Madagascar - Accounting and Management Training Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 14969 ITPLEMENTATION CONPLETION REPORT REPUBLIC OF MADAGASCAR ACCOUNTING AND MANAGEMENT TRAINING PROJECT (CREDIT 1661-MAG) SEPTEMBER 5, 1995 Central and Indian Ocean Department Population and Human Resources Division Mrica Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF MADAGASCAR ACCOUNTING AND MANAGEMENT TRAINING PROJECT (CREDIT 1661-MAG) CURRENCY EQUIVALENTS Currency unit: Malagasy Franc (FMG) (Period average, US $ 1 equivalent) 1986 = FMG 676 1987 = FMG 1,069 1988 = FMG 1,407 1989= FMG 1,603 1990= FMG 1,494 1991 = FMG 1,835 1992 = FMG 1,864 1993 = FMG 1,913 1994 = FMG 3,067 WEIGHTS AND MEASURES Metric system FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CCM Central Tender Board (Commission Centrale des Marches) CFC Accounting Training Center (Centre de Formation en Comptabilit) CIDA Canadian International Development Agency CPA Certified Public Accountant IGE State Inspectorate - General INPF National Institute of Training and Development (Institut National de Promotion et Formation) INSCAE National Institute for Accounting and Management (Institut National des Sciences Comptables et de I Administration d 'Entreprises) MCD Ministry of Cooperation and Development of France (Ministere de la Cooperation et du Developpement) RINDRA National Auditing Company USAID United States Agency for International Development Certificates and Degrees "Baccalaureat" At the end of upper secondary studies "Licence" After three years of university studies "Maitrise" After four years of university studies  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT (ICR) REPUBLIC OF MADAGASCAR ACCOUNTING AND MANAGEMENT TRAINING PROJECT (CREDIT 1661-MAG) CONTENTS Preface .................i Evaluation Summary ........................................................................... ii 1. PROJECT IMPLEMENTATION ASSESSMENT .......................................................1 PROJECT OBJECTIVES ........................................................1 ACHIEVEMENT OF PROJECT OBJECTIVES ............... ........................................ 2 IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT .................................................3 PROJECT SUSTAINABILITY ........................................................5 IDA PERFORMANCE ........................................................6 BORROWER PERFORMANCE .......................................................7 ASSESSMENT OF OUTCOME .......................................................7 FuTRE OPERATION .......................................................9 KEY LESSONS LEARNED ...................................................... 9 2. STATISTICAL TABLES ...................................................... 11 TABLE 2.1: SUMMARY OF ASSESSMENTS ...................................................... I 1 TABLE 2.2: RELATED IDA CREDITS .......................................................11 TABLE 2.3: PROJECT TIMETABLE ....................................................... 13 TABLE 2.4: CREDIT DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL .......................... ................ 13 TABLE 2.5: KEY INDICATORS FOR PROJECT IMPLEMENTATION ................................. ..................... 14 TABLE 2.6: KEY INDICATORS FOR PROJECT OPERATION ................... .................................... 1 3 TABLE 2.7: STUDIES INCLUDED IN PROJECT ...................................................... 1 4 TABLE 2.8: PROJECT COSTS ...................................................... 16 TABLE 2.8B : PROJECT FINANCING ...................................................... 16 TABLE 2.9: ECONOMIC COSTS AND BENEFITS ....................................................... 16 TABLE 2.10: STATUS OF LEGAL COVENANTS IN CREDIT AGREEMENT .................................... 17 TABLE 2.1 1: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS ..................................................... 19 TABLE 2.12: BANK RESOURCES: STAFF INPUTS ....................................................... 20 TABLE 2.13: BANK RESOURCES: MISSIONS ...................................................... 21 APPENDICES .............................................. 22 | This docunent has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed wiihout World Bank authorization.   IMPLEMENTATION COMPLETION REPORT REPUBLIC OF MADAGASCAR ACCOUNTING AND MANAGEMENT TRAINING PROJECT (CREDIT 1661-MAG) PREFACE This is the Implementation Completion Report (ICR) for the Accounting and Management Training Project in Madagascar, for which Credit 1661-MAG in the amount of SDR 9.5 million was approved on February 25, 1986 and made effective on October 8, 1986. The Credit was closed on December 31, 1994, two years later than the original closing date. An amount of SDR 1.0 million was canceled on July 13, 1993. Final disbursement took place on May 22, 1995, when the remaining balance of SDR 2.8 million was canceled. Apart from the government's counterpart contribution, cofinancing for the project was provided by the Ministry of Cooperation and Development of France for US$2.5 million equivalent (more than the appraisal estimate), as well as CIDA and USAID for about US$1.15 million and US$0.17 million, respectively. The ICR was prepared by Mr. Paul Geli (consultant) for the Population and Human Resources Division, Central Africa and Indian Ocean Department of the Africa Region. It was reviewed by Mr. Abdelwahed Zhiri, Acting Chief of the Population and Human Resources Division, and Mr. P. Hari Prasad, Operations Adviser of the Central Africa and Indian Ocean Department. Preparation of this ICR began during the Bank's final supervision/completion mission in October 1994. It is based on material in the project file. The Borrower contributed to the preparation of the ICR by providing views reflected in the mission's aide-memoire (Appendix A), preparing its own evaluation of the project's execution (Appendix B), and commenting on the draft ICR.   IMPLEMENTATION COMPLETION REPORT REPUBLIC OF MADAGASCAR ACCOUNTING AND MANAGEMENT TRAINING PROJECT CREDIT 1661-MAG EVALUATION SUMMARY Introduction. 1. The education sector had been a major recipient of Bank assistance with two credits approved in 1967 and 1976. The third credit was of SDR 9.4 million (Cr. 1155- MAG) was approved in 1981 and was for an Accounting and Audit Organization and Training Project which included an important training component. The Accounting and Management Training Project was a continuation and expansion of the objectives of Cr. 1155-MAG. The procurement component in the project was intended to assist the Government in the implementation of recommendations included in the Procurement Assessment Report of a Bank mission that visited Madagascar in May 1984. Project Objectives 2. The objectives of the project were to upgrade the level of expertise of accountants, auditors and managers so as to strengthen the management planning and financial control of enterprises in Madagascar, and to improve the procurement procedures of the Borrower. The objectives were to be achieved through (i) the training of qualified accountants, auditors and managers, and (ii) technical assistance and training for those responsible for procurement. Thus the project had two components: (a) the establishment and operation of the National Institute for Accounting and Management (Institut National des Sciences Comptables et de l'Administration d'Entreprises, or INSCAE), and (b) procurement assistance, i.e. technical assistance to a unit to be established and attached to the Central Tender Board (Commission Centrale desMarches, or CCM). 3. The credit included special covenants to promote the achievement of project objectives. These related to: enactment of new accounting legislation; availability of adequate premises for INSCAE; introduction and collection of tuition fees by INSCAE; and submission to IDA for approval of annual training programs for procurement. 4. The project's objectives were important for Madagascar and for the development of its economy and its enterprises. The objectives were clear and realistic for the INSCAE component, by far the more important. They responded well to Borrower circumstances and priorities which had begun to change in the early 1980s. Although relatively simple, the INSCAE component was demanding for the implementing agency. In order to be successful, the component had to rely on a substantial input of technical assistance which was included in the project design. The objectives of the procurement component consisting of technical assistance to the Government on establishing procurement regulations and procedures, and training of staff responsible for procurement within public  Evaluation Summary i agencies were also clear, but less realistic than those for the INSCAE component. Although the aim was to modernize the legislation and procedures, it was not obvious that IDA and the Borrower would agree on the specific reforms to be made. Implementation Experience and Results 5. Achievements have been substantial for financial and physical objectives; partial for macro policy and sector policy improvements, institutional development, and private sector development; and probably negligible for public sector management. Although not necessarily as a result of the project, improvements have been made in procurement and are not likely to be undone. Regarding the INSCAE component, a number of factors favor the prospect of sustainability: the apparent interest of the Borrower in maintaining achievements; participants' incentives, as demonstrated by their ability to find jobs upon graduation, and therefore their willingness to pay sizable tuition; and the contributions of donors. INSCAE has made substantial progress in increasing its cash generation. However, despite annual increases in tuition and fees, for the next five years or so INSCAE will continue to need some Government subsidies, which appear entirely justified. On balance, the sustainability of the project can be rated as likely. 6. The project took 2.5 years longer to complete than expected at appraisal but it met all its development objectives. The delay was due to the adaptation and extension of facilties for INSCAE which was not originally planned but was included as savings were made in other components. The actual project cost was US$12.8 million compared to the US$13.1 million appraisal estimate. Only US$8.1 million of IDA resources were used compared to the US$10.3 million appraisal estimate. These savings were possible because additional grant financing became available as MCD-France increased its grant contribution from about US$1.5 million to US$2.5 million and two new financiers provided grants i.e. CIDA (US$1.15 million) and USAID (US$0.17 million). These additional grants helped Madagascar reduce its potential indebtedness by switching from IDA to grant financing. 7. A number of factors affected implementation of the INSCAE component. On the positive side, these included the ownership of the project by the Malagasy accounting and auditing profession (it was their idea and it responded to a need that they felt); the excellent motivation of the faculty and teaching staff as well as students; and the generally good quality of the technical assistance provided and financed by donors. Negative factors (particularly at the beginning of project implementation) were the lack of Government counterpart funds, a certain lack of interest by the Board of Directors, and deficiencies in management. Regarding the procurement assistance component, its implementation was affected mostly by the difficulty of reconciling differences in points of view between IDA and the Borrower on the reform of procurement regulations and procedures. 8. IDA performance on this project was highly satisfactory at the identification stage, and satisfactory or somewhat less than satisfactory in preparation assistance, appraisal and supervision. The Borrower performance was satisfactory for project  iv ICR - Madagascar: Accounting andManagement Training Project preparation, implementation and covenant compliance, and highly satisfactory for operation. 9. The outcome is highly satisfactory for the INSCAE component, and somewhat less than satisfactory for the procurement component. The procurement component could not succeed once the the interim Government abolished the CCM (Central Tender Board) in 1992. However, measures to reform procurement under Bank/IDA projects accompanied the CCM abolition and the procurement component's principal objective of improving procurement under Bank projects was reached. Thus, overall, the project's outcome deserves a rating of "highly satisfactory". Summary of Findings, Future Operations, and Key Lessons Learned 10. Apart from the procurement component, the project was designed to continue and expand training in basic accounting principles (experts comptables or CPAs were to be trained under the IDA-financed Financial Institutions Development Technical Assistance Project approved in May 1993). Implementation was in general good despite shortcomings in certain areas. The project is an example of successful capacity building, and the output of INSCAE since its establishment has been substantial. INSCAE is now well established, reasonably well managed and has a competent faculty, while its courses and seminars are very much in demand. Based on its past experience and on the demand for its products, INSCAE has made realistic plans for an expansion of its activities and its income generation. It can also reasonably expect to continue to receive additional support from donors. 11. The following lessons can be learned from this operation: . Projects most likely to succeed are those that are owned by the Government and/or beneficiaries, are designed to meet widely perceived needs, and respond to a demand. * Project cofinancing requires special efforts on the part of IDA in order to promote good cooperation among cofinanciers in the best interests of the Borrower. * Technical assistance, whether long-term or short-term or a combination of both, can be successful for capacity building, provided that it corresponds to needs recognized by recipients and is carefully planned and implemented, in a spirit of partnership and with particular emphasis on the appropriateness and quality of the technical assistance to be provided. * To facilitate implementation and monitoring, it is advisable to avoid projects with a mix of components of different kinds and with different implementing agencies (such as accounting and management training, on the one hand, and procurement assistance on the other). The procurement component was attached to the project as the Bank felt that it was important at that time and this was the only project within the foreseeable time horizon. However, the project's experience  Evaluation Summary v demonstrates the inadvisability of attaching unrelated components without sufficient preparation. * IDA should use its leverage at all stages of the project cycle, including in connection with any extension of the closing date of the credit, to bring about improvements in project management, implementation and overall orientation. * Projects should only be submitted for Board approval when fully prepared.  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF MADAGASCAR ACCOUNTING AND MANAGEMENT TRAINING PROJECT CREDIT 1661-MAG 1. PROJECT IMPLEMENTATION ASSESSMENT STATEMENT AND EVALUATION OF PROJECT OBJECTBPES 1.1 The objectives of the project were to upgrade the level of expertise of accountants, auditors and managers so as to strengthen the management planning and financial control of enterprises in Madagascar, and to improve the procurement procedures of the Borrower. The objectives were to be achieved through (i) the training of highly qualified accountants, auditors and managers, and (ii) technical assistance and training for those responsible for procurement matters. The project consisted of two components: (a) the establishment and operation of the National Institute for Accounting and Management (Institut National des Sciences Comptables et de I'Administration d'Entreprises, or INSCAE), and (b) procurement assistance, i.e. technical assistance to a unit to be established and attached to the Central Tender Board (Commission Centrale des Marches, or CCM). 1.2 The objectives were clear and realistic for the INSCAE component, which represented 92 percent of total project costs. An Accounting Training Center (Centre de Formation en Comptabilite, or CFC) had been established under the Madagascar Accounting and Audit Organization and Training Project (approved in FY 84), whose original objective was to support the development of the country's accounting/auditing profession by revising the relevant legislative framework, and thereby raise the profession's antiquated status relative to other countries at the same level. The success and speed with which the CFC was put in place and started operations made it essential that Bank Group assistance be continued until the management and operation of the institution could be filly transferred to Malagasy staff with up-to-date accounting skills, in 1993. One of the aims of the new project was to ensure that INSCAE, the successor of CFC, would continue its very useful work of training accountants/auditors, and that it would become self-sustaining. At the same time, the Government was interested in expanding the role of the CFC (INSCAE) to provide management training to accommodate the needs of companies in both the private and public sectors. 1.3 The objectives of the procurement component, consisting of technical assistance to the Government on procurement regulations and procedures as well as training of staff responsible for procurement within public agencies, were also clear, but not as realistic as those of the INSCAE component. On the one hand, IDA was interested in helping to modernize the procurement regulations and procedures of Madagascar and in training staff of Government agencies on how to follow them and to carry out procurement efficiently.  2 On the other hand, the central govemment agency responsible for procurement (CCM) agreed on training, but it was not obvious that it would agree with IDA on the specific reforms to correct certain shortcomings of the procurement regulations, aimed at simplifying government approval procedures. 1.4 The objectives of the project were important for Madagascar, both for the development of its private sector and the improved management of its public sector; they were also important for the Bank's country assistance strategy. Madagascar was experiencing a shift from a centrally-controlled economy to a more market-oriented one, and there was need for a change in mentalities as well as for training in accounting and management. The project was intended to assist in modernizing and improving management and operation of public and private enterprises, thus supporting the Government in implementing policies geared to the revitalization of the economy. Thus the project was responsive to changes in the borrower's circumstances and priorities. Though neither complex nor risky, the project was demanding for the implementing agencies (particularly INSCAE), requiring a substantial input of extemal technical assistance (reflected in the project design). ACHIEVEMENT OF PROJECT OBJECTIVES 1.5 The assessment of the project's success in achieving its major objectives should take into account the significant differences between the two components, in terms of both content and relative importance. One has to distinguish between review of the project as a whole (reflected in Table 2.1 of Part II), and more qualified comments that can be made on individual components. For the whole project, achievements were substantial for financial and physical objectives; partial for macro policy and sector policy improvements, institutional development, and private sector development; and negligible for public sector management (other objectives listed in Table 2.1 do not apply). 1.6 Physical objectives were almost achieved for the INSCAE component (although not necessarily for the type of training and diplomas envisaged in the President's Report), and basically achieved for the procurement component (through the establishment of a procurement unit, training and updating of legislation). 1.7 Macro policy and sector policy objectives were only partially achieved. Economic performance cannot immediately reflect the impact of better trained managers and accountants, or of improvements in procurement, which should all have a cumulative effect in the long term. The same reasoning applies to the impact of the project on private sector development. Although equally difficult to measure, the impact of the project on public sector management was most likely negligible. The lack of more specific baseline sample data with tracking over time suggests that such technical projects should have more monitorable objectives.  3 1.8 The achievement of financial objectives has been substantial. Although INSCAE is not yet fully self-supporting financially, it has managed over the years to increase its revenues by more than 50% percent for all its different activities including more than 100% of its training costs excluding TA as required in the covenants to the credit agreement on cost-recovery. 1.9 Institutional development objectives have been achieved only partially. INSCAE has been established and is operating satisfactorily, providing a very good example of successful capacity building with external assistance (long as well as short- term). INSCAE's management offers room for improvements, however, especially in planning and programming. Government procurement has improved, but regulatory deficiencies and procedural delays still exist. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT 1.10 The Borrower's report in Appendix B discusses the implementation record for the project, with some mention of the problems encountered. In summary, the INSCAE component was implemented reasonably well despite shortcomings in certain areas, whereas the implementation of the procurement assistance component was somewhat less than satisfactory. 1.11 The project had a slow start, primarily because it was not fully prepared by the time the IDA credit was approved. One of the main concerns of Government and IDA was to avoid an interruption in the availability of financing for the continued operation of CFC and its successor INSCAE for training in accounting and auditing. The processing of the project had already been delayed by the need to resolve issues prior to the signing of the IDA credit whether INSCAE should be part of the university or (as was decided) remain under the umbrella of the Ministry of Finance, and whether the project description should include the construction of a new building or the rehabilitation of existing buildings (the latter was decided because of the belief that there were enough buildings to be rehabilitated in Antananarivo). The issue of technical assistance for INSCAE (its type, source, role and how it should fit within the organization) was debated but not solved during project preparation, which is rather surprising for what was essentially a technical assistance project. Thus, INSCAE's first task was to sort out the type and source of technical assistance it needed (keeping in mind the different approaches of French and Anglo-Saxon accounting, auditing and management systems), the respective roles of the cofinanciers, and the problems of getting the technical assistance set up. In actual practice, conflicts arose between the approaches proposed by Canadian and French experts, which had to be resolved before detailed plans for the introduction of the management courses and diplomas could be prepared and implemented with the help of the technical assistance. The management training started only in September 1988, reflecting a delay of one year compared to the appraisal estimate. During the first two years of project implementation, audit reports were submitted late, which was paradoxical for an accounting and management school. During the latter years, audit reports were submitted in a timely fashion and were unqualified.  4 1.12 The procurement assistance component was added to the project only because this project was the first one being processed in which the component could be included. Otherwise, it was to be implemented by a different entity: the Central Tender Board (CCM), which was a body reporting to the Director-General of the State Inspectorate- General. On the IDA side, the necessary arrangements should have been but were not made to ensure that this component was supervised by a staff member who was highly knowledgeable on procurement issues. The implementation of the procurement assistance component was delayed. The special procurement unit was established and attached to CCM, and staff of public agencies were trained in procurement principles and procedures (almost 600 persons, including 21 trainers), as envisaged at appraisal. The consulting firm that provided one long-term expert to prepare recommendations for improving of procurement regulations and procedures started its work only in 1989. It prepared two manuals or reports: one on public procurement regulations, and one on the preparation of bidding documents and contracting for government procurement. As a result, a new procurement code (Decree No. 91-056) was issued on January 29, 1991. However, the Government did not agree with all IDA comments on the draft new code (essentially an updating of the old one rather than a complete revision), which still contains many unsatisfactory regulations (particularly regarding the number of steps and signatures required, and the low levels of clearance and approval thresholds). 1.13 The contract of the consulting firm was amended in June 1991 to include the preparation of standard bidding documents to be used for all government procurement. That task, however, was not carried out, for two reasons. First, in September 1991, the cryptic Government replaced CCM (considered by IDA task managers to be excessively involved in procurement) with a Commission ad hoc des Marches. Second, in March 1992, the Government agreed that IDA standard bidding documents should be used for procurement in all IDA-financed projects. Because of that breakthrough, together with the lack of responsiveness of Government to IDA comments and the fact that the Commission ad hoc des Marches was functioning better than the old CCM (in the sense that the processing time of contracts had been shortened, which was particularly important for IDA task managers), IDA lost interest in pursuing a dialogue with Government on the further improvement of regulations and procedures for all government procurement. In doing so, IDA accepted implicitly a change in the component's objectives. The component was considered completed, although in late 1994 IDA approved additional expenditures for equipment and training for the General Directorate of the General Inspectorate of the State which is left with the task of control a posteriori of public procurement. 1.14 In terms of physical targets (establishment of INSCAE, preparation of recommendations on procurement, training of staff, etc.), implementation was complete. The project took 2.5 years longer to complete than expected at appraisal but it met all its development objectives. The delay was due to the adaptation and extension of facilities for INSCAE which was not originally planned but was included as savings were made in other components. The actual project cost was US$12.8 million compared to the US$13.1 million appraisal estimate. Only US$8.1 million of IDA resources were used compared to the US$10.3 million appraisal estimate. These savings were possible because  5 additional grant financing became available as MCD-France increased its grant contribution from about US$1.5 million to US$2.5 million and two new financiers provided grants i.e. CIDA (US$1.15 million) and USALD (US$0.17 million). These additional grants helped Madagascar reduce its potential indebtedness by switching from IDA to grant financing. 1.15 A number of factors affected the implementation of the INSCAE component. On the positive side, the project benefited from: the increased ownership of the project by the Malagasy accounting profession (it was their idea and it responded to their needs); the excellent motivation of the faculty and teaching staff as well as students; and the generally good quality of the technical assistance provided and financed by donors. Negative factors (particularly at the beginning of project implementation) included the lack of Government counterpart funds, a certain lack of interest by the Board of Directors, and deficiencies in management. INSCAE's management style has not always been participatory enough, since certain decisions were taken by the Board of Directors and not discussed with all concerned parties, including some at high levels. Originally, the private sector was not sufficiently represented on the Board of Directors; this may explain some of the difficulties experienced by INSCAE in starting the management course, obtaining recognition of the profession of certified public accountant (expert comptable or comptable agre), or even finding a building suitable for INSCAE's use after rehabilitation. Regarding the procurement assistance component, its implementation was affected mostly by the difficulty of reconciling differences between IDA and the Borrower on the reform of procurement regulations and procedures. PROJECT SUSTAINABILITY 1.16 A number of factors favor the prospect of project sustainability, uncertainties also exist. Improvements made in procurement, at least for IDA-financed projects (and including those not due to the project) are not likely to be undone. The policy environment is generally favorable to an institution like INSCAE; the increase in recent years in the Government's contribution is an indication of its commitment to sustaining the achievements of this project component. The effectiveness of INSCAE's management, too is satisfactory, notwithstanding a certain lack of dynamism. The faculty remains interested and motivated. Participants' incentives are a highly favorable factor, as demonstrated by the students' ability to find jobs upon graduation, and therefore, their willingness to pay sizable tuition. Finally, although IDA has no follow-up project, other donors, particularly France, are likely to continue to support INSCAE. On the other hand, INSCAE's financial viability is not guaranteed, despite the significant increase in revenues from tuition and fees and resulting improvement in cost recovery. On balance, the sustainability of the project can be rated as likely.  6 IDA PERFORMANCE 1.17 IDA performance on this project was highly satisfactory at the identification stage, and satisfactory or somewhat less so in preparation assistance, appraisal, and supervision. As mentioned earlier, the project was very important for Madagascar and for IDA's country assistance strategy, and project identification was on target. With the benefit of hindsight, preparation assistance could have been more thorough and detailed, to facilitate the start of the project. Also, the design of the project and its conditionalities might have benefited from efforts at appraisal to test the seriousness of government commitment to certain aspects of the project (revision of accounting and auditing legislation, access to the profession of certified public accountants and auditors, and procurement reform). 1.18 IDA's supervision of the procurement assistance component was deficient. An important problem was the failure to arrange for the contribution of a procurement specialist. Moreover, supervision was basically neglected after the Government did not agree with IDA's comments on the draft new code and replaced CCM with a Commission ad hoc des Marches (para 1.11). With only two-thirds of the credit (in SDRs) disbursed, resources were available, which could have been used in particular for training of ministerial and public agency staff, to improve procurement capabilities in the country. 1.19 In supervising the INSCAE component, IDA played an important role, early on, to help resolve conflicts among cofinanciers and sort out their respective functions and technical assistance; more could have been done, however, to accelerate this process. Moreover, subsequent supervision suffered from excessive reliance on an outside consultant (an accounting professor), who likely lacked the authority and weight to deal adequately with the Malagasy (or at least certain groups in Madagascar) on sensitive subjects as the new accounting and auditing legislation, and access to the profession of certified professional accountants and auditors. According to a credit covenant, the Government was to enact new accounting legislation by December 31, 1987; the legislation was finally enacted in November 1992. Even though IDA gave its formal approval, it turned out later to have a number of unsatisfactory clauses (including restricted access to the profession), calling for revision. The promulgation of a revised ordinance is a condition of disbursement under the Financial Institutions Development Technical Assistance Project (Cr.2497-MAG) approved in 1993, which included a component for improving the accounting and audit environment; the Governrment has reached agreement with IDA on a revised ordinance which is expected to be promulgated very soon. 1.20 In the last years of project implementation, the INSCAE component was better supervised by IDA. However, for a period of time INSCAE believed that part of the undisbursed balance of the credit could be used to finance the construction of a new building, and thus INSCAE concentrated on the search for a suitable plot of land and preparation of architectural plans, rather than on the rehabilitation of an existing building. There was no requirement for a mid-term review, but two in-depth evaluations of results and prospects were undertaken at the end of 1992 and 1993, respectively, bcfore deciding  7 on an extension of the credit closing date. Those evaluations led to a useful and constructive dialogue with Government and INSCAE on the future of the institution and the measures to be taken to improve its management and operations; they also provided the basis for the conditions that were attached to the three closing date extensions (from December 31, 1992 to December 31, 1993, then to June 30, 1994, and finally to December 31, 1994). Those conditions covered: (i) an increase to at least FMG 275 million of the Government contribution to INSCAE's operating costs for 1994 (the actual contribution was FMG 455 million); (ii) an amendment of INSCAE's by-laws to increase the representation of the private sector in its Board of Directors and, therefore, in its management; (iii) the entering into ten-year leases for the building occupied by INSCAE and the additional one to be rehabilitated; and (iv) the preparation of a realistic financing plan for the next five-year period (the plans that were prepared included substantial increases in tuition and fees which have so far been implemented as planned). BORROWER PERFORMANCE 1.21 The Borrower's performance can be rated as satisfactory for preparation, implementation and covenant compliance, and highly satisfactory for operation. These ratings apply basically to the dominant INSCAE component; the Borrower's performance on the procurement assistance component was less satisfactory. The main merit of the Borrower lay in its pursuing a project idea that was really its own and that was responsive to widely felt needs in the country. Some of INSCAE's shortcomings at the beginning of project implementation, particularly the management deficiencies and the fact that audit reports were submitted late, were disturbing and paradoxical for an accounting and management school, but the situation improved later on. INSCAE succeeded in establishing partnerships with outside training institutions and securing financial support from a number of donors. INSCAE also prepared itself for the time when the proceeds of the IDA credit would no longer be available, by controlling closely its operating expenditures and increasing its revenues. Particularly noteworthy is the way INSCAE handled the introduction of tuition and fees for its various activities and, in the end, more than complied with the covenants in the credit agreement on cost recovery. Unresolved areas relate to the failure of the Government to enact acceptable legislation on accounting and auditing and to settle the question of access to the profession, these had to be addressed through a follow-up on going operation (Financial Sector Development Project, FINDEP). ASSESSMENT OF OUTcoME 1.22 The outcome is rated as highly satisfactory for the INSCAE component and somewhat less than satisfactory for the procurement component. Overall, the project's outcome deserves a rating of "highly satisfactory". Three favorable aspects of the INSCAE component deserve to be highlighted.  8 1.23 First, the project is a good example of successful capacity building, through a combination of long-term and short-term technical assistance to highly motivated recipients (administrators, faculty and other teaching staff). The success of the operation can be explained also by the partnerships that INSCAE managed to establish with outside training institutions, care exercised by INSCAE in selecting the most appropriate institutions, and the generally good quality of the foreign specialists. The number of long- term expatriates was reduced from a maximum of ten to three at present, with INSCAE personnel fully competent to carry on the activities. 1.24 Second, the output of INSCAE since its establishment has been substantial. As shown in Table 2.6 in Part II, the number of graduates of the three-year program in accounting was only slightly less than the appraisal estimate, although the number of graduates of the four-year program in accounting and of the two-year program in business administration was half or less than half the appraisal estimates. However, INSCAE offered more diversified training programs for both full-time and evening students than was envisaged at appraisal, so that by the end of 1994, the total number of diplomas awarded since the beginning was 928. The demand is very strong from full-time students, who have no difficulty in finding a satisfactory job upon graduation, as well as from employers who search for evening courses for their employees, whom they reward upon graduation with increased responsibilities and salaries. 75% of INSCAE graduates find employment within 3 months of graduating while the remaining 25% find employment within six months - this in a labor market characterized by high graduate unemployment. These results clearly indicate that the training provided by INSCAE is very much in line with the requirements of the labor market. 1.25 Third, as mentioned earlier, INSCAE has been very successful in collecting increasing revenues from tuition and various fees, above and beyond levels envisaged at appraisal. According to a covenant in the credit agreement, the Borrower was committed to submit to IDA, by June 30, 1987, a proposal on the feasibility of the introduction of tuition fees for the full-time accounting students. The proposal submitted in June 1987 concluded that the introduction of fees would only aggravate the precarious financial situation of the majority of the students; the proposal was accepted by IDA as complying with the covenant. However, starting in 1988, fees were introduced for the full-time accounting students as well as for other students and trainees. Another covenant of the credit agreement required 1NSCAE to ensure that the fees paid for the evening accounting courses and the management training program would cover the total cost of salaries of teachers for such programs during project execution and thereafter. INSCAE started complying with that covenant in 1993. In 1994, the income from tuition and fees for all courses (accounting and management, full-time and evening) represented 157 percent of the cost of salaries of teachers, while total income, including seminars and other activities, was almost half the expenses of INSCAE, excluding technical assistance. This was less than estimated by the five-year financing plan though the slippage can be partly attributed to rapid inflation resulting from the devaluation in spring 1994.  9 FuTuRE OPERATION 1.26 INSCAE is now well established, reasonably well managed, has a competent faculty, and offers courses and seminars that enjoy strong demand. As discussed above, INSCAE has done better financially than envisaged at appraisal, but needs to make further progress to become fully self-supporting. 1.27 Based on its past experience and on the demand for its graduates, INSCAE has made realistic plans for an expansion of its activities and its income generation. It can also reasonably expect to continue to receive additional support from some donors, particularly France. However, financial forecasts prepared by INSCAE show that, despite annual increases in tuition and fees, for the next five years or so it will continue to need some subsidies from the Government. These subsidies, however, are estimated to decline in absolute as well as in relative terms; expressed as a percentage of INSCAE's operating expenses (excluding technical assistance and other expenses financed by donors), the Government contribution would decrease from about 30 percent in 1995 to about 15 percent in 1999, and would represent a relatively small amount per student. These shortfall estimates are higher than in the five year financing plan prepared in 1993. However, considering the contribution that INSCAE makes to the national economy, particularly the development of the private sector, this seems justifiable particularly when viewed in comparison to subsidies for other institutions of higher learning. The Government recognizes INSCAE's contribution and a continuation of some form of Government support appears likely. KEY LESSONS LEARNED 1.28 The following lessons, which are relevant for future projects both in vocational training/technical education and in Madagascar, can be learned from the Accounting and Management Training Project: * Projects most likely to succeed are those that are owned by the Government and/or beneficiaries, are designed to meet widely perceived needs, and respond to a demand. * Project cofinancing requires special efforts on the part of IDA in order to promote good cooperation among cofinanciers in the best interests of the Borrower. * Technical assistance, whether long-term or short-term or a combination of both, can be successful for capacity building, provided that it corresponds to needs recognized by recipients and is carefully planned and implemented, in a spirit of partnership and with particular emphasis on the appropriateness and quality of the technical assistance to be provided.  10 * To facilitate implementation and monitoring, it is advisable to avoid projects with a mix of components of different kinds and with different implementing agencies (such as accounting and management training, on the one hand, and procurement assistance on the other). The procurement component was attached to the project as the Bank felt that it was important at that time and this was the only project within the foreseeable time horizon. However, the project's experience demonstrates the inadvisability of attaching unrelated components without sufficient preparation. * IDA should use its leverage at all stages of the project cycle, including in connection with any extension of the closing date of the credit, to bring about improvements in project management, implementation and overall orientation. * Projects should only be submitted for Board approval when fully prepared.  2. STATISTICAL TABLES Table 2.1: Summary of Assessments Summary of Assessments A. Achievements of Objectives Not Obiectives Substantial Partial NeAligible ADDlicable Macro policies a 0 0 Sector policies a 0 0 Financial objectives 0 0 Institutional development a 0 O Physical objectives 0 0 0 Poverty reduction a 0 0 Gender issues a a 0 Other social objectives O 0 RI Envirornental objectives 0 0 0 Public sector management a O 0 Private sector development a 0 0 Other (specify) a 0 0 B Project sustainability Likely Unlikely Uncertain 0 0 C. Bank performance Highly satisfactory Satisfactory Deficient Identification 0 0 Preparation Assistance 0 0 Appraisal 0 0 Supervision O 0 D. Borrower performance Highly satisfactory Satisfactory Deficient Preparation 0 0 Implementation 0 o Covenant Compliance 0 0 Operation 0 0 E. Assessment of outcome Highly satisfactorv Satisfactory Deficient 0~ ~ ~~ 0  12 Table 2.2: Related IDA Credits Credit or Loan Title Purpose Year of Approval Status Preceding Operations Accounting and Audit Organization and Training Project The objective of the project was to 1981 The project was satisfactorily completed encourage the practice of modern with the establishment of an accounting (Cr. 1155) accounting and auditing by upgrading the school, and the preparation of modern professional skills of accountants and accountancy legislation and of updated auditors, and the establishment of a rules governing the profession, including management consulting capability so accountants' qualifications. as to help develop efficient management, planning and financial control. Following Operations Education Sector Reinforcement Project One of the components of the project is the 1990 Higher level education component is being strengthening of higher implemented satisfactorily. In March 1992, (Cr. 2094) level education, and one of the covenant is the Government established the that the Govermnent shall "Delgation Generale du Gouvernement establish, by Dec 31, 1990, an agency pour la Formation Technique et responsible for coordination of Professionnelle "(DGFTP), whose Head is vocational training and technical at present the chairman of the Board of education activities in the education INSCAE. The Delegation Generale sector. became a Ministry in August, 1995. Manpower Training Project The objectives of the project are to 1992 After some initial delays and problems, the establish a technical and vocational project is now being implemented (Cr. 2382) education and training system satisfactorily. encompassing private and public training institutions and responsive to actual training needs of the economy. Financial Institutions Development Technical Assistance The objective of one of the components of 1993 The credit became effective in June 1994, Project the project is to formulate and enforce and project implementation started only audit and financial disclosure standards recently. (Cr. 2497) based on international norms.  13 Table 2.3: Project Timetable Steps in project cycle Date planned Date actual Identification (Executive Project Summary) Apr 1984 Preparation Aug 1984 Appraisal Jan/Feb 1985 Negotiations Dec 1985 Board Presentation Feb 25, 1986 Signing Apr 16, 1986 Effectiveness Jul 15, 1986 Oct 08, 1986 Midterm Review N/A. N/A. Project Completion Jun 30, 1992 Dec 31, 1994 Loan/Credit Closing Dec 31, 1992 Dec 31, 1994 Table 2.4: Credit Disbursements: Cumulative Estimated and Actual (US$ million) FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 Appraisal 2.0 4.0 6.2 8.2 9.2 10.0 10.3 Estimate Actual 0.1 0.3 1.0 1.6 2.3 3.1 4.3 5.3 8.1 Actual as % of Estimate 5% 8% 16% 20% 25% 31% 42% 52% 79% Date of final disbursement: May 22, 1995  14 Table 2.5: Key Indicators for Project Implementation 1. Number of Diplomas in Accounting 3-year program for a first cycle diploma in accounting - DSSC - 4-year program for a second cycle diploma in accounting - Dipl6me Superieur Specialise en Sciences Comptables DESCA- DipIome d'Etudes en Sciences Comptables Approfondies Appraisal Actual Appraisal Actual Estimate . Estimate 1987 64 73 30 18 1988 64 93 30 19 1989 64 60 40 17 1990 64 51 40 17 1991 64 37 40 14 1992 64 37 40 16 1993 64 54 40 10 1994 64 75 40 12 Total 512 480 300 123 Note: The number of graduates is not equal to the total number of diplomas (DSSC plus DESCA) because the graduates with a DESCA diploma also obtained previously a DSSC diploma. 2. Number of Graduates in Business Administration(MBA) (2-year program Appraisal Actual for a Third Cycle diploma - MAE: Master en Administration des Entreprises) Estimate 1988 20 1989 30 1990 30 17 1991 30 22 1992 30 18 1993 30 18 1994 30 26 Total 200 101 Note: In addition, during the same period 1988-1994, 116 full-time students graduated with a First Cycle diploma (DSSAE - Dipl6me SupMrieur Spkialise en Adlministration des Entreprises) and 27 full-time students graduated with a Second Cycle diploma (DHESAE - Diplome de Hautes Etuides en Sciences de l 'Administration d'ELnlreprises). Also, 4 evening students obtained the DSSAE diploma.  15 Table 2.6: Key Indicators for Project Operation Number of Students in Accounting Number of Students in Management Number of Teachers Needed Year Beginners In-Service Full-time In-Service Malgache Foreign 1996 280 700 25 20 26 5 1997 280 700 25 20 30 5 1998 280 700 25 20 30 4 1999 280 700 25 20 30 3 2000 280 700 25 20 30 1 2001 280 700 25 20 30 0 2002 280 700 25 20 30 0 2003 280 700 25 20 30 0  16 Table 2.7: Studies Included in Project Study Purpose as defined at appraisal Status Impact of Study Procurement To prepare recommendations for Completed A new procurement code was Study the improvement of procurement issued on Jan 29, 1991 regulations and procedures. (Decree No. 91-056). Table 2.8: Project Costs (US $ million) Project Components Appraisal Actual/Latest Estimate Estimate INSCAE 9.78 11.67 Procurement Assistance 0.49 1.12 Total Base Costs 10.27 12.79 Physical Contingencies 0.87 Price Contingencies 1.96 Total Project Costs 13.10 12.79 Table 2.8B: Project Financing (US $ million) Source Appraisal Actual/Latest Estimate Estimate IDA Credit 10.30 8.10 Government Funds 1.30 0.87 Sub-Total 11.60 8.97 MCD (France) 1.50 2.50 CIDA (Canada) __1.15 USAID (USA) __0.17 Total 13.10 12.79  17 Table 2.9: Economic Costs and Benefits The President's Report did not include an estimate of the economic rate of return of the project, but indicated that the INSCAE component was the least-cost solution for training accountants, auditors and managers. The alternative of sending students abroad was estimated to be about four times more costly (a minimum of about US$12,000 equivalent per student year abroad vs. US$3,000 in INSCAE). The actual cost of a student per year at INSCAE was about US$1,400 in 1994, whereas the alternative of training a student abroad (varying from about US$12,000 per year in France to about US$25,000 per year in Canada) was at least eight times more costly.  18 Table 2.10: Status of Legal Covenants in Credit Agreement Section Covenant Present Fulfillment date Description of Covenant Type Status Original Revised 3.01 4, 5 CP continuous Borrower's commitment to project objectives; Borrower initially provided only part of the Borrower to carry out project wit.h due diligence agreed upon counterpart funds, and with some and efficiency and in accordance with appropriate delays. This became less of a problem as practices, and to provide, promptly as needed, the INSCAE own receipts increased. funds, facilities, services and other resources required for project. _ 3.02 10 C continuous Procedures for procurement of goods, works and consultants' services financed out of the proceeds of the Credit. 3.03 10 CP By Sep 30 of each By September 30 of each year of execution of the Annual training programs have not been year, for the project, Borrower to submit to IDA for approval submitted for each year of execution of project. following year an annual training program to be carried out This improved in later years. during the following year under Part B.2 of the .. ________ project (Procurement assistance component). 3.04 12 CD Dec 31, 1987 By December 31, 1987, the Borrower shall enact a New accounting legislation was enacted in new accounting legislation. November 1992. However, it contains a number of unsatisfactory clauses which need to be revised. A revised text has been agreed in the context on the Financial Sector Development Project. 3.05 10 C continuous Borrower to take all necessary measures to ensure One condition of credit effectiveness was that that INSCAE shall, at all times, have at its the Borrower has made available to INSCAE disposition adequate premises for carrying out its adequate premises. INSCAE took a ten year responsibilities. lease on a rehabilitated building in 1994. 3.06 5,10 C continuous Any change of the legal arrangements for INSCAE The establishment of INSCAE under legal shall be subject to prior approval by IDA. arrangements satisfactory to IDA (including an acceptable composition of the board of directors and pedagogical committee) was a condition of credit effectiveness. The Board was changed in 1994 to increase private sector participation.  19 Section Covenant Present Fulfillment date Description of Covenant Type Status Original Revised 3.07 (a) 2 C During execution During execution of the project and thereafter, of the project, and Borrower to take all measures necessary, or to thereafter. cause INSCAE to take all measures necessary, to ensure that the students enrolled in the evening accounting courses and the students enrolled in the management training program, or the sponsors of any such student, shall pay a tuition fee adequate to cover the total cost of salaries of teachers for any such program but exclusive of salaries of technical assistants. 3.07 (b) 2 C Jun 30, 1987 By June 30, 1987, Borrower to submit to IDA for The proposal submitted in June 1987 (and review a proposal on the feasibility of the accepted by IDA) concluded that the introduction of tuition fees to be paid by the introduction of fees would only aggravate the students enrolled in the day time accounting precarious financial situation of the majority of program of INSCAE. the students. However, fees were introduced at a later date and now more than cover teachers' salaries. Section Covenant Present Fulfillment date Description of Covenant Type Status Original Revised 4.01 1 CD by June 30 of each Borrower to maintain adequate project records and In the early years of project execution, audit year, for the accounts, to have the accounts audited by reports were submitted with considerable preceding year. independent auditors acceptable to IDA, and to delays. Since then, they have been timely. furnish to IDA, not later than six months after the end of each fiscal year, the report of such audit by said auditors. Covenant types: I = Accounts/audits. 8 = Indigenous people. Present status: 2 = Financial performance/revenue 9 = Monitoring, review and reporting. generation from beneficiaries. 10 = Project implementation not covered by C = Covenant complied with. 3 = Flow and utilization of project funds. categories 1-9. CD = Complied with after delay. 4 = Counterpart funding. 11 = Sectoral or cross-sectoral budgetary or CP = Complied with partially. 5 = Management aspects of the project or other resource allocation.. NC = Not complied with. executing agency. 12 = Sectoral or cross-sectoral 6 = Environmental covenants. policy/regulatory/ institutional action. 7 = Involuntary resettlement. 13 = Other.  20 Table 2.11: Compliance with Operational Manual Statements All applicable Bank OMS were complied with. Table 2.12: Bank Resources: Staff Inputs Stage of Project Cycle Planned Revised Actual Weeks US$ Weeks USS Weeks US$ Preparation to Appraisal N/A N/A N/A N/A 28.7 N/A Appraisal / Negotiations N/A N/A N/A N/A 26.2 N/A Negotiations through N/A N/A N/A N/A 9.3 N/A Board Approval _ Supervision N/A N/A N/A N/A - 7 1.5 N/A Completion N/A N/A N/A N/A 6.0 N/A TOTAL N/A N/A N/A N/A 141.7 N/A  21 Table 2.13: Bank Resources: Missions Stage of MontW/ Number of Days in Specialized staff Perforrnance Rating Types of Problemns Project Cycle Year Persons Field skills represented Implemen- Develop- tation Status ment I Objecdves Through appraisal Dec-84 2 7 EC, PS _ _ _ _ _ Appraisal through Jan/Feb-85 4 20 EC, SA, MTS, PS Approval Supervision I Mar-86 3 9 EC, SED Supervision 2 Jul-86 2 9 EC, SED Supervision 3 May-87 1 6 PS Supervision 4 Oct-87 2 13 EC, SED 2 1 PMP Supervision 5 Jan-88 1 N/A ACMTS Supervision 6 Sep/Oct-88 1 175 EC 2 I PMP Supervision 7 Jan-89 1 17 ACMTS 2 1 PMP Supervision 8 Jul-89 1 9 ACMTS 2 1 CLC, PMP AF, PP, TAP Supervision 9 Oct-89 2 8 EC, ACMTS N/A N/A Supervision 10 Jul-90 _____ 1 18 ACMTS 2 1 CLC, PMP, AF, PP, TAP Supervision 11 Jan-91 _ 1 14 ACMTS N/A N/A Supervision 12 Jul-91 1 2 EC 2 1 CLC, PMP, AF, PP, TAP Supervision 13 Jul-92 2 14 TVS, AIS 2 1 CLC, PMP, AF, PP, SP Supervision 14 May-93 2 14 TVS, FA 2 1 CLC, PMP, AF, PP, SP, FP Supervision 15 Nov/Dec-93 2 16 TVS, FA 2 1 PMP, AF, PP, SP, FP Supervision 16 Mar/Apr-94 1 16 TVS 2 1 PMP, AF, PP, SP, FP Supervision 17 Oct-94 1 7 TVS S HS Completion Apr/ 2 EC, IS S HS May-95 Key to specialized staff skills AIS = ArchitecVlmplemnentation Specia IS = Implementation Specialist SA Senior Architect EC = Economist MTS = Management Training Specialist SED = Senior Educator FA = Financial Analyst PS = Procurement Speciaist TVS = Technical/ Vocational Specialist Key to performance ratine I = Problem Free 2 = Moderate Problems 3 = Major Problems 4 = Major Problems - Corrective action to be taken. HS = Highly Satisfactory S = Satisfactory Key to problems AF = Availability of funds PMP = Project management performance SP = Studies progress. CLC = Compliance with legal covenants PP = Procurement progress TAP= Technical Assistance Progress. FP = Financial performance  APPENDICES A. MISSION'S AIDE-MtMOIRE I A World Bank mission, composed of Messrs. Pierre Mersier (Mission leader) and Paul Geli (Consultant) visited Madagascar from April 16 to May 17, 1995 to, inter alia, finalize the Completion Report of the Accounting and Management Training Project, for which credit No. 166 1 -MAG was signed on April 16, 1986 and closed on December 31, 1994. The mission thanks in particular Mr. Richard Fienena, Director of Cabinet of the Minister of Finance and Budget, for granting it an audience, during which the main findings and recommendations of the completion report were presented to him. The mission also thanks the management and staff of the "Institut National des Sciences Comptables et de l'Administration d'Entreprises" (INSCAE) and of the Inspection Generale de l'Etat (IGE), with whom it had working sessions in a constructive environment. 2. The retrospective evaluation of the Accounting and Management Training Project made independently by the World Bank was largely based upon the reports prepared by the beneficiaries of the IDA Credit 1661-MAG, i.e., IGE and INSCAE. These reports include a detailed description of activities carried out and of problems encountered during project implementation. The completion report, which will be submitted to the Board of Directors of the World Bank, must present the points of view of both the World Bank and the Borrower, so that they do not have to be harmonized. In any case, the mission noted that, in spite of a few differing opinions concerning especially the procurement component implemented by IGE, overall analysis by INSCAE and IGE on the one hand, and the World Bank on the other, reflect convergent points of view on the project's implementation and its outcome. 3. The project's objectives were to improve the management and financial monitoring of enterprises (INSCAE component), as well as the procurement procedures of Madagascar (procurement component). The INSCAE component (the main one) had been designed to continue and deepen the training in accounting and to add training in business and management, through the establishment of a new institution which would eventually become financially viable. The objectives of this component were crucial for the development of the Malagasy economy and enterprises. In spite of difficulties, INSCAE has been a success. The implementation of this component is a good example of successful capacity building; INSCAE is now well established and fairly well managed; its teaching staff is qualified and its classes and seminars are in high demand. This success is mainly due both to a sustained effort towards the training of trainers and to INSCAE's determination and capability to adapt its training to the needs of the labor market. The demand is strong from full-time students who, after graduation, find a job easily. It is also strong from employers for evening classes for their staff who, upon completion of their INSCAE training, are usually rewarded with increased responsibilities and better salaries.  23 Appendices 4. This very strong demand for training has allowed INSCAE to increase school fees, resulting in a satisfactory level of self-financing, well in excess of what was envisaged at the time of appraisal. However, in spite of the annual increase of school fees, INSCAE will not be able, in the medium term, to reach complete financial autonomy but will continue to require subsidies from the Government. These subsidies, which would decrease and represent a rather small amount per student, appear entirely justified in the light of INSCAE's contribution to the national economy and particularly to the development of the private sector. Besides, and in view of its excellent performance, INSCAE should benefit from additional financing from donors to pursue and reinforce the training of trainers (training or fellowships abroad will continue to be needed to upgrade skills in accounting and management), and to renew equipment. As for the grouping of its various facilities and classrooms in the same premises, INSCAE could, perhaps, mobilize the necessary financing locally. 5. As regards procurement, there was a need to bring regulations and procedures up- to-date. Therefore, the objectives of this component were essential for Madagascar and IDA, but it was not obvious that the Malagasy Government and IDA would share the same point of view on the reforms to be undertaken. In accordance with the project description, studies and recommendations were made and many were trained, so that, for the main part, what had to be done has been done. Nevertheless, the outcome of this component is not very satisfactory for two reasons: first, the Government and IDA could not agree on the content of the reforms; second, the political events of 1991-1992 and decisions taken at that time by the Government have partially "rolled back", and led to the abandonment (at least by IDA) of the original project objective, namely to improve regulations and procedures for all public procurement in Madagascar. When the Government agreed (in March 1992) that IDA sample bidding documents would be used for all projects financed by the World Bank, the latter lost interest in pursuing a dialogue with the Government on any other procurement, and the component was considered completed. 6. Overall, the outcome of the Accounting and Management Training Project can be rated "highly satisfactory". Antananarivo, May 22, 1995  24 Appendices B. BORROWER CONTRIBUTION TO THE ICR COMPLETION REPORT BY INSCAE on the INSCAE component Credit 1661-MAG FOREWORD 7. The Institut National des Sciences Comptables et de l'Administration d'Entreprises (INSCAE), established in 1986, falls within the context of the development of the Centre de Formation en Comptabilite (CFC) (Accounting Training Center) created in 1982: (a) In 1981, the granting of a development credit (115 5-MAG) made it possible to implement in Madagascar a project for organization and training in accounting and auditing. This was the context in which: (b) In 1982, the Centre de Formation en Comptabilite (CFC) was created. (c) In 1986, the obvious success of the project, and the development of the Center's activities, led to: (i) recognition of the pertinence of its continuation, (ii) renewal of the confidence of all its partners; (iii) a new name being adopted --Institut National des Sciences Comptables et de I'Administration d'Entreprises (INSCAE)-- to take the place of CFC; (iv) new financial support from IDA in the form of Credit 1661 -MAG. (d) December 31, 1992 was the initial closing date set for Credit 1661-MAG. However, in view of the importance of the project and of the Institute's needs, IDA responded favorably to a request from the Malagasy party for the credit to be extended to the end of 1993. Moreover, analysis of the situation at that date led to a request for further extension to the end of 1994 which was agreed by IDA subject to certain conditions and in two stages (end June 1994 and end December 1994). 8. Credit 1661-MAG was finally closed on December 31, 1994 and is the subject of this completion report consisting of four main sections: (a) evaluation of the project objectives and of the degree of accomplishment of these objectives, (b) evaluation of the project content, its implementation, its functioning, its cost and outcomes, and of INSCAE's future prospects, (c) an evaluation of the World Bank's performance at each of the different stages of the project ( preparation, appraisal and execution), and (d) a plan of  25 Appendices action for continuation of INSCAE's activities after the closing of Credit 1661 -MAG, with a list of indicators of the project's performance and of its impact on the development of Madagascar. EVALUATION OF THE PROJECT OBJECTIVES AND OF THE DEGREE OF ACCOMPLISHMENT OF THESE OBJECTIVES INSCAE: project objectives 9. The purposes of the Institut National des Sciences Comptables et de l'Adrninistration d'Entreprises (National Institute for Accounting and Management - INSCAE) are to (a) provide basic and advanced training for business management staff, accountants, auditors and certified public accountants, and to foster research; (b) strengthen its relations with the business world and with national and foreign organizations operating in similar fields; (c) promote Malagasy enterprises through training for their senior staff and managers; and (d) contribute thereby to the development of the national economy. INSCAE and its partners 10. To achieve its objectives and perform its role of providing basic and advanced training and upgrading for businesses, INSCAE has developed two main categories of partnership: (a) Educational and scientific partnership. Educational and scientific partnership with other similar institutions, including particularly: (i) Universite du Quebec a Trois-Rivieres (UQTR), Canada; (ii) Fondation Nationale pour l'Enseignement de la Gestion des Entreprises (FNEGE) and other universities in France, (iii) The higher education establishments in Madagascar and Reunion. (b) Financial partnership (i) Bilateral cooperation a. Canadian International Development Agency (CIDA): (i) resident and nonresident technical assistance since 1988, (ii) training fellowships for teaching and any administrative staff; (iii) pedagogic support (textbooks and institutional equipment); and (iv) support for research (symposia, seminars, courses).  26 Appendices b. The Mission Frangaise de Cooperation et d'Action Culturelle - MFC: (i) resident and nonresident technical assistance; (ii) support for trainer training (training and research fellowships); (iii) support for documentation; and (iv) support for Junior-Entreprise creation. c. USAID: Permanent missions and short-duration training courses. d. AUPELF/UREF: Non-resident technical assistance, and support for research. (ii) The Malagasy State a. The Malagasy State plays a role in the INSCAE project by assuming responsibility for provision of the local counterpart funds for external financing, and through the administrative and financial supervision performed by the Ministry of Finance and Budget and the educational and scientific supervision by the Ministry of Higher Education. Annual State subsidies in FMG/million 1987 1988 1989 1990 1991 1992 1993 1994 1735 100 80 180 180 162 250 455 b. Although the State subsidies furnished to INSCAE were very small at the start, there has been a marked increase in these subsidies since 1993. (iii) Malagasy enterprises. Through their confidence in INSCAE training. (iv) The World Bank As the Institute's principal financial partner through the granting of Credit 1661 -MAG, the World Bank has been involved in several components of the INSCAE project: (a) support for nonresident technical assistance; (b) support to the training for trainers and administrative personnel; (c) logistic support for civil works, furniture, equipment, and vehicles; and (d) computerization of various departments (library, personnel, accounting, studies management, etc.).  27 Appendices Evaluation and degree of accomplishment of objectives 11. Upon the closing of Credit 1661-MAG, it is clear that the pertinence of the project was fully justified: it met and is still to this day meeting a market need. 12. The number of INSCAE graduates is increasing every year, totaling at the end of 1994: (a) 653 graduates from first cycle (b) 174 graduates from second cycle (who also have the first cycle diploma) (c) 101 graduates from third cycle Management. 13. Placement rate: If the effectiveness of a school is measured in terms of the placement rate of its graduates, it can be affirmed that INSCAE has fully achieved its objectives. The placement rate of INSCAE's graduates is 100%. Seventy-five percent find employment within three months of receiving their diplomas, and the other 25% within three to six months, taking into account the time it takes them to make their choice, the positions being available during the first three months. 14. Labor market perception: The above-noted placement rate clearly demonstrates the positive perception that employer enterprises and organizations have of INSCAE graduates. The reasons for this success derive essentially from INSCAE's unwavering focus on: (a) excellence of the training provided by high-level teachers, reaping benefits from an aggressive trainer-training policy; (b) improvement of appropriate technical and instructional aids (computer programs, audiovisual materials, library); (c) continuous adaptation of training to the needs of the labor market, with emphasis on the "professional" content. 15. Theoretical and practical instruction are provided on a joint basis (case studies, visits to and short assignments in enterprises, effective participation in forums, seminars, etc.). It can be stated, therefore, that, notwithstanding the few shortcomings that still remain to be remedied (in particular in strengthening of the "communication and expression" dimension), the competitive advantage gained by INSCAE graduates lies in the fact that they are fully operational upon completing the training. 16. Enrollment rates: Despite the increase in admission fees for the Initial Training (IT) and Continuing Training (CT) management courses, it is clear that enrollment rates have remained consistent in IT and CT management, while a progressive increase has been witnessed in enterprise participation in the courses and seminars offered by the Department of Advanced Business Training. One of the reasons for INSCAE's success  28 Appendices lies in its capacity to respond to labor market needs through flexibility in the training provided: (a) by adapting course content; (b) by creating courses leading to diplomas, in which enterprises can enroll their employees and management staff; (c) by combining training and work schemes in Management, which offer the following advantages: (i) security for the enterprise that it will retain its employee while training him; (ii) security for the employee who keeps his job while being trained at his employer's expense; (iii) assurance for INSCAE that the training fees will be paid; (d) by introducing a fourth year in Administration, and developing short-duration (inter or intra-enterprise) training courses at the level of the Department of Advanced Business Training, with a view to preparing for and ensuring INSCAE's financial autonomy. 17. Finally, the following points should be emphasized: (a) the development of INSCAE's relations with a network of Canadian and French teachers, through mission members who are sent to Madagascar; (b) the positive impact of INSCAE graduates in the management field in Madagascar: many of them, especially graduates of the management sub- component, are presently employed in production or service enterprises at various levels of management, or else are working as promoters, business developers and owner-managers. EVALUATION OF THE PROJECT CONTENT AND OF ITS IMPLEMENTATION, FUNCTIONING, COST AND RESULTS - PROSPECTS FOR INSCAE 18. The results of the INSCAE project are clearly positive with respect to the objectives that were set. Notwithstanding this, there are a few comments: (a) Content of the project, its implementation, functioning and cost: Out of the credit of SDR 9.5 million, SDR 3.7 million was canceled. This saving originated from several factors: (i) the delays in starting up the project; (ii) the Ordinance defining the accounting trade was not issued until 1993;  29 Appendices (iii) unlike other projects, any training project requires a longer lifespan than the training course provided, to allow for prior training of the teachers; (iv) the assistance provided during implementation of the project by CIDA, MFC and USAID, whose contributions were not included at appraisal; (v) the tight control exercised by INSCAE over operating costs, in anticipation of: (vi) the withdrawal of donors at the end of the project. This policy was intended to put INSCAE in a better position to move into the self- financing period, commencing in 1995; (vii) the construction of a single facility, an undertaking on which INSCAE had pinned considerable hopes but which, ultimately, proved to be impossible; (viii) the inadequacy of the counterpart funds up until the end of 1993, which limited the volume of local procurement: INSCAE was required to disburse before being able to obtain reimbursement; (ix) the cumbersome bidding and disbursement procedures, which improved only toward the end of 1993; (x) the absence of budgetary decentralization in the Institute up until the end of 1993; this was not without impact on the staffs motivation as regards preparation and execution of the budget. 19. The following comments need to be made regarding each of the disbursement categories of the IDA credit: (i) Civil works: The amount initially included under this category was insufficient to finance the rehabilitation of the new building rented by INSCAE on the site of the Andolaho Iycee. Therefore, part of the "contingency" funds provided by the Credit were allocated to these works. (ii) Materials, Furniture, Vehicles, and Equipment: To consolidate what had been accomplished and ensure the sustainability of its activities, in 1994 the Institute purchased: a. new data-processing equipment (microcomputers, inverters, software). This equipment was used to implement the various computerization projects involving the different administrative services (accounting, teaching, personnel,  30 Appendices stores, library) and improve computer use practice for the students and business higher level staff b. modem educational equipment (video projectors, camcorders, language laboratories) to enhance the quality and effectiveness of the different programs provided; c. reprographic equipment, essential for the activities of the Studies and Advanced Business training departments; In light of these acquisitions, combined with the renewal of the vehicle fleet, the reason for the discrepancy between the original allocations under this category and expenditures will be readily apparent. (iii) Consultants-Fellowships-Training: The saving realized under this category corresponds approximately to the assistance provided, during the project implementation, by CIDA, MFC and USAID. Moreover, because there was no guarantee of long-term World Bank financing, the Institute has not been sending fellows since 1992. Only short-duration courses have been organized. (iv) Professional services: Under this category credit funds have been fully utilized, as expected. (v) Operating costs: The saving shown is essentially due to a certain "austerity policy" applied in view of the construction of a single facility and to provide for the period when INSCAE would become self-sufficient. (b) Future prospects of INSCAE. INSCAE's accomplishments and outputs are significant, in terms of a. academic results (graduates, placement rate, enrollments rate); b. qualified teaching staff, c. improved administrative management (computerization); d. procurement of efficient instructional equipment (computer center, audiovisuals, language laboratory, textbooks); e. the appreciation of INSCAE training by enterprises as demonsti ated through: - promotions plus salary increases for graduates;  31 Appendices - requests to INSCAE for training; - offers of training courses and employment directly addressed to INSCAE. As a result, INSCAE is now in a position to: f. maintain its status as a leading management school thanks to the consistent excellence of its training, at national and international levels; g. ensure its financial independence by increasing its own resources; h. promote national and regional enterprises through the training of management-level staff; i. contribute thereby to the development of the national and regional economy. EVALUATION OF THE BORROWER'S AND OF THE WORLD BANK'S PERFORMANCE 20. It can be stated that overall the INSCAE project was a success in term of both its identification and preparation as well as implementation, in spite of some weaknesses regarding: 21. Disbursements: The problems were due to: (a) savings effected at management level (cf. II); (b) administrative procedures linked to competitive bidding and to the non- continuity of the credit after 1992; and (c) the lack of systematic monitoring of the project by the World Bank Resident mission, except after the end of 1994. 22. Regrouping of INSCAE sites: A project for the financing of a new construction was set up in 1992 with the World Bank following the purchase of a site by INSCAE (the site was located at Nanisana and architectural plans were completed in 1992). Unfortunately, this project was abandoned by the World Bank in spite of some recommendations made in its aide-memoires. THE INSCAE PROJECT AFTER THE CLOSING OF CREDIT 1661-MAG 23. After the final closing of Credit 1661-MAG on December 31, 1994, INSCAE, concerned with development and sustainability, is submitting this year (1995), under a four-year financing plan, a balanced budget --taking account of reasonable State- supported subsidies and of steady support from donors other than the World Bank-- and a  32 Appendices program of instnictional activities, maintained at their level of excellence. The financing table indicates: (a) projections of expenditures to be committed by the Institute in the context of its activities; (b) the projected revenues it expects from its activities; (c) a surplus or a financing need for each coming year; and (d) the external financing sources that the Institute could explore to cover its expenses. 24. The comparative figures of 1994 have been used for this plan, which has been developed under the following assumptions: (a) PREFTEC will finance the technical assistance for the Centre de Preparation a l'Expertise Comptable from 1996 to 1997; (b) the Mission Francaise de Cooperation et d'Action Culturelle will fund annually, up to 1 999, four annual individual teaching missions and two fellowships; (c) regarding fees, a 10% increase every two years is envisaged up to 1999; (d) the rate of revenue increase is 10% per year for the Advanced Business Training Department and 20% for the various centers. 25. If the State and donors would subsidize its activities according to the projected financing plan, the sustainability of INSCAE would be assured. This action plan for the Institute's activities is justified by the steadily growing confidence of Malagasy enterprises and of the State in INSCAE training, reflected in: (a) its high enrollment rate; (b) high demand for training; (c) employment offers for graduates; (d) appreciation of INSCAE training as evidenced by promotions and salary increases for graduates; (e) the confidence of INSCAE's donors (PREFTEC, COI, USAID, CIDA) in light of its results; (f) INSCAE's self-confidence; and (g) the trust of the Malagasy State in INSCAE s enterprises and for the development of the national economy. GENERAL CONCLUSION 26. Following closing of IDA Credit 1661 -MAG and with the assistance of its other partners, INSCAE will therefore continue to play its role of providing training and advanced training in business management and accounting in order to promote the development of national enterprises and the Malagasy economy. 27. It will, however, have to deploy even greater efforts in order to retain the confidence of its partners and of the users of its outputs, with a view to managing more efficiently its activities and thus ensuring their sustainability. Such efforts should include: (i) maintaining the excellence of its training: (ii) constant upgrading of the knowledge of its teaching staff (short and long-duration training courses), (iii) maintenance and renewal of its equipment and facilities; (iv) strengthening of its research activities;  33 Appendices (v) adapting the content of its training to market needs (creation of adapted training modules, e.g. business creation); and (vi) finalizing the accounting expertise;  34 Appendices COMPLETION REPORT by the Direction Generale de l'Inspection Generale de l'Etat on the procurement component 28. The document focuses only on the two sub-components for which the Direction Generale de l'Inspection Generale de l'Etat was responsible, identified hereinafter as: (a) Sub-component I, relating to improving contract award and procedures; (b) Sub- component n, relating to the improvement of monitoring procedures for contract award and procedures. EVALUATION OF OBJECTIVES AND EXTENT OF THEIR IMPLEMENTATION Sub-component I 29. The main objectives of Sub-Component I were: on the one hand, to improve procurement procedures; on the other hand, the training and/or improvement of the performance of ministries and public entities and their staff for procurement. 30. Concerning the first objective, the studies carried out led to the elaboration of new procedures (decree no.91-056) developed within the framework of a consultancy dialogue between the Association and Malagasy officials. However, the respective views of the parties were not convergent on a few points, mainly: preselection procedure, presentation of submission envelopes, procedure of bid opening, mode of intervention by the Commission Centrale des Marches, visa and approval procedure, preparation of standard documents. 31. As for the second objective, the training sessions and/or advanced training included respectively: (a) 21 participants for 2 sessions concerning the training of trainers; (b) 567 participants for 28 sessions of training in contract awards. Sub-component I 32. The sub-component II aimed at improving control over contract award and execution. 33. The expected results are likely to be reached thanks to: (a) the experience gained by the 3 employees of CCM of a fellowship abroad and by the 28 others trained locally by a foreign expert; (b) the use of a manual of control procedure prepared with the assistance of another foreign expert.  35 Appendices CONTENT EVALUATION OF SUB-COMPONENTS I AND 1I Sub-component I 34. This sub-component I included: (a) technical assistance for the organization, a study of procedures and training; (b) study trips abroad, and (c) various purchases of equipment. 35. It is unfortunate that the Cellule des Marches, beneficiary of assistance in organization, has been operational only for a short time due to the political events of 1991/1992, at least at the central level. Sub-component II 36. This sub-component II included: (a) technical assistance in organization and training; (b) a study trip abroad, and (c) various purchases of equipment. 37. There are no comments on the implementation of this sub-component. EVALUATION OF THE BORROWER AND OF THE WORLD BANK PERFORMANCE Sub-component I38. Although the new procedure finally adopted was not entirely satisfactory to the World Bank, the Borrower fully completed its task. 39. The political events of 1991/1992 and government's decisions made at that time have unfortunately ruined the efforts undertaken due to the replacement of the Commission Centrale des Marches with the Commission ad hoc des Marches (which was to be temporary but managed to stay in place for almost 3 years), and the interruption of training and advanced training. 40. From the Borrower's point of view, the World Bank seemed to have applied the law of "everything or nothing", resenting that some of its recommendations had not been followed. Sub-component II 41. All tasks assigned to the Borrower have been completed. 42. On the World Bank side, some changes in procedures have somewhat disconcerted the Borrower (i.e. a single contract award for procurement of all services related to sub- component I; separate contracts for technical assistance on the one hand and for equipment purchases on the other hand in the case of sub-component II).  36 Appendices ACTION PLAN FOR THE FOLLOW-UP OF THE BENEFICIARY SERVICE'S ACTIVITIES AFTER CLOSING THE CREDIT 166 1-MAG. 43. Apart from the achievements realized with the World Bank financing, the action plan of the beneficiary service should take into account a recent amendment to the procedure decided by the Government (decree no.94-624 of September 28, 1994 published in the Journal Officiel of February 20, 1995). 44. Deprived of any role within the Commission Centrale des Marchds, the Direction G6nerale de l'Inspection Generale de l'Etat will focus from now on, on the one hand, on the operation of the Cellule des Marches; on the other hand, on the control aposteriori of contract awards and their execution (which could be made systematic if affordable). 45. The benefits gained from the Project financed by Credit 166 1-MAG will enable the Direction Generale de l'Inspection Generale de l'Etat to comply easily with these tasks. 46. Concerning the procurement award procedures, the Direction Generale intends to propose an overhaul in the light of the experience gained by the three most recent fellowships organized abroad.   :