Cambodia: Public Financial Management for Rural Development Program, Subprogram 1

Sovereign Project | 41373-012

Summary

The program's objective is to assist in implementing the PFMRP, particularly in the three aforementioned rural development ministries.

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Project Name Public Financial Management for Rural Development Program, Subprogram 1
Project Number 41373-012
Country Cambodia
Project Status Closed
Project Type / Modality of Assistance Grant
Source of Funding / Amount
Grant 0132-CAM: Public Financial Management for Rural Development Program, Subprogram 1
Asian Development Fund US$ 6.71 million
Grant 0133-CAM: Public Financial Management for Rural Development Program (Project Grant)
Asian Development Fund US$ 4.10 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector Public sector management - Public expenditure and fiscal management
Gender Equity and Mainstreaming Some gender elements
Description The program's objective is to assist in implementing the PFMRP, particularly in the three aforementioned rural development ministries.
Project Rationale and Linkage to Country/Regional Strategy
Impact Strengthened prioritization of resource use; efficient delivery of public services to the rural population and improved governance
Project Outcome
Description of Outcome Improved PFM in the ministries dealing with rural development
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

Strengthened Financial Management Framework to Increase Accountability: Policy framework and incentive structure for public financial management established and PFM reform program

effectively implemented

Strengthened Financial Management Framework to Increase Accountability: Increased transparency and

efficiency in the use of Government expenditure

Strengthened Financial Management Framework to Increase Accountability: Effective debt management

system

Strengthened Financial Management in the Rural Priority Sectors to Improve Service Delivery to Rural Population: Enhanced water management for rural development

Strengthened Financial Management in the Rural Priority Sectors to Improve Service Delivery to Rural

Population: Increased budget comprehensiveness and transparency in public expenditures

Strengthened Financial Management in the Rural Priority Sectors to Improve Service Delivery to Rural Population: Increased rural priority sector budget execution rates

Strengthened Financial Management in the Rural Priority Sectors to Improve Service Delivery to Rural Population: Reduced fiduciary risks and increased efficiency of procurement

Strengthened Financial Management in the Rural Priority Sectors to Improve Service Delivery to Rural Population: Improved accounting records and reports and a modern financial management information system

Strengthened Financial Management in the Rural Priority Sectors to Improve Service Delivery to Rural Population: Improved accountability and performance measurement for management established

Strengthened Financial Management in the Rural Priority Sectors to Improve Service Delivery to Rural Population: Enhanced service delivery at subnational level

Strengthened Financial Management in the Rural Priority Sectors to Improve Service Delivery to Rural Population: Strengthened PFM capacity and system in rural development ministries

Strengthening External Audit as a Pillar of Public Accountability: NAA strengthened in areas of financial audit and performance audit

Status of Implementation Progress (Outputs, Activities, and Issues)

The public financial management reform program was approved in December 2008, and included a project to support institutional and capacity development through four components to strengthen PFM in three rural development ministries, including internal audit (component 1 and 2); strengthen debt management in MEF (component 3) and strengthen audit capacity of the National Audit Authority (component 4). In November December 2011, a mission was undertaken to o (i) Review with the Ministry of Economy and Finance (MEF) and the implementing agencies - Ministry of Rural Development (MRD), Ministry of Agriculture, Forestry and Fisheries (MAFF) and Ministry of Water Resources and Meteorology (MOWRAM) the implementation of activities under the Public Financial Management for Rural Development Program (PFMRDP) subprogram 1 project strengthening public financial management in three rural development ministries (Component 1), strengthening internal audit in three rural development ministries and MEF (Component 2); (ii) Review the progress concerning Standard Operating Procedures (SOP), Financial Management Manual (FMM) and the Procurement Manual (PM) update and other activities under subprogram 1. The mission reviewed progress regarding public debt management capacity development activities (Component 3). The mission discussed separately the strengthening of the National Audit Authority (NAA) (Component 4). The wrap up meeting workshop was chaired by Mr. Pen Thirong, Director of MEF/DIC. In his opening remarks, he referred to the awareness created by the project on the government's reform programs: Public Financial Management Reform Program (PFMRP), Public Administration Reform (PAR), Deconcentration and Decentralization (D&D) and the continuing need for linkage between the initiatives. The Chairpersons of the PFM Working Groups in each Ministry on behalf of MRD, MAFF, MOWRAM and Internal Audit Departments of MEF, MRD, MAFF and MOWRAM, made presentations outlining the achievements, outcomes, challenges, lessons and next steps required in their respective ministries. There is recognition that the three rural development ministries have made good progress, and have improved their Budget Strategic Plans and Budget Plans and were making a real contribution to the PFMRP Committee forum on a quarterly basis but many remains to be done. MEF and the 3 Rural Development Ministries (3 RDMs) reiterated that the efforts should be sustained and institutionalized. A snapshot of progress is summarized in the following paras.

Component 1 strengthening PFM in 3RDMs. This component provided technical assistance to roll out the government's PFMRP to the three rural development ministries. The PFMRP is an umbrella reform program of the government, supported by a range of development partners, and through a multi-donor trust fund led by the World Bank. ADB is part of this sector wide approach, and provides bilateral support through technical assistance projects. Over the years, the PFMRP progress has not kept pace with expectations and contributing factors to the delay have included a rather lengthy and drawn out procurement of Consultants to design and implement a FMIS which looks like drawing to conclusion in December 2011. However, due to the cost of the system the specifications have been revised on several occasions and now the FMIS will include only a treasury and budgeting system as opposed to a Government wide system. Another contributing factor has been the differences between the government and the World Bank around resettlement issues. The delays in PFMRP implementation had implications for the roll out to the 3 RDMs as many guidelines and decisions from MEF are still in process and have not been finalized. Nevertheless, Component 1 has produced a credible performance and has facilitated achievable Ministry Action Plans (MAP) through strengthening the PFM Working Group (PFMWG) in each ministry and building a critical mass of trained and knowledgeable staff throughout the 3 RDMs. By designing Terms of Reference for each member of the PFMWG and mentoring the Chairman and selected staff in each ministry, supported by an effective capacity building program for key ministry staff, Component 1 has laid the foundations for a successful roll out to such an extent that at least 2 of the 3 ministries may become the models for implementation of PFMRP in line ministries.

Significant level of capacity building has taken place, and close to 3,000 staffs have participated It is mainly focused on the three rural development ministries; however it extended across government including 36 other ministries or government agencies. All training materials and support documents from all training events, seminars and workshops have been captured in a project website. All this training was supported by additional initiatives and support from ADB.

The review and update of the Standard Operating Procedures (SOP), Financial Management Manual (FMM) and Procurement Manual (PM) for externally financed for externally financed projects required a significant allocation of project resources, however the outcome is 3 manuals considered by appropriate divisions of ADB and World Bank to be of an excellent standard. MEF will prepare these manuals for a sub decree in early 2012 and it is expected they will be operational in the first quarter of 2012. ADB will support the printing of these manuals through this project, as budget has been earmarked under grant 0133 for this purpose.

Monitoring and Evaluation initiatives. ADB's Community of Practice supported Component 1 by hosting several workshops to build awareness and capacity in Monitoring and Evaluation with a focus on Managing for Development Results (MfDR). MAFF was the initial focus and this has provided an entry point for ADB to the Ministry of Planning and it is hoped this will develop into a government wide M&E system. ADB had designed and implemented an M&E system, with appropriate manuals and institutional structure, in MAFF and Component 1 has now placed the seeds for replication in MRD and MOWRAM through a series of workshops and the provision of dedicated manuals and tools. Phase 2 of the program will build on this effort.

Linkage with D&D and PAR. The government has also embarked on further reform initiatives including PAR and D&D component 1 has participated in workshops to ensure linkages are identified when the reforms are implemented in the 3 rural development ministries. MAFF, MRD and MOWRAM staff are aware of the objectives of each area of reform and the need for consideration of each area of reform when identifying Budget Entities, Budget Holders and functional allocations in the PFMRP roll out.

Component 2 strengthening internal audit in 3RDMs. It assisted with the formulation of a current Strategic Audit Plan and provided guidelines, procedures and templates for preparation and conduct of (i) future Strategic Audit Plans (ii) Audit processes (iii) Audit quality reviews (iv) Communication modalities for audit results, and v) Audit result monitoring. The project also supported a study tour for Internal Audit Departments (IADs) of MAFF, MOWRAM, MRD and MEF to Viet Nam. Finally the project produced an Internal Audit Manual for the whole of government.

Component 3 strengthening public debt management. A Public Debt Management (PDM) Sub-Decree was issued on 23 June 2011 and a Draft Debt Strategy has been prepared, and will be discussed by PDM Committee on 8 December 2011. A Portfolio Database Management System (PDBM) is being prepared to consolidate key data of all investment projects (externally financed projects, domestically financed projects, and BOT/BOO/IPP/PPP Projects).

Component 4 - enhance the effectiveness of NAA. This was sought to be achieved through several measures, which addressed both the long term and short term capacity enhancing initiatives. The project was steered under the overall leadership of two Auditor General. Review of the implementation demonstrated optimal results in terms of the designed outputs and outcomes. The project to enhance the effectiveness of the NAA was accomplished through four major efforts: (i) the Office of the Controller and Auditor General of New Zealand and medium to long terms Action Plan and Implementation Plan have been developed; (ii) a draft Implementation Sub-decree to clarify issues under the Audit Law was developed under the project, and the version of the draft Sub decree approved by NAA was under discussion with the Jurist Council of the Council of Minister; (iii) a formal Rules of Procedures for dealing with the Audit Reports by the Commission have been developed, and has been approved by the President of the National Assembly; and (iv) institutional capacity development in audit of externally assisted projects.

Capacity Development. Among others, the most demonstrable impact of the grant project has been in the area of capacity development in audit of externally assisted project. Cambodia receives significant external aid and large number of loan/grant projects is ongoing at any given point of time. The development partners have, in the past, expressed concern at the limited audit oversight of NAA over the externally assisted projects both in terms of coverage and depth. The grant project has addressed this issue with development of contemporary benchmarked audit manual, intensive training over 10 training programs, standardized methodology and product, model audits, mentor support, study tour to SAI Indonesia and Secondment training of audit staff in SAI Indonesia. There has been three fold increase in the number of audits from 4 to 13 within one year and a large pool of over 30 audit staff provided with sustainable training over more than 30 training days in the audit of externally assisted projects. Additionally the project is supporting an outsourced workshop in the audit of financial statements of externally assisted projects. The project has deepened capacity building in introducing the performance audit in NAA through training, followed by two pilot performance audits. This will afford a good platform for launch of the full scale performance audit practice in sub-program 2.

Challenges. There were several challenges to effective implementation. The first was coordination of effort between the ministries and between departments within ministries. Second, the political economy issues challenges within MEF, between MEF and line ministries and within the 3 RDMs added to the challenges. Third, at a sector level, it was always a challenge for the experts to successfully deepen knowledge and expertise in the rural development ministries on the PFMRP when the umbrella program was experiencing significant delays. Some of the other challenges related to lack of capacity in effective project management, delays in decision making, and an inherent resistance to change, and sweeping reforms.

Lessons. Ownership, flexibility, and persistence are essential pre-requisites. Effective communication and trust are key ingredients. Practical training, such as problem solving approach, and pilot audits has significant potential for translating theory into practice, and for sustainability. Despite the challenges, it is worth supporting PFM measures. A comprehensive, sector-wide approach is of immense value.

Project implementation has been extended to 31 December 2012.

However, Project activites relating to all the four components have been completed for component 1, 2 3 and 4. However, some activites under component 1, such as further awareness building for Standard Operating Procedures (SOP) for externally aided projects, including awareness and dissemination of updated Financial Management Manual, and Procurement Manual embedeed in the SOP , and residual activites under component 3 relating to Portfolio Database Management System, and Training in DMFAS under UNCTAD will be fully accomplished by the end of 2012.

Approved minor change in scope and implementation arrangements called for additional activities, namely: (i) the printing of the updated Standard Operating Procedures (SOPs), Procurement Manual and Financial Management Manuals; (ii) awareness-building program on SOPs; (iii) recruitment of international project management specialist under Component 1; and (iv) procurement of additional equipment for MEF and rural development ministries.

Grant closing date was extended from 31 December 2012 to 30 September 2013 for procurement of additional equipment for the three rural development ministries (RDMs). In August, ADB was furnished copies of the contracts for the supply of equipment to the 3 RDMs.

Ongoing winding-up activities by both MEF and NAA include submission of last withdrawal applications for liquidation and return of unused funds under Imprest Accounts.

Geographical Location Phnom Penh, Cambodia
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services The Grant assistance will finance a team of 8 international (86 person-months) and 15 national consultans (213 person months). The consultants, including the team leader, will be selected by ADB through a consulting firm(s) (including joint proposal with domestic firms). One international consutlant and one national consultant for component 2 (internal audit) and one international consultant and one national consultant for component 4 (external audit) will be selected on an individual basis, as the distinct areas of expertise involved may not be avaialable through a single firm.
Procurement Project component 3 supporting debt management will finance an IT system that will allow MEF to record and provide project-specific information, including disbursement and contract awards of both development partner- and Government-funded projects. The functional specifications of the system will be designed, including specifying hardware and software system requirements, for commissioning and implementation by a team of IT national experts working under the supervision of international consultants. Information and communication technology (IT), related equipment and two vehicles will be procured by the consultants in accordance with ADB's Procurement Guidelines (2007, as amended from time to time).
Responsible ADB Officer Prasanna Kumar Jena
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SERD
Executing Agencies
Ministry of Economy and FinanceDr. Sok Saravuthsoksaravuth@yahoo.comNo. 60 Street No. 92 Sangkat Wat Phnom
Timetable
Concept Clearance 09 Jun 2008
Fact Finding 09 Jun 2008 to 23 Jun 2008
MRM 28 Jul 2008
Approval 04 Dec 2008
Last Review Mission -
PDS Creation Date 14 Jul 2008
Last PDS Update 31 Mar 2014

Grant 0132-CAM

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
04 Dec 2008 08 Dec 2008 22 Dec 2008 30 Apr 2009 - 30 Apr 2009
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 6.71 Cumulative Contract Awards
ADB 6.71 04 Dec 2008 6.71 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 04 Dec 2008 6.71 0.00 100%

Grant 0133-CAM

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
04 Dec 2008 08 Dec 2008 22 Dec 2008 30 Sep 2012 30 Sep 2013 09 Jul 2014
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 4.10 Cumulative Contract Awards
ADB 4.10 04 Dec 2008 3.45 0.00 84%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 04 Dec 2008 3.45 0.00 84%

Safeguard Documents

See also: Safeguards

No documents found.

Evaluation Documents

See also: Independent Evaluation

No documents found.


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