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COUNTRY FINANCIAL ACCOUNTABILITY ASSESSMENT (CFAA)

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COUNTRY FINANCIAL ACCOUNTABILITY ASSESSMENT (CFAA)

    CONFIDENTIAL

AFRICAN DEVELOPMENT BANK AFRICAN DEVELOPMENT FUND

    ADB/BD/IF/2004/13 ADF/BD/IF/2004/11

    11 February 2004

    Prepared by: POPR

    Original: English

Probable Date of Board Presentation FOR INFORMATION Not Applicable

    MEMORANDUM

TO : THE BOARDS OF DIRECTORS

FROM : Cheikh I. FALL

     Secretary General

SUBJECT : COUNTRY GOVERNANCE PROFILE ASSESSMENT (CGP)

     CHECKLIST/QUESTIONNAIRE

     GUIDELINES TO STAFF *

    The Boards of Directors approved the Bank Group’s Policy on Good Governance in December 1999, and a Guideline for its implementation was approved in March 2001.

Please find attached, for information, the current Checklist/Questionnaire which has been

    prepared to assist Staff/Consultants to gather information on Governance during diagnostic

    work in order to prepare a Country Governance Profile (CGP). This Checklist/Questionnaire is

    made of sections to allow a modular approach in preparing a CGP.

Attach:

cc: The President

    *Questions on this document should be referred to:

    Mr. P. AFRIKA Director POPR Extension 2025

    Mr. O.E. FAJANA Division Manager POPR.3 Extension 2128

    Mr. A.K. KOFFI Principal Governance Specialist POPR.3 Extension 3265

    SCCD: N.G.

    AFRICAN DEVELOPMENT BANK

    AFRICAN DEVELOPMENT FUND

    COUNTRY GOVERNANCE PROFILE ASSESSMENT

    CHECKLIST/QUESTIONNAIRE

    GUIDELINES TO STAFF

    POPR

    (Issued by the Governance Division)

    OCTOBER 2003

    SCCD: N.G.

    TABLE OF CONTENTS

    ACRONYMS

1. BACKGROUND 1

    1.1 INTRODUCTION……………..…..……………………………………..……………………… 1 1.2 WHAT IS A CGP…………………….………………………………………………………….. 1 1.3 INCREASED EMPHASIS ON CGP...………………………………………………………….. 1 1.4 SPECIFIC USES OF CGP…………...…………………………………………………..……… 1 1.5 POLICY ON CGP COVERAGE….....………………………………………………………….. 2 1.6 THE SCOPE OF MISSION…………….…….………………………………………………….. 2 1.7 MANAGEMENT AND QUALITY OF CGPs…….....…………………………………………. 2 1.8 RELATIONSHIP TO OTHER ESW PRODUCTS…..…………………………………………. 2 1.9 ROLE OF BORROWER……………...…………………………………………………………. 2 1.10 COLLABORATION WITH OTHER DONORS…………………………………………….….. 3 1.11 DISCLOSURE………………………...………………………………………………………….. 3

2. CONTENT 3

    2.1 TYPICAL CONTENT OF A CGP…....…………………………………………………………. 3 2.2 REPORT OF A CGP……………….....…………………………………………………………. 4 2.3 GUIDANCE ON QUALITY……….....…………………………………………………………. 4

3. PROCESS 4

    3.1 PROCESS-GENERAL…………….....………………………………………………………….. 4 3.2 ISSUE PAPER………..………………....………………………………………………………… 4 3.3 INITIAL DESK WORK……………………………………………………………………………4 3.4 USE OF CHECKLIST AND QUESTIONNAIRE……….……………………………………….5 3.5 IN-COUNTRY WORK……………………………………………………………………………..5 3.6 RESOURCES OF THE CGP…………..………………………………………………………… 5 3.7 REPORTING……………………….....…………………………………………………………. 5

4. CGP FOLLOW UP 5

    4.1 FOLLOW UP-GENERAL……………………………………………………………………….. 5 4.2 ACTION PLAN……………………………………………………………………………………. 5 4.3 ACTION PLAN AND GOVERNMENT OWNERSHIP…………………………………………6 4.4 MONITORING AND EVALUATION…………………………………………………………….6

ANNEX I CONTENTS OF CGP

    ANNEX II GUIDANCE ON QUALITY

    ANNEX III ISSUES PAPER

    ANNEX IV OTHER SOURCES OF RELEVANT INFORMATION

    ACRONONYMS

CD’S COUNTRY DEPARTMENTS

    CFAA COUNTRY FINANCIAL ACCOUNTABILITY ASSESSMENT CGP COUNTRY GOVERNANCE PROFILE

    CPAR COUNTRY PROCUREMENT ASSESSMENT REPORT CPIA COUNTRY POLICY AND INSTITUTIONAL ASSESSMENT CSP COUNTRY STRATEGY PAPER

    ESW ECONOMIC SECTOR WORK

    IMF INTERNATIONAL MONETARY FUND

    MDB’S MULTILATERAL DEVELOPMENT BANKS

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    COUNTRY GOVERNANCE PROFILE

    (CGP)

    GUIDELINES TO STAFF

I. BACKGROUND

1.1.Introduction. The Board of Directors approved the Bank Group’s policy on Good Governance in

    December 1999, and a Guideline for its implementation was approved in March 2001. The current

    Checklist/Questionnaire is to assist Staff/Consultants to gather information on Governance during

    diagnostic work to prepare a Country Governance Profile (CGP). This Checklist/Questionnaire is made

    of sections to allow a modular approach in preparing a CGP.

1.2 What is a CGP? A CGP is a general assessment and dialogue tool on the key governance

    issues in each country. It supports both the exercise of the Bank’s fiduciary responsibilities and the

    achievement of its development objectives. For the fiduciary responsibilities, the CGP identifies the

    strengths and weaknesses of governance arrangements in particular areas in a country and helps in

    assessing the risks that these may pose to the use of Bank funds. Concerning the development

    objectives, the CGP will facilitate a common understanding by the borrower, the Bank and where

    possible, development partners of the country governance arrangements in both the public and the

    private sectors, thus facilitating the design and implementation of capacity building programs and

    specific reforms in Regional Member Countries (RMC).

    1.3 Increased emphasis on CGPs. The Bank’s Vision document identifies governance as a priority theme, to be pursued at the country and regional levels. It notes “promoting good governance

    is probably the single most catalytic role the Bank can play in the fight against poverty”. The

    increased lending to social sectors, the shift to Policy Based Lending (PBL), and the growth of sector

    programshave reduced the relative importance of tracking individual borrower transactions and

    increased the importance of the performance of borrower institutions that manage these transactions.

    The Bank’s development objective and fiduciary objective are thus increasingly aligned. For these reasons, it is important that the Bank has a sound understanding of the broader governance

    environment within which its operations are implemented, be able to assess the risks that these

    arrangements may pose to its programs and funds, and work to strengthen governance arrangements as

    part of the essential institutional infrastructure needed to support poverty reduction programs.

1.4 Specific uses of CGPs. As noted in paragraph 2, the CGP enhances the Bank’s knowledge of

    governance arrangements in RMCs, helps assess risks to the use of Bank funds, and supports the

    design and implementation of Reforms and capacity building programs in governance. Specific uses

    to which it can be put include:

? An input to assessments and strategy of governance section included in Country Strategy Paper

    (CSP).

    ? An input to the Country Policy and Institutional Assessment (CPIA)

    ? A reference point in carrying out the assessment of the financial management capacity of

    project implementing agencies required for investment operations.

    ? The definition of the nature and extent of financial management expertise in Bank teams

    preparing and supervising Bank projects.

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    ? A basis for a dialogue with the borrower and development partners on Reforms to be

    undertaken in the RMCs.

    ? A source of recommendations to improve governance issues that can be supported by the Bank.

1.5 Policy on CGP coverage. The increased emphasis on understanding overall borrower

    governance arrangements and the risks that they may pose to Bank operations have created an

    expectation that the level of coverage of borrower countries by CGPs and other related Bank

    diagnostic Economic and Sector Work (ESW) products will increase. The concept of ESW is

    emerging as part of the core “due diligence” work that the Bank needs to have in place to do business

    in a country. Planned CGPs should generally be recorded in the CSP as a non-lending ESW product.

1.6 Scope of mission. The scope and timing of a CGP in a country depends on two factorsthe

    availability of other reliable sources of information, and the particular conditions and circumstances of

    the country. The scope may be reduced to exclude areas covered, by other diagnostic work undertaken

    by the Bank or other Donors provided that the final CGP report includes the relevant conclusions from

    that work. Timing and process can be impacted by agreeing to carry out the CGP at the same time as,

    or sequencing its timing with respect to, one or more of the other products and coordinating

    administrative arrangements with other partners and the borrower. Staff planning CGPs should first

    review other relevant planned or actual ESW products and where appropriate meet with the teams

    concerned to ensure coordination of the Bank’s overall diagnostic effort with other Development

    Partners. In all, a comprehensive issues paper should guide in terms of coverage, mission composition

    and timing. The CGP should precede the CSP by one year.

1.7 Management and quality of CGPs. The Country Departments are responsible for the

    preparation of CGPs - the Senior Management has final sign-off authority. Team composition and

    budget should make appropriate provision for quality assurance inputs, including peer reviews. POPR

    and GECL Departments are responsible for providing guidance to staff, overall monitoring of quality.

    The CGP should follow the normal Bank review system.

1.8 Relationship to other ESW products. Other Bank ESW products address aspects of borrower

    financial accountability arrangements. The principal examples are:

    ? Country Procurement Assessment Report (CPAR), which reviews public procurement

    institutions and practices in borrower countries.

    ? Country Financial Accountability Assessment (CFAA), which reviews public finance including

    Budgeting, Accounting and financial reporting, internal control system and record management,

    Auditing, Legislative scrutiny, Private Sector Financial Accounting and Auditing Practices and

    Corporate Financial accountability.

For cost effectiveness and scarcity of resources the Bank is encouraged to use reports from other

    Donors or jointly produce Diagnostic works undertaken by them.

    1.9 Role of borrower. The CGP should be undertaken with the agreement of the government. The Bank’s proposal to conduct a CGP should normally be discussed with the borrower at the Vice Presidency level. Staff will consult Government representatives in planning, preparing and reviewing

    the results of a CGP. In addition to the government representatives, the Bank generally encourages

    broad participation from within the borrowing country, which may include civil servants, private sector,

    professional bodies and firms, civil society, and academics. Staff should work actively with

    governments towards this goal.

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    1.10 Collaboration with other donors. The Bank encourages collaboration with development

    partners in carrying out governance diagnostic work. With respect to CGPs, collaboration can take the

    form of joint preparation with one or more partners, or reflecting in the planned scope of the CGP the

    work to be done by partners in parallel reviews. Collaboration of this kind can lead to more cost

    effective results, and promotes greater consistency among development partners in the design and

    implementation of programs to strengthen institutions. Among the principal partners with whom the

    Bank can collaborate on CGPs are the World Bank the IMF the UNDP and bilateral agencies.

1.11 Disclosure. The Bank generally encourages governments to involve a wide range of interested

    stakeholders in the process of preparing CGPs, and to disseminate the results of the review to these

    groups. They may include other development partners, professional bodies, civil society

    representatives, financial statements user groups and academics. The appropriation of the CGP

    recommendations and the subsequent action plan to be implemented will be successful depending on

    the full commitment of the in country participants and their understanding of the exercise. The CGP

    report may be disclosed in line with the Bank’s disclosure policy.

2.

     CONTENT

2.1 Typical contents. A typical full-scope CGP will address the following areas. These are

    elaborated more fully in Annex I:

    A Accountability

    ? Political Accountability

    ? Public Sector Management (Administration and Civil services, Budget process and control,

    Accounting and Record keeping, Internal Control and Auditing)

    ? Legislative Scrutiny of Public Sector Financial management

    ? Public Enterprise Management

    ? Corporate Governance

    ? Private Sector Financial Accounting and Auditing

    ? Banking Sector Solvency

    B Transparency

    ? Information Disclosure ( Public assess to information, Medias)

    ? Public Expenditure Reviews- Public Revenue Collection mechanisms

    ? Public Policy Analysis

    C Participation ? Electoral Process

    ? Gender Issues; Minority Groups Protection

    ? NGOs, CBOs, CSOs

    ? Economic Cooperation & Regional Cooperation

    ? Decentralization at sub-national levels

    ? Public/Private Sector interface

    D Legal and Judicial Systems

    ? Role and Responsibilities ( Executive, Legislative and the Judiciary Bodies) ? Law Reform: Human rights

    ? Independence of judiciary decisions (including appointment of judges) ? Judicial Reform

    ? Private Sector legal Framework

    ? Public/Private Sector legal interface

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    E Combating Corruption & Money Laundering

    ? Existence of legal framework for combating corruption and money laundering.

    ? Institutional bodies in place to watch corruption practices

    ? Sanctions in place for corruption practices

    ? Policies & Procedures for preventing corruption

    ? Code of Conduct and of Ethics

    2.2 Report. The format of the final report will be the same for each CGP and the distribution arrangements agreed with the government. It should include the following:

? The objectives and scope of the review

    ? The process by which it was conducted, including the roles and contributions of borrower

    agencies and development partners

    ? Sources of information used by the team, including other Bank ESW products, and data

    obtained from borrower agencies and partners

    ? A description of the key governance arrangements within the area of the defined scope

    ? An assessment of the strengths and weaknesses of the key governance arrangements

    ? An assessment of the risks that the weaknesses in governance may pose to Bank programs and

    funds as well as to development objectives.

    ? Action plan to address identified weaknesses

2.3 Guidance on Quality. To assist teams, the criterion used by the Bank in reviewing ESW work

    is described in Annex II.

3.

     PROCESS

    3.1 General. The following is a general guidance on the process for carrying out a CGP. A key point is the close involvement of the country team with the CGP team.

3.2 Issues Paper. The CGP team should prepare an Issue Paper before commencing work. The

    Paper should be discussed at a review meeting chaired by the Country Director, at which should be

    present key members of the country management team and staff familiar with the key governance

    arrangements in the country. An illustrative list of the issues to be reflected upon in the Issues Paper is

    provided in Annex III. The Paper should be issues-focused, and not too long. A short note of

    agreements reached at the meeting should be prepared by the team leader and distributed once cleared

    by the meeting chairman.

3.3 Initial desk work. In planning a CGP, staff should identify other relevant sources of reliable

    and current information on governance in the country. Much of this can be obtained through deskwork.

    A list of possible sources of this information is provided in Annex IV. This information should be

    taken into account in both planning (including the preparation of the Issue Paper) and conducting the

    work. It will be particularly important to make early contact with Bank staff involved in procurement

    and public expenditure management in the country concerned.

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    3.4 Use of Checklist and questionnaires. In preparing the in country work, and in light of the set

    scope of the CGP, the mission team should select the appropriate questionnaire to be used by specific

    entities within the Country. The questionnaires should be sent in advance to the Country and be filled

    by different administrations and services in the Public sector as well as the private sector and civil

    society. Some time should be given to allow recipient to fill the questionnaires before the

    commencement of the field mission.

    3.5 In-country work. Armed with an Issues paper, the Vice-President, the Country Director, and the Economist should discuss the CGP with the Government, and point out its benefits to the country.

    Assignment planning will be discussed and agreed upon with the borrowing government. Staff will

    carry out the in-country work in close collaboration with the country authorities. Staff will analyze the

    responses to the questionnaires and select questions, which appear to be unanswered, and follow up

    with appropriate interviews to complete the respective responses.

3.6 Resources of the CGP. The CGP requires adequate resources; both in terms of the skills mix of

    team members and the provision of an adequate budget by the CD. The team may include external

    consultants with high qualification and experienced in the field they are selected for. The team may

    include in country participants made up civil servants, private sector officials, civil society and NGO’s.

    The team should comprise: (i) Public Finance Specialist; (ii) Lawyer; (iii) Public Accounting

    Specialist;(iv) Economist; Specialist in Sociology Wherever possible, the Bank should seek the

    participation of other donors in terms of Staff or consultants they will finance.

    3.7 Reporting. The CGP report will be shared in draft with the country authorities and any participating partners prior to being finalized. It will normally go through the Bank’s review process.

    Before finalizing the report, the assignment team will prepare together with the government authorities,

    an action plan based on the mission recommendations.. . Stakeholder workshop should be held in the

    country to validate findings of the CGP and ensure country’s ownership of the report.

    4. CGP FOLLOW UP

    4.1 General. The follow up of recommendations is critical to the impact of the report. This has often been a weak aspect of ESW. The government must take the lead in any follow up. From the

    outset of the CGP exercise, there should be an understanding between the government and the Bank

    that the CGP is intended to form the basis for agreed remedial actions if the CGP indicates significant

    deficiencies in the country governance arrangements, and that these remedial actions would normally

    be incorporated in an agreed action plan. The Bank will also need to anticipate the likely need to

    provide technical assistance, capacity development and financial resources to assist in implementing

    any agreed action plan, although not all technical assistance or capacity development arising from a

    CGP will necessarily be undertaken by the Bank.

    4.2 Action Plan. The action plan should be focused, prioritized, tailored to the country’s needs and affordable. It should take account of existing reform programs agreed with the Bank and other donors.

    The plan’s recommendations should be clearly justified and prioritized and be differentiated in terms of their short, medium and longer-term impact. As far as possible a lead agency should be identified

    for the plan overall, and a relevant agency for each of the recommendations. Likely requirements by

    way of technical assistance, capacity development and financial support should be estimated as far as

    possible.

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    4.3 Action Plan and Governance and Government Ownership. The action plan should be agreed with the government and significant aspects reflected in the Country Strategy Paper (CSP). Assistance

    to be provided by the Bank or by other development partners involved in the CGP on technical issues

    and capacity development should be clearly identified. Coordination of action plans and follow up

    work is in principle the responsibility of the government but in some cases may need to be undertaken

    by the Bank or another donor.

4.4 Monitoring and Evaluation. Designing a monitoring and evaluation strategy, with appropriate

    benchmark indicators is essential to tracking progress during the implementation of agreed action plan.

    However, these benchmark indicators are mainly generic indicators developed for overall tracking of

    the country’s progress in public financial management for CPIA ratings, for meeting adjustment lending conditionalities and not specifically for CGP follow up. Separate guidance is being developed

    on such indicators. Meanwhile Governance Indicators have been developed by the World Bank

    Institute and could be used for the purpose. Ref to:

    (<http://info.worldbank.org/governance/kkz2002/sc_chart.asp>)

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