the reconstruction agenda forward.

3.2 Achievement of Project Development Objectives

Satisfactory. The PFMR Project was successful in achieving its objectives. As a result of various

capacity building tasks during the life of this project, there has been a steady increase in building

basic financial management capacity throughout the government. For example, the MOF has

made good progress in a challenging environment, in creating basic conditions leading to

becoming an accountable, credible and self-managed/directed institution. The principle

components of budget and treasury operations are in place, including a legal and regulatory

framework; cash flow management systems; decentralization of some daily functions to regional

sub-departments; automated internal reporting; and internal audit of its departments. The MOF

has also made progress in establishing the human resources management capacity needed to

recruit and administer its own staffing, qualifying them for a new civil service pay and grading

system, and promoting skills training. This is an important step in building morale, loyalty and

accountability of the MOF staff.

The project has also been instrumental in sensitizing GOA about the role of external auditing and

its importance in providing assurance to all the stake holders. Further, during last few years,

understanding the role of internal and external auditors by all the relevant entities with active

support under the project has improved the audit regime in the governance of

Afghanistan. Other achievements of the project include:

establishment of capacity to devise procurement policy and oversee its implementation in

PPU and the increased capacity of staff working on procurement in the line ministries.

extension of the AFMIS system to the HQ line ministries for temporary posting of

transactions and on-line real time consultations and reporting and to all provinces for on-

line real time processing of all provincial transactions through the AFMIS, thus raising

the integrity of the financial information.

fewer international staff in TA position on PFM and training has been absorbed and

duties of staff continue to expand both in areas formally done by consultants and to new

areas of responsibilities.

The details of the project’s achievements are as follows:

Objective 1: Developing an efficient and effective public financial management system.

(a) Procurement Institutional Development and Social Accountability:

Institutional development and capacity assessment for standalone procurement of six

line ministries; (Public Health; Rural Rehabilitation and Development; Agriculture;

19

Education; Energy & Water, Public Works; and Finance) has been done. Out of these,

Ministries of Education, Agriculture were awarded capacity certification for stand-alone

procurement and Public Health for consultants services only.

Also, the institutional development of seven more line ministries (Transportation,

Communication and IT, Counter-Narcotics, Higher Education, Urban Development,

Mines and Commerce) is under process. All seven line ministries have submitted their

report on current procurement structures with proposed procurement structure and

budgetary information as was required. PPU has worked and finalized Institutional

Development report for Ministry of Communication and IT and the rest are under

finalization stage. Furthermore, capacity assessment of these ministries will be done for

standalone procurement after their institutional development, in addition to those which

were not certified earlier.

PPU website (www.ppu.gov.af) and PMIS have been developed and are operational. The

website contains important information on Public Procurement Law, Rules of Procedures,

Circulars, SBDs, RFPs, RFQs and other documents issued by PPU from time to time and

it is properly functional. Staff of line ministries have been trained on the usage PMIS.

(b) Treasury Systems Development and Roll-out:

AFMIS rollout of core modules has been completed for all line ministries and all

mostoufiats. This is a major milestone reached by the project. For example the payment

requisitions (M - 16) documents are no longer sent to the Treasury for input to AFMIS.

Since the line ministries now have AFMIS, they are required to enter the M - 16

documents which has made the processing more timely and efficient. Likewise, all

moustafiats have been provided with full functionality of AFMIS, including real time

posting (budget execution) and check generation for operating budget. The central

ministries in Kabul have also been provided with online connection with report retrieval

and transaction processing capabilities. AFMIS currently caters to capturing all the

budget execution on real-time basis. The plan is now to start roll out of AFMIS to the

secondary budgetary units.

AFMIS has been upgraded to FreeBalance Financial Accountability Module Version 6.5;

further upgrade is pending securing donor support.

The Qatia (annual national budget execution statement) and the World Bank loan and

grant financial statements are audited and submitted to the National Assembly on 22nd

September every year.

All 34 mustofiats have completed implementation of restructuring and new processes of

Moustoufiat Reform program.

(c ) Internal Audit Work Practices:

Satisfactory progress has been made in strengthening internal audit work practices and

capacity in the Internal Audit Department (IAD) of the MOF. Internal audit is now being

applied comprehensively to departments in the MOF and through a staged approach is

20

being gradually expanded to other ministries. In Solar Year 1387 (ending March 22 ,

2009) , 11 MOF entities, in 1388, 16 MOF entities, in 1389, 105 MOF entities and in

1390 till the end of the 3rd

quarter, 73 MOF entities were audited. Some special cases

were also audited by the IAD on special request of the Minister’s Office. These reports

were reviewed by a team of national and international auditors in the IAD and verified

that the reports were prepared at acceptable standards.

As for internal audit of line ministries, in 1389 as per plan, four line ministries (Rural

Rehabilitation and Development, Energy & Water, Health, Transport and Civil Aviation)

were audited. In 1390, ten ministries were planned to be audited; however, due to

interference of the CAO, only four lines ministries (Agriculture; Mines; Urban

Development; and Information & Culture) were audited.

Fraud Investigation Unit (FIU) was established in the IAD in January 2008 (last quarter

of 1386). Basic and on the job trainings were provided to the staff of this unit and during

on the job training, they investigated four cases, one in the Treasury Department and

three in the Customs Department. In 1388, totally 7 cases were investigated. In 1389, 159

cases were investigated, 82 of which were resolved via direct correspondence with the

relevant officials and the rest 77 were physically investigated by FIU. In 1390, 114 cases

were investigated in the first 9 months. 64 cases were resolved via direct correspondence

with the relevant officials the concerned department and the rest 50 cases were physically

investigated by FIU. Reports of all have been submitted to the Director General of IAD.

(d) Supports for External Audit:

The CAO is a Supreme Audit Institution (SAI) of Afghanistan and it is imperative that its

function is based on the mandate reflecting the vision enshrined in the constitution and

the principles of INTOSAI. The draft law received inputs from the Bank from time to

time and currently it is placed before the National Assembly for enactment. It will

enhance external audit mandate and put the role of CAO in correct perspective in the

public financial management framework in Afghanistan. It will also strengthen auditing

in the government as a whole and clear the blurred line between internal audit and

external audit set up in Afghanistan.

The role of CAO, supported under the project, has also indirectly created an atmosphere

for the development of private sector Accounting and Auditing. The enactment of audit

law will also result in the formation of a Public Accounts Committee in the National

Assembly to discuss audit reports and help the National Assembly in exercising effective

oversight over public expenses and revenues.

The Qatia audit in the CAO has been reported to the legislature on time and has been

strengthened through the application for the first time, of better auditing methodologies

developed by the advisors for the report to provide more focused and useful commentary

on accounting practices. The CAO’s audit program for grants has been strengthened

sufficiently for all CAO audits to have met the reporting timetable for the first time since

the program was put in place in 2002 and for the financial management of the grants to

have been improved such that the proportion of clean audit opinions increased from 66%

in the previous year to 90% and ineligible expenditure amounts for all the projects was

reduced from US$5,611,650 to US$120,134.

21

(e) Targeted Restructuring of Internal MOF Business Arrangements:

Re-structuring of all the MOF departments and re-grading and revision of job

descriptions for all 6100 staff, started at the end of 1387 in line with new Civil Servants

Law and pay and grading system. A proposal was developed and submitted to IARCSC

which was approved at the beginning of 1388 and implemented since then. Also, a further

review of the MOF taskheel took place in 1388 and an additional 680 new positions were

added. Furthermore, in 1389 the MOF taskheel was reviewed and as per the need of

MOF, a number of 256 more positions with job descriptions were created. All the

positions had approved functions and reporting line. The new taskheel also included the

newly established Office of the Deputy Minister for Policy under which there are two

General Directorates (Policy Execution and Strategy Implementation). HRMD was

assisted in developing new job descriptions for all the positions within these two new

departments as well. In 1390, a further review of the taskheel took place and HRMD was

assisted in restructuring it in line with MOF strategic plan.

The new MOF taskheel for 1390 consisted of 7679 positions, which is 9% higher than

that of 1389. The project also facilitated restructuring the Customs Department for the

1391, in terms of developing job description for new positions and in revising the

existing job descriptions.

(f) Staff Re-grading under the GOA Pay/Grading Policy:

About 6750 MOF employees have been transferred to the Pay and Grading System since

1388, accounting for 88% of the MOF total tashkeel. Progress is 88% at Headquarter,

87% at Mustofiats and 89% at Provincial Customs. However, high staff turnover and

security issue in some provinces has made it difficult to achieve 100% of the target. At

HRMD 95% of the staff has been hired under the Pay and Grading System.

Objective 2: Developing the human resource capacity of the MOF and CAO to ensure better

operation of public financial management.

(a) H.R. Capacity Development in Procurement:

About 3550 staff of line ministries and mustofiats were trained in basic, intermediate, and

advanced and special courses in procurement during 1387-1390, with an average of 885

staff trained per year.

(b) H.R. Capacity Development in Financial Management:

In preparation of the rollout of AFMIS, basic training in financial management was

provided to line ministries staff, mustofiat’s staff and Treasury interns. For example, in

1389, more than 700 staff and in 1390, 900 staff of line ministries, and provincial

mustofiats, were trained in the following areas: COA, Data Entry; AFMIS Rollout

Training; Problem Solving & Coordination W/Shop; Financial Management Framework;

Workshop of ARTF, Procurement; and Development Budget AFMIS Rollout training.

The training was very successful as illustrated by the successful rollout of AFMIS.

(c) H.R. Capacity Development in Audit:

22

14 Auditors were given on-the-job training by US Treasury Technical Advisors on

techniques for accomplishing an assessment, procedures for auditing revenue processes

& conducting Risk Assessment in line ministries.

A three month program was conducted in which following training courses were

provided to 81 internal auditors: a) Customs, Revenue & Civil Service Law; b)

Procurement Law & Regulations; c) Financial Mathematics; and d) Toolkits usage.

A training on fraud investigation techniques and methodologies was conducted by UNDP

International consultant.

(d) Support for the HRM Department:

RIMU made good progress in the support and development of the HRMD and

implementation of the administrative reforms, assistance in monitoring and evaluation of

the MOF strategic plan and technical assistance and project coordination and

administration.

A results-framework of the HR operations was produced indicating the targets for the

next three years (1389-1391). A situational analysis of HRMD was prepared and four HR

Coordinators/Consultants were recruited, out of which, one was deployed to the Customs

Department, another to the Revenue Department for implementation of shared services

model. The HRMD Strategic Plan was finalized as well as a performance appraisal

policy. Performance appraisal training materials are in development and the training will

soon be rolled-out to the Customs and Revenue Departments.

About 80 staff of HRMD were given different duty-specific trainings. Training was also

provided to sub-national level HR staff and staff of other MOF Departments.

(e) Preparation of New Human Resources Management Initiatives:

The number of international TA consultants has decreased and shows a reduction of 30%

at the MOF. In July 2008, there were 80 international TA, whereas in June 2011, it

reached to 56. In 2008, at the Treasury Department there were 11 expats, whereas this

number since then has been reduced to only four. But the local contracted staff has

increased from 242 in 2008 to 305 in 2011 at the MOF. Relatively, TA as a % of

government staff in MOF HQ has decreased from 16% in 2008 to 14% in 2011. Most of

these TA staff have a supporting role to government staff, which includes institutional

development and capacity building.

3.3 Efficiency

N/A

3.4 Justification of Overall Outcome Rating

Rating: Satisfactory

Based on the discussion given in Sections 3.1 and 3.2, the overall outcome is rated as Satisfactory.

23

3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

N/A

(b) Institutional Change/Strengthening

The project resulted in a substantial institutional development impact in the areas of procurement,

treasury, audit, and reform management. For example:

Full legal framework was developed under PPU and structure in place to monitor its

compliance. There is increased procurement capacity and skills in the line ministries,

while training is on-going under the supervision of PPU but delivered through the

Afghanistan Civil Services Institute.

There is a full country coverage of AFMIS for online real time processing of provincial

financial transactions.

Internal Audit Department’s capacity to conduct audits has been elevated to a high

standard to include audits of computer systems. IAD has also raised the capacity of civil

service staff and management in particular – this stands out in MOF, where the reliance

of local consultants had been the rule for higher level functions.

Monitoring capacity in the RIMU has increased to follow PFM reforms both in MOF and

across the government.

For details see Section 3.2.

(c) Other Unintended Outcomes and Impacts (positive or negative)

N/A

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

N/A

4. Assessment of Risk to Development Outcome Rating: High

The ICR team considers that the risk to development outcome would be high based on the

following factors:

SAI independence is not embedded until an enacted Audit Act meets all of the

requirements of the principles of independence contained in the International Standards

of Supreme Audit Institutions ISSAI 10 “Mexico Declaration on SAI

Independence”. Most especially the new Audit Law: (i) must meet these requirements

and (ii) be enacted in PFMRII.

SAI capabilities will very likely not reach a standard such that the Bank or donors could

rely on CAO to carry out audits of TA projects without oversight and support of an audit

24

agent. Use of foreign audit firms alone is also unlikely to be effective in gaining adequate

access to regions so joint arrangements should be favored.

SAI capacities may not reach a standard such that the CAO can competently audit an

Afghan annual financial statement prepared according to IPSAS. The CAO currently

audits a Qatia statement of budget realization and the assurance that this provides is not

clear and probably does not meet ISSAI standards.

Ad hoc rather than institutionalized arrangement for English language training has not

been sufficiently extensive to support the Afghan scrutiny of English language donor

projects documents and related contracts.

The Afghan resources for its budget are less than half the budget requirement and

extensive donor support has been entrenched.

There is a strong opposition from the CAO in implementing Article 61 Audits. As a

result, some ministries have denied the MOF Internal Audit Dept. access to their internal

audit offices, and benchmarks were not met for the 2nd

quarter 1390 and may not be met

for either the 3rd

or 4th quarter, if CAO maintains the same approach.

The project did initiate improvements in the operation and audit processes in MOF IAD,

and initiated implementation of MOF IAD leadership of internal auditing in GIROA.

Additional efforts and consistent hard work is required before these improvements result

in proper oversight of expenditures and revenues; prevention and detection fraud, waste

and abuse, and a general reduction in corruption.

There seems to be continued misunderstanding of the role of internal audit within some

ministries. The auditing concepts that are generally accepted in the world are not

understood or even accepted in many ministries. Many Ministry internal audit offices are

used as a dumping ground for staff and the audit heads are not fully accepted within the

senior management circle.

In spite of a sound new grading and pay system being adopted, remuneration in the public

sector remains uncompetitive for persons with the skills required to make public financial

management function effectively. The MOF has recognized this, but alone, it is not in a

position to change the underlying structure of public sector employment that permits

competitive remuneration to be determined and applied systematically. Instead, there

continue to be ad hoc arrangements with donors, use of contractors, to operate outside the

civil service, out of necessity.

The deteriorating security may slow down implementation and discourage contractors

from bidding, and agencies may not be able to source high level TA on a timely basis and

at reasonable cost. Further, escalating insurgency-related violence has increased the level

of fragility in the political environment, which is also impacting the ability of the

government to deliver services and programs.

Corruption continues to be widespread and pervasive. Afghanistan’s ranking in

Transparency International’s Corruption Perceptions Index has slipped from 176 out of

180 countries surveyed in 2008 to 179 out of 180 countries surveyed in 2009.

While the Procurement Law and the Appeal and Review mechanism provide a modern

legal system for procurement, effective implementation of the law may encounter

difficulties in the current weak institutional structure and capacity of the government.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry

Rating: Satisfactory.

25

The Bank's performance in the identification, preparation, and appraisal of the project was

satisfactory. During preparation and appraisal, the Bank took into account the adequacy of

project design and all major relevant aspects, such as technical, financial, economic, and

institutional, including procurement and financial management.

Project preparation was carried out with an adequate number of specialists who provided the

technical skill mix necessary to address sector concerns and a good project design. The Bank

provided adequate resources in terms of staff weeks and dollar amount to ensure quality

preparation and appraisal work. The project was consistent with the government priorities in the

sector at the time. The Bank had a consistently good working relationship with the Borrower

during preparation and appraisal.

(b) Quality of Supervision


The Bank's performance during the implementation of the project was satisfactory. The task team

prepared Aide-Memoires regularly and alerted the government and the implementing agencies to

problems with project execution and facilitated remedies in a timely manner, in conformity with

Bank procedures. The Implementation Status Reports (ISRs) realistically rated the performance

of the project both in terms of achievement of development objectives and project

implementation. The task team also monitored fiduciary compliances.

Bank’s procurement and financial management staff worked with the staff of the implementing

agencies to explain the rules and procedures to be applied during project implementation, with

regard to procurement of goods and works, and selection of consultants, accounts and audits,

based on the Grant Agreement. The task team carried out a Mid-Term Review in April 2009, and

assessed progress to date on all project components, the implementation issues and the actions to

be taken to ensure the successful completion of the project.

As mentioned in Section 2.2, one important aspect of the Bank's performance and contribution

was the continuity of the Task Team, including the TTL and other key sector specialists, from

project inception through completion. This continuity engendered consistency, depth and follow-

up in the dialogue with the government and provided expertise to help the government analyze

issues and implement actions as they emerged during supervision. Further, having the TTL on the

ground in Kabul was strongly positive, given weak implementation capacity and thus the need for

Bank assistance in drawing up the TORs for various consultancies (including: treasury systems

development and roll-out; external audit advisory services; and direct operations support to

treasury), and assisting the government in the contracting process. There was considerable input

from technical staff. The project also received support in addressing project issues from the

Country Management Unit (CMU), the Quality Director, Regional Procurement Manager, and the

Sector Manager.

(c) Justification of Rating for Overall Bank Performance


Based on the Bank performance during lending phase and supervision as discussed above,

overall Bank Performance is rated as Satisfactory.

26

5.2 Borrower Performance

(a) Government Performance


The Borrower had substantial involvement in defining the project's scope and identifying the

agencies and ministries where consultants would be located to best advantage. There were also

strong champions in senior levels of government. Commitment on the part of the MOF, MOE,

CAO, and Treasury Department, was high. The government officials worked closely with the

Bank's project team on a continual basis, and cooperated fully with the task team.

The government consistently demonstrated and maintained full commitment to the project and its

objectives throughout the implementation. Examples of active implementation interventions on

the part of the government are:

directing other donors support to complement the project activities – specifically through

US Treasury Advisors in Treasury to assist with the preparation of TORs for project

activities and in Internal Audit Dept to support the expansion of audit to line ministries;

investing domestic resources in a modern data center for the operation of the AFMIS in

Treasury

preparing a PFM Roadmap for presentation to the entire donor community at the Kabul

Conference (July, 2010) which contains significant actions to support the project ends.

agreeing to memorandums of understanding with donors under the Recurrent Cost

Incentive Program which committed them in FY 2010 to address the legal framework on

internal audit and in FY 2011 to improve the legal framework for external audit.

collectively leading the management and coordination of the project through the Project

Steering Committee which was chaired by the Deputy Minister of Finance and approved

all aide memoires and project budgets.

The government prepared periodic monitoring reports, communicated issues freely and openly.

Given the country context in Afghanistan and the difficulties to find qualified staff, the

government made every effort to comply with Bank covenants.

(b) Implementing Agency or Agencies Performance


RIMU performed fully satisfactorily in keeping focus on improvements in basic operational

matters according to a MOF plan, and addressed human resources management issues. The

RIMU: (i) prepared the overall plan of actions with the contributions of the various departments

and donors making contributions; (ii) coordinated actions to assure mutual support and cross-

functional efficiency; (iii) monitored progress; and (iv) evaluated the intended results. It covered

all project-supported activities including those implemented through the MOE and the CAO as

well as activities financed by other donor partners.

The RIMU Director convened periodic meetings of the working level authorities of various

departments to identify and resolve implementation issues that were outside the scope of their

individual authorities. The RIMU assisted the MOF to track and account for commitments to its

27

Annual Strategic Plans for improving MOF performance. It conducted annual reviews from a

strategic perspective (Annual Performance Reviews).

Treasury Department’s performance was highly satisfactory in terms of executing the planned

activities and raising the PFM performance.

Internal Audit Department’s performance was highly satisfactory as it executed the activities

planned and raised the skills of the civil servants in particular. However, IAD’s efforts to extend

coverage to line ministries was stifled by interference from the CAO.

PPU was responsible for both formulating and then overseeing the national procurement legal

and institutional framework. It needed the support of an international firm while the framework

was being developed and training material was prepared. It is currently operating on its own and

the training is on going under the Afghan Civil Service Institute – a best practice for training

approach.

CAO. The direct operations support was very successful and the performance on project audits

in terms of timeliness and quality is among the best in the Bank. Training was also delivered and

planning and execution of audits, in addition to project audits, is improving. One short coming,

however, was the failure to implement a new legal framework for external government audit.

ARDS/ MOE. The role of ARDS was to ensure that all procurement over an agreed threshold

complied with the rules and regulations. ARDS managed to do this even when there was no TA

contract in place between the period of TAs from PFMR to PFMRII.

Financial Management. Performance of the implementing agencies was satisfactory. The project

closed with a ‘Moderately Satisfactory’ FM supervision rating. Annual audited financial

statements were acceptable and submitted on time except for FY 2009 when all the audit reports

in the portfolio were late.

Procurement: Procurement Arrangements. Procurement of all works, goods and technical

services under the project followed the Procurement Guidelines “Procurement under IBRD Loans

and the IDA Credits”. Overall, after initial delays, procurement activities proceeded both at a

satisfactory pace and at acceptable quality levels.

(c) Justification of Rating for Overall Borrower Performance


In light of the performance of the government and implementing agencies as discussed above, the

overall performance of the Borrower was satisfactory.

6. Lessons Learned

Continuity of the team working on the project, especially the TTL, is very important both

for the Bank and the Borrower, as it will engender consistency, depth and follow-up in the

dialogue with the government and provided expertise to help the government analyze issues

and implement actions as they emerged during supervision.

28

PRR. Even though the PRR has been an invaluable tool, in order to make it sustainable, it

is important to find an alternative incentive mechanism which can be continued

indefinitely using national resources.

Corruption Risk The country operating environment carries a high risk to perceived

corruption. Further strengthening of procurement and audit including developing social

accountability and support for the activities of the Public Accounts Committee should

help address these issues.

Internal Audit. Management oversight is key to good governance. This oversight is

constrained by the lack of an effectively operating internal audit function, except in the

MOF. Building internal audit capacity in each line ministry cannot be done in the short

term so implementing the approach provided in the Public Expenditure and Finance Law

which entrusts MOF to establish internal audit throughout the government would be the

most effective and expeditious route to establish the function across government, while at

the same time supporting the development of internal audit in the line ministries, where

feasible.

External Audit. The external accountability of the executive must be strengthened if

confidence in its performance is to be built. Many achievements in PFM are discounted

because there is little independent oversight or assurance that the reports and decisions of

the executive deserve credibility, particularly given the perception of rising corruption. A

new legal framework, training for members of a public accounts committee, and training

and technical support to the CAO are needed.

It is important to recognize that an operation aimed at changing institutions is

fundamentally about changing behavior and attitudes, social relationships and

organizational culture, not strictly installing technical solutions. Granted that the PFMR

was, correctly, focused on installing strict financial management tools to accompany

large and emergency infusions of budget support and development assistance ; for results

to be sustainable, additional efforts would have been required to raise the level of

willing adoption of the new practices.

The PFMR tended, correctly, to measure results in terms of quantitative achievements

(numbers trained, audits received, line ministries adopting rules) but these are more like

necessary conditions for progress; the project could also have taken additional steps to

track changes in the business culture (for example, timeliness and quality of functions;

employee morale; turnover and absenteeism, among other indicators related to business

culture).

It is necessary to accept the use of short term expedient measures that may appear to

contradict a longer term goal; recognizing that the choice of implementation measures

should be pragmatic. The PFMR provided heavy support for using contractual consulting

services to actually perform many PFM functions, even though a longer term goal was to

develop a MOF-led system managed by the civil service. The PFMR resisted

understandable impatience on the part of the GIRA to take responsibility for financial

operations, but was correct in working towards a more macro-level outcome—

maintaining transparency and accountability acceptable to those providing the resources.

29

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies

To fill up after receiving the Borrower’s comments on the Bank’s ICR.

(b) Cofinanciers

NA

(c) Other partners and stakeholders

NA

30

Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

(Total rows and percentage column will be calculated by the system)

Components Appraisal Estimate

(US$ million)

Actual /Latest Estimate

(US$ million)

Percentage of

Appraisal

1. Institutional

Development

11.40 9.8

2 - HR Capacity Building 5.00 3

3. Reforms Management 1.00 0.6

4. Direct Operations

Support

16.00 20

Total Baseline Cost 33.40 33.4

Physical Contingencies

Price Contingencies

Total Project Costs 33.40 33.40

Project Preparation Facility

(PPF)

Front-end fee (IBRD only)

Total Financing Required 33.40 33.40

(a) Co-financing

(The appraisal estimate will be pre-populated from the Financing data in SAP/AUS;

Percentage of Appraisal column will be calculated by the system)

Source of Funds Type of

Financing

Appraisal

Estimate

(US$ million)

Actual/Latest

Estimate

(US$ million)

Percentage of

Appraisal

[Government]

[IBRD/IDA] 33.40 33.40

[Donor A] [WB-administered

TF]

[Donor B] [Parallel financing]

31

Annex 2. Outputs by Component

1. INSTITUTIONAL DEVELOPMENT

1.1 Procurement Institutional Development & Social Accountability:

PPU website (www.ppu.gov.af) and PMIS have been developed and operationalized.

The website contains important information as Public Procurement Law, Rules of

Procedures, Circulars, SBDs, RFPs, RFQs and other documents issued by PPU from time

to time and it is properly functional.

Line ministries staff have been trained on the usage PMIS and user name and password

have been created for them, through which they can enter the data (awarded contracts,

bidding opportunities and job announcement).

For public awareness campaigns, three workshops on appeal and review mechanism,

bidding process, public procurement law, rules of procedures and preparation of SBDs

were held at Civil Service Institute, Ministry of Finance and Afghan Builders

Associations. About 150 businessmen, suppliers and contractors participated.

1.2 Treasury Systems Development and Roll-out:

AFMIS connectivity was established for 34 provinces in 1389. These provinces have

been provided with full functionality of AFMIS, including real time posting (budget

execution) and check generation for operating budget. All line ministries in the centre

have been connected to AFMIS and are performing temp save for operating budget

execution.

The Treasury has undertaken a program to establish a world class data center. An IT

advisor under the project has been supporting the data center development.

All mustofiats have been restructured in line with the government pay and grading policy.

Also, implementation of the pay and grading system has been completed in all mustofiats

with around 90% progress.

1.3 Internal Audit Work Practices:

Fraud Investigation Unit (FIU) was established in the IAD in January 2008. Basic and on

the job trainings were provided to the staff of this unit and during on the job training, they

investigated 4 cases, 1 in Treasury Department and 3 in Customs Department. In 1388,

totally 7 cases were investigated. In 1389, 159 cases were investigated, 82 of which were

resolved via direct correspondence with the relevant officials and the rest 77 were

physically investigated by FIU.

Internal audit of MOF entities was done both at central and sub-national levels due to

suspension of article # 61 of the PFEM law. The assigned teams have performed the

audits in accordance with auditing standards and reports were prepared and sent to the

relevant entities with recommendations for improvement. In 1387, 11 MOF entities, in

1388, 16 MOF entities, in 1389 105 MOF entities and in 1390 till the end of the 3rd

quarter, 73 MOF entities were audited.

In 1389, four line ministries (Rural Rehabilitation and Development, Energy & Water,

Health, Transport and Civil Aviation) were audited.

http://www.ppu.gov.af/

32

In 1390 new technical audit manuals were prepared by IAD international advisors in

consultation and involvement of the senior auditors:

1.4 Supports for External Audit:

External audit Report has been submitted every 6 months to the President and Ministry

of Parliamentary Affairs for onward transmission to Parliament.

II. HUMAN RESOURCES CAPACITY DEVELOPMENT

2. 1 H.R. Capacity Development in Procurement:

3532 staff of line ministries and mustofiats has been trained in basic, intermediate, CIPS

and advanced and special courses during 1387-1390, indicating an average of 883 staff

trained per year.

2.2 H.R. Capacity Development in Financial Management:

In 1387, more than 500 and in 1388, more than 1300 staff of all central and provincial

budgetary units and Treasury interns were trained in the following areas.

AFMIS (Afghanistan Financial Management Information System)

Second Phase of AFMIS

New Charts of Accounts Training

Financial Reporting

Payment/Disbursement Procedures

Financial Planning and Commitment Control

Introduction to Treasury

Qatia

SDU Procedures

Results-based Management

Anti Corruption

Overview of Procurement

Taxes Relevant to Government Suppliers & Wage Withholding Tax

Training on the Computerized Payroll System CPS has been provided for 50 accounting

offices and 3 Provincial Mustofiats

In 1389, more than 700 staff and in 1390, 900 staff of Line Ministries, Provincial

Mustofiats, Line Ministries’ Controllers, Financial Officers of Mustofiats, Budget Dept

and Kabul Mustofiat were trained in the following areas:

COA, Data Entry

AFMIS Rollout Training

Problem Solving & Coordination W/Shop

COA and Budget Execution Presentation.

Financial Mgmt Framework

Workshop of ARTF , Procurement

Development Budget AFMIS Rollout training

2.3 H.R. Capacity Development in Audit:

Internal Audit:

33

In 1388, 74 staff including 27 from IAD, 37 from Treasury and 10 from other

departments received English Language training during this period. Additionally, a total

of 25 staff, 24 from IAD and 1 from another department were trained in IT.

In 1389, 10 IT Auditors and 5 other auditors were given preliminary ASYCUDA training.

Also, twenty five newly recruited auditors were given basic trainings in auditing by the

senior auditor. Furthermore, International Audit Advisor provided one month classroom

training to 20 newly recruited auditors on basic internal auditing, usage of toolkits,

introduction to Revenue, Customs, PFEM, and procurement & performance auditing.

In 1390, also 14 auditors were given on the job training by US Treasury Technical

Advisors in techniques for accomplishing an assessment, procedures for auditing revenue

processes & conducting risk assessment in line ministries. They were also provided with

comprehensive training of two weeks on process auditing and internal audit toolkits

effectiveness & usage.

81 internal auditors were trained in a three-month program in the following areas.

a) Customs, Revenue & Civil Service Law,

b) Procurement law & regulations,

c) Financial Mathematics,

d) Toolkits proper usage

External Audit:

In 1389, 120 staff (30 in English, 30 in IT courses, 15 on use of excel sheet for grants

audit, 15 on enterprise audit, 15 on frauds and corruption concepts, 15 on INTOSAI

Auditing Standards) were trained. In 1390, 75 (30 in English, 45 in IT courses) were

trained. All these training programs were conducted by the international consultants and

were appreciated by the participants and were useful to the auditors in carrying out their

work.

III. REFORM MANAGEMENT

3.1.1 Targeted Restructuring of Internal MOF Business Arrangements:

The re-structuring of all MOF Departments and re-grading and revision of job

descriptions for all staff, 6100, started at the end of 1387 in line with new Civil Servants

Law and pay and grading system. A proposal was developed and submitted to IARCSC

which was approved at the beginning of 1388 and was implemented then. Also, a further

review of the MOF taskheel took place in 1388 and an addition of 680 new positions was

added.

In 1389 the MOF taskheel was reviewed and as per the need of MOF, a number of 256

more positions with job descriptions were created. All the positions had approved

functions and reporting line. The new taskheel also included the newly established

Office of the Deputy Minister for Policy under which there are two General Directorates

(Policy Execution and Strategy Implementation)

3.1.2 Staff Re-grading under the GOA Pay/Grading Policy:

About 6740 MOF employees have been hired under the Pay and Grading System

accounting for 88% of the MOF total tashkeel. Progress is 88% at Headquarter, 87% at

Mustofiats and 89% at Provincial Customs. As mentioned above ongoing staff turnover

34

and security issue in some provinces has made it difficult to achieve 100% of the target.

To date, 95% of the HRMD staff has been hired under the Pay and Grading System.

3.1.3 Support for the HRM Department:

Indicator: 25. Number of human resource management staff completing duty-specific training in

their respective specialties (specialties approved and training conducted with IARCSC)

In 1387, totally 30 staff of HRMD were trained with assistance of IARCSC ( 20 staff on

pay and grading policy implementation here at MOF in a one-week workshop, 6 staff on

communications in a one-week workshop and 4 staff on recruitment in a four-day

workshop at IARCSC Training Center). In 1388, all staff of the HRMD received a one-

month general training on HRM with assistance of IARCSC.

In 1389, with assistance of RIMU, a two- month duty specific training was conducted for

all staff of HRMD in the areas of organization development, recruitment, performance

appraisal and record keeping, training and development and employees relations.

In 1390, all staff of HRMD were trained under different duty specific trainings. We have

also had trainings for sub-national level HR staff and staff of other MOF departments.

3.1.4 Preparation of New Human Resources Management Initiatives:

A PFM staff incentive program was drafted under PFMR II project, which would have

assisted in the reduction of the reliance on TA directly. However, the scheme was

removed from PFMR II project later and linked to PAR project of the IARCSC.

There is a reduction of 30% in the number of international TA consultants in the MOF. In

July 2008, there were 80 international TA, whereas in June 2011, it declined to 56.

3.156 Monitoring and Evaluation of Results:

MOF strategic plan was reviewed and updated, which went approved by HE Finance

Minister. As part of the MOF strategic plan, monitoring and evaluation (M&E)

framework was developed in line with MOF strategic goals and objectives. Baseline,

indicators and annual benchmarks were set and performance monitoring plan was

developed.

Annual performance review events were organized in 1388, 1389 and 1390.

IV DIRECT OPERATIONAL SUPPORT FOR PFM FUNCTIONS:

4.1 Direct Operations Support for Procurement:

The facilities for announcement of bidding opportunity, registered bidders and award of

contracts processed through ARDS were created and publications of bidding and job

opportunity as well as outcome of awarded contracts are now made on this site.

4.2 Direct Operations Support to Treasury Operations:

Bank reconciliations are completed within 20 days from month end for operating budget.

Monthly financial statements are posted on Treasury website within 25 days from end of

each month and the annual budget (Qatia) statements are submitted to National Assembly

by 22nd Sep. The WB grant and loan financial statements are submitted to the WB on

35

22nd Sep. Monthly cash plans are provided to stakeholders with accuracy of 85% on

monthly projections.

4.3 Direct Operations Support to External Audit:

Bank Project audit reports were submitted within 6 months of year-end, except for SY

1387, and are done to International Standards on Auditing and the financial statements

are IPS - compliant.

36

Annex 3. Economic and Financial Analysis

(including assumptions in the analysis)

N/A

37

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/

Specialty

Lending

Robert W. Crown Consultant EASPR

Deepal Fernando Senior Procurement Specialist SARPS

Shawkat M.Q. Hasan Senior Procurement Specialist AFTPC

Ali Hashim Consultant SARFM

Michael John Jacobs Consultant SARFM

Michael G. Jacobson Consultant CICRS

Ronald Points Consultant EASPR

Paul Edwin Sisk Lead Financial Management Spec SARFM

Donna Thompson Sr Financial Management Specia CTRLP

Peter-Armin Trepte Consultant OPCPR

Supervision/ICR

Robert W. Crown Consultant EASPR

Deepal Fernando Senior Procurement Specialist SARPS

Shawkat M.Q. Hasan Senior Procurement Specialist AFTPC

Michael John Jacobs Consultant SARFM

Leslie Isao Kojima Sr Financial Management Specia SARFM

Kenneth O. Okpara Sr Financial Management Specia SARFM

Ronald Points Consultant EASPR

Donna Thompson Sr Financial Management Specia CTRLP

(b) Staff Time and Cost

Stage of Project Cycle

Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including

travel and consultant costs)

Lending

FY06 18.25

FY07 134.69

FY08 0.00

Total: 152.94

Supervision/ICR

FY06 0.00

FY07 0.00

FY08 73.20

Total: 73.20

38

Annex 5. Beneficiary Survey Results (if any)

N/A

Annex 6. Stakeholder Workshop Report and Results (if any)

N/A

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR

Islamic Republic of Afghanistan

Ministry of Finance

Office of the Deputy Minister for Administration

Reform Implementation and Management Unit

Public Finance Management Reform Project

Borrower’s Evaluation Report

Project Name Public Finance Management Reform

Project

Region South Asia

Country/Area Afghanistan

Project ID P099980

Bank Team Lead Paul Edwin Sisk

Approval Date 29 May 2007

Effectiveness Date 15 Sep 2007

Closing Date 31 Dec 2011

Borrower Islamic Republic of Afghanistan

Implementing Agency Ministry of Finance

Main Loan/Credit # H-298

Total Project Cost US$ 33.4 Million

IDA Commitment US$ 33.4 Million

39

Amount Disbursed tbd After the Grace Period

I. Assessment of Operation’s Objective, Design, Implementation and Operational

Experience

The Public Finance Management Reform (PFMR) Project was launched in Sep 2007 subsequent

to the three other investment operations of the World Bank (WB), the Emergency Public

Administration Project (EPAP), US$ 10.0 million, GRTD-H 0060; the Second Emergency Public

Administration Project (SEPAP), US$8.4 million, GRTD-H 0550; and the Public Administration

Capacity Building project (PACB), US$27.0 million, GRTD-H 1440 to support the functioning

of a sound Public Finance Management (PFM) system in Afghanistan . The main objective of

these projects was to assist the Government of Afghanistan (GOA) to make good and transparent

use of public sector resources in the post conflict environment.

The PFMR project was for a period of three years. It was effective in Sep 2007 and was

supposed to end in Dec 2010; however, as per the recommendation of the WB January 2010

supervision mission to allow for completion of activity under two contracts which were

mobilized late i.e. Control and Audit Office (CAO) Advisor (PKF) contract, closing September

2011 and Treasury Advisor (Deloittes) contract closing March 2011 and request of Ministry of

Finance (MOF) to the WB so that the benchmarks under the project could be achieved, the

closing date was extended to Dec 2011.

The objectives of the PFMR Project were to: (i) develop an efficient and effective public financial


ensure better operation of public financial management. The objective of the project was well set

and continued to provide support for good progress made under the PACB project. To realize the

objective, the project had four well designed components: (i) Institutional Development, (ii)

Human Resources Capacity Development, (iii) Reform Management and (iv) Direct Operation

Support. The Reform Management Component was a new important activity that contributed a

great deal to a sound function of the PFM system through establishing and implementation of the

administrative reform in MOF, helping the MOF in strategic planning and monitoring &

evaluation of the reforms and achievements in line with the strategic plan.

The Project’s objectives and design were very supportive of the MOF/government goals for an

effective and functioning public finance management system in the country. The design of the

project and the activities and strategies determined therein were the key to an effective public

finance management system. As MOF intends to maintain both the effective public finance

management system both at central and provincial and a sound expenditure management system

to ensure fiscal sustainability, the Project directly addressed this issue and enabled MOF to

effectively manage public resources and bring reforms in the system.

The highlights of these four planned components as assessed are as below:

COMPONENTS

I. INSTITUTIONAL DEVELOPMENT

The Institutional Development Component included assistance to each of the major departments

within MOF and the CAO to develop and implement the structures, procedures and systems

required to carry out their mandates under the new Public Finance Management (PFM) legal

40

framework. Within MOF, the project assisted the Treasury Department with systems

development, assisted Procurement Policy Unit (PPU) to finish the procedures for procurement,

and assisted Internal Audit Department to develop work practice tools for government internal

audit. For the CAO, it provided them advisory services of external audit.

This component had the following sub-components.

1.1 Procurement Institutional Development and Social Accountability: This sub-component included institutional support for the newly created regulatory body, PPU.

The PPU required direct assistance to carry out its functions as per the Procurement Law. The

sub-component assisted PPU to develop an information website and a Procurement Management

Information System (PMIS). Under this sub-component, PPU was also assisted to develop SBDs,

RFPs and RFQs. The project also intended to assist PPU to develop procurement manual and

guidance notes; and to publish, analyze and disseminate review panel procedures, documentation

and decisions. About procurement accountability and disclosure, the project under this sub-

component intended to assist PPU to design an effective and strategic communication and

procurement disclosure strategy, taking into account the specific circumstances that prevail in the

country to raise awareness of the reform agenda and its implications within (i) the government

(politicians, parliamentarians, and public officials), (ii) the private sector (bidders, consultants

suppliers, etc) , and (iii) civil society at large (academia, NGOs, civilians, etc).

1.2 Treasury Systems Development and Roll-out: This sub-component included support for enhancement of the Afghanistan Financial Management

Information System (AFMIS) to meet the increasing demands on the Treasury as well as line

ministries and Mustofiats that would include purchasing, fixed asset and accounts receivable

modules as well as Human Resources Management Information System (HRMIS). It also

included support for the roll out of the AFMIS so that transaction processing and payment

authorization may be decentralized but that payment processing would remain centralized within

Treasury and the Mustofiats. The target for the roll out was five or six line ministries that

accounted for the majority of public sector non-military and non-policing functions and six

Mustofiats.

1.3 Internal Audit Work Practices: As the control of internal audit was transferred from CAO to MOF under the article# 61 of the

Public Finance and Expenditure Management (PFEM) Law and its financial regulations, the sub-

component included support for the development of the Internal Audit Department (IAD) of the

MOF. This consisted of development of improved audit methodology, further development and

roll-out of internal audit procedures and plans to the line ministries and provinces, and

improvement of the capacities of the internal audit staff through on the job training. The sub-

component also assisted with establishing a fraud investigation unit in the MOF, IAD, developing

and launching its basic operational skills and preparing a road map for developing specialist fraud

investigation processes in Afghanistan.


This sub-component included advisory services for the CAO to improve the skills of the audit

staff taking into consideration the reforms taking place in CAO and support in implementation of

the new audit law. It also included on the job trainings. The project would also finance improved

physical infrastructure including information & communication technology (ITC), office

furnishings and on line access to AFMIS. This sub-component also consisted of support to

establish the Parliamentary Oversight Committee (PAC) function, and reinforce and reinvigorate

the accountability of the Executive in the management of public finances to the Legislature

through a timely, comprehensive, and methodical review of audit reports and audited accounts of

the government. The CAO would provide management assistance, training, and operating support

to build the capacity of members of the parliamentary committee in their oversight function as

41

well as in supporting secretariat and technical assistance aimed at strengthening the

administrative support to the PAC.


This component consisted of providing consultants, training opportunities and materials for the

development of skills of MOF staff, of line ministry staff in procurement and financial

management and of staff of the CAO. By MOF, it is considered to be one of the most important

strategies under the project which helped in attainment of a sustainable PFM system in the

country. This included the following sub-components.


In particular at sub-national level, more private sector workshops specific training programs for

the PPU staff and a training program for dispute panels


This sub-component would assist the MOF Treasury Department and the Administration

Departments of selected line ministries in developing staff capacity in financial management

functions. In addition to providing trainers and materials for duty specific training, for developing

a pool of staff with higher accounting skills, the project would also provide funds to reimburse

Treasury staff for attending classes conducted by private entities such as the ACCA.

2.3 H.R. Capacity Development in Audit: The project would complete the classroom training in introductory accounting and auditing that

began under the PACB project for the first batch of internal auditors of the MOF and staff of the

CAO. Additionally, a stream of internal auditors and CAO auditors intended to provide

leadership and more expert skills would be financed for advanced training. The ACCA

professional accountant training now available in Kabul could be used for this purpose for the

staff who would become senior leaders in the IAD and CAO


This component consisted of the support to the Reform Implementation & Management Unit

(RIMU) of MOF in developing annual work plans which would assure the coordination of

actions proposed in various departments, monitoring implementation of these actions so that the

overall results of the project and the MOF Strategic Plan are achieved. It also included support for

RIMU in assuring that new personnel policies for the civil service being developed and supported

by the Independent Administrative Reform & Civil Service Commission (IARCSC) are properly

integrated into the MOF’s own Human Resources Management Department (HRMD). The key

sub-components under this were:


The RIMU would assure that the various functions and relationships between targeted MOF

departments were organized to be mutually supporting in providing efficient PFM. It included

working of RIMU with Department Heads and staff to implement any restructuring that is

recommended and pursuing a “change management “methodology.


It included support for RIMU to arrange with the IARCSC for applying the new grade and pay

policy of the government with support provided through the Civil Service Reform Project. Staff

of the MOF HRMD would be trained in creating and grading job descriptions as part of the

process.


42

The RIMU would facilitate the strengthening the HRMD to position it to perform new personnel

management functions being developed under the GOA civil service reform strategy.


The MOF would be expected to make three major strategic decisions to sustain the effects of

training, pay reform, improved personnel management : (1) Initiation of “schemes of service” to

permit the MOF to be competitive in recruiting and retaining professionals; (2) Reducing the

reliance on internationally recruited technical assistance in line functions ; (3) Introducing

Gender-Sensitive Personnel Practices..

3.1.5 PFMR Project Coordination and Administration:

The RIMU would coordinate the implementation of the components of the project. It would also

coordinate through the use of the annual work plan for MOF, the implementation of the PFMR

project with the projects being financed in parallel, for example, the DFID support to the Budget

Department.

3.1.6 Monitoring and Evaluation of Results:

The RIMU would temporarily incorporate the MOF Monitoring and Evaluation Unit to assure

coherence between monitoring and evaluation of results and the development and re-development

of reform work programs.

IV DIRECT OPERATIONAL SUPPORT FOR PFM FUNCTIONS

This component consisted of assistance in providing direct operation support to PFM Functions.

Because of the limited progress in capacity building of civil service skills in PFM, there was a

need for continuing the direct operations support under a new PFM Technical Assistance

operation. It was projected that by the end of the project the nature of support needed to

procurement, treasury and audit would have evolved to that of supervision, policy advice and

assistance for reform rather for the execution of the day to day operations.

Contribution to building the skills for Afghanistan public sector was planned by two means: (i)

on the job training for civil servants, who will be acquiring basic knowledge under the HR

Development component of this project, with the direct operations consultant firms and (ii) by

including in the technical assistance teams under the direct operations support contracts a larger

share of local advisors with concrete deliverables for the transfer of knowledge and skills for the

operation of the PFM systems. It included the following sub-components:


The services of a central procurement facilitation consultant at Afghanistan Reconstruction and

Development Services (ARDS) and operation support for the PPU: A different approach was

planned to be envisaged to be followed under the current proposed project, whereby the Team

Leader of the consultants’ team would be located at the ARDS and all other key staff would be

located at the line ministries. Through this modified approach, the procurement facilitating

consultant would not only be able have better interaction with the line ministries, but would also

be able to mentor the line ministries’ procurement staff. For the PPU, it included receiving

direct support through the funding of its director (an international consultant) and core staff who

were tasked with setting up the PPU and making it operational. This short term support was

planned to continue under this component to enable the PPU to begin its functions while a full

complement of local staff were being recruited and trained in all the required functions.

4.2 Direct Operations Support to Treasury Operations:

The project would continue to provide operational support for the Treasury functions through the

services of internationally recruited firms. Activities under this sub-component included:

operational support and on the job training in accounting and reporting, cash management,

43

payroll processing, grant management, payment processing operation and maintenance and

operation of AFMIS.

4.3 Direct Operations Support to External Audit:

This sub component included financing the consultant services to conduct with the CAO the

external audit of donor projects. An important objective was achieving compliance with

international standards of financial management including the use of the International Standards

of Auditing (ISAs). CAO would also make greater use of the advisor in audit of government

financial statements.

II. Assessment of Outcome of the Operation against Agreed Objectives

The objectives of the PFMR Project were to: (i) to develop an efficient and effective public

financial management system; and (ii) develop the human resource capacity of the MOF and

CAO to ensure better operation of public financial management.

The Project results were measured against 6 outcome and 34 output indicators associated with the

project objectives and components activities. Actual performance against the project indicators

and annual benchmarks under each component is satisfactory. This has resulted in significant

improvement and positive impact on MOF performance enabling it to move towards attainment

of its strategic goals and creating an enabling environment for the donor’s assistance to be

channeled through government.

Outcome Indicators

1. Coherence of treasury and revenue estimates with ANDS priorities and MTFF, 2. Timeliness

and predictability of treasury and revenue preparation and execution, 3. Number of ministries

managing some PFM functions independently with ex post control, 4 Percentage of GOA Core

Budget under improved line ministry and Mustofiat units, 5. Percentage of national payroll with

automated payroll processing, 6. Level and perception of good governance in PFM operations

Overall, the performance against the outcome indicators was satisfactory and most of the

benchmarks have been achieved except for line ministries to manage PFM functions

independently, the benchmark for which was 6 line ministries by the end of 1390.

Monthly cash plans are provided to stakeholders with accuracy of 85% on monthly projections.

The capacity of line ministries to manage independently with accountability the PFM functions

remains weak to delegate them additional PFM functions for independent implementation. Line

ministries cannot yet conduct comprehensive financial management. High rejection rate,

outsourcing of core functions to consultants, and lack of adequate internal audit in line ministries

are examples of this. All line ministries currently have access to prepare operating budget

Expense vouchers (EVs) in AFMIS (temp save). Allotments, commitments, and payments are

posted in a centralized manner in the Treasury and provincial Mustofiats.

Concerning indicator no 4, it is worth mentioning that hundred percent of operating budget

execution is captured in AFMIS on real-time transaction processing, including provincial budget

execution. For development budget transactions are recorded on real time basis in the center.

About automated payroll system, as of end of 2nd quarter 1390, more than 622,000 government

employees have been covered, out of whom 406,000 government employees receive their salaries

through direct deposit in their bank accounts, which is fifty percent of the payroll. Payrolls for the

staff having bank deposit are calculated mostly using specific systems or Excel, which comprise

over 50 percent of tashkeel.

44

Related to level and perception of donors of the good governance in PFM operations, regular

PFM assessment is going on. PFM capacity assessment in 14 line ministries has been launched to

prepare for the next steps in PFM capacity building. The PFM systems have been evolving and

new procedures implemented through capacity building and training. The donors have sponsored

PEFA assessment, which places Afghanistan higher than some other middle-income countries.

Output Indicators

1. INSTITUTIONAL DEVELOPMENT

1.1 Procurement Institutional Development & Social Accountability:

Indicators: 7.Number of line ministries and provincial offices of line ministries conducting

stand-alone procurement, 8. Volume of contracting under line ministries and provincial offices of

line ministries conducting stand-alone procurement, 9. Reviews of feedback from public

awareness campaign completed.

Performance under these indicators is rather satisfactory to MOF. End of the project benchmark

was 13 line ministries to conduct stand alone procurement. While the benchmark has yet to be

achieved, efforts are underway to realize the target. Most of the targeted line ministries couldn’t

meet the criteria for standalone procurement due to different factors such as lack of retention of

the qualified staff, lack of support of the ministries’ leadership to the procurement departments

and involvement of different actors in the procurement activities. At provincial level, six

provinces are targeted for institutional development. However, the main issues are ambiguity in

the procurement thresholds for the provinces, lack of provincial budget and inconsistency

between recent cabinet decision and procurement law regarding thresholds for the ministers and

governors.

Regarding volume of contracting, the PPU website and PMIS are developed and operationalized,

which will capture the data and provide the results. However, due to lack of cooperation, only

few ministries have started to feed data into the system. The main challenge is retention of the

trained staff in PMIS. About public awareness campaign, PPU has conducted three workshops

for the private sector. Details are as below:

Institutional development and capacity assessment for standalone procurement of six line

ministries; (Public Health, Rural Rehabilitation and Development, Agriculture, Education,

Energy & Water, Public Works and Finance) was done out of which Ministries of Education,

Agriculture and Public Health only in Consultancy Services were certified for standalone

procurement. During 3rd Quarter of 1390, Ministry of Agriculture was re-assessed for capacity

certification and report is under process. It is worth mentioning that for the institutional

development of the line ministries a Joint Advisory Committee (JAC) comprised of

representatives of PPU, IARCSC and line ministries has been constituted.

Also, the institutional development of seven more line ministries (Transportation,

Communication and IT, Counter-Narcotics, Higher Education, Urban Development, Mines and

Commerce) is under process. All seven line ministries have submitted their report on current

procurement structures with proposed procurement structure and budgetary information as was

required. PPU has worked and finalized Institutional Development report for Ministry of

Communication and IT and the rest are under finalization stage. Furthermore, capacity

45

assessment of these ministries will be done for standalone procurement after their institutional

development in addition to those which were not certified as mentioned in the first paragraph.

At provincial level, for the institutional development, six provinces (Kandahar, Herat, Balkh,

Bamyan, Nangarhar and Kunduz) are targeted for finalization of a unified Procurement structure.

PPU website (www.ppu.gov.af) and PMIS have been developed and operationalized. The

website contains important information as Public Procurement Law, Rules of Procedures,

Circulars, SBDs, RFPs, RFQs and other documents issued by PPU from time to time and it is

properly functional. Line ministries staff are trained on the usage PMIS and user name and

password have been created for them, through which they can enter the data (awarded contracts,

bidding opportunities and job announcement). However, due to lack of cooperation, only few

ministries have started to feed data into the system. Therefore, PPU technical staff are visiting

each line ministry in order to ensure that the trained staff of line ministries in PMIS are entering

data into PPU website properly and resolve any problem occurred.

Regarding public awareness campaigns, it is worth mentioning that three workshops on appeal

and review mechanism, bidding process, public procurement law, rules of procedures and

preparation of SBDs were held at Civil Service Institute, Ministry of Finance and Afghan

Builders Associations during the life of the project. In these workshops, around 150 businessmen,

suppliers and contractors participated.

1.2 Treasury Systems Development and Roll-out:

Indicators: 10. Number of ministries managing some PFM functions independently with ex post

control, 11.Number of PFM units in mustofiats which have implemented restructuring and new

processes of ADB study

Performance in line with above indicators is satisfactory, in particular the second one. The first

indicator is also part of the project agreed outcome indicator and has been redundantly used as

output indicator in the project. Additional AFMIS functions have not been added during the time-

span of the project not allowing delegating additional tasks to line ministries. The systems

development has been mostly limited to expanding the functions that could be completed by the

staff of the Treasury, while the additional functionality offered for line ministries has not been

adopted as practicable. Details of the AFMIS and progress of the 11th indicator are as below:

AFMIS connectivity, which was established for the last of 34 provinces during the early part of

FY 1389, continues to be the backbone for ensuring sound budgetary and payment controls

countrywide. These provinces have been provided with full functionality of AFMIS, including

real time posting (budget execution) and check generation for operating budget. All line

ministries in the centre have been connected to AFMIS and are performing temp save for

operating budget execution. AFMIS coverage at the centre caters to all active budget entities,

which are on the AFMIS network. The central ministries in Kabul have also been provided with

online connection with report retrieval and transaction processing capabilities. AFMIS currently

caters to capturing all the budget execution on real-time basis. The plan is to start roll out of

AFMIS to the secondary budgetary units. The initiative has been taken to begin the process in

providing AFMIS nodes to MoI in the provincial centers and the required equipment have been

setup for delivery.

Based on the assessment of the current IT environment and the envisaged improvements

necessary for supporting AFMIS setup and other treasury initiatives including Electronic

Payment systems, online revenue collections, auto reconciliation etc., the Treasury has

undertaken a program to establish a world class data center. An IT advisor under the project has

http://www.ppu.gov.af/

46

been supporting the data center development. The integrated and modern data center would have

the capabilities for ensuring physical and data security, besides preparing the grounds for the next

level of treasury reforms. The delay with the completion of civil works has not allowed pursuing

the implementation of the data center on schedule.

Regarding restructuring of Mustofiats, it is worth mentioning that the benchmark is 100%

achieved and all mustofiats have been restructured in line with the government pay and grading

policy. Also, implementation of the pay and grading system has been completed in all mustofiats

with around 90% progress.

1.3 Internal Audit Work Practices:

Indicators: 12. Number of professional fraud investigations conducted (assuming growth at this

stage of development) IA, 13. Number of internal audits completed in line ministries and

Mustofiats to acceptable standards.

Performance particularly with regard to the first indicator is satisfactory and the benchmarks have

been achieved. However, related to the second indicator, the internal audit of the line ministries

couldn’t be achieved to the full extent due to suspension of the article # 61 of the PFEM Law and

interference of the CAO.

Related to indicator number 12, Fraud Investigation Unit (FIU) was established in the IAD in

January 2008 (last quarter of 1386). Basic and on the job trainings were provided to the staff of

this unit and during on the job training, they investigated 4 cases, 1 in Treasury Department and 3

in Customs Department. In 1388, totally 7 cases were investigated. In 1389, 159 cases were

investigated, 82 of which were resolved via direct correspondence with the relevant officials and

the rest 77 were physically investigated by FIU. In 1390, 114 cases have been investigated up to

9th Qaws 1390. Sixty four cases were resolved via direct correspondence with the relevant

officials the concerned department and the rest 50 cases were physically investigated by FIU.

Reports of all have been submitted to the Director General IAD. Also, IT Audit Unit was

established under this IAD in Aug 2008 and much capacity development work has been done so

far. AFMIS & ASYCUDA, the two backbones Information Systems of the country, has been

audited for the first time by this unit.

Regarding internal audit of line ministries and mustofiats, mostly internal audit of MOF entities

was done both at central and sub-national levels due to suspension of article # 61 of the PFEM

law. The assigned teams have performed the audits in accordance with auditing standards and

reports were prepared and sent to the relevant entities with recommendations for improvement.

In 1387, 11 MOF entities, in 1388, 16 MOF entities, in 1389 105 MOF entities and in 1390 till

the end of the 3rd

quarter, 73 MOF entities were audited. Some special cases were also audited by

the IAD on special request of Minister’s Office. These reports were reviewed by a team of

national and international auditors in the IAD and verified that the reports are prepared at an

acceptable standards.

About internal audit of line ministries, in 1389 as per plan, 4 line ministries (Rural Rehabilitation

and Development, Energy & Water, Health, Transport and Civil Aviation) were audited. In 1390,

ten ministries were planned to audited; however, due to interference of CAO, only four lines

ministries (Agriculture, Mines, Urban Development and Information and Culture) were audited.

In addition, in 1390 the following new technical audit manuals were prepared by IAD

international advisors in consultation and involvement of the senior auditors:

47

1) Mustofiat Audit Manual

2) Revenue Audit Manual

3) Customs Audit Manual

4) Procurement Audit Manual

5) Process Audit Manual

6) Follow-up Procedure

7) Donor Funded Project Guide

8) Treasury Audit Manual

9) Budget Audit Manual

10) Post Audit Quality Review Manual

11) Fraud Investigation Manual (Revised)


Indicator: 14.Annual comprehensive external auditor report to parliament.

Regarding the above indicator, performance is satisfactory. External audit reports have been

submitted every 6 months to the President and Ministry of Parliamentary Affairs for onward

transmission to Parliament.



Indicator: 15.Number of line ministry and Mustofiat procurement staff completing duty-specific

procurement training and accredited.

Performance under the above indicator is satisfactory. On an average basis, the number of staff to

be targeted per annum in the last four years has been 900, which has almost achieved. The

outcome of these trainings is visible. In total, 3532 staff of line ministries and mustofiats has been

trained in basic, intermediate, CIPS and advanced and special courses during 1387-1390,

indicating an average of 883 staff trained per year. Out of this, 1899 staff in basic, 750 staff in

intermediate, 218 in CIPS and advanced and 665 in special courses have been trained. This also

includes training of 732 procurement staff at provincial level (592 in basic and 140 in

intermediate courses).

The outcome of these procurement trainings has been good. In short, thanks to these trainings,

PPU can claim that procurement procedures in line ministries are being more transparent and

legal frameworks are being adhered to by procuring entities. This clearly indicates that the

capacity in line ministries is built and enhanced. The usage and implementation of SBDs,

prepared and issued by PPU is improved. Now the procuring entities in comparison to last two

three years are able to fill in the SBDs and use the evaluation forms as required. All these show

that the result of the capacity building programs are positive and worth investing on.

Type of Training 1387 1388 1389 1390 Total

Basic 546 363 507 483 1899

Intermediate 91 185 208 266 750

Special Course 183 234 173 75 665

CIPS and Advanced 94 124 218

48

Total 914 906 888 824 3532


Indicators: 16. Number of treasury operations staff trained under duty specific program, 17.

Number of treasury operations staff given advanced level training and accredited.

Many staff of the Treasury were trained under duty specific programs and the benchmarks were

achieved. While in advanced training program, out of the of 53 Treasury employees who gave the

Certified Accounting Technician (CAT) Entrance Examination, 11 were successful and

completed the course in Sep 2011. Overall, the performance under the above indicators is

satisfactory to MOF.

In 1387, more than 500 and in 1388, more than 1300 staff of all central and provincial budgetary

units and Treasury interns were trained in the following areas.

AFMIS (Afghanistan Financial Management Information System)

Second Phase of AFMIS

New Charts of Accounts Training

Financial Reporting

Payment/Disbursement Procedures

Financial Planning and Commitment Control

Introduction to Treasury

Qatia

SDU Procedures

Results-based Management

Anti Corruption

Overview of Procurement

Taxes Relevant to Government Suppliers & Wage Withholding Tax

Training on the Computerized Payroll System CPS has been provided for 50 accounting

offices and 3 Provincial Mustofiats

In 1389, more than 700 staff and in 1390, 900 staff of Line Ministries, Provincial Mustofiats,

Line Ministries’ Controllers, Financial Officers of Mustofiats, Budget Dept and Kabul Mustofiat

were trained in the following areas:

COA, Data Entry

AFMIS Rollout Training

Problem Solving & Coordination W/Shop

COA and Budget Execution Presentation.

Financial Mgmt Framework

Workshop of ARTF , Procurement

Development Budget AFMIS Rollout training

Regarding the advanced training, 11 staff of the Treasury completed the two-year CAT program

under Audit Training Program in MOF.

In addition, it is worth mentioning that the Treasury Internship Program started in 1387 with the

purpose of creating a professional cadre which could replace Treasury technical assistance staff

supported through donors’ projects and assisting Treasury in its day to day operations at national

and sub-national levels. During the period 1387-1390, on average basis, 115 interns have been

recruited and trained per annum, around 40% of whom have been hired as civil servants in MOF

49

and line ministries PFM entities. Now, there are 157 interns in total at the Treasury, of whom 100

are working at Mustofiats.

2.3 H.R. Capacity Development in Audit:

Indicators: 18. Number of auditor staff completing and accredited by in-house program, 19.

Number of auditor staff given advanced training and accredited

Performance under the above mentioned indicators is satisfactory. The benchmarks have been

achieved. Many training programs were held and more than 800 staff were trained in the last four

years. These have resulted in greater performance of the IAD as well as CAO.

In House Program - Internal Audit

To build the capacity of the internal audit staff to conduct professional audits, MOF under

PACB Project contracted Bakhter University, earlier called Afghanistan International University

of Management Sciences (AIUMS), on an SSS basis to provide class room training in basic

accounting and auditing to 400 auditors of MOF, CAO and other line ministries in four cycles of

training. The training started in the month of Dalwa FY 1385 (Jan 2007) and completed in the

month of Sunbula FY 1387 (Sep 2008). During this period, a total of 365 government staff were

trained, of whom 92 belonged to MOF IA Dept and 32 to other MOF Depts and the rest 241

related to the CAO, Ministry of Defense, Ministry of Interior, other line ministries, Independent

Offices of the Government and officials of the local commercial banks . Out of the 365 staff, 158

of them were trained in FY 1385 and FY 1386 and 207 of them were trained in FY 1387.

In 1388, 74 staff including 27 from IAD, 37 from Treasury and 10 from other departments

received English Language training during this period. Additionally, a total of 25 staff, 24 from

IAD and 1 from another department were trained in IT.

In 1389, 10 IT Auditors and 5 other auditors were given preliminary ASYCUDA training. Also,

twenty five newly recruited auditors were given basic trainings in auditing by the senior auditor.

Furthermore, International Audit Advisor provided one month classroom training to 20 newly

recruited auditors on basic internal auditing, usage of toolkits, introduction to Revenue, Customs,

PFEM, and procurement & performance auditing. In the same year, 20 internal auditors of IAD

(10 IT auditors, 3 FIU staff & 7 internal auditors) completed specialized IT training in a private

institute within Kabul. And, fourteen internal auditors were given on the job training by US

Treasury Technical Advisors in the techniques for accomplishing an assessment, procedures for

auditing revenue processes & conducting risk assessment in line ministries. In 1390, also 14

auditors were given on the job training by US Treasury Technical Advisors in techniques for

accomplishing an assessment, procedures for auditing revenue processes & conducting risk

assessment in line ministries. They were also provided with comprehensive training of two weeks

on process auditing and internal audit toolkits effectiveness & usage.

In addition, 81 internal auditors were trained in a three-month program in the following areas.

a) Customs, Revenue & Civil Service Law,

b) Procurement law & regulations,

c) Financial Mathematics,

d) Toolkits proper usage

Also, several workshops on process auditing, process flow charting and procedure, toolkits

effectiveness and mustofiats audit manual, treasury audit manual, customs audit manual and

revenue manual was conducted for senior level auditors. The trainings were provided by

internal audit directors. A one- month training to the newly recruited auditors on the basic

50

auditing, toolkits was provided by IAD Audit Advisor. Besides, a one day comprehensive

workshop was conducted by PKF senior consultant on process auditing and more than 30 internal

auditors participated in this workshop.

For the line ministries, IAD provided training on usage of auditing toolkits, and provided on the

job training in a sample revenue audit. The training was provided only to 4 auditors of Ministry of

Information & Culture and could not be provided to other line ministries due to CAO’s

interference & objection. Work shall resume after conflict resolution between CAO & MOF.

In House - External Audit

In 1387, CAO introduced quarterly training program for 30 participants in each program. Three

such programs were completed involving 90. The program includes basic knowledge in audit and

accounts, HR related topics, English and computer courses. In 1388, two more such programs

were completed in which 54 staff were trained. The program includes basic knowledge in audit

and accounts, HR related topics, English and computer courses. The feedback of these programs

was excellent and was found to be quite useful by CAO. Further, a training program with 16

participants on audit of grants was done.

In 1389, 120 staff (30 in English, 30 in IT courses, 15 on use of excel sheet for grants audit, 15

on enterprise audit, 15 on frauds and corruption concepts, 15 on INTOSAI Auditing Standards)

were trained. In 1390, 75 (30 in English, 45 in IT courses) were trained. All these training

programs were conducted by the international consultants and were appreciated by the

participants and were useful to the auditors in carrying out their work.

Advanced Program - Internal Audit

In 1387, A firm called Oriental Consultants was hired in August 2008 to provide advanced

training in accounting and auditing to officials working in different departments of MOF. The

training called CAT started on 6 Sep 2008 and ended in Oct 2011. The first year training was

computer and English courses followed by two years of special CAT training. In total, 112 civil

servants from all MOF departments inclusive of 26 from IAD were admitted. Out of the total, 92

completed the training program in 1390.

Additionally, computer and English trainings are provided to 64 staff of MOF (24 in IT and 40 in

English) to prepare them for attending the next CAT training course in the coming year. Besides,

in 1390 two auditors have been sent to India for Certified Internal Auditor and Certified

Government Auditing Professional courses for four months. The training is conducted in

Association of Government Accounts Organizations of Asia and INGAF by Cowater

International.

CAO. In 1387, the advanced course on computer was organized for 30 staff keeping their

working as auditors in view. Three such programs were organized during the three quarters with

10 participants per program. The course included higher knowledge in MS-Word, MS-Excel and

MS-PowerPoint with some input on internet. The course was very useful. In 1388, the advanced

course on audit of grants was organized comprising of 16 participants. These participants were

also trained in advanced computer. In 1389, 20 staff was sent abroad for international training

programs i.e. 16 to India, 2 to Singapore and 2 to Turkey on various training programs on

professional courses. In 1390, 12 staff were sent abroad for international training program i.e. 9 to

India and 3 to Beijing. In addition, two study tours to European Commission and Turkey were

organized which included 10 persons from CAO.

51



Indicator: 20. Percentage of MOF units with approved functions, reporting and accountabilities

Performance under the above indicator is satisfactory to MOF and the benchmark was 100%

achieved. Annual review of the MOF taskheel took place in line with new civil servants law and

MOF strategic plan.

The re-structuring of all MOF Departments and re-grading and revision of job descriptions for all

staff, 6100, started at the end of 1387 in line with new Civil Servants Law and pay and grading

system. A proposal was developed and submitted to IARCSC which was approved at the

beginning of 1388 and was implemented then. Also, a further review of the MOF taskheel took

place in 1388 and an addition of 680 new positions was added to it ,which went approved.

Furthermore, in 1389 the MOF taskheel was reviewed and as per the need of MOF, a number of

256 more positions with job descriptions were created. All the positions had approved functions

and reporting line. The new taskheel also included the newly established Office of the Deputy

Minister for Policy under which there are two General Directorates (Policy Execution and

Strategy Implementation). HRMD was assisted in developing new job descriptions for all the

positions within these two new departments as well. In 1390, a further review of the taskheel

took place and HRMD was assisted in restructuring it in line with MOF strategic plan. The new

MOF taskheel for 1390 reaches to 7679 positions, 9% higher than that of 1389. Assistance was

also provided in restructuring of the Customs Dept for the 1391, developing job description for

new positions as well as in revising the old job descriptions.


Indicators: 21. Percentage of MOF tashkeel positions with job descriptions, qualifications and

grades assigned on 8-grade/40 pay-point system, 22.Percentage tashkeel positions in human

resource management with job descriptions, qualifications and grades assigned on the 8-

grade/40 pay-point scale; 23. Percentage of tashkeel positions level 2+ filled by re-grading and

mapping staff into 8-grade/40 pay-point system or hiring; 24. Percentage of tashkeel positions

level 3 and below filled by re-grading and mapping staff into 8-grade/40 pay-point system or

hiring

Performance under the above indicators is satisfactory. The benchmarks have been achieved

almost 90%. The bad security situation in some provinces and increased staff turnover has

impeded the pace with which the target could be achieved 100%.

Since the beginning of the program in 1388, more than 6749 MOF employees have been hired

under the Pay and Grading System accounting for 88% of the MOF total tashkeel. Progress is

88% at Headquarter, 87% at Mustofiats and 89% at Provincial Customs. As mentioned above

ongoing staff turnover and security issue in some provinces has made it difficult to achieve 100%

of the target. To date, 95% of the HRMD staff has been hired under the Pay and Grading System.

Concerning percentage of taskheel positions grade 2 plus and grade 3 and below hired under pay

and grading, it is worth mentioning that MOF has 9 grade 1 positions, 7 of which have been

filled under P&G system and there are 82 grade 2 positions, 65 of which have been filled under

P&G system. The progress is 79%. About grade 3 and below, more than 6677 MOF employees

have been hired under the Pay and Grading System accounting for 87% of the MOF total tashkeel.


52

Indicator: 25. Number of human resource management staff completing duty-specific training in

their respective specialties (specialties approved and training conducted with IARCSC)

Performance under the above indicator is satisfactory. Many duty specific trainings were held and

all HRMD staff were trained. In addition, many other general training on HRM, pay and grading

system, civil servants law and HR policies were provided to staff of HRMD both at the

Headquarter and provinces and staff of other MOF departments. Coaching and mentoring of

HRMD staff by the RIMU team is ongoing.

At the end of 1387, totally 30 staff of HRMD were trained with assistance of IARCSC ( 20 staff

on pay and grading policy implementation here at MOF in a one-week workshop, 6 staff on

communications in a one-week workshop and 4 staff on recruitment in a four-day workshop at

IARCSC Training Center). In 1388, all staff of the HRMD received a one-month general training

on HRM with assistance of IARCSC.

In 1389, with assistance of RIMU, a two- month duty specific training was conducted for all staff

of HRMD in the areas of organization development, recruitment, performance appraisal and

record keeping, training and development and employees relations. The training started at end of

Jan 2010 and finished at the end of March 2010. Separate training sessions for each section of the

HRMD were held and each session lasted one or more than one week. Also, HRMD general

awareness trainings for MOF staff at three phases for MOF Central, Provincial and Custom staff

were provided. The main purpose of these trainings was to acquaint the MOF staff with new

HRM policies and regulations. Furthermore, various short training courses were held on

performance appraisal, time management and negotiation.

In 1390, all staff of HRMD were trained under different duty specific trainings. We have also had

trainings for sub-national level HR staff and staff of other MOF departments. Below is the list of

all the trainings conducted under PFMR project.

S/N Training Description Participants

Number of

Participants Year

1

With assistance of IARCSC, a one-week training on

P&G Policy implementation, another one week

training on communication and a four day training on

recruitment was conducted. Staff of

HRMD 30 1387

2 A one-month HRM general training including all five

areas of HRM with assistance of IARCSC.

Staff of

HRMD 70 1388

3

HRM duty specific trainings including all five areas of

HRM was conducted through AIMTIEC institute. The

duration of the training was two months.

Staff of

HRMD 70 1388

4 Outreach training program on Pay and Grading for 1-4

grade managers.

MoF other

Depts Staff 70 1389

5 Outreach training program to educate Grade 1,2,3 & 4

Managers in all Performance Appraisal activities

MoF other

Depts Staff 70 1389

6

HRMD general awareness trainings for MoF staff at

three phases for MoF Central, Provincial and Customs

staff were provided.

Staff of

HRMD and

other Depts 100 1389

7 Three Month HRM Internship program at RIMU

Staff of

HRMD 3 1389

53

8 One-day training programs on Time Management,

Communication and Negotiation has been implemented

at Customs and Revenues Depts

Staff of

Revenues &

Customs

Depts 60 1389

9 One-day training workshop on strategic plan and action

plan development was conducted.

Staff of

HRMD 70 1390

10

One-day training workshop on monitoring, evaluation

and reporting for HRMD sections heads was

conducted.

Staff of

HRMD 6 1390

11 One day workshop conducted on time management and

code of conduct for the LTO staff.

Staff of

Revenue

Dept 25 1390

12

Information session on employee relation management

and HRM policies and their implementation to

representatives of Mustofiats

Staff of

Mustofiats 34 1390

13 A two-day training workshop on coordination for

HRMD section heads

Staff of

HRMD 10 1390

14 A one-day general workshop on performance

management system was conducted for the Custom &

Revenue Departments

Staff of

Customs and

Revenue

Dept 25 1390

15 Awareness training on HRM policies was conducted to

senior level staff of the Customs & Revenue

Departments.

Staff of

Customs and

Revenue

Dept 30 1390

S/N Training Description Participants

Number of

Participants Year

16

A general workshop on advance human resources

management is conducted in Custom Academy

for one day for the provincial customs staff

Staff of

Customs Dept 60 1390

17

A five -day general workshop on advance human

resources management conducted for provincial

HR officers Staff of HRMD 70 1390

18

Advance Performance Management System (5

Modules included five separate workshops) 14

sessions of two days duration each. The training

program was successfully completed;

Participants are professionally trained to conduct

performance appraisal process as a management

tool, not only as administrative process. Staff of HRMD 20 1390

19

An orientation training program (HRM) is

conducted for Treasury Department Staff for four

days.

Staff of

Treasury Dept 30 1390

20

A one day information session on Performance

Management System is conducted for property

department staff

Staff of the

Property Dept 25 1390

54

21

A half day workshop for LTO of ARD and

provincial officers on recruitment and its process

as well as on performance management was

conducted

Staff of

Revenue Dept 40 1390

22

A one-day workshop on General HRM

(recruitment, performance management, leave

policy and overseas training policy) was

conducted for the provincial LTO officer. Also, in

this event HRM policies and Induction manual

were distributed to them so they can inform their

staff in provinces.

Staff of


23

A one-day workshop has been given to the

senior employees of CRD regarding the HRMD

newly developed policies, especially in the areas

of Merit based Recruitment, Performance

management, employee relations, leave and code

of conduct.

Staff of

Customs and

Revenue Depts 20 1390

24 A one-day workshop on Performance

Management was conducted for the MTO officers

Staff of


25

A three- day workshop was conducted for the

MTO covering code of conduct, performance

management and change management.

Certificates were also distributed

Staff of


Total 1038


Indicators: 26. Reduction of Reliance on International TA; 27.Implementation of Schemes of

Service

Performance under the above indicators is rather satisfactory. Efforts were made and a scheme

was designed, but later on it was eliminated from the project.

A PFM staff incentive program was drafted under PFMR II project, which would have assisted in

the reduction of the reliance on TA directly. However, the scheme was removed from PFMR II

project later and linked to PAR project of the IARCSC.

As far as the number of international TA consultants is concerned, it shows a reduction of 30% in

all over MOF. In July 2008, there were 80 international TA, whereas in June 2011, it reached to

56.

3.1.5 PFMR Project Coordination and Administration:

No indicators attached to this activity

3.1.6 Monitoring and Evaluation of Results:

Indicator: 28. Completed Annual Progress Review with donors covering results, modifications

and follow-on work program

Performance under the above indicator is satisfactory. A results-based monitoring and evaluation

system was developed all over the MOF. Reviews were conducted and reports were produced.

MOF strategic plan was reviewed and updated, which went approved by HE Finance Minister.

As part of the MOF strategic plan, monitoring and evaluation (M&E) framework was developed

in line with MOF strategic goals and objectives. Baseline, indicators and annual benchmarks were

55

set and performance monitoring plan was developed. Templates were made to capture data in line

with indicators and annual benchmarks. A network of M&E (a group of 15 persons) was

established all over the ministry. And on the job trainings were provided to them. M&E manual

was developed. The mechanism was put into place and quarterly, semiannual and annual

performance monitoring and reviews were conducted and reports were prepared and submitted to

MOF leadership.

Also, annual performance review events were organized in 1388, 1389 and 1390. These

gatherings were led by MOF top management and chaired by HE Finance Minister with

participation of MOF senior staff from Headquarter and provinces. In these events, annual

performance was reviewed, problems, issues and recommendations were discussed and reports on

the implementation of the recommendations were presented.

Furthermore, monitoring of the MOF Technical Assistance (TA) projects and individual

consultants takes place twice a year and summary reports are prepared and submitted to MOF

leadership.

IV DIRECT OPERATIONAL SUPPORT FOR PFM FUNCTIONS:


Indicators: 29. Percentages of contracts subject to competitive bidding; 30. Absence of major

delays in processing and payment of contracts; 31. Comparability of prices paid by public sector

to pricing items available in the market price; 32.Regular publication of opportunity and

outcomes of public contracts

Performance under these indicators is fairly good. This is due to the fact that the PMIS has

recently been established and operationalized and feeding data into the system has just started.

Therefore, analysis of the data to provide thorough information on these indicators is not

available.

The facilities for announcement of bidding opportunity, registered bidders and award of contract

are created and publications of bidding and job opportunity as well as outcome of awarded

contracts are commenced. All bidding opportunities and job announcement and outcome of

awarded contracts by line ministries will be published through PPU website and the process has

started. MOF, MRRD and MoE have the major contribution in publication of outcomes of public

contracts.

By ARDS, publication of all procurement opportunities is being done 100% on ARDS website

and also in local newspapers. Publication of outcome of all public contracts which are processed

through ARDS is 100% on ARDS website.

4.2 Direct Operations Support to Treasury Operations: Indicators: 33.Timeliness and regularity of data reconciliation; 34. Timeliness, quality and

dissemination of in-year budget execution reports, 35. Timeliness and quality of annual financial

statements submitted to the legislature and donors, 36. Effectiveness of cash flow planning,

management, and monitoring, 37. Evidence that budgeted resources reach spending units in a

timely and transparent manner.

Performance under above indicators is satisfactory and the benchmarks were achieved.

Bank reconciliations are completed within 20 days from month end for operating budget.

Monthly financial statements are posted on Treasury website within 25 days from end of each

month. Audited Qatia statements are submitted to National Assembly on 22nd Sep. Audited WB

56

grant and loan statements are submitted to the WB on 22nd Sep. Monthly cash plans are provided

to stakeholders with accuracy of 85% on monthly projections. And, more than 90% operating

budget payments are processed within 2 working days from receipt. Actual cash flows are within

85 percent range from the projections developed at the end of the fiscal year and tabled for the

Cash Management Committee. Budgeted resources are allocated based on decisions by line

ministries. Pilots for preparing financial plans to improve the resource allocation have been

conducted and the launch of allotments based on the financial plans for the operating budget is

under preparation.

4.3 Direct Operations Support to External Audit: Indicators: 38. Timeliness and quality of audited financial statements submitted to the legislature

and donors. 39. Standards to which project audits is conducted. 40. Follow-up of audit reports by

the executive or audited entity

Benchmarks have been achieved and performance is satisfactory.

WB Audit Reports have been submitted within 6 months and the audits are done as per the

International Standards with financial statements IPS as compliant. The status of follow up is also

included in the next audit report.

III. Borrower’s Own Performance, Emphasizing Lessons Learned

The Ministry of Finance through its office of the Deputy Minister for Administration provided

full support to implementation of the Project. The Steering Committee of the Project, the leading

body, was formed in Sep 2007 chaired by HE Deputy Minister for Administration. Members of

the Steering Committee were Heads of Treasury, Internal Audit, PPU, RIMU, ARDS of

Ministry of Economy and a representative of the CAO. This Committee was a successor to the

advisory committee overseeing the PACB Project.

Later, in Jan 2011 the Steering Committee leadership was delegated to the Deputy Minister for

Finance and same support was continued to the project implementation under the office of the

Deputy Minister for Finance. The Steering Committee led, oversaw and assisted project

implementation. Throughout life of the project, 11 Steering Committee meetings were held

which created synergy and kept the momentum.

The Reform Implementation and Management Unit provided secretariat support to the Steering

Committee and handled the coordination and monitoring activities of the Project, which well

contributed to the Project effectiveness. This or such set up could be used for handling other

Technical Assistance Projects in the Ministry in the similar way for an effective project

management

The Ministry of Finance did its best to ensure smooth running of the Project as the execution of it

was important for many objectives of the Ministry Strategic Plan to be attained. The way the

Project was managed both by the MOF and the WB was a great example of good governance,

which needs to be considered in the implementation of the other Technical Assistance Project in

the Ministry.

Key lessons learned:

- Supporting Role of the Consultant: The consultants under the project played mostly a

supporting role not an executive role which is a good example to be followed at MOF by

other TA projects.

57

- Working together with Civil Servants: Most of the consultants under the project

worked together with civil servants. This was an important mechanism for transfer of

capacity and sustainability of the project.

- Close Monitoring of the Consultant by the Client: The implementing department

closely monitored the performance of the consultants and ensured that the set benchmarks

are achieved effectively and in a timely fashion.

- Trainings as per the Needs of the Departments: Most training programs under the

project were carefully selected based on the assessments done. This enhanced the

effectiveness of the project outcomes.

- Capacity Building, One of the Most Important Activities: As mentioned above, the

project had a great capacity building program in the areas of Financial Management,

Procurement, Audit and HRM with tangible results. This needs to be further supported

under the next intervention of the WB.

- Central Coordination Body: The project was coordinated by a central body, RIMU.

RIMU mostly served as a one point contact between the WB and the implementing

departments. This arrangement enhanced efficiency and effectiveness of the project.

IV. Performance of the Bank

The WB provided full support and assistance to implementation of the Project. The WB

Supervision Missions took place and provided technical inputs and recommendations to the

project which brought improvements to the project implementation. The cooperation and

assistance of the project task team leader, Mr. Paul Sisk, was outstanding. His technical inputs

and support contributed very positively to the Project’s effectiveness. Timely response to MOF

requests for NOLs and ad hoc visits and meetings of Mr. Paul Sisk with implementing units on

different issues are few examples of this. During life of the project, workshops on procurement

and financial issues were held by the WB for the project staff. These workshops were effective as

direct interaction took place between the WB and project staff on solving different issues.

The Ministry of Finance highly appreciates the WB in general and Mr. Paul Sisk in particular for

their great contribution and support to MOF.

V. Assessment Technical, Institutional, and Financial Sustainability of Activities Initiated

under the Project after Project Closure

The activities initiated under the project are sustainable to a great extent. In Treasury

Department HQ, there are only 4 expatriates and 32 national consultants as compared to 569

Treasury Civil Servants. And the whole system is mostly run and led by the civil servants.

Similarly, in the Internal Audit Department, there are only 4 expatriates and 12 national

consultants as compared to 169 civil servants.

This relatively low presence of the TA staff in the Treasury and Internal Audit Departments, to

some extent, is an indication of the technical, institutional and financial sustainability of the

activities initiated under the project. However, still there is long way to go and to build adequate

58

PFM capacity in particular in line ministries and at sub-national level. Similarly, in the field of

procurement, while much has been done, the Procurement Policy Unit is run by the consultants

hired under the Project and procurement facilitation support is provided to line ministries by

ARDS at Ministry of Economy. To date, as indicated by PPU capacity assessment report, only

three ministries (Education, Agriculture and Public Health only in Consultancy Services) are

certified for standalone procurement. Institutional development and capacity building of line

ministries procurement entities is underway and needs further support. But, the main issue is

retention of the qualified staff. Once the capacity of civil servants is built, they quit and find jobs

with NGOs and donor agencies with higher pay scale. The government pay and grading system

pays relatively more than the previous system; however; still the pay scale is much lower than the

salaries offered by NGOS and donor agencies. And, qualified staff cannot be retained with such

low payment scheme.

Therefore, in order for an adequate capacity to be built in PFM, audit and procurement areas in

national and sub-national levels, we need to build upon good progress made under PFMR project.

The WB and MOF together have realized this need and investment operation continues under the

Second Public Finance Management Reform Project administered by the WB.

Methodology

The Borrower’s Evaluation of the PFMR Project included:

I. Review and examination of the below documents:

Project Technical Annex , 30 April 2007

Project Performance Monitoring Reports 1387,1388,1389 and 1390

Project Steering Committees Meetings Minutes

Aide Memoire Jan 2010

Project Second Quarter Interim Unaudited Financial Monitoring Report,1390

II. Interview and Discussion with:

Mr. Mohammad Aqa, Director General Treasury

Mr. Janis Platais, Chief of Party, Deloitte, Treasury Department

Mr. Mohammad Tamim Shahimy, Training Coordinator, Treasury Department

Mr. Mahmood Qadri, Acting Director General Internal Audit

Mr. Sayed Murtaza, Head of PPU

Mr. Anwar Raufi, Procurement Analyst, PPU

59

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

USAID – Kabul

Overall, the report was honest about the successes and shortcomings of the project. There may

need to be more talk about the political economy and how that has affected the outcomes of the

project.

Legal framework: The project did provide guidance and help towards the drafting of the Audit

Act, however since it is still being discussed in parliament and has been since 2002, there may

need to be a concentration of resources elsewhere.

Audit: Progress has been made with the CAO through the provision of technical assistance.

There is more need for more auditors to be trained in international accounting standards, however

the reliance on legislation in order to improve the functions and capabilities of the CAO and

Internal Audit is a sticking point moving forward.

Procurement: The help to the Procurement Policy Unit to train officials in procurement

certification is notable. Increased transparency on contracts awarded is also a welcome

development. However even given the help that was provided, the execution rates of line

ministries are still considered to be low.

Shortcomings: The ICR notes that the number of local consultants increased and international

consultants decreased. The issue of well-paying tashkheel positions and skilled people to fill

them remains a key issue to be addressed. The projects reliance on changes in the legislation law

may have impeded progress in some of the projects work. There should be some discussion about

the risk that project successes may be lost if GIRoA staff leave.

Recommendations: Given the concentration that USAID has placed on public financial

management reform, more coordination is needed between the World Bank and USAID and other

donors. USAID recommends that with the release of this report if the donor community should

set up a PFM working group to enhance donor coordination

DFID – Kabul

Clearly a significant amount has been achieved in the areas covered over the life of the project in

often very difficult circumstances. It does appear however that only two or three out of the seven

PDO indicators were fully met so some explanation of the satisfactory rating could be added to

the document.

IMF – Fiscal Affairs Dept.

The report discusses in detail the project deliverables/outputs, their current status, etc., and could

usefully include a brief executive summary clearly indicating the overall project outcome in

concrete terms and the specific challenges that remain. This would be extremely useful for the

reader so as to get a sense of these while reading the various chapters of the report, which contain

some repetitive discussions partly due to the design of project components with overlapping

objectives (e.g. the objectives of components 2.2 and 4.2 overlap) and the description of

outcomes/achievements in general terms (e.g., “satisfactory”, “of acceptable quality”, etc.).

60

Annex 9. List of Supporting Documents

Project Implementation Plan

Technical Annex: Afghanistan Public Financial Management Reform Project, dated April

30, 2007 (Report No: T7697-AF)

Aide Memoires, Back-to-Office Reports, and Implementation Status Reports.

Project Progress Reports.

Borrower's Evaluation Report dated January 2012

*including electronic files