AIDE-MEMOIREREPUBLIC OF ZAMBIA

Public Financial Management Reform Program (PFMRP) - Phase I (P147343)Implementation Support Mission

(December 3-12, 2014)

1. A World Bank team led by Pazhayannur K. Subramanian (Task Team Leader) and comprisingKhuram Farooq (Sr Financial Management Specialist), Srinivas Gurazada (Sr Financial ManagementSpecialist). Lingson Chikoti (Financial Management Specialist), Wedex Ilunga, (Sr ProcurementSpecialist). John Bosco Makumba (Operations Officer), David Child (Revenue Specialist Consultant),Mike Jacobs (Audit Expert Consultant) and Ali Hashim (IFMIS and TSA Expert Consultant) carried outan implementation support mission for the Public Financial Management Reform Program (PFMRP) -Phase I from December 3 to 12. 2014. The objective of the mission was to review the projectimplementation progress and provide support for accelerating progress. The mission also supported theMinistry of Finance (MoF) workshop on 'End Poverty in Zambia through PFM Reforms: Leveragingglobal knowledge in Integrated Financial Management Information Systems (1FMIS) and Treasury Single

Account (TSA)'. The mission wishes to thank the officials of the Ministry of Finance (MoF) and thecomponent heads of the project for the support and courtesy extended to the members. The details of thediscussions and agreements reached with the component technical teams are provided following theIxecutive Summary which captures the summary of the overall project progress.

Ratings & FlagsKey Project Data Performance Categories Ratigs_&Flag

Previous Current

Effectiveness Date 07/17/2014 Project DevelopmentMSObjectives

Original Closing Date 12/31/2017 Implementation Progress MS

Project Age 6 months Financial Management MS

Approved Amount US$17.0 mil Procurement MS

Disbursed Amount US$2.0 mil Monitoring &Evaluation S

Disbursed Percentage 11.76 Flags None

Rtunng [IS-FHighly siSactory, S--Satisfactory. M=Moderately Satisfactory. MU1-Modcrately Unsati6factory, U-zUnsalisfactory;

Hl-Highly Ulnsatisfactory

Executive Summary

fhe performance on Project Development Objective (PDO) and implementation progress have been rated asmoderately satisfhctory as the results are mixed with some elements of the project moving well and others laggingfor various reasons. The mission agreed with the component teams on specific timelines for actionable items (listedlater in this document and recommends that MoF and the component heads follow up on these items to ensure

I timely monitoring of progress).

The Project became effective on July 17, 2014 and was formally launched by Government on 19 August 2014. No

funds have been spent from the Designated Account (DA) during the first quarter of the Project's operations. Themission was informed that the Project had used USS189,567.56 of Government's resources to implement some of its

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activities, and that these funds would be claimed from the DA. A further US$ 492,285.51 has been committed for

payment before December 31, 2014.

Component I: Integrated Planning and Budgeting and Revision of PFM Legal Framework: The progress on this

component is 'moderately satisfactory'. There is progress on preparation of the draft Integrated Planning and

Budgeting Bill (based on the Integrated Planning and Budgeting Policy) and holding sensitization workshops and

seminars to disseminate information about the policy and bill. -lowever, progress on many major activities as

planned under this component could not be achieved. These activities include: comprehensixe review of Public

Finance Act and related laws and regulations; preparation of revised debt and public investment lawls, and

preparation of budget and [FMIS manual. The mission discussed and agreed on : (a) timely action on the Challenge

function'; (b) preparation of budget for FY 2016 using IFMIS budget module; (c) development of budget and

accounting manuals; and (d) support for high level guidance on review of complementarity of various legislative

reviews. The component is expected to accelerate absorption of the allocated funding under PFMRP after the

Integrated Budget and Planning bill is legislated (intended to be brought up for approval during the first quarter of

20 15).

Component 2: Strengthening IFMIS and Cash Management: The progress on this component is rated as

'moderately satisfactory'. The mission expresses satisfaction over the progress on IFMIS mainstreaming (a

disbursement condition for release of finds under this component) and advises that the transition should be handled

with good planning to avoid any disruption in IFMIS operations. The Bank expects to receive the formal

communication on IFMIS mainstreaming by 9 January 2015. The Government has completed the preparatory work

for further roll-out of IFMIS using funds from its own budget. The next roll-out at 8 out of the remaining 15 sites is

planned to be carried out during first quarter of2015. The preparatory work for piloting Treasury Single Account

(TSA) at Ministry of Finance is at an advanced stage of completion. The job descriptions for the treasury

department to be established within the Accountant General Department (AGD) have been developed. BudgetExecution Reports (BERs) are not being published within 30 days of end of the quarter as agreed. The quality of the

BERs which are published after considerable delays also needs improvement to ensure comprehensiveness (possibly

through ensuring the IFMIS is used as mission critical system for process). The budget for 2015 could not be

prepared using IFMIS budget module as agreed in the Monitoring and Evaluation (M&E) framework. The mission

held extensive discussions with Manager, Centralized Computer Services Department (CCSD) and recommended

specific steps to strengthen capability in handling responsibilities relating to IFMIS.

Component 3: Public Procurement Reforms: The progress on this component is rated as 'moderately satisftactory'.

The progress on Zambia Public Procurement Authority (ZPPA) restructuring (which has a significant impact on eGP

project) is behind schedule. The progress of Electronic Government Procurement (eGP) bidding was behind

schedule by about 3 months; however it is at an advanced stage and contract is likely to be signed before the end of

January, 2015. ZPPA needs to develop structure and methodology for its planned initiatives of procurement training

to various MPSAs. World Bank discussed with ZPPA and ZIPS on the availability of funding and technical support

for procurement training in 2015 to MPSAs. There were some delays in recruitment of staff for Zambia Institute of

Purchasing and Supplies (ZIPS) for the posts of Education Manager, Finance Manager, MIS & Database Consultant

and Legal Consultant and the mission recommend early action by MoF and ZIPS.

Conponent 4: Enhanced Internal Audit and Internal Control: The component is rated as 'moderately

satisfactory'. Audit manual has been revised and training of internal auditors in the usage of new manual has

commenced. it was agreed that to supplement the manual, detailed specific procedures manuals would be developed

for various types of internal audits. The mission also discussed with Internal Audit Department ([AD) available

options for certification of IAD staff with relevant Institute of Internal Audit (llA) qualifications (CGAP, CIA.

QIAL etc.) and suggested that IAD consider proposing a number of staff to be supported under the project for these

qualifications for inclusion tinder this activity, It is understood that introduction of risk management in the public

sector may no longer be the exclusive responsibility of IAD, but would be coordinated through a committee headed

by Secretary to Cabinet. Accordingly, it is recommended to holistically examine and propose to World Bank

whether this component (originally planned for funding under internal audit) still needs support under the project.

IAD is in the process of contracting with vendor for the latest version of ACL licences.

Component 5: Increasing effectiveness of Revenue Administration: The progress on the component is rated as

satisfactory. Overall, good progress has been made by Zambia Revenue Authority (ZRA) since the programme

started and almost all the activities are expected to commence in earnest in 2015. There has, however, been

reprioritisation of sub-activities planned under this component (as ZRA responds to changing requirements).

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Mechanisms need to be in place to capture and approve changes of this nature as the program moves forward. It isimportant to note that ZRA believes that they can largely complete the 7 funded sub components during 2015; andthe progress made to date supports this expectation. Specifically, the mission discussed details of ElectronicRecords Management System and advised that flurther work is necessary at ZRA to develop the business case andrule out any possible findamental roadblocks from vendor side.

Component 6: Strengthening Tax Policy Fornmuation: The progress on this component is assessed as 'moderatelysatisfactory'. Considering the early stage of PFMRP project, not much progress has taken place on this component,

I lowever, specific plans have been drawn out to organise studies (Marginal Effective Tax Rate study, Excise Studiesctc) and training and capacity building plans have been developed.

Corpnrent 7: Project Managemeni: The progress on this component is rated as moderately satisfactory. A PFMReform Unit mainstreamed in Ministry of Finance is functioning. At present, the unit faces challenges on its time inthe absence of full time dedicated procurement specialist, change management specialist and M&E specialist, It wasdiscussed and agreed that the focus of manning these positions should be based on sustainability principles whereGovernment staff are earmarked to take up these functions and external consultants are made available only toprovide on-the-job training and support to the Government staff. It was also agreed that fill time secretariat supportbe provided to Reform Unit from project funding.

Component 8: Other PFMI interrentions: The progress on this component is rated as 'moderately unsatisfactory'.The funding requirements on this component are expected to evolve over the life of the project.

Worhbop on 'Eud Poverty in Zambia through PFM Rqforns: Leveraging Global Knowledge in IFMIS rind7SA': Ministry of Finance has successfully conducted the well-attended workshop on IFMIS and TSA whereinternational experts shared global knowledge on 1M IF S and TSA to enable component teams effectively handle theday to day challenges in implementation.

Component 1: Integrated Planning and Budgeting and Revision of PFM Legal Framework

2. The overall assessment of the component is rated as 'moderately satisfactory'. The objective ofthis component is to improve the development planning and budgeting processes to enhance the servicedelivery impact of the public sector. Government has successfully prepared the draft Integrated Planningand Budgeting Bill, based on the Integrated Planning and Budgeting Policy approved by the cabinet priorto project effectiveness. Government has also continued to hold sensitization workshops and seminars todisseminate information about the policy and Bill. However, progress on many activities as plannedunder this component could not be achieved. These activities include: comprehensive review of PublicFinance Act and related laws and regulations; preparation of revised debt and public investment laws; andpreparation of budget and IFMIS manual. The Government has committed to progress in the comingmonths with specific focus on: (i) strengthening the challenge function; (ii) accelerating TORs for thebudget and accounting manuals; and (iii) review and possible drafting of relevant legislations. The Bankteam stands ready to offer the necessary technical support as needed (discussed in subsequentparagraphs).

3. Planning and Budgeting Bill and Challenge function: The 'Planning and Budgeting Policy'was approved by the Cabinet on 24 March, 2014. Funding and technical support inder PFMRP has not sofar been made use of by Government on the dissemination of the policy. The MoF is disseminating thepolicy through workshops and seminars. Based on the policy. a draft bill has been prepared for legislative

approval. The mission offered technical support to the Ministry in review of draft bill, if requested for byGovernment, from a technical stand point based on international experiences. The mission was alsoinformed that GIZ is supporting MoF with TA to review the draft Integrated Planning and Budgeting Bill.The review is planned to be completed by end December, 2014 for presentation before the first session ofthe parliament during 2015. It is understood that absorption of funding from PFMRP on the bill would

take place only after the bill is passed as legislation. The mission was requested to see if followingpriorities of the MoF could be supported through the project:

a. TA to establish Zambia Project Appraisal System (PAS)- the challenge function of the MoF

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b. TA to prepare the budget manual

The mission responded that all the above activities are within the scope of the project and could be

supported.

4. The establishment of the challenge function was especially re-emphasized as high priority. This

would enable the MoF to appraise project proposals contained in the National Development Plan (NDP).

Due to current capacity constraints. several projects get approved without optimal economic and financial

rationale, due diligence or rigorous prioritization process, resulting in inefficient use of public resources.

A dedicated unit within the MoF set up to scrutinize these proposals through technically qualified staff

would help MoF strengthen the budget allocation process for development projects. The mission was

informed that UNDP has supported the government for preparing the PAS manual. A few sessions of

training of the trainers drawn from public institutions [MoF, National Institute of Public Administration

(NIPA) and University of Zambia (UnZA)] have also been completed. In order to learn better practices.

the government team had visited Chile. As a follow-up to that visit, the MoF requested the World Bank.

to assist in acquiring technical assistance to help them implement the manual through hand-holding and

technical support. This support will complement the support already provided by UNDP on development

of PAS manual and facilitate it's effective utilization. The mission has provided sample TORs to the

MoF. The mission recominends Director Planning to ensure that the ToRs are finalized and submitted

to the Bank for clearance by 15 January, 2015. The target is to have the consultants on board by March

2015, so that, a PAS could be piloted in at least one ministry during FY2016 budget cycle.

5. Preparation of FY2016 Budget on IFMIS: In addition to the above initiatives, the MoF plans to

prepare the Budget 2016 using IFMIS. This will help the government streamline its reporting on budget

execution through an integrated system. It was informed that the ministries are still having mismatch of

budget classification and IFMIS chart of accounts in certain areas during FY2014, though considerable

progress has been made successively over the last three years to achieve better alignment. For FY2015

budget cycle, parallel budget was prepared using Activity-Based Budgeting (ABB) system and IFMIS,

though the primary budget system was developed in ABB.

6. The mission advises that all IFMIS related preparatory work should be completed well before

June 2015, when the next budget preparation cycle will start. This includes: (a) demonstration of and

training on the Business Planning and Consolidation (BPC) module to the budget staff of the MoF by

February 2015; (b) iterative enhancements and testing of the BPC module to meet the requirements of the

budget department during March - May 2015; (c) review of the Budget Call Circular to ensure that it is

consistent with IFMIS requirement-by April/May 2015; (d) test printing of budget 2015 for at least 1-2

ministries through the BPC before June 2015; and (e) further training of budget staff, and enhancing help-

desk arrangements to receive and review budget submissions from ministries to avoid discrepancies with

1FMIS coding. It was agreed that a SAP specialist is needed to support the lFMIS team during the budget

compilation period. The mission recommends the IFMIS Project Manager to submit the ToRs for the

needed SAP expertise to the World Bank.

7. Budget Manual: The mission was also informed of the MoF's plans to prepare a budget manual

that will update the existing procedures to align them with the revised Integrated Planning and Budgeting

Policy and the principles of Output Based Budgeting (OBB). The Accountant General informed that

there is a need to update the existing Accounting Manual and chart of accounts. The mission is of the

view that due to close linkages of budget, accounting procedures and chart of accounts, and to avoid

multiple procurements, a combined TA is suggested by the Bank to prepare the two manuals. The

mission therefore, recommends Director Planning to ensure that the ToRs for preparing the budgetand accounting manuals are sent for Bank clearance by 23 January, 2015. The mission has already

shared sample ToRs with the government team.

8. Complementarity of various Legislative Reviews: The mission underscored the importance of

ensuring complementarity of various legislative reviews currently being undertaken within the MoF. For

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example, the coherence between the draft Integrated Budgeting and Planning Bill, decentralization

legislation and review of PFM Act needs to be ensured. The mission was informed that IMF FADMission plans to visit Zambia during early 2015 to support the government in this regard and provide

high level guidance. The consultant will be hired only after this guidance is available. The MoF willensure that the TORs of the consultants working on these drafts will be required to ensure such coherence.This is primarily supported by the upcoming IMF mission and MoF will evaluate the need for supportfrom PFMRP project after the mission. Post [MF mission, Bank recommends that the Ministry examinesby 31 March 2015, whether there is any further requirement for funding / technical assistance underPFMRP through engagement of legal consultant.

Component 2: Strengthening IFMIS and Cash Management

9. '[his component is rated as 'moderately satisfactory. The objective of the component is to helpensure that: (a) budget is executed as planned; (b) the quality and timeliness of financial reports isimproved for better 1iscal management; and (c) the efficiency of cash management is enhanced to reduceborrowing. The government has completed the preparatory work for further roll-out of IFMIS out of itsown budget. The next roll-out at 8 of the remaining 15 sites is planned to be carried out during firstquarter of 2015. The preparatory work for piloting TSA Ministry of Finance is at an advanced stage of

completion. The job descriptions for the treasury unit to be established within the Accountant GeneralDepartment (AGD) have been developed.

10. Mainstreaming IFMIS: The mainstreaming of [FMIS is a disbursement condition for this

component. The IFMIS team has been working in a project management mode for more than 8 years andhas been able to achieve considerable success by rolling-out the system at 35 plus Ministries, Provincesand Spending Agencies (MPSAs) against a target of 50. In order to enhance sustainability of its set-up, itwas agreed that the team needs to be integrated into the regular operations of the government. The

mission was informed that the Cabinet has approved the new management structure for IFMIS. Keyfeatures of the proposed new set-up include: (a) creation ofa separate unit within the AGD, to be headedby a Deputy Accountant General (DAG) -IFMIS responsible for the functional aspects of IFMIS; (b)

enhancing the responsibility of the Centralized Computer Services Department (CCSD) in MoF to includemanagement of the core IT aspects of IFMIS (such as servers, IT security, network, operating system,SAP Basis laver, IT helpdesk. service-level agreement for the hardware, etc.); (c) unified reportingarrangements of all IFMIS functional experts through the DAG (IBMIS) to effectively coordinate theactivities with relevant client groups (budget department, internal audit, external audit, line ministries

etc.) in a matrix arrangement; and (d) creation of new posts, where necessary, in consultation with theCabinet office to implement this structure and preparation of the job descriptions to ensureaccountabilities.

11. The mission advises that the transition should be handled with good planning to avoid anydisruption in IFMIS operations. The planning should focus on handling human resource (HR) issues.

The technical staff needs to be assigned to appropriate positions in the new organization structure. Themission notes that some technical staffs have been working at higher skill level within IFMIS team than

their original position in the parent department and some IFMIS experts have lost promotion

opportunities in their parent department while working on [FMIS for the last several years. Due

recognition of scarce IFMIS skills through salary grade or scale adjustments permissible within the

government s)stems could mitigate the risk of staff attrition; regular communication with the IFMIS teamon the proposed changes could improve staff morale; better office space for the relocated staff would helpimprove productivity; and job descriptions of the experts should be prepared to establish clearaccountabilities.

12. The government is aware of the issues mentioned above. The MoF plans to complete the

consultations with relevant departments and prepare a detailed proposal. If required, the government will

request the project to assist in reviewing the proposal through some expert, If necessary approvals for

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creation of posts cannot be completed by end December, 2014, administrative measures will need to be

taken to ensure smooth operation of IFMIS through seamless transition. A letter to the World Bank on

the decision to mainstream IFMIS along with structure and roll-out plan may be sent to the Bank

before 9 January, 2015.

13. IFMIS roll-out: The target for completing this activity is to roll-out IFMIS at 50 MPSAs during

first year of the project. The mission was informed that iFMIS has been rolled out at 35 of 50 MPSAs.

The roll-out was completed using government's own funds, due to the disbursement condition. The

preparatory work for 8 of the remaining 15 sites is completed. The mission reconmends the AG to

ensure roll-out of IFMIS at 8 additional sites during the first quarter of 2015 and remaining 7 sites b'

June 2015. The go-live definition must be agreed to avoid fragmented implementation where ministries

using FMIS also use the legacy systems to carry out their expenditure recording. Typically, go-live

should involve stopping the usage of the legacy systems and switching completely to IFMIS, so that, all

financial transactions of the relevant site- both recurrent and capital/donor funded projects- are carried out

using IFMIS. If there are off-site locations of the ministry where transactions are being recorded outside

IFMIS, they should be uploaded into the systems so that the consolidated financial statements and budget

execution reports could be prepared using IFMIS.

14. The mission was informed that the implementation of IFMIS at current sites needs to beimproved to address some of these issues: (a) operationaliiing the revenue module of 1"MIS fully to

capture non-tax receipts of the ministries; (b) configuring the delegatioii of authority to approve purchase

orders in the system [Local Purchase Orders (LPOs) are routed to the Permanent Secretary (PS) for

approval in IFMJS even though the PS is required to approve LPOs only after a certain threshold. Proper

configuration of the workflow to reflect the delegation of authority as per government rules will relieve

the PSs from additional workload]; (c) many users in sites need additional training on project systems

module to support recording of donor-funded project transactions adequately and to produce reports from

the system; (d) many high-transaction volume spending units/departments of the large ministries (such as

UTH and other major hospitals under Ministry of Health) are recording expenditures manually or through

spreadsheets as they are not connected to [FMIS (despite the HQ of the ministry being on-line. large

ministries at provincial I-lQs are not connected).

15. IFMIS roll-out for de-concentrated funds at the pro vincial HQs and additional sites of big line

ministries in Lusaka: The mission was informed that 1FMIS has been rolled out at 3 provincial I IQs.

However, during the consultations, it was informed that the big line ministries- Agriculture. Health.

Education- need additional support regarding IFMIS roll-out at the provincial FIQs. Currently. the service

units of these ministries get funds from their ministry HQ as advances and record expenditures in

manual/spreadsheets due to lack of IFMIS support. Even at districts like Chipata where IFM IS has been

rolled-out, these service units are using manual systems as IFMIS is only being used for expenditure

tracking of provincial administration. These service units of large ministries at the provincial -lQs could

use IFMIS if connectivity is provided- typically, they are 300-500 meters away from the already

connected provincial HQ office building, and therefore, could be provided connectivity by laying fiber-

optic wire between the buildings. The mission also met the accounting staff of the Ministry of

Agriculture. The consolidation and off-site service units related issues at the provincial I lQs are similar

to the ones described above.

16. The mission was also informed that some large service units of these ministries within Lusaka are

not connected to IFMIS and hence are doing their expenditure tracking manually. File uploads are used

from these units to consolidate the financial statements through 1FMIS. For example, during a meeting

with the Ministry of Health officials. it was informed that there is a critical requirement to connect large

hospitals and provinces- around 7 hospitals in Lusaka and 10 provinces. If such an arrangement is worked

out, 60-70 percent of the expenditure transactions of the ministry could be tracked through IMIS. Due

to lack of connectivity with IFMIS, the consolidation of financial statements from the service units in the

provinces and the districts is a 'nightmare'- requiring a team of officials to travel to the Central Province

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quarterly to consolidate and reconcile the financial statements and reports which takes about 10 days tocomplete, It was agreed that the IFMIS team needs support of a firm to fast-track this roll-out, implementhielp-desk and enhance the reporting module of SAP. Specifically, mission also reiterates the urgent needfor implementation of a help-desk. Bank has been discussing with Government for over two years on the

need for helpdesk and it has not yet been activated'. The mission recommends the IFMIS Project

Manager to submit the ToRs for hiring a SAP firm by 9 January, 2015. The mission has already shared

sample ToRs.

17. IFMI5 advisor: The mission has cleared the evaluation report for hiring an IFMIS Advisor. The

mission recommends the AG to ensure that the contract is finalized by 31 January, 2015.

18. Cash Management and TSA: The mission was informed that the organization structure and jobdescriptions for the 'Treasury Department' within the AGD have been developed. The PFM Reform Unit

(PFMRU) has hired a Treasury Advisor to support the AGD in setting-up this function. The

implementation of TSA for capital and salary expenditures has already been started. The design for the

remaining expenditures involves centralizing the payments function of the ministries through the AGD,who would send the payment advice through IFM IS to the Central Bank (Bank of Zambia) using an

Electronic Fund Transfer (FFT) mechanism. Thereafter. the Bank of Zambia (BoZ) system would

transIer the funds from the control account of the ninistrv within the BoZ into the vendor bank accounts

electronically using the Real-Time Gross Settlement (RTGS) system. The IFMIS at MoF is connectedwith BoZ through a VPN link to transmit the payment advice. The RTGS system is being rigorously

monitored - 19 participatory banks meet with BoZ every week to monitor progress. The Consultant from

Bo/ had developed the system with support from the IFMIS technical team to operationalize the

arrangements. The treasury team of the AGD, under the guidance of the Treasury Advisor, is carrying out

testing of the system. The mission recommends the AG to ensure that the TSA go-live for at least one

pilot is achieved in January 2015. The government plans to pilot first only at Ministry of Finance. Anylessons learned from that pilot will be incorporated in the next roll-out. It was informed that the operating

accounts of the Ministry have not been closed yet and that there are plans to close them in a phased

manner. The mission was informed that the encryption has been implemented while the remaining layersof IT security- Digital Signature and MQ Adopter- have not yet been fully implemented.

19. The mission views that the operationalization of the TSA will have a substantive impact on the

Project Development Objective (PDO). The above progress is encouraging. However, the mission viewsthat een though the government team is carrying out due diligence through rigorous testing, a third party

assessment of process controls and IT security should be carried out before the system is rolled out to the

next batch of ministries after the pilot. The scope of this assessment should include overall IFMIS

assessment, with special focus on TSA and EFT. The mission therefore recommends the AG to hire a

consulting firn to carry-out controls assessment through an IT Audit of lFMIS. The ToRs of the firm

may be submitted by 30 January, 2015 for Bank clearance.

20. After the assessment and tightening of the controls based on the recommendations, the TSA is

expected to be rolled out to all the IFMIS sites by October 2015.

21. The mission also recommends that service level agreements with the BoZ and some of the

commercial banks, where needed. to operate zero-balance accounts should also be signed on a priority

basis.

LEcrpt from Jone 2012 World Bank Aide Memoire or quick reference. 'The currenI user c onmlnuty, totaling 1300 named users, need support

ir Leriis of refresher train ings arid a robust help desk infrastructure The Mission appreciates the set-tip of 9 member help-desk leam working as a

call center through the use of IP' phones (users can call the central help desk by using network based telephone equipment free of charge).However, the electronic help desk, which can be accessed by the users to register their support requests through email, which are constantly

tracked and monitored for an enhanced user satisfaction, together with development oIF a knowledge-basc/FAQ accessible to users and help desk

upport stalf to resolve issues at first contact, need to be developed SAP has a module, Solution Manager (SM Version 5 already part of the

hlCiset Mhichi sUpports that Intrastructure as well as server landscape managemetnt However, this module is being used only to manage the

servers I telp I )tvk fuiictionalitt has not been configured ini this module The Mission recommends iiplementing electronic help desk to enhance

Lser Suppon, ugnent hand-ho ding and 'aci atle change management '

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22. The mission also recommends that the Cash Management Manual should be prepared bY end

of January 2015.

23. Budget Execution Reports (BERs): BERs are not being published within 30 days of end of the

quarter. The quality of the BERs which are published after considerable delays also needs improvement

to ensure comprehensiveness. The target under the M&E framework is to publish this report within

thirty day's of the end of the quarter. The mission noted that the last report on the MoF website is as at

317 December, 2013. The report does not comprehensively cover the budget execution and has gaps

that need to be fixed as a priority. The mission evaluated the reasons for deficiencies in BERs,

Primarily BERs quality suffers when fragmented implementation of I FMIS goes concurrently with use of

legacy systems (discussed in subsequent paragraphs). IFMIS needs to be used as the mission critical

system, so that, all the financial transactions of the relevant site- both recurrent and capital/donor funded

projects- are carried out through IFMIS. If there are off-site locations of the ministry where transactions

are being recorded manually or through legacy system, they should be uploaded into the IFMIS systems.

so that, the consolidated financial statements and budget execution reports could be prepared through

IFMIS. The mission explained and agreed with the Government on the need to use IFMIS as a mission

critical system to upgrade quality of BERs. The mission recommends that the AG ensure that the

reports for the first three quarters of FY2014 are published on the web-site immediately and the last

quarter report is published by 30" January, 2015.

24. Role of CCSD on IFMIS: The mission was informed that the Manager. Centralized Computer

Services Department (CCSD) has been mandated to manage the IT systems of all the public institutions.

including IFMIS and that CCSD would need support to augment its capacity through hiring consultants in

critical areas of IT infrastructure, training of staff and refurbishment of offices. Based on the

discussions, the mission recommends the Manager CCSD to ensure that the:

a. TORs for hiring a senior network specialist, and a basis consultant are submitted frBank clearance by 9 January, 2015

b. The TORs for hiring a firm to carry out Business Continuity Planning (BCP) for the

IFMIS are sent for Bank clearance by 9 January, 2015;

c. Detailed proposal for training/certification of staff in critical technical skills is subinitted

for Bank clearance by 30 January, 2015; and

d. Detailed proposal for refurbishment of office space for 8-10 rooms is submitted to project

authorities by 30 January, 2015.

Component 3: Public Procurement Reforms

25. The overall assessment of the component is rated as "moderately satisfactory". A separate

procurement mission in November engaged with ZPPA and ZIPS and the PFMRP mission drew heavily

from the work of the procurement mission and updated the position flirther.

26. ZPPA restructuring: ZPPA restructuring (which has significance impact on MDTF funded eGP

project) was noted as being behind and may require to be brought to the attention of high level

government officials and cooperating partners. In view of the ongoing discussions of 7PPA with DFID

and World Bank, the mission limits itself at the present stage to reiterate the need for early and

appropriate completion of restructuring, which will enable other ZPPA initiatives yield intended results.

ZPPA informed the mission that they are determined to carry out the implementation of the new structure

and conditions of service by the end of 2014 and that this action will result in reduced stalT requirements

and associated costs going forward.

27. eProcurement Project: The mission informed ZPPA that the Zambia eGP is a flagship for the

Region and therefore its success is critical for introducing this tool in other countries of the Region. The

evaluation of bids was completed and submitted to the Bank for its review and clearance in mid-October.

2014. The Bank emphasized the need to conduct due diligence on the recommended bidders*

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qualifications. After necessary action from ZPPA on due diligence, Bank provided (21 November 2014)

it's 'No Objection' to negotiate and finalize the contract with the selected bidder. The contract is

expected to he signed before end of January, 2075. The mission noted that the processing of the eGP

bidding was behind schedule by about 3 months.

28. The mission advised ZPPA that once the eGP developer has been contracted, it should reach out

to the stakeholders as part of information sharing and awareness of the eGP. Stakeholders in the public

sector. in particular, should be made aware of the phases of the development as part of readiness for roll

out of the system.

29. Mission reviewed the work plans of ZPPA for 2015. It was agreed that substantial output is

expected on: (i) review and preparation of standard bidding documents and standard contracts; (ii)

procurement audit in 10 institutions; (iii) preparation of Procurement Guidelines & Manual; and (iv)

introduction of framework contracts. ToRs for these activities have already been cleared by the World

Bank. ZPPA restructuring has significant impact on all these activities and needs to be brought to a

logical conclusion at the earliest. Further, Bank impresses upon ZPPA to expedite its action on other

activities as well. Specifically, mission recommends early action on development of procurement

capabilities of Ministries, Provinces and Spending Agencies (MPSAs) as it has significant impact on the

(]ualitk of procurement practices in the Government. Bank has been providing continuous technical

support to /PPA and will be able meet any requirements of ZPPA for advice.

30. Zambia Institute of Purchasing and Supplies (ZIPS): The mission was informed that the effort

to localize the training for purchasing and supply professionals in Zambia in the development of the ZIPS

Graduate Diploma was behind schedule. ZIPS have been holding discussions with Chartered Institute of

Procurement and Supplies (CIPS) to determine the equivalence of the ZlPS qualifications that have so far

bee n developed for the Certificate and Diploma levels. The mission took note and advised that whilst this

was going on, ZIPS needed to continue with the development of the ZIPS Graduate Diploma and more

importantly reach out to training institutions which may be identified to begin conducting the ZIPS

Certificate and Diploma training with the training materials and curriculum for these courses developed in

2013.

31. The mission was informed that recruitment of two staffs (education and finance managers) is

Underway with the assistance of the Ministry of Finance. Advertisements have been made and CVs have

been received. One finance staff has since been recruited out of ZIPS's own resources. ZIPS is yet to

decide between acquiring a building and purchasing of land to develop its offices out of the US$90,000

equivalent that is available for this purpose. Selection of a consultant for MIS and database development

consultancy is underway. The selection for legal framework review consultancy is also underway. The

mission suggested and ZIPS agreed to engage a consultant to develop a marketing strategy for ZIPS as

a critical activity to enhance and strengthen ZIPS as the lead professional procurement institution of

Zambia.

Component 4: Enhanced Internal Audit and Internal Control

32. The overall assessment of this component is rated as 'moderately satisfactory'. The objective of

the component is to strengthen and promote internal control systems in order to enhance transparency and

accountability in the use of public resources in accordance with the Zambia 2013-2015 PFM Reform

Strategy. The component includes: provision for developing a local curriculum for public sector internal

auditors; upgrading internal audit work and quality assurance procedures to international standards;

strengthening Audit Committees in ministries; and greater use of IT auditing tools and skills. The

summary results indicator is for the relevant PEFA rating to improve to the B level. This will require

better internal control through improved response by Audit Committees and Controlling Officers to

rcle\ ant, well-conducted internal audit work.

9

33. Appoved ToRs: The Component has been designed as a set of specific consultancies and

acquisitions to improve the performance of Internal Audit Department (lAD) as measured by PEFA

indicators through the period of the project. According to the Bank's Guidance Note on sequencing PFM

reforms, the first priority is to establish core PFM functions. focused on financial compliance and

measured by target PEFA indicator scores. Internal audit needs to function adequately to provide support

through feedback to management on the performance of the internal control systems. The activities in the

Component are aimed at this and terms of reference were to be developed by lAD for each activity. lb

the end of the mission, all but one activity (development and introduction of internal audit quality

assurance systems) had approved ToRs. The mission team advised LAD that the PEFA methodology has

been reviewed and another indicator has been put forward on QA - this looks for "A quality assurance

process is in place within the internal audit function. There is evidence that assurance services meet

professional standards. including following a risk-based audit plan." The ToRs for this issue have not yet

been finalised and will address the re-basing of the indicator set. At the time of the mission the project

had been effective only for a few months and it was not practicable to see specific results against the

PEFA indicator dimensions - coverage and quality of the internal audit function; frequency and

distribution of reports; and extent of management response to internal audit findings. The mission

examined proposed activities and their ToRs as to whether they were likely to contribute to the desired

improvements.

34. Terms of reference have been approved for:

* development of a curriculum for government internal auditing with the Zambia chapter of the

Institute of Internal Auditors (11A), and consultancy to develop a training programme and to

conduct training on the use of a revised Internal Audit Manual - this will improve the quality of

the internal audit function through more competent staff

* provision of training to audit committees on corporate governance and their roles and

responsibilities under the Public Finance Act - this will improve the management response to

audit findings through more informed audit committee members

* development and piloting of risk management system required by the Public Finance Act and

conducting training to improve internal control arrangements and internal audit effectiveness ---

this will improve the coverage and reporting of internal audit through focussing on better

assessment of risks.

During the mission, terms of reference for the following component activities were assessed by the

mission team:

* strengthening the value provided by internal audit through the facilitation of sensitization

workshops of key stakeholders on the role of internal audit - this will improve the management

response to audit findings through more informed stakeholders including the public

* review of the adequacy of the Public Finance Act against international equivalents to provide

recommendations on changes towards best practice - this will improve the governance

arrangements for managing the scope and response to internal audit work

* Development of training materials in forensic audits, performance audits, procurement audits and

human resources audits. and the provision of training in these specialized aidits - this will

improve the scope and reporting of internal audit work.

35. The expenditure to date under this component of US$18,683 on various types of training was

discussed with IAD by the mission team as appearing to be rather low. lAD explained that funds

committed for some actions could not be paid and booked because of substantial delays in the legal

approval processes of contracts. The work plans for 2015 on the various component activities were

discussed with 1AD and the mission team was satisfied that the plans were appropriate. Based on inputs

10

provided, IAD agreed to provide the mission team with its latest comprehensive spreadsheets of

planned expenditures up to the close of the project by 9 January, 2015.

36. Alignment of internal audit work procedures to international auditing standards and

etablishing arrangements for training public sector internal auditors in local training institutions:

Fhe expected result from this activity is for all auditors to have been trained in fA standards and applying

them through the use of the manual. This wNill improve the quality of internal audit work through training

263 auditors in IA standards. A contract has been established for the upgrade of the Audit Manual and

the conduct of training. The Audit Manual has already been revised and training of internal auditors in

the usage of the new manual has also commenced. The mission discussed the need for the manual to be

extensively modified to provide more detailed guidance at the audit testing and procedures level in

accordance with audit standards. The IAD explained that it intended to have detailed specific procedural

manuals for various types of' internal audit and that this would Fill the apparent gaps. The IAD also

explained that through the establishment of specialised audit units in the Department, the IT Audit

Manual and Risk Management Manual have already been developed with the support of GIZ. The

Department further indicated that the Risk Management Manual will be incorporated in the main Audit

Manual as this is critical to every Internal Auditor. Preliminary work has begun with the Zambia Chapter

of the Institute of Internal Audit to coordinate with the International Institute of Internal Auditors (11A

Global) to design an appropriate curriculum for Zambian needs; and subsequently to build local capacity

for training public sector internal auditors in accordance with the curriculum. Arrangements are under

discussion in the context of an educational institute support program funded by the European Union for

delivery of the courses once developed. The mission also discussed with IAD available options for

certification of (AD staff with relevant flA qualifications (CGAP, CIA, QIAL) and suggested that IAD

consider proposing a number of staff to be supported under the project for these qualifications for

inclusion under this activity.

37. The mission met separately with members of the Governing Board of the IIA Chapter who

discussed their need for assistance to operate more effectively and the need to examine whether

legislation was needed to establish stronger requirements for all practicing internal auditors to be IIA

members and to promote internal audit professional qualifications for internal auditors operating in

Zaimbia including in government agencies. The mission discussed various steps that would assist the

Chapter to be more effective. The mission suggested to the IIA Board to discuss the issue with MoF and

provide a proposal for consideration by the March meeting of the Joint Government Donor Committee

(.IGDC) if MoF is in favour.

38. Strengthening the value provided by internal audit: Sensitization programs for Controlling

Officers and other stakeholders are being considered under this activity. These activities are aimed at

improving the planning of internal audit activities and the response to internal audit findings. The mission

team noted the need to include media in these sensitization plans. The lAD mentioned that IAD and the

Office of the Auditor General (OAG) were developing an MOU. In view of the commonality of

stakeholders and complementarity of function, the mission suggested that some coordination of these

sensitization exercises would be helpful. The IAD agreed to consider this with OAG.

39. Introduction of risk management in the public sector: The measure of results from this activity is

the number of'civil servants provided with training on risk management. This will feed into improved

internal control and better focused internal audit programs. The objective of consultancy is to develop

a Risk Management System framework to be initially piloted in 3 agencies and thereafter rolled out

across the public sector. A report has been prepared by the Government of Zambia on a baseline

study of risk management. The work will involve developing a risk management policy and

framework based on a comparative review of other implementations. Procurement of necessary

11

software and training of staff and users for implementation first on a pilot basis and then full roil-out

will follow acceptance by Government of the design. This activity depends on the establishment of

a risk management framework by GRZ. GRZ has formed a Steering Committee chaired by the

Secretary to Cabinet to implement the requirements of the Public Finance Actfor a system of risk

management by Controlling Officers and the committee needs to progress this work. GRZ is

considering establishing a department under the Secretary to the Treasury in the Ministry of Finance

to be in charge of risk management in the public service. Considering the developments, mission is

of the view that this item need not remain in the work plans of IAD. Mission recommends that

Government may examine the issue holistically and propose to the World Bank whether this

component need to be funded by PFMRP.

40. ACL expansion to audit ITsystems: A contract has been established to upgrade & integrate the

ACL sotlware. [AD has found value from the use of ACL in improving the quality of the audit of payroll

and plans to transfer this expertise to other audit areas (e.g. IFMIS etc) using the experienced auditors.

This technique has potential across all audit engagements where digital data is available with the client,

including Risk Based and IT Audits. Improving familiarity with ACL is planned through an in-house

exercise. Of the existing 80 licenses, 20 will be upgraded. Difficulties have arisen through the need to

approve new contract conditions and the mission undertook to expedite the required approvals- After

exploring various options, it was agreed that the IAD would go in for a fresh contract. Bank has

provided the mandatory conditions that need to be included in the contract. It is suggested that IAD

may expedite the contract.

Component 5: Increasing effectiveness of Revenue Administration

41. The assessment of this component is rated as satisfactory.The objective of this component is to

increase the effectiveness of revenue administration by the Zambia Revenue Authority (ZRA). This

component includes supporting major ongoing change initiatives funded by Government and enhancing

the professionalism and productivity of the workforce. The underlying aim is to generate increased

revenue for Government. Overall, good progress has been made by ZRA since the programme started.

Almost all the activities should commence in earnest in 2015. There have been modifications in the work

plans to accommodate the omissions in the original budgets (as ZRA responds to changing requirements).

Mechanisms need to be in place to capture and approve changes of this nature as the program moves

forward. The budgets have been reviewed with ZRA authorities as a part of mission activity and are now

more realistic. It is important to note that ZRA believes that they can largely complete the 7 funded sub

components during 2015; and the progress made to date supports this expectation.

42. Implementation of Mining Sector Monitoring Mechanism: This subcomponent %as designed as

part of a multifaceted approach to monitoring production, costs, sales and revenues in a manner that is

reliable and independently verifiable. The aim is to bring into one system all the reporting obligations of

mining companies to Government oversight institutions. The Government and Norwegian Aid were to

provide much of the required project costs. However, this program should provide support for parts that

are unfunded - primarily for the creation of the integrated information portal and an Integrated Service

Centre. However, since 2013 when the program was designed, the nature of the activities to be supported

by the PFM programme has altered (and the extent of funding under PMFRP will be much reduced).

Support is now sought for two parts of the solution - a production monitoring module and an export

permits module. Both of these systems solutions will now be provided by UNCTAD with links to

ASYCUDA. That is a welcome development as such modules developed for Zambia could potentially be

made available to other countries with ASYCUDA (and mining interests). The export permit system will

also be potentially able to be used wider in Zambia as part of the Customs / Government single window.

The likely costs of the solution are much less than the originally budgeted figure.

12

43. System for Monitoring Balance of Payments: This sub component is primarily the cost of

engaging an UNCTAD ASYCUDA technical expert to make the necessary changes to the base

ASYCUDA World software. This would facilitate the use of the single window concept capabilities of

the system to enable data exchange and operational integration between Customs and Other Government

Agencies (OGA). Although S155 has been withdrawn, the need to monitor Financial movements remains

and a solution to permit the electronic capturing of the financial transactions (for imports and exports)

within ASYCUDA is to be developed by UNCTAD (for implementation in 2015).

44. Transit Tracking and Suspense Regime: This sub component seeks to use new technology to

put in place improved control systems and procedures for goods that are in transit across Zambia or are

moving within Zambia without remitting duties and taxes. This will provide for a vehicle tracking system

with a control room to monitor movements. ZRA has decided that the most cost effective approach is to

adopt the tracking system that has been developed by COMESA. This will alter the nature of the

activities and composition of expenditure required. The budget will go towards procurement of hardware

requirements, communication, seals and reinforcement of equipment for the control room.

-45. Capacity Building Program for Medium Taxpayer Office (MTO) staff: This subcomponent was

designed to support tax audit and tax debt collection. For audit, the intention was that the consultancy

assistance would include training and mentoring auditors, as well as reviewing audit manuals and

procedures. In addition, a start would be made on producing audit sector notes and training staff on their

use. For debt management, the consultancy assistance would review the current policies and procedures

and train staff in debt management skills. The ToRs for sector notes (covering construction and selected

retail/wholesale trades) have been prepared, discussed and agreed. The sector notes when prepared will

then be used for audit training (and subsequently as models for further sector notes that ZRA stall can

develop themselves). Audit training w ill be limited to training on the sector notes (Norway is providing

support for the training for auditors in audit procedures/processes etc). ToRs for the debt management

area are in the 1inal stages of development.

46. Support for Investigation and Internal Affairs: ZRA planned a wide range of initiatives to

enhance the capabilities of its Investigative arms - both tax/customs investigation and Internal Affairs

(the ZRA anticorruption unit). This component has 4 parts (with the position on each being shown):-

i. Case management software : vendor selected; contract signing shortlyii. Forensic lab: tender issued but no compliant response. ZRA reflecting on the next step

iii. Investigation tools: business case to be ready shortly; procurement will then follow (using a

combination of retail shopping and tender invitations).iv. Protective vests etc - cleared for procurement to take place (some items removed from the

original list).

The costs of these elements are now substantially more than the initial budget line but the items and the

expenditure appear well founded and should make a worthwhile contribution to enhanced revenues.

47. uMlk Intelligence Data Analysis Capability: ZRA is seeking to enhance its Intelligence Unit so

that it can collect and disseminate information on apparent discrepancies on tax or customs to audit and

investigation staff, This sub component seeks to develop the capability to automatically analyse and

compare third party and ZRA data in order to identify specific areas and cases of revenue interest. This

support is for the Intelligence Unit and sits within Investigation. The design of the Bulk analysis system

requirements have been completed and agreed. A tender is currently running. The cost has increased due

to the need to plan for additional hardware (to provide business continuity) and the need to include

training of staff in the (operational) usage of the system.

48. Electronic Records Management System: This subcomponent will provide for introducing

scanning technology into the Central Registry at all offices so that all remaining documentation can be

captured and stored digitally. This will make ZRA more efficient and ensure that required documentation

13

can be accessed quickly (thus giving improved turnaround times etc.). The initial budget for this

component was approx $0.2m (to pay for outstanding cost of software) for the system but the amount

needed for full implementation, including the required hardware and Oracle etc licences, had been

assessed at $2.6m. Therefore ZRA has already submitted a business case to the P1-N Program

Coordinator for a budget variation within the ZRA funding portfolio. I-lowever, ZRA are re-examining

alternative ways of structuring the system and the server requirements/usage (to reduce the cost of licence

etc fees). ZRA will prepare a business case for the increased expenditure by early January, 2015. The

likely budget is now about $2.0n. ZRA may share the business case with the World Bank by 9.Januarly,

2015.

Component 6: Strengthening Tax Policy Formulation

49. The progress on the component is assessed as 'moderately satisfactory'. The objective of this

component is to enhance the capacity and capabilities of the Tax Policy Unit in the Ministry of Finance.

50. Studies and research projects to support tax policy formulation : Three such studies are

planned:-

* Marginal Effective Tax Rate (METR) study - the last was done in about 2004; this will look

at key trade sectors (including mining, agriculture and tourism). MoF has undertaken to

prepare ToRs by end of January, 2015.* Two Excise studies - on tax policy as regards tobacco and alcoholic drinks. MoF has

undertaken to prepare ToRs by end of January 2015.* A study (in 2016) of Gambling and Lotteries. ToRs will be prepared k end Oct 2015 to

enable the study to start in Jan 2016.

Further studies/research needs are expected to be identified later in 2015. Study visits to aid research may

also be needed. Support in implementing the results of the research could also possibly be required.

51. Training/capacity building: Assistance is likely to be required in 2015 on the following:

* To put in place a revenue forecasting system; to train staff on the operation of the forecasting

system; and to train staff in revenue forecast techniques,* To train staff in reviewing the effectiveness ofdouble taxation agreements;

* Business (tax) accounting - to help staff understand the accounting principles underlying

corporate Income Tax [this training might be something Zambia Institute of Chartered

Accountants (ZICA) could offer].

Requirements for the above will be prepared by 37' March 2015. Assistance on Tax Icgal drafting is

likely to be required in 2016.

52. Improve the access to information to aid tax policy formulation to help the Unit source the

material needed to support their tax policy: The support is in two parts. First the payment of a

subscription to International Bureau of Fiscal Affairs (IBFA) - the current annual subscription rate (5

users) is $21,000. In addition, the original program included the provision of laptops and software to

support improved revenue forecasting, with a budget of $18,000.

53. The Tax Policy Unit in the Ministry ofF inance is largely pre-occupied on the National Budget

from about August to December each year. Thus, the activities under this component are likely to be

concentrated in the first half of each year.

Component 7: Program Management

54. Project Management: The assessment of this component is rated as moderately satisfactory.

The objective of this component is to manage the agreed development program, provide additional

procurement and financial management support to the implementing departments and to monitor the

14

objectives and performance against the indicators. A PFM Reform Unit mainstreamed in MoF has beenestablished. The unit has coordinated all activities of PFMRP since the program's effective date. Someof its major achievements at a macro level include: (i) the week-long workshop to update work plans for2014-2015: (ii) Two Technical Committee meetings; (iii) One Joint Government Donor CommitteeMeeting; and (iv) a workshop titled 'End Poverty through PFM Reforms'. The structure and reporting

mechanism of the unit is satisfactory. The PFMRP coordinator is presently over worked with multipleresponsibilities relating to the project since several key positions in the unit are not yet mapped with fulltime stalf. . The unit faced challenges in collecting information from components sufficiently in advanceto provide background papers for Technical Committee and Joint Government Donor Committee well inadvance of the meetings. The quality of the background papers could be significantly improved. The unitworked with the World Bank and MDTF Donor representatives to develop appropriate reporting formats.During the mission, it was decided that the unit will build up on the work already done to put in placeappropriate processes and fornats (including those reflecting results matrix) by middle of January2015. The formats and the process will also be communicated to MDTF Development partners throughthe World Bank for their views and concurrence.

55. Project Coordinator: A full time senior level Project Coordinator is in place and is tasked withthe responsibility of GRZ's PFM reform strategy implementation coordination. The Project Coordinatoris expected to perform work relating to GRZ's PFM reform strategy, which also includes components thatare not supported by the MDTF. The project coordinator has depicted sincerity and requiredunderstanding to successfully implement the strategy. However, there were challenges on makingavailable a full time secretary to support the unit necessitating the coordinator to spend time on routineadministrative jobs. The issue was discussed in JGDC and it was decided that a full time secretary can beengaged fromn market using the Program Management component of PFMRP to support the unit. It wasagreed that the TORs for the Secretary would be developed and shared with the World Bank byJanuarr 9, 2015.

56. Limitations in Procurement, change management and M&E staffing of coordination unit:A fuIl time Accountant and Financial Management Specialist for the project are iin place. The position ofFull time Procurement specialist is not yet filled due to delays in process. This is seriously affecting thecapabilities of the unit and is consuming substantial amount of time of Project Coordinator. A

procurement specialist has been temporarily assigned to the project. M&E arrangements are also atpresent on a sharing resource basis. The experience on temporary time sharing arrangements forProcurement Specialist and M&E Specialist has not been found adequate. Mission recommends thatGovernment revisits the arrangements and bring in place a full time M&E Specialist and ProcurementSpecialist from Government staff to the project. Any arrangements for consultants for ProcurementSpecialist and Change Management Specialist can only be for short term (maximum of 12 months) andfor development of internal competencies. World Bank ofTers to provide training to specific individuals ofthe unit on Procurement. The advertisement for Change Management Specialist has been issued but therecruitment did not take place due to initial insufficient response. The Bank and MDTF Developmentpartners are of the view that decisions on manning the positions of PFMRP unit should be based onsustainability parameters; instead of consultants coming in on a project mode. In these circumstances, theprocess of manning position of Change Management Specialist may be deferred and in the interim, theresponsibilities can be shared amongst the existing staff.

Component 8: Other PFM interventions

57. The progress on 'Other PFM interventions' component is rated as 'moderately unsatisfactory'.This assessment need not be a cause of concern considering the early stage of project implementation.The component is expected to support emerging PFM requirements that have not been funded in theproject.

15

Project Financial Management:

58. Project Financial Management has been rated moderately satisfactory and risk rating is assessed

as moderate. Although the Project became effective on July 17, 2014, the first withdrawal application

(WA) of US$ 2 million, an estimate of 6 months expenditure from July to December 2014, was made on

September 8, 2014, No funds have been spent from the Designated Account (DA) during the first Quarter

of the Project's operations. The mission was informed that the Project had used US$189,567.56 of

Government's resources to implement some of its activities, and that these funds would be claimed from

the DA. A further US$492,285.51 has been committed and will be paid before December 31. 2014. The

current disbursement ratio is 11.8%. Mission recommends to the Project Management Unit to identify

eligible expenditure from Government's resources that are intended to be booked against the DA and

take necessary action by 9 January, 2015. Mission also emphasizes on the need for timely submission of

IFRs to World Bank.

Workshop on 'End Poverty in Zambia through PFM4 Reforms: Leveraging global knowledge in IJMIS

and TSA.

59. Ministry of Finance successfully conducted the well-attended workshop on IFMIS and TSA.

Permanent Secretary (EMF) inaugurated the workshop in the presence of Heads of missions of MDTP

Development Partners. Thirty five key officials from various ministries participated in the workshop. Ali

lashim provided global perspectives on IFMIS implementation challenges and solutions and ho" they

applied to Zambia's specific concerns. Khuram Farooq provided insights into the implementation of

IFMIS at District Treasury level. Srinivas Gurazada shared the experiences on IT security concerns on

IFMIS from India and possible road map for IT Audit for IFMIS. Africa Financial Services Volunteer

Corps team presented an overview of implementation challenges in IFMIS based on SAP. The

participants were unanimous on the need to accelerate the implementation of IFMIS to unleash its true

potential.

60. Public Disclosure of the Aide memoire: The mission and the government confirmed their

understanding and agreement to publicly disclose this aide memoire, consistent with the World Bank's

Access to Information Policy introduced on July 1, 2010.

16

Public Financial Management Reform Program (PFMRP)Agreed Actions and Accountability Matrix: December 2014 mission

No I TASK DUE OFFICER

DATES RESPONSIBLE

* Component I - Integrated Planning and Budgeting

I. Submission of TORs for consultancy to January 15, 2015 Director, Planning. strengthen the Challenge Function relating to

. - Public Investment Management

Submission of ToRs for preparing the budget January 23, 2015 Director, Planning and

and accounting manuals Director-Budgeting,Mop

3. Post IMF mission which focusses on review and March 31, 2015 Director, Planningdrafting of multiple legislations (Planning &Budgeting, Procurement etc), update WB on theneed for funding / technical support fromPFMRP through engagement of legal consultant

Component 2 - Strengthening IFMIS and Cash Management

4. Completion of all IFMIS related preparatory June 30, 2015 IFMIS Projectwork for facilitating 2016 budget preparation in Manager and Budget

SAP budget module Director, MoF

5.6. Setting up of a special working group to ensure January 31, 2015 PS-EMFthat there is complementarity among variouslegislative reviews currently under way

7. Preparation of ToRs for hiring a short term January 15, 2015 Project Coordinator,consultant to prepare the organization structure PFMRU

and job descriptions of the IFMIS team in theTleXV SCt-LIp

8. Ro[ll-ct IFMIS at 8 additional sites by January, January 30, 2015 IFMIS Project

2015 and remaining 7 sites by June 2015 and June 30, Manager and2015 ACCOUntant General

9. - i naliation of the contract for the IFMIS January 30, 2015 Accountant General

Advisor

10. TSA pilot to go live in at least one pilot site January 30. 2015 Accountant General

I 1. Submission of TORs for hiring a consulting fin JanUary 30. 2015 Accountant Generalto carr out control assessment of IFMIS

12. 1F inalization of the Cash Management Manual January 30, 2015 Accountant General

13. Publication of the Budget execution Reports for Immediate Accountant General

the first three quarters of 2014

14. Publication of the BER for the last quarter of JanUary 30, 2015 ACCOUntant General

2014

17

No TASK DUE OFFICER

DATES RESPONSIBLE

IS. Submission of the TORs for hiring a senior January 9.2015 1 Manager- CCSD and

network specialist, and a basis consultant Project Coordinator

16. Submission of TORs for hiring a firm to carry January 9. 2015 Manager - CCSD and

out Business Continuity Planning (BCP) for the Project Coordinator

IFMIS i

17. Submission of Detailed proposal for training of January 30, 2015 Manager - CCSD and

staff in critical technical skills Project Coordinator

18. Submission of detailed proposal for January 30, 2015 Manager - CCSD and

refurbishment of office space for 8-10 rooms in Project Coordinator

CCSD

Component 3: Public Procurement Reforms

19. Signing of contract for eProcurement January 30, 2015 ZPPA

20. Substantial completion of ZPPA restructuring June 30. 2015 ZPPA

21. Review and amendment of Procurement law and December 31, ZPPA

regulations 2015

22. Issue invitation for EOl & RFP for development April 30. 2015 ZPPA

of SBD and user manual for framework

agreements

23. Commence publication of contract awards and January 30. 2015 ZPPA

procurement plans

24. Conducting Capacity Assessments and June 30. 2015 ZPPA

Procurement Audits of selected MPSAs

25. TORs for selection of consultants for January 3 1, 2015 ZIPS

development of curriculum for ZIPS GraduateDiploma program

26. Finalisation of recruitment of ZIPS staff February 28, ZIPS and PFMRP2015 Coordination Unit

Component 4 - Internal Audit

27. Remaining proposed ToRs for component January 9. 2015 Component Manageractivities to be sent to Bank for comment

28. Component activity and inputs costings January 9, 2015 Component Managerspreadsheet to be sent to Bank for information

29. Activity (viii) ACL contract - as discussed with January 30, 2015 Controller. IAD

WB, a fresh contract may be processed

30. Activity (i) - proposal for HA Zambia Chapter to January 9, 2015 TTl. Bank

be assisted and for regulations to support

internal auditors' registration though HA

membership to be considered by PFMRP

18

No TASK DUE OFFICER

DATES RESPONSIBLE

principals

31. Activity (i) - proposal for HA Zambia Chapter to End March 2015 Chair, HA Zambia

be assisted and for regulations to support Chapter Board

internal auditors' registration though IlA

membership to be discussed by [[A Chapter

Board with MoF and progressed through MoF to

JGDC March 2015 meeting

32. Activity (ii) - Controller IAD to discuss with End Feb 2015 Controller, 1AD

Auditor General the possibility of joint action

for sensitization of IAD and OAG stakeholders -

to be coordinated through project

33. Activity (iv) - Decision whether the End Feb 2015 Controller4 lAD

establishment of a department for risk

management would be deleted (or varied) fromthe Component

Component 5: Increasing effectiveness of Revenue Administration

34. 7 Request received to reallocate funds between January 9, 2015 PS EMF and CC, ZRA

activities

35 Implementation of mining sector monitorincg March 31, 2015 Commissioner

mechanism - signing of contract for development CuStoms, ZRA

of the production and export monitoring modules

36. System for monitoring balance of payments - March 31, 2015 Commissioner

signing of contract CuStoms, ZRA

37. Transit tracking system - MoU completed with March 31, 2015 Commissioner

COMESA Customs, ZRA

38. Capacity building programme for MTO staff January 9, 2015 Commissioner DOMT,

(particularly in audit staff skills, policies and ZRA

procedures and on audit sector notes and their

use: and on debt management staff skills, policies

and procedures) - TORs finalised

39 Tools and equipment for specialist investigations January 9, 2015 Director Investigations,

and internal affairs- ZRA

Business case completed

40. :Tools and equipment for specialist investigations March 31, 2015 Director Investigations,

and internal affairs - ZRA

Procurement processes for investigative tools and

case management completed

41. Bulk analysis system - contract signed February 28, Director Investigations,2015 ZRA

42. Electronic Records Management System - January 31, 2015 Project Manager,

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No TASK DUE OFFICER

DATES RESPONSIBLE

i Benefits documented ERMS, ZRA

43. Electronic Records Management System - March 31. 2015 CG. ZRA. Procurement process commenced

Component 6 - Support to the Tax Policy Unit, MoF

44. TORs finalized for METR study January 31, 2015 Head. Tax Policy Unit,MoF

45. TORs finalized for Excise Studies study JanUary 31, 2015 - lead. Tax Policy Unit.MoF

46. Training events for 2015 finalized March 31, 2015 Head. Tax Policy UnitMoF

47. Revenue forecasting requirements Finalized March 31. 2015 Ilead. Tax Policx Unit,MoF

48. IBFD Subscription taken out March 31, 2015 1lead, Tax Policy Unit,MoF

Component 7: Program Management

49. ToRs for Secretary to PFMRP Coordination unit January 15, 2015 PFMRP Coordinationunit

20