Open Contracting Initiative to Transform Government Procurement

Climate Change and Public Financial Management

Implementing the Extractive Industries Transparency Initiative

Dr. Andre Ufer, Sustainable Energy – Oil, Gas and Mining, The World Bank described implementing the Extractive Industries Transparency Initiative (EITI) globally and at the country level at the IGFM Winter Conference. Dr. Ufer asked why it is important to have transparency at the sector level. He contrasted the difference between mineral and fishery industries.

Dr. Ufer provided a history of origins of EITI. He described the "paradox of plenty" in countries with mineral resources: poor development results and high corruption. EITI was luanched in Johannesburg in 2002.

The purpose of EITI is to help resource-rich developing countries in their own national efforts to better manage natural resources. Dr. Ufer described how the “resource curse” effects of oil gas and mining wealth can be managed through accountability and transparency. Transparency gives civil society an oversight role. He described how EITI supports standards for through open dialog, public/private sector balance, and transparency.

Dr. Ufer described the EITI process and the adoption to date by countries and private sector organizations.

Dr. Ufer described EITI benefits to governments:

• Demonstrate value of the sector to citizens


• Income across all government organizations consolidated


• Improve government credit-worthiness


• Less risk to private sector investment


• Strong brand in accountability

Benefits to business was also described:

• Demonstrates value of business to citizens


• Reduces operational risks


• Improves relationships with governments


• Reduces reputational risks

Dr. Ufer described the motivations for countries to implement EITI. He provided case studies of Nigeria and Ghana. Nigeria exceeded EITI requirements and an audit found significant unresolved differences in payments and receipts.

Dr. Ufer suggested that EITI has achieved strong momentum. IASB (International Accounting Standard Board) is currently working on a possible country-by-country reporting requirement. He stated that there is a general agreement that longer-term outcomes need to be tracked. The future impact of EITI is still a work-in-progress. He pointed out that EITI provides a very narrow focus on disclosure.

Ufer eiti globally and implementation at country level current status, emerging results and lessons

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Ufer iniciativa de transparencia de la industria extractiva (eiti)

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Ufer l'itie au niveau mondial et la mise en œuvre au niveau des pays état actuel, premiers résultats et leçons

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Job Offer: The World Bank has an Opening for a Financial Management Specialist (FMS) Based in La Paz, Bolivia

Job descriptions and qualifications needed are detailed in the job announcements, posted on the World Bank's website: Financial Management Specialist based in La Paz, Bolivia -- Job # 101546

The Closing Date is August 9, 2010. For convenience, we provide the ICGFM readers with excerpts from the Job Announcement.

Duties and Accountabilities:

The Financial Management Specialist (FMS) will work from the La Paz Country Office and work on all financial management (FM) aspects related to the World Bank’s operations in Bolivia. This will include, but is not limited to: assessing the adequacy of project financial management arrangements, providing implementation support and supervising projects financed by grants and credits; ensuring compliance with the Bank’s audit and other fiduciary requirements, ensuring that the project operations are carried out in accordance with sound financial management practices, performing analytical work on financial management and accountability issues, and carrying out capacity building activities. The FMS will work with the country team, including Task Team Leaders, FMS, Procurement and other technical specialists, and Administrative and Client Service (ACS) staff.

The FMS is expected to assume the following duties and responsibilities:
• Assess the adequacy of the borrower’s project financial management systems and their ability to manage and monitor World Bank financed projects. This includes budgeting, policies and procedures, internal controls, accounting, financial reporting and auditing.
• Provide implementation support and carry out supervision work to ensure that projects financial management systems are functioning appropriately, including the review of periodic interim financial reports.
• Assess the selection and engagement of auditors, ensuring their suitability including their independence, and competence to perform audits; and ensure that the borrower provides auditors with all the relevant information (including Terms of Reference and Bank requirements) necessary to carry out their engagement.
• Review audited financial statements and other periodic financial reports received, monitor the Borrower's compliance with financial covenants including audit compliance, ensure adequate communication with the Borrower and the project implementing agencies with respect to audits and other financial reports, and advise as appropriate.
• Provide advice and support to Borrower and the World Bank Task Teams on project financial management matters.
• Provide guidance and advice to borrowers and Bank staff on capacity building in projects and with public sector accountability institutions.
• Assess the financial and operational viability of implementing entities (e.g. with respect to revenue earning entities), and advise on the design and use of financial performance covenants.
• Monitor implementation of the agreed action plans for public financial management (PFM) and/or corporate financial reporting reform initiatives, and provide technical advice to the Government in the implementation of reform actions.
• As requested by the RFMM, undertake other FM activities, as appropriate.

Selection Criteria:

Education/experience/language:
• The candidate should be a professional accountant (CPA, CA or equivalent membership of an internationally recognized professional accounting institute) with a Bachelors degree in accounting, business, finance, economics or related subject.
• A minimum of 5 years of relevant experience in financial management.
• Language: Fluency in English and Spanish is required.

Technical and other skills:
• Knowledge of International Accounting Standards and International Standards on Auditing.
Experience in designing and assessing internal control systems and procedures, using internationally accepted control frameworks such as COSO.
• Knowledge in the application of accounting, auditing and financial reporting systems and software packages.
• Experience in evaluating audits, assessing auditor competence, and following up on issues raised by the audits.
• Experience in interpreting financial and project management reports and determining appropriate remedial actions.
• Knowledge of current issues in financial management, including relating to the public sector and relating to developing country issues.
• Ability to assess the quality of portfolio performance on financial management.
• Ability to understand cross-cutting issues beyond financial management (e.g. procurement, governance, public sector management) at sector/country level.
• Ability to conceptualize, design and implement country or sector level financial management capacity building initiatives. Ability to promote client/beneficiary participation and commitment to financial management and accountability.
• Ability to distill and disseminate financial management knowledge. Experience in advising clients on the design and implementation of financial management systems, including financial and management reports.
• Experience in financial statement analysis, their use in comparison with industry benchmarks and their application to particular circumstances.
• Strong planning, organization and time management skills to function in a team and contribute towards a common goal. Ability to manage multiple tasks and projects.
• Capacity to function effectively as a member of a multi-disciplinary team, to search for common ground, to resolve problems, and where appropriate, to recommend decisive action.
• Strong analytical capabilities and proven skills to deal with FM issues innovatively and independently.
• Ability to communicate effectively, in writing and orally, including situations requiring negotiation.
• Understanding of information systems and the application of new technology.
• Willingness and ability to travel frequently.

Ensuring Gender Equality in Government

Nadereh Chamlou of the World Bank discussed the talent crisis and the need for gender diversity to support economic growth. She started her presentation with surveys about the workforce in participant countries.

79% of the ICGFM attendees believe that there is a link between female participation in the workforce and an increase in GDP. The most binding constraint on development in countries survey found:

• Financial 56%
• Natural resources 12%
• human resources 43%

Most consistent global challenge was found to be food security and climate at 57%. 2/3s of the audience believes that the issue of gender inequality is important or very important. 57% of people believe that the route of gender inequality comes from tradition and religion.

Ms. Chamlou believes that the world is at the dawn of a new talent crisis. Demographic changes means that the talent pool is being reduced while countries attempt to develop. This is a problem for all governments and businesses. She pointed out that forecasts suggest that the global population of 60+ is projected to exceed the under15 cohort for first time in history. She warns that developed economies will not find enough employees in home markets to sustain profitability and growth. There is also a brain drain from developing to developed countries. She discussed the "brain waste" defined as women and minorities being underutilized in the work place.

Numerous studies were quoted by Ms. Chamlou that ties GDP growth with gender equality.

• Gender is Smart Economics (The World Bank, 2009)
• The Bottom Line: Connecting Corporate Performance and Gender Diversity (Catalyst, 2004)
• Stimulating Economies through Fostering Talent Mobility (World Economic Forum, 2009)
• The Gender Corporate Gap report (World Economic Forum, 2009)

Ms. Chamlou recognizes that there is a causality between female managers and growth. However, studies suggest that better talent management, may also lead to better management of other assets/operations. This Catalyst report found 35% higher Return on Equity (ROE) and 34% better Total Return to Shareholders (TRS) with companies with a higher percentage of women in top management roles. A French study showed that companies with a higher percentage of women in top management roles did far better during the financial crisis.

Ms. Chamlou provided additional statistics on the persistent gender gap. She pointed out that the gender gap is a persistent problem in developed and developing countries. She presented studies from the Middle East and North Africa region. Many of these studies overturned some myths about gender inequality.

Ms. Chamlou concludes that Human Capital is the most indispensable driver of economic growth and the foundation of innovation. Bridging the gender gap at all levels is critical for talent management according to Ms. Chamlou. She warns that the talent gap may be much wider than many think.

Nadereh Chamlou is Senior Advisor to the Chief Economist for the Middle East and North Africa Region of the World Bank. In her 28 years with the World Bank, she has worked in technical and managerial positions across the organization in such areas as economic management, private and financial sector development, infrastructure and environment, corporate governance and the knowledge economy. Her experience also extends to Latin America, East Asia and Pacific, and Eastern Europe. She co-authored a World Bank flagship report, "Corporate Governance: A Framework for Implementation," in 1999, and was co-founder of the World Bank/OECD-sponsored Global Corporate Governance Forum, which she headed from 1998 to 2000. She was the principal author of "Gender and Development in the Middle East and North Africa Region–Women in the Public Sphere" in 2003, and of "The Environment for Women's Entrepreneurship in the Middle East and North Africa Region" in 2008.

Nadereh chamlou crisis de talentos y brecha de género espanol

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Nadereh chamlou le déficit de talents et l’écart entre les sexes francais

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Nadereh chamlou talent crisis and gender equality english

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The Impact of the Financial Crisis on Public Private Partnerships

Filip Drapak, Senior PPP Specialist at the World Bank discussed the impact of the financial crisis on Public Private Partnerships. He recognizes the affect of PPP on public accounts. The financial community has not provided effective guidance on how to account for PPP. Nevertheless, he remains an advocate for public private partnerships

The European Union has provided some guidance on how much risk must be passed to the private sector to not show PPP investments on the government balance sheets. There is always something that doesn't go well in long-term contracts, PPPs are no different, according to Mr. Drapak.

The financial crises impact on the PPP market is not over yet, however recovery and optimism is quite strong, according to Mr. Drapak.

Unexpected stress can increase risk on PPP financing and deliverables. Mr. Drapak pointed out that financial stress can originate in unexpected places like Greece. You must expect that financial markets will undergo stress of some sort. Governance of financial markets will increase according to Mr. Drapak. He sees governance as the most important aspect to PPPs.

The financial crisis affected PPPs in liquidity, capital allocation, and the "de-risking" of projects. Debt guarantees have become a new tool in use for PPPs according to Mr. Drapak. Before the financial crisis, there was considered that large projects had less risk. But, financing issues have resulted in many smaller projects. And, some of the risks that were exclusively with the private sector before the crisis is now shared with the public sector. Mr. Drapak asks how governments can show market disruption risks on financing on the books?

The financial crisis has put pressure on PPP governance. Mr. Drapak provided PPP case studies from the UK, South Africa and Russia. The UK is the largest PPP market, according to Mr. Drapak. India has emerged as the second largest world market. The UK created a special agency called "Partnership UK". There is a plan is to make an organization, within Treasury, called "Infrastructure UK." The Treasury of the Government of South Africa is creating a separate PPP organization in order to separate delivery from regulatory interests. The Government of Russia viewed that PPPs were unnecessary because of large budget surpluses. Now, the Government is developing PPPs. Russia is managing PPPs through its own development bank.

Mr. Drapak says that governments did consider the full lifecycle of PPP projects. However, there had not been any planning associated with potential financial crisis. PPP projects today suffers from the increased cost of equity. This requires higher levels of financing by governments which tends to reduce the value for money. In some projects, the government had to replace all private financing while the private sector has the equity risk.

Mr. Drapak discussed global PPP trends showing an increase in activity in BRIC countries. He showed a case study from Canada for Partnerships BC. The organization looked at the internal rate of return while looking at the public contribution to debt. Some people wonder whether government funding is a PPP. Mr. Drapak points out that banks have very little risk in PPPs, so government funding does not change the fundamentals of PPPs. This option is really only available to governments with stable revenue.

Mr. Drapak believes that the financial crisis is improving PPP governance. He also pointed out that the analysis of PPP projects tend to look at full lifecycles unlike traditional capital financing. This often results in better long-term planning for PPPs.

Developed countries tend to leverage PPPs to improve efficiency, according to Mr. Drapak. Developing countries tend to use PPPs for other reasons. The finance crisis means that developing country governments tend to have to take more financing risk than developed country governments.

Filip Drapak has over 14 years of experience in economics, public policy, and finance. Mr. Drapak has worked as assisting professor at Prague University of Economics, as a head of financial advisory services in Societe Generale Komercni banka and as assistant director in corporate finance of PricewaterhouseCoopers During the past six years, Filip was involved in the area of public-private partnerships (PPP) and was instrumental in the creation of PPP Centrum, under the Ministry of Finance to provide technical assistance and support to public entities engaged in public private partnerships. He introduced the Czech Republic's policy for public-private partnerships and was involved in training for the public sector as well as in the formulation of legislation for privatization and concessions.

Mr. Drapak served as the CEO and Chairman of the Board of Directors of the PPP Centrum, as a non executive Chairman of electric distribution company, oil transport company and on boards of airlines company and energy engineering company.

Filip drapak ppp in financial crises espanol

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Filip drapak ppp in financial crises francais

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Filip drapak ppp in financial crises english

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World Bank seeking Public Sector Management Specialists

The World Bank is seeking a Lead Public Sector Management Specialist, and a Senior Public Sector Management Specialist to work on the Latin America and Caribbean Region. These positions, located in Washington, DC, are high-profile appointments requiring proven experience and an established track record in the region and the relevant technical community of practice. Fluency in Spanish is required and Portuguese is desirable.

The successful applicant will make a world-class technical contribution to the Bank’s work in public financial management, performance-informed budgeting, and human resource management, and contribute to dialogue concerning public sector reform in the region. Experience on the ground in OECD, developing and/or transition countries is essential.

The Lead position requires a Ph.D and a minimum of 12 years of experience, or a Master’s degree and 15 years of experience. The Senior position requires an advanced degree in Public Administration, Public Policy or Political Science and at least 8 years of experience.

Candidates may view the full job descriptions and apply through the World Bank website at www.worldbank.org/jobs referring to the job #s noted above. The closing date is December 31, 2009.

Vocabulary of Government Performance Management

Many countries aspire to performance based budgeting – implementation is a journey rather than a destination.

James Brumby of the World Bank discussed the significant cultural and institutional change needed for Performance Based Budgeting. Much in Public Financial Management (PFM) has focused on limiting discretion – but discretion is needed to improve performance.

Performance is determined by where you sit, according to Mr. Brumby. Government performance is complex because of the variety of interests.

Mr. Brumby glossary began by defining inputs, outputs, outcomes and indicators. Outputs are controllable by government organizations and easy to measure. Outcomes are harder to control and measure, according to Mr. Brumby. He pointed out these connect together in a performance chain showing where efficiency and effectiveness measurements are used. He described the difference between intermediate outcomes and final outcomes. A list of indicator types like timeliness and location were presented. He recommends that output measurements should be externally focused, controllable, comprehensive measurable and informative.

3 levels of performance based budgeting include:

• Weakest: Performance as an instrument of transparency


• Moderate: Performance informed budgeting


• Strongest: Direct performance budgeting with an unambiguous contractual mechanism. This is only the case in two OECD countries.

It is possible to see all three in any system. The moderate form is the dominant method used around the world. Performance is one of the elements used for developing budgets.

Mr. Brumby described methods of contractual, program, formula-based, purchaser-provider, and the agency model used in performance frameworks in government.

Mr. Brumby described how many countries aspire to performance budgeting – implementation is a journey rather than a destination. He contrasted this with accrual accounting that is a destination. Ideas and objectives change, so there is not destination for performance budgeting.

2.30 3.00pm Understanding Vocab Of Perf Mgmt (Jim Brumby)

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2.30 3.00pm Understanding Vocab Of Perf Mgmt (Jim Brumby) Spanish

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2.30 3.00pm Understanding Vocab Of Perf Mgmt (Jim Brumby) French

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International Government Performance Management Conference Kicks-Off

Performance - Results - Outcome

The International Consortium on Governmental Financial Management (ICGFM) Winter Conference starts shortly at the Inter-American Development Bank (IDB) in Washington DC. The conference focus is on government performance management - understanding impact in managing public finance.

Conference speakers include:

• Mario Sangines of the Inter-American Development Bank
• James Brumby of the World Bank
• Jean-Baptise Sawadogo of Leader One Inc.
• Edouard B. Houssou and Gabin Mehou of the Government of the Republic of Benin
• Dr. Piotr Perczynski and
  Dr. Marta postula of the Government of the Republic of Poland
• Doug Hadden of FreeBalance
• Jerome Dendura of Quistron Inc.
• Lelia Aridi Afas and Steve Clyburn of Grant Thornton LLP
• Pokar Khemani of the International Monetary Fund

OECD / DAC Benchmarking Tool for Public Procurement

Pamela Bigart of the World Bank introduced the OECD/DAC benchmaking tool for public procurement at the 23rd Annual ICGFM Conference. This tools is based on broadly accepted international tool. It was attended to achieve good practices in many countries across a spectrum of capacity.

Overview of the application of the OECD/DAC Procurement Assessment Tool

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La reforma de la adquisición pública y su importancia en el clima económico actual

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Visión global de la aplicación de la herramienta de evaluación de adquisición OECD/DAC

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The benchmarking tool has been used in over 50 countries and enables self-assessments. The tool analyzes elements of public financial management such as budgets and controls because of the impact on the procurement process. It also integrates with PEFA assessments. It is a qualitative assessment rather than a performance assessment.

The OECD/DAC tool covers four pillars:

• I – Legislative and Regulatory Framework
• II – Institutional Framework/Management
• III – Operations and Market Practices
• IV – Integrity and Transparency

Ms. Bigart described the 12 indicators and 54 sub-indicators.

She cautioned about poor procurement practices including not paying vendors on time. This increases the cost because vendors recognize the long payment cycles. Some governments start projects without sufficient budgets. This causes projects to be abandoned. Budget and procurement systems should be integrated.

Ms. Bigart pointed out some other poor practices including lax contract administration and no delegation of procurement responsibility. The private sector and civil society should be enabled to question government procurements.

Lessons learned from the use of the OECD/DAC benchmarking tool includes:

• The tool is useful and relatively easy to use
• Standardization through the tool creates need to use flexibly in a given country – may require some customization and interpretation
• Some indicators will require adjustment after experience from over 40 countries
• Use of the tool is an input to a process so scoring is not as important as the information learned
• Results of any benchmarking exercise needs to be more clearly linked to other tools like PEFA
• Reform strategy must be integrated and prioritized on the basis of overall public sector management and public financial management strategy
  

How has the Financial Crisis Changed the PPP Market

Filip Drapak of the World Bank says that there have always been financial crisis. The current crisis is wider reaching than those in the past. Mr. Drapak spoke about the impact on infrastructure project public private partnerships with the financial crisis at the ICGFM Spring Conference.

How the Financial Crisis has Changed the Market for Public Private Partnerships (PPPs)

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Cómo la crisis financiera ha alterado el mercado para asociaciones entre los sectores público y privado (PPPs)

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Comment la Crise Financière a-t-elle Changé le Marché pour les Partenariats Secteur Public/Privé (PPP)

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Infrastructure programs provide significant investment opportunities even in the financial crisis. Mr. Drapak suggests that PPP economics have changed. In particular, emerging countries are seeing a lack of funding on both the equity and debt side. There is a general lack of interest of investors and operators in PPP for infrastructure projects.

Before the financial crisis most experts did not make provisions for economic cycles. Equity bubbles are present every 13 years and last 2 1/2 years on average. Housing bubbles have larger impacts.

New debt calculations and risk management concerns can mean that many cost-benefit analysis do not show a positive value for money. Equity financing has increased as an overall percentage, creating high costs. Governments need to look at broader factors in order to better evaluate PPP projects.

The rule had been that larger projects were more attractive to the private sector. Risk and equity factors mean that projects need to be of a more modest size to gain financing.

The government of the United Kingdom has created a method to improve PPP projects called DFC (Direct Funding Competition). The French Institute for PPP is advocating flexible financing rates.

Mr. Drapak concludes that PPP economics are only temporarily jeopardized by the financial crises. He recommends that PPP is not solution in time of financial crises, and should not be leveraged to stimulate the economy.

The World is out of Balance

Djordjija Petkoski of the World Bank Institute says that the annual cost of corruption is over $1 Tillion. Mr. Pekoski put a human face on the effects of corruption at the ICGFM conference explaining that the world is out of balance. "It is not a transaction."

Over 2.6 billion people or 40% of the world lives on less than 1$ day. "Should we be sorry," he asks. "It is more about opportunities."

Mr. Petkoski (left) was joined by Eugenio Marulanda Gomez, President Confecemas Colombia (center) and John Sullivan from the Center for International Private Enterprise. Mr. Gomez spoke about the need for measurement to determine how effective programs are working.

Statistics show that the amount of net flows from the private sector to developing nations is far more than official donor and government funding. Therefore, the private sector must play a larger role in reducing corruption. The private sector can work for collective action to motivate the reduction of corruption. The World Bank and partner organizations are setting up a portal to assist the private sector to reduce corruption.



John Sullivan described how important the OECD Convention on Anti-Bribery has been to break the taboo about talking about corruption. Mr. Sullivan does not believe that corruption is based on culture. He recommends reading the book, The Logic of Collective Action, by Mancur Olson to show how collective action can work to reduce corruption.

Copies of Development Outreach was provided to attendees.

Business in partnership against corruption, out of balance

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Business in partnership against corruption

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