National execution in finance and procurement

Agenda Overall framework Risk analysis in two stages Overall assessment Organisational assessment Execution modalities Attention points Roll out

Guidelines Joint working group Approved October 2010 Implementation 2011

Overall framework - Project modalities

Who takes responsibility ? Together (Cogestion) BTC (Regie) Partner (Nex)  What system to be used ? To be decided BTC system, most of the time Partner system, most of the time 

Overall framework - NEX applies to what ? First finance and procurement … In line with EU policy Overall framework - Projects are multi-modal Many partners with different capabilities Not necessarily the same modality in each field (Fin, RH, ….)

Overall framework - Risks Fiduciary risk Development risk Reputation risk

Overall framework – National execution in projects

Overall framework – BTC is responsible for: Ensuring an adequate risk analysis, Defining risk mitigating measures, Verifying that the agreed risk-mitigating measures are properly implemented, and delivering an annual report on that matter, Auditing the project every year and delivering a report, Taking measures, seeking solutions with the partner and possibly using sanctions in case of a negative audit report, including recuperation of misused funds, Informing adequately and timely the Belgian State.

Risk Analysis in 2 Stages Organizational assessment Overall assessment Risk category assigned to sector Risk category assigned to organization Before the joint commission After the joint commission national and sector levels organizational level TIMINGFOCUS

Risk Analysis in 2 Stages 1) Overall assessment 2) Organisational assessment Choix des modalités d’exécution financières Dossier de motivation DTF

Overall assessment Opportunity and risk of using national execution for financial and procurement management in projects in a country Risks and opportunity are assessed, both fiduciary and developmental Output of analysis is translated on a scale of 4 positions (see next slide)

Output of Overall assessment : risk category

Proces Overall assessment

Overall assessment - Etapes et rôles DGD / CTB

Methodology Overall assessment (fiduciary risk part) Guideline NEX § 2.1 Objectif : “The objective of the overall assessment is to allow Belgium : -to take a stand -on the opportunity of using national execution -for financial and procurement management -in projects -in a country (and in key sectors if deemed necessary).  Les Overall Assessment sont organisés dans le cadre des PIC, sur demande de la DGD; ils alimentent la note de base

Methodology Overall assessment (fiduciary risk part) Analysis and interpretation of existing documents -PEFA (Public Finance Management) -OECD-DAC MANPS (Procurement) -Other documents and assessments (ex : FRA DFID) Field mission -Interview with key persons and organisations -Collection of additional documents Conditions – minimum requirements: 1) systèmes (PFM et Procurement) robustes -PEFA -OCDE DAC MANPS 2) volonté prouvée du partenaire

Methodology Overall assessment (fiduciary risk part) L’analyse des risques fiduciaires (étape 6) est réalisée par Controlling Avec consultants internationaux et nationaux  Les consultants internationaux sont déjà recrutés (société ADE).  Les consultants nationaux (si nécessaire) sont recrutés par la Représentation.

Methodology Overall assessment (fiduciary risk part) Etape 6 : CS performance assessment Analysis and interpretation of existing credible performance assessment reports and documents, in order to determine the (fiduciary) risks. The objectives of the study are: 1.Appreciating the main risks involved in using national execution for public financial and procurement management during the execution of projects in the key sectors, 2.Providing recommendations: - As to what extent national execution can potentially be used in the key sectors, - On risk mitigating measures. The final product of this analysis is a document including the following elements: 1.Description of the key processes of public financial management and procurement (overall and in the key sectors) 2.Overview of main weaknesses and strengths per field (budget elaboration, budget execution, accounting and reporting, audit, procurement) (overall and in the key sectors); 3.Overview of how weaknesses are being addressed; 4.Appreciation of the main risks involved in using national execution for public financial management and procurement in the execution of projects (overall and in the key sectors); - Recommendations as to what extent national execution can potentially be used in the various public finance management and procurement components and this from a risk point of view; - Recommendations on risk mitigating measures that can be taken

Methodology Overall assessment (fiduciary risk part) - TDR

Organisational assessment It will appreciate the risks of using national execution in projects with a particular organization, by analysing that organization’s performance with a focus on the capacity issue. Based on checklist  Evaluation organisationnelle : évaluation de la performance (« performance assessment ») évaluation de la performance (« performance assessment ») d’une organisation : forces et faiblesses des processus financiers de l’organisation + évaluation des risques (« risk assessment ») évaluation des risques (« risk assessment ») pour la CTB de travailler avec cette organisation : identification par processus financier des risques et mesures de maîtrise des risques.

Organisational assessment

Organisational assessment – 3 étapes Besoin eva. orga. identifié Rapport éva. des risques Max. 5 mois ( 19 semaines ) Rapport final éva. Performance commenté Rapport final éva. Performance 2 semaines Envoi lettre de Mission Etude Préliminaire Mission Terrain 2 semaines 5 jours ouvrables 4 semaines Max 2 mois 2 semaines Constitution équipe Termes de référence Comm. officielle à l’orga. Mise à jour dossier permanent Etape 1 Etape 2 Etape 3

Organisational assessment – 3 étapes RC ou MAF -> team leader évaluation (2 évaluateurs) 1) Planification et préparation de la mission Pré-requis: organisation à évaluer clairement identifiée. Termes de référence, constitution du dossier permanent et lettre de mission 2) Analyse et évaluation Étude préliminaire et mission terrain (5 jours ouvrables) 3) Communication des résultats Communication orale des premiers résultats de l’évaluation et ensuite 2 rapports (format standard et questionnaire rempli) : Evaluation de la performance et Evaluation des risques pour la CTB

Organisational assessment - Outils Contrat Cadre – consultants internationaux (mai 2011) Coordonnateur des évaluations organisationnelles Questionnaire – Finance Processus financiers: Rapportage budgétaire et financier Préparation du budget Exécution du budget Comptabilité Gestion de la trésorerie Audit Organisation du département Financier Questions par processus financier Manuel pratique – Finance Explicatif du processus évaluation organisationnelle Explicatif du questionnaire Finance Explicatif de la question Moyens de vérifications Documents constituant le dossier Lessons-learned (remarque : questionaire et manuel pratique “procurement” à développer)

Execution modalities - as output of risk analysis Overall assessment Organizational assessment Choice of execution modalities

Execution modalities Risks for donor depends on Performance of organisation Risk profile of project Modalities will be defined based on risk level Feasability issue also has to be analysed Harmonisation  Motivation report (template)

Execution modalities - Choice PIC Formulations Performance organisation Type of project (budget, Type of activities, …) Modalities used by other donors Feasibility of different modalities Risk level donor Choice of modalities and risk mitigating measures Overall Assessment Belgian position and agreement with partner country on the extent in wich country systems can potentially be used

Execution modalities - Changing A switch to national execution is not allowed unless explicitly provided for in TFF and CS. Amendment of CS necessary If annual audit finds that the organisational performance is declining, this issue will be discussed in the steering committee and the strengthening of the risk-mitigating measures can be decided by BTC. Similarly, BTC can also decide to relax the risk-mitigating measures during project execution following conclusions of the annual audit and after discussion in the steering committee.

Attention points - The following problems are considered major Any significant delay in implementation of mutually approved financial planning that is managed by the partners Any presumption of corruption, of any kind Any adverse opinion from an audit report Any use of the funds that is not in conformity with the purpose of the project Any significant delay in transmission of financial reports Any ineligible expenditure that is presented in project accounts.

Attention points - BTC reacts in the following way Organisation of formal consultation between BTC and the partner country Implementation of immediate risk-mitigating measures, if necessary Search for medium-term solutions, including the recuperation of misused funds Inform the Belgian state in case these actions would not lead to a solution within a period of 4 months.

Roll-out Guidelines have to be respected First overall assessment If partner only wants national execution and there is no overall assessment available -> directly doing organisation assessment is an option (joint decision Cabinet, DGD, BTC)

Roll-out Overall assessment Rwanda : nearly completed Vietnam : nearly completed Uganda, Mozambique, Palestine : started Organisation assessment PZA, SAF, MOR, …, Accords d’exécution

Questions