Ghana - Second Public Financial Management Reform Project

Report No. PID9535 Project Name Ghana-Public Financial Management... Reform Project II Region Africa Regional Office Sector Public Financial Management Project ID GHPE69348 Borrower(s) GOVERNMENT OF GHANA Implementing Agency Address MINISTRY OF FINANCE Secretariat of the Public Financial Management Reform Programme (PUFMARP) P.O. Box M40, Accra/Ghana Contact Person: Cornelius Adablah, Project Coordinator Tel: +233-21-668016/669289 Fax: +233-21-663854/662216 Email: pufmapl@ghana.com Environment Category C Date PID Prepared September 29, 2000 Projected Appraisal Date February 2001 Projected Board Date May 2001 1. Country and Sector Background In order to articulate and specify a clear vision for Ghana indicating the long-term direction of development, in 1995 the GoG published the "Ghana: Vision 2020" document. The major government objective set out in this strategic document is to systematically reduce poverty through macro-economic stability and the promotion of sustained accelerated economic growth. A precondition for achieving this objective is the existence of sound financial management and accountability systems to ensure that government resources are effectively generated and spent in line with the strategic objectives of the GoG. Recognizing these deficiencies and the negative impact on the macro-economic performance the GoG with inputs from the Department for International Development (DFID), the Canadian International Development Agency (CIDA), the European Union (EU) and the World Bank developed a medium-term strategy for reforming the entire public financial management system, the Public Financial Management Reform Programme (PUFMARP). PUFMARP seeks to develop an integrated financial management system in government. The program forms an important part of a wider transformation process in the Ghana public sector which is being implemented by the GoG as part of its National Institutional Renewal Programme. For the upcoming year, the main objective of the GoG is to complete the ongoing reform agenda. To underline its commitment for transparency and accountability the GoG has agreed to further deepen the reforms by enhancing the participation of key stakeholders. Consequently, the new project foresees specific intervention in the area of economic management aimed at strengthening the oversight role of parliament, civil society and of specific watchdog agencies. 2. Objectives  The key objectives of the projects are:Rationalization and modernization of the budget and public expenditure management of the Government of Ghana (GoG),Improvement of efficiency and effectiveness of revenue collection of the GoG,Strengthening of monitoring and evaluation capacity,Enhancement of stakeholder participation and civil society involvement in the area of economic management. 3. Rationale for Bank's Involvement Bank experience with comprehensive financial management reforms will continue to add substantial value to the ongoing reform process in Ghana. This particularly applies to the scope and conceptual design of the various project components. The proposed design reflect lessons learnt from other projects, in particular the need toTake a strategic, integrated approach which is based on clear operational objectives and measurable outcomes,Appropriately time and sequence the different project components,Build strong stakeholder commitment during project implementation, and toEffectively integrate ongoing activities of other donors. 4. Description The project would continue to assist the GoG in its efforts to improve economic management and revenue collection. It will enhance efficiency, accountability and transparency of the financial management functions of the GoG. The project will build on the achievements of the first Public Financial Management Technical Assistance Project (FIMTAP I) and other reform activities in the context of the Public Financial Management Reform Programme (PUFMARP) of the GoG. The project will include 2nd-generation financial management reforms by addressing issues of economic governance. The project which will be implemented over a period of 5 years will address the following areas which have been identified as essential elements for the continuation of public financial management reform in Ghana:(i) Component 1 - Further roll-out of the Budget and Public Expenditure Management System (BPEMS)BPEMS is the comprehensive financial management system of the GoG, which will be operational by the end of 2000. It supports the preparation of the budget in accordance with the considered priorities of the GoG. It facilitates the production of a three year rolling plan as basis for the government's budget which is based on a Medium Term Expenditure Framework (MTEF) process that has been operational since the budget year 1999. BPEMS also provides for the effective control and monitoring of government expenditures. It permits the classification, recording and analysis of financial transactions in a timely and standardized manner. Under FIMTAP I BPEMS will be introduced in up to pilot 42 sites including the Ministry of Finance, the Controller and Accountant General's Department and key sector ministries which account for a significant portion of the government's expenditure (Ministry of Education, Health etc.). PUFMARP II will roll-out BPEMS to additional 76 sites which would result in a full-coverage of the financial management in all Ministries, Departments and Agencies (MDAs) including the respective regional sites. PUFMARP II will also include the pilot introduction of BPEMS to some District Assemblies (DAs) in line the fiscal decentralization policy and strategy of the GoG.(ii) Component 2 - Additional Expenditure ControlsBPEMS, which is based on Oracle Financials (applications and software), provides for a wide range of expenditure controls. While some control mechanism will be introduced together with the implementation of BPEMS under FIMTAP I there is the need to enhance - 2 -  control mechanisms in particular with regard to government procurement. To fully complete the control processes associated with acquisition and procurement, PUFMARP II will cater for the introduction of two additional modules: (i) Inventory Management, and (ii) Fixed Assets Management. The latter will facilitate the maintenance of an asset register, asset depreciation and retirement, and will ensure correction of allocation of asset costs over time. (iii) Component 3 - Revenue Agencies' ReformThe project would support the government's strategy to improve the operational efficiency of the revenue agencies as well as to strengthen policy formulation and coordination among the various revenue agencies. To this end, PUFMARP II would make operational the new institutional framework for the revenue agencies, which was enacted in 1999 under the Revenue Agencies Governing Board (RAGB) Act. Specifically, it would establish the necessary interface between BPEMS, the RAGB and Internal Revenue Service (IRS). The new project would also assist in establishing a Tax Policy Division in the Ministry of Finance to strengthen tax policy formulation at the central government level. (iv) Component 4 - Economic GovernanceUnder this component, PUFMARP II would support 2nd generation financial management reforms with a focus on economic governance. The proposed reform agenda is mainly built on the results of the Ghana Anti-Corruption Survey which was conducted in 2000 and the findings of the Country Financial Accountability Assessment (CFAA) in 2000. The project will address the following areas, which are deemed necessary for effective and transparent economic management in Ghana:Sub-component 4.1 - Procurement reformUnder FIMTAP I the GoG has begun a comprehensive reform of the public procurement system. It is expected that the ongoing reform will result in the enactment of a new procurement code in the year 2001. PUFMARP II would support the implementation of the new code, in particular the relevant capacity building and awareness creation activities. The project would also assist in making operational the new procurement oversight institution, which is expected to be established in 2001 as part of the enactment of the new procurement code. Sub-component 4.2 - Strengthen economic governance role of ParliamentTo enable Parliament to play its oversight role in the area of economic management more effectively and to professionalize its interaction with the government the project would help establish a professional parliamentary service. The new service would provide technical support to the various parliamentary committees in the area of economic management (budget preparation, budget execution, and expenditure control). To this end, the project will review and restructure the existing parliamentary service. It will provide technical and logistical support for the development of a new and more efficient infrastructure. Sub-component 4.3 - Strengthening watchdog-role of specialized agenciesThis sub-component would strengthen the watchdog-role of two agencies specialized in combating fraud and corruption in the public sector, the Serious Fraud Office (SFO) and the Commission on Human Rights and Administrative Justice (CHRAJ). The key objective is to strengthen the existing mechanisms in the public sector to monitor financial activities of public agencies and effectively pursue prosecution of mismanagement. In addition, the project would provide basic technical and logistical support to other key actors of the Ghana Anti-Corruption Coalition (GACC), in particular the Ghana Integrity Initiative (GII), to enable it to effectively fulfill its mandate. The ultimate goal is to strengthen independent monitoring and evaluation of economic management of the government at the level of civil society.Sub-component 4.4 - Improve participation of civil society and other stakeholdersThis sub-component -3 -  would assist in the development of a comprehensive strategy for a pro-active participation of civil society in the area of economic management. This will include the support of pilot projects aimed at enhancing the role of civil society. The project would support coalition, capacity building and awareness creating activities at the level of the civil society to strengthen oversight and control from the grass-root level. To enable the media to effectively play its watchdog role vis-a-vis the fiscal and economic activities of the government the project would provide assistance for specialized capacity building activities. Sub-component 4.5 - Reform information and public disclosure policyOpen access to information regarding the economic management of the government is key to an effective monitoring and supervision role of the media, civil society and other stakeholders. This sub-component will therefore review the existing legislation and administrative practice with the aim to develop a credible freedom-of-information legislation and to reform the existing public disclosure policy.Sub-component 4.6 - Strengthen monitoring and evaluation capacityThe successful implementation of the government's public sector reform strategy will benefit from a stronger performance orientation within government. This capacity-building sub-component will strengthen the government's ability to formulate and monitor its poverty reduction strategy. It will also provide cross-cutting support to ongoing public sector reforms as well as those proposed in this project particularly budget preparation and monitoring; sector ministry planning, monitoring and evaluation; the oversight role of parliament; and the ability of civil society to understand and provide input to the budget. 5. Financing Total ( US$m) GOVERNMENT 15.00 IBRD IDA 85.00 Total Project Cost 100.00 6. Implementation The Government of Ghana - through the Minister of Finance - would continue to be responsible for ensuring that the project is undertaken as planned. 7. Sustainability Project implementation will be ensured by current and successive governments. Despite the high risk to implement such complex reform program continuous government's commitment is expected because of the broad consensus about the need to comprehensively reform the existing financial management and accountability framework. This commitment cuts across all political and institutional borders. 8. Lessons learned from past operations in the country/sector 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues n/a -4-  11. Contact Point: Guenter Heidenhof The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: (202) 458 5591 Fax: (202) 614 1191 Smile Kwawukume The World Bank Ghana Office 69 Dr. Isert Rd. Northridge Residential Area P.O.Box M27 Accra/Ghana Telephone: +233-21-229 681 Fax: +233-21-227 887 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. This PID was processed by the InfoShop during the week ending September 29, 2000. -5-