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This work assumes additional significance in view of the targets specified in the Paris Declaration, to which the Bank is a signatory. For 2010, the Paris Declaration aims at a two-thirds reduction in the percentage of aid to the public sector that does not use partner countries’ public financial management (PFM) systems. The Accra Agenda for Action, adopted by donors and partner countries in 2008, reiterates the importance of using country systems and exhorts donors to accelerate and deepen that use and to explicitly state the reasons when not using the country system. Country FM Systems are routinely used in poverty reduction support credit (PRSC) and other development policy lending (DPL) operations. In addition, some elements of the country FM system are used regularly in investment lending projects in Malawi. For example, all investment lending projects are audited by the Office of the Auditor General or by his or her nominee. Fiduciary risk is the risk that Bank funds will not be used for the intended purposes or that they will be used without due attention to economy and efficiency. In projects using country FM systems, Bank funds are potentially commingled with the country’s own funds; therefore, a fiduciary risk assessment also needs to consider broader country PFM risks that could affect the fiduciary risk. The objectives of this study are –
a) To inform the Country Assistance Strategy (CAS) on the approach to future project delivery in Malawi. Identifying the use of the country FM system as one of the key goals of Bank support to the country in the CAS provides important incentives to the government and a clear message to task teams.
b) To get an understanding of overall fiduciary risks in the use of the country FM system. By comparing such risks to fiduciary risks using traditional ringfenced arrangements, staff can highlight any differential and/or incremental steps in terms of risk-management approaches, when using country FM systems for implementing a new project.
c) To identify the steps the Bank or the government would need to take to make greater use of country FM systems. This assessment would highlight crosscutting issues requiring agreement with the authorities at the country level rather than at the project / sector level. Engaging with the authorities at an early stage to address such issues helps ensure that the minimum FM arrangements are in place for projects considering the use of country FM systems. It is important to emphasize here that the objective of the assessment is not to prepare an overall PFM reform program for the country, but rather to identify specific steps for making greater use of country FM systems.
d) To inform the design of future projects in order to move towards greater use of the country PFM system for its implementation. |
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