Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 43369-CM

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 9.3 MILLION (US$15 MILLION EQUIVALENT)

TO THE

REPUBLIC OF CAMEROON

FOR A

TRANSPARENCY AND ACCOUNTABILITY CAPACITY DEVELOPMENT PROJECT

M a y 27,2008

Public Sector Reform & Capacity Building Unit (AFTPR) Central Africa 1 (AFCC1)

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without Wor ld Bank authorization.

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CURRENCY EQUIVALENTS (Exchange Rate Effective as o f May 1,2008)

CurrencyUnit = CFAF CFAF450 = US$1

US$1.62976 = SDR 1

AfDB ANTILOPE

ANlF APL APMs ARMP BEAC CDBF CEMAC

CFAF CFAA CPAR CPPR CPlA CONAC CONSUPE CQ CTS

DA DGB DgMarket DGT DHR DRFi DPL EC ElTl ESW FM FMlS FY GDP GoC GPN HlPC HRM ICB ICT IDA IMF INTOSAI INS IFRs ISN

FISCAL YEAR January 1 - December 3 1

Abbreviations and Acronyms African Development Bank Application Nationale pour le Traitemenf lnfomatique et Logisfique des Personnels de /'€fat (Computerized System of Administrative and Logistics Management for State Personnel) Agence Nationale d'lnvestigafions Financieres (Financial Intelligence Agency) Adaptable Loan Program Administrative Procedure Manuals Agence de Regulation des Marches Publics (Regulatory Agency for Public Procurement) Banque des Hats dlfrique Centrale (Bank of Central African States) Conseil de Discipline Budgefaires et Financidres (Budgetary and Financial Discipline Council) Communaufe Economique et Monetaire d'Afrique Centrale (Economic and Monetary Community of Central Africa) Central African Franc (Franc de la Cooperation Financiere en Afrique Centrale) Country Financial Accountability Assessment Country Procurement Assessment Review Country Portfolio Performance Review Country Policy and Institutional Assessment t Commission Nationale Anti -Corruption (National Anti - Corruption Commission) Contrble Superieur de /'€tat [State Superior Audit Institution) Selection Based on Consultants' Qualifications Cornit6 Technique de Suivi des Programmes Economiques (Technical Committee for Monitoring Implementation of Economic Programs) Designated Account (DA) Direction Generale du Budget (Budget Directorate) Development Gateway Market Direction Gbnerale du Trhsor (Treasury Directorate) Director of HR Direction des Ressources Financidres Development Policy Lending European Commission Extractive Industries Transparency Initiative Economic and Sector Work Financial Management Financial Management Information System Fiscal Year Gross Domestic Product Government of Cameroon General Procurement Notice Heavily Indebted Poor Countries Human Resources Management International Competitive Bidding Information and Communication Technology International Development Association International Monetary Fund International Organization of Supreme Audit Institutions lnsfitut National de la Sfatisfique (National Institute of Statistics) Interim Financial Reports Interim Strategy Note

JSA JSAN LC s M&E MDAs MDRl MINEDUC MI NEPAT

MlNFl MINFOPRA

MDGs MTEF NCB NSBD OECD-DAC OLC PAD PDO PEM PEMFAR PER PETS PFM PFMSC PFMTS PFMDSC PFMDTS PHRD PNG POM PPF PRSC PRS PRSP QBS QCBS RDPC SBDs SFB SIL SlGEFl SlGlPES

SNH SOEs SWAP TACD TORS UNDB online

Joint Staff Assessment Joint Staff Assessment Note FOR OFFICIAL USE ONLY Least-Cost Selection Monitoring and Evaluation MinistrieslDepartmentslAgencies Multilateral Debt Relief Initiative Ministere de Education (Ministry of Education) Minisfere de I'Economie, de la Planification et de l'Am6nagement du Tem'foire (Ministry of Economic Affairs, Programming and Regional Development) Minisfere des Finances (Ministry of Finance) Minisfere de la Fonction Publique et des Reformes Administratives (Ministry of Public Service and Administrative Reforms) Millennium Development Goals Medium Term Expenditure Framework National Competitive Bidding National Standard Bidding Documents Organization of Economic Co-operation and Development-Development Assistance Committee () Observatoire de Lutte Contre la Corruption (Anticorruption Observatory) Project Appraisal Document Project Development Objective Public Expenditure Management Public Expenditure Management and Financial Accountability Review Public Expenditure Review Public Expenditures Tracking Survey Public Financial Management Public Financial Management Steering Committee Public Financial Management Technical Secretariat Public Financial Management Dialogue Steering Committee Public Financial Management Dialogue Technical Secretariat Policy and Human Resources Development Programme National de Gouvernance (National Governance Program) Project Operational Manual Project Preparation Facility Poverty Reduction Support Credit Poverty Reduction Strategy Poverty Reduction Strategy Paper Quality Based Selection Quality- and Cost-Based Selection Rassemblement Democratique du Peuple Camerounais (Cameroon People Democratic Movement) Bank's Standard Bidding Documents Selection under a Fixed Budget Sector Investment Loan Systbme lntbgr.4 de Gestion des Finances (Integrated Financial Management System ) Sysfeme lnformatique de Gestion lnthgree des Personnels de /Waf (Computerized System of Integrated Management of State Personnel) Societe Nationale des Hydrocarbures (National Oil Company) Statement of Expenditures Sector Wide Approach Program (SWAP) Transparency and Accountability Capacity Development Terms of Reference United Nations Development Business online

Vice President: Country Managermirector:

Task Team Leader:

Obiageli K. Ezekwesili, AFRVP Mary A. Barton-Dock, AFCC 1

Mamadou L. Deme, AFTPR Sector Manager: Anand Rajaram, AFTPR

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.

CAMEROON Transparency and Accountability Capacity Development Project

CONTENTS

A . STRATEGIC CONTEXT AND RATIONALE ........................................................................................................ 1 Country and Sector Issues ................................................................................................... 1 1 .

2 . 3 .

Rationale for Bank Involvement ......................................................................................... 4

Higher Leve l Objectives to Which the Project Contributes ................................................ 4

PROJECT DESCRIPTION ................................................................................................................................... 4 B . 1 . 2 . 3 . 4 . 5 . Alternatives Considered and Reasons for Rejection 13

Lending Instrument ............................................................................................................. 4 Project Development Objective and Key Indicators ........................................................... 5

Lessons Learned and Reflected in Project Design ............................................................ 12

C . IMPLEMENTATION ........................................................................................................................................... 13 1. Partnership Arrangements ................................................................................................. 13

Institutional and implementation arrangements. ............................................................... 14

Project Components ............................................................................................................ 5

.........................................................

2 . 3 . M&E o f Project OutcomesResults 16

4 . Sustainablllty 17

5 . 6 .

................................................................................... . . . .....................................................................................................................

Critical R isks and Possible Controversial Aspects ........................................................... 17

Loadcredit Conditions and Covenants ............................................................................. 18

APPRAISAL SUM MARY. .................................................................................................................................. 19 D . 1 . 2 . 3 . 4 . 5 . 6 . 7 .

Economic and Financial Analyses .................................................................................... 19

Fiduciary ........................................................................................................................... 20

Social ................................................................................................................................. 20 Environment.. .................................................................................................................... 20 Safeguard policies ............................................................................................................. 20

Policy Exceptions and Readiness ...................................................................................... 21

Technical ........................................................................................................................... 19

Annex 1 : Country and Sector Background ................................................................................... 22 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies .......................... 30 Annex 3: Results Framework and Monitoring .............................................................................. 32 Annex 4: Detailed Project Description ......................................................................................... 37 Annex 5: Project Costs .................................................................................................................. 49 Annex 6: Implementation Arrangements ...................................................................................... 50 Annex 7: FM and Disbursement Arrangements ........................................................................... 53

Annex 9: Economic and Financial Analysis ................................................................................. 70 Annex 10: Safeguard Policy Issues ............................................................................................... 72 Annex 1 1 : Project Preparation and Supervision ........................................................................... 73 Annex 12: Documents in the Project File ..................................................................................... 75 Annex 13: Statement o f Loans and Credits .................................................................................. 76

Annex 15: Map ............................................................................................................................. 79

Annex 8: Procurement Arrangements ........................................................................................... 62

Annex 14: Country at a Glance ..................................................................................................... 77

Box 1: Comite' Mult i Bailleur and the PFM platform in Cameroon ............................................. 14 Box 2: The PNG-Strategic objectives and priority action plan .................................................. 26 Box 3: Progress on PFM ............................................................................................................... 27

Table 1 : Cameroon recent macroeconomic performances ........................................................... 2 Table 2: Existing or fbture donors' intervention in support o f P F M reforms in Cameroon ........ 11

Table 4: Arrangements for Results Monitoring ........................................................................... 34 Table 5: FM Risks Rating Summary ............................................................................................ 54 Table 6: FM Action Plan ............................................................................................................... 55 Table 7: Procurement capacity building action plan ..................................................................... 65

Table 3 : Cameroon recent macroeconomic performances .......................................................... 22

Map IBRD 33382

CAMEROON

Transparency and Accountability Capacity Development Project

Appraisal Document

Africa Regional Office AFTPR

Date: M a y 27,2008 Country Director: Mary Barton-Dock Sector(s): Public Sector Management (100 percent) Sector Manager: h a n d Rajaram Theme(s): Public Finance Management

BF-Public Financial Management BI-Institutional Development

Team Leader: Mamadou Lamarane Deme

Project ID: PO84160 Lending Instrument: Technical Assistance/Investment Loan

[ ]Loan [XI Credit [] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Amount (US$m): US$15.0 Proposed Terms (IDA): Standard IDA terms with a 40-year maturity including a 10-year grace period Commitment fee: Maximum of !h o f 1 percent

Project Financing Data

Service charge: Maximum of 7 4 o f 1 percent

Local Foreign Total Borrower IDA Other Donors

Grand Total

Estimated Disbursements ( Bank FY/US$lS.Om): 1

N o t available N o t available N o t available 6.4 8.6 15.0

N o t available N o t available N o t available 6.4 8.6 15.0

FY09 Annual 1.80

FYlO F Y l l FY12 FY13 3.20 4.00 3.50 2.50

Project implementation period: January 2009 - December 3 1,20 12 Expected effectiveness date: December 3 1,2008 Expected closing date: December 31,2012

Does the project depart from the CAS in content or other significant respects? Does the project require any exceptions from Bank policies? Have these been approved by Bank management?

[ - ] Y E S [XI NO [ - I Y E S [XI NO [-I Y E S [X I NO

The Project Development Objective (PDO) i s to contribute (i) to enhance transparency and efficiency in the P F M o f Cameroon and (ii) to strengthen accountability in the use o f public resource in Cameroon. The project will play a key role in Cameroon’s acceleration o f the pace toward a more transparent and orderly P F M and, in addition, more efficient public service delivery. Project description:

I s approval for any policy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Does the project meet the Regional criteria for readiness for implementation?

The proposed PDO will be achieved through the following four project components which were identified during the appraisal mission and which reflect government priorities-for an estimated IDA financing o f US$l5.0 mi l l ion (including an advance Project Preparation Facility [PPF] o f US$0.7 mill ion, and contingency fund o f $0.9 million):

[ - ] Y E S [XI NO [ X I Y E S [ - I NO [X ] Y E S 1 1 NO

. Component 1 : Improving Budget Management including Procurement (US$4.1M); .

. Component 3 : Strengthening External Oversight and M&E (US$l.9M) . Component 2: Integration and development o f the F M I S including the HRM and Payroll Management systems (US$5.9M);

Component 4: Support to the Project Focal Point for PFM reforms coordination (US$1.5M)

Which safeguard policies are triggered, if any? None. Significant, non-standard conditions, if any, for:

Board presentation: None Credit effectiveness:

Setting up o f the project institutional framework through establishment o f the Public Financial Management Steering Committee (PFMSC) and the Public Financial Management Technical Secretariat (PFMTS) within the Ministry o f Finance, in a form and substance that i s satisfactory to IDA with required functions and resources and with clear mandate, governing arrangements, and responsibilities; Recruitment o f a procurement specialist and a Financial Management specialist in line with Bank procurement guidelines and procedures; Appointment o f qualified and experienced staff for PFMTS (coordinator, three national experts responsible respectively for Budget Management reforms, I C T and Capacity Building) in a form and substance satisfactory to IDA; Adoption o f the Project Operational Manual (POM), including two annexes relating to Financial and Accounting Procedures, and Procurement, in line with IDA rules and satisfactory to IDA. And installation o f an integrated accounting system for the project, satisfactory to IDA.

Covenants applicable to project implementation: Adoption, by November 30 o f each year, o f the PFMRAP Annual Programs and related budget, procurement plan and monitoring and evaluation plan satisfactory to the Association. Appropriation o f the amounts o f the PFMRAP Annual Programs not financed by any donor in i t s draft annual Budget and ensure the availability o f such annual budgeted amount for the activities o f the PFMRAP. Finalization o f contractual arrangements for the establishment o f a countrywide network system connecting

al l provinces, and al l ministerial departments before the initiation o f the procurement process for the I C T system. Establishment o f core I C T teams within the beneficiary organizations with clear and specific incentive plans before the initiation o f the procurement process for the I C T system. Development, in consultation with the Bank staff, and adoption o f adequate legislative and regulatory framework regarding HRM and Payroll management (institutional and organizational framework, requirements for the use and access o f central database by l ine ministries, collection o f records, payroll checks and controls, etc.) before the initiation o f the new HRM/Payroll systems. Recruitment o f professional auditors’ staff, with experience and qualifications satisfactory to the Bank, for the Treasury internal audit office before initiation o f any action in the project activity # 1.4.3 “Assistance to the Treasury internal audit unit” featured in the project activity plan. Selection o f the project external auditor four (4) months after project effectiveness, and, Recruitment o f an assistant accountant with qualification and experience satisfactory to the Bank, to help in financial management, after his specific training in this area.

0

0

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A. STRATEGIC CONTEXT AND RATIONALE

1. Country and Sector Issues

Social, political, and macroeconomic context

1. Cameroon i s a country characterized by diversity. In 1961, Cameroon under French mandate and the southern part o f Cameroon under British mandate merged to form the current country, resulting in two administrative systems and two official languages (French and English). The current total population i s estimated at 18.5 mi l l ion people. Poverty and income inequality are s t i l l very high, with more than 40 percent o f the population living below the poverty line.

2. Cameroon has enjoyed relative stability in a region prone to turbulence. As a result, Cameroon plays a leadership role in the Central Afr ica region. However, i t s democratic institutions and process remain very weak and require significant strengthening. This i s particularly crucial given that Cameroon i s a key member o f the Economic and Monetary Community o f Central Afr ica ( in French, Communautd Economique et Mondtaire d ’Afrique Centrale [CEMACI), accounting for about ha l f o f i t s population and wealth.’

3. The revival o f the economy following major reforms in the mid-nineties-including the devaluation o f the local currency in 1994-appears to be short-lived as economic growth i s faltering (See Table 1 below). Real GDP growth rate has decelerated recently with an average annual rate o f less than 3.0 percent in the period 2004-2007, down from 4.3 percent in the period 2000-2003. The non-oil sector has been performing poor ly as a result o f several factors, including erosion in external competitiveness l inked to the appreciation o f the E u r L t o which the local currency i s pegged-against the US dollar, the non-conducive business environment evidenced by Cameroon’s modest rank (155th out o f 170 countries surveyed) in the Bank’s Doing Business 20082 report, poor infrastructures, and l o w access to financing. Cameroon’s attainment o f i t s Heavily Indebted Poor Countries (HIPC) completion point in April 2006 has yet to translate into any long-awaited development impact and results because o f the persistent poor governance situation reflected in i t s flawed public sector management.

Governance and anti-corruption efforts

4. Sustaining and accelerating improvements in governance and fighting corruption represent the country’s greatest development challenges. T o address these challenges, Cameroon has undertaken pol icy and institutional reforms over the past few years which have led to some progress in the following areas: (i) budget reporting and transparency; (ii) adherence to and implementation o f the Extractive Industries Transparency Initiative (EITI); (iii) implementation o f public procurement reforms, including: adoption o f a new law, establishment o f a regulatory agency, and application o f sanctions for violations o f procurement rules; increased efforts to reduce corruption, including the dismissal and arrest o f several high-level public officials suspected o f corruption; (iv) establishment o f an external audit body, the Chamber o f Accounts (in French, Chambre des Comptes); and (v) the adoption o f a revised National Governance Program ( in French, Programme National de Gouvernance [PNGI) in November 2005 that led to the approval o f several laws, that provide for the following: asset declaration, the creation o f an anti-corruption commission, and setting up o f the Constitutional Council.

’ Other CEMAC members include the Central African Republic, Chad, the Republic o f Congo, Equatorial Guinea, and Gabon. Doing Business 2008. Washington, D.C.: The World Bank.

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Table 1 : Cameroon recent macroeconomic performances.

Cameroon: Selected Macroeconomic IRdlCputorS, 2006489

3 2 4 2 4.9 4 a 2.9 4.4 5.2 5.3 5 1 118 1.8 2 0

61.6 50.0 54.8 51.5 16.8 ZO 1 21.5 22.8

79.3 177 37.9 176 73 .9 13.6 13.7 139 14.5 16.8 16.8 16.9 10.7 11.4 113 11.3 2.9 4.9 5.1 5.1 4 7 1 0 1.0 0 7

2 7 3.4 1 5

62.6 18 4

18 6 13.9 16.3 11.6

4.4 4 6 4.5 4.9 3.3 2 0

6.5.0 59.3 19.4 20 0

18.4 18 5 14.2 144 17.3 17.9 11.7 11.8 5.2 5.7 1.1 0.5

4 2 2 4

-0.6 - 3 . 0 0.5 0 . 7 -1 0 2.1 - t 0 3 s 1 9 1 5 0.0 -0.2 1.8 1.0 0 3

4.8 -5.8 -2.6 -3.1 -3.6 3.6 3.8 2 0 4.0 4 0 5.4 5.9 5.1 5.4 5.9 5.5 5.9 9.6 3.7 3.3 8.7 e o 8 5 3.9 4 9

5. Cameroon s t i l l has a long way to go to create an environment o f strong governance and reduced corruption that i s conducive to economic development. Although the country's Transparency International corruption rating rose from last place in the late 1990s to 138th o f 163 countries surveyed in 2006, corruption remains a serious problem. Cameroon's Country Policy and Institutional Assessment (CPIA) rating o f 3.3 for 2006 i s close to the Sub-Saharan Africa average o f 3.2, but ratings for transparency, accountability, and corruption in the public sector as well as on property rights and rule- based government are a mere 2.5. These ratings are consistent with the World Bank Institute (WI) Worldwide Governance Indicators for Camer~on.~ The Government o f Cameroon (GoC) recognizes this challenge and has requested further support from international development partners to improve governance and strengthen the fight against corruption by fostering public sector management reforms specifically in the Public Financial Management (PFM) sector.

Public Sector Management Issues

6. Many challenges are still ahead for Cameroon to improve the PFM efficiency and transparency and therefore enhance economic growth prospects and reduce poverty. As pointed out by the 2006 PEMFAR4, the growth prospects o f the Cameroonian economy and i ts ability to deliver on the poverty reduction objectives o f the Poverty Reduction Strategy Paper (PRSP) will be substantially enhanced if Cameroon makes progress on i t s Poverty Reduction Strategy (PRS) priorities o f improving governance, strengthening human capital, rebuilding infrastructure, improving the climate for private sector investment, and promoting regional integration.

The WBI 's Worldwide Governance Indicators i s a composite governance indicator that includes the Transparency International

Public Expenditure Management and Financial Accountability Review. Report No. 38179-CM, 2006 The World Bank, corruption rating and the CPIA rating.

Washington, D.C.

2

7. The public sector has a major role to play in these areas and the budget i s a key instrument for public actions in fostering progress. The recent Public Expenditure and Financial Accountability Report’, (PEFA), released in January 2008 stressed several weaknesses in the following six core dimensions o f PFM performance.

Budget credibility remains questionable because gaps between actual out-turns and originally budgeted expenditures continue to be significant (20 percent less in 2004 and 2005) even though actual exceed projected revenues (103 percent in 2005). Moreover, the stock o f arrears was not reduced over the last 2 years, mirroring difficulties in controlling the budget. Comprehensiveness and transparency i s s t i l l l imited since ha l f o f the budget operations (mostly donors’ funded projects) are not properly covered, transfers to decentralized entities are not reported, and budget reports made public are either incomplete or unreliable. Policy-based budgeting i s weak though formal budget preparation based o n Medium Term Expenditure Framework (MTEF) and budget calendar are applied. L ine ministries’ participation in the budget process i s limited. Sector strategies do not guide the resources allocation process and there i s disconnect between capital and recurrent budget-the latter ignoring the recurrent costs stemming from the former. Whi le budget execution is more or less predictable, arrangements for controls of budget execution and stewardship in the use o f funds are not fully effective. Controls over payroll, which represents more than 40 percent o f the total domestically-financed spending, are weakened by the actual situation o f the HR and payroll management systems, raising looming concerns over the reliability and security o f the current wage bill, salary arrears and size o f the personnel. Complex and fragmented nature o f the expenditure chain translates into belated spending procedures, excessive use o f ad hoc regulations, and exceptional procedures-such as cash budgeting and advance payments-that tend to distort the processes. Procurement controls system does not prevent improper use o f sole source service and contracts splitting. Accounting, recording, and reporting are among the weakest part o f the PFM due to obsolescence and partial integration o f the existing Financial Management Information System (FMIS). Whi le the Treasury balance and budget settlement l aw (in French, Loi de R6glement)-which represent the budget and state financial reports-are regularly produced, their quality and reliability remain below international standards. External scrutiny and audit i s formally organized around the Chamber o f Accounts and the National Assembly Finance and Budget Committee (NAFBC) but their independence and efficacy are s t i l l questionable since they lack capacity and are sti l l not fully operational.

8. Given that such a broad public sector development program cannot be covered by a specific donor or GoC intervention alone, there i s a consensus over a joint-working agenda in line with the Paris Declaration objective, to have a broad review o f PFM institutions, policy and performance, and to develop a shared action plan to foster fiscal discipline, consolidate strategic allocation o f resources and increase operational efficiency and delivery o f service.

Public Expenditure and Financial Accountability Report. January 2008. Commission EuropCenne, Cameroun, YaoundB.

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2. Rationale for Bank Involvement

9. The rationale for Bank involvement i s to contribute to the implementation o f the three pillars o f the 2006 Interim Strategy Note6 (ISN): (i) better service delivery (pillar #2), (ii) good governance and anti-corruption (pillar #1), and (iii) enhanced cooperation between donors (pillar #3) which are key PRSP development challenges for Cameroon to reach the Mi l lennium Development Goals (MDGs). As defined in the 2006 ISN, which proposes a support strategy in FY07-08, the Bank intends to focus i t s assistance in: (i) addressing governance and corruption issues; (ii) managing for results; and (iii) strengthening partnerships, alignment, and harmonization. The proposed operation would assist GoC lay solid foundations for a transition to increased budgetary assistance, including from the Bank, under Poverty Reduction Strategy Credits (PRSCs).

10. In addition, the Bank’s experience shows that strengthening P F M i s critical to building institutions that can sustain good governance and positively affect long-term development prospects. Concurrently, the Bank can be instrumental in helping the GoC develop and maintain stronger demand for good governance through interaction with parliamentarians, c iv i l servants, and c iv i l society organizations. Finally, discussions with GoC have confirmed the need for the Bank financial and technical support given i t s expertise in these areas.

3. Higher Level Objectives to Which the Project Contributes

11. The proposed project would provide support to PRSP priorities, by providing continued support to GoC towards poverty reduction, and preparing the country for a programmatic lending approach under PRSCs. The goals set for Cameroon’s PRS and social sector programs as wel l as infrastructure and capacity building cannot be achieved without operational efficiency in the PFM. The proposed Transparency and Accountability Capacity Development (TACD) project i s intended to help the country overcome some o f the most compelling PFM shortcomings in order to create appropriate environment for effective implementation o f PRS and other development programs.

B. PROJECT DESCRIPTION

1. Lending Instrument

12. The T A C D project i s being designed as a sector specific investment loan (SIL). An Adaptable Program Loan (APL) would have been desirable with respect to incremental institutional and behavioral changes envisaged, and to the nature o f the envisioned operation, which will be a contribution to the PFM sector program where time i s required to build consensus and convince diverse actors o f the benefits o f polit ically and economically diff icult reforms. However, since there i s not yet an agreed-upon PFM program with shared priorities among stakeholders, i t i s diff icult to consider an APL with adequate phasing and triggers. Therefore, an S I L appears to be the most suitable lending instrument to consolidate and further ongoing technical reforms, while preparing the transition to an increased programmatic-lending approach, which could be envisaged under PRSCs. The project would be implemented over a period o f four years (2009-2012) to support the future government PFM Reform Act ion Plan (PFMRAP) and i t would be financed through an International Development Association (IDA) credit o f US$15 mi l l ion equivalent.

Interim Strategy Note for the Republic o f Cameroon, FY07-08, Report # 37897-CM, November 9,2006 The World Bank, Washington D C

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2. Project Development Objective and Key Indicators

13. The Project Development Objective (PDO) i s to contribute (i) to enhance transparency and efficiency in PFM, and (ii) to strengthen accountability in the use o f public resource. The project will p lay a key role in Cameroon acceleration o f the pace toward a more transparent and orderly PFM and, in addition, more efficient public service delivery.

14. T o monitor the project’s impact and outcomes, eleven (11) indicators have been chosen with emphasis o n indicators f rom the PEFA’ standard wherever possible (see also Section C.3 below o n Monitoring and Evaluation [M&E] Arrangements).

15. The progress toward more transparency and efficiency in PFM will be monitored through one key indicator derived from the 2008 PEFA Report (Indicator PI-23 o f PEFA). This indicator on availability o f information o n resources received by service delivery units (PI-23) which score i s D in the PEFA Report should gradually increase to B level in 2012. I t will help measure the impact o f project activities in GoC’s abil ity to effectively implement the budget supporting the service delivery in two critical priority sectors, Health and Education where I N S will survey annually budgeted resources received by schools and health centers, with funding from the project.

16. Accountability in the use o f public resources strengthening will be measured through one indicator (Public access to key fiscal information-PEFA PI-10) also drawn from the PEFA set. It should progress f rom the current B score to A by end o f the project, in 2012. This indicator will capture how the project, through i t s support to publication o f fiscal data and reports by the National Assembly and the MINFI, i s influencing the extent to which the general public and interest groups have access to relevant and quality fiscal plans, position, and performance.

17. Project primary target beneficiaries will be crosscutting government agencies involved in financial and human resources management (HRM). Ultimate recipients o f project outcomes will be the users o f the Cameroon public service who would benefit f rom greater transparency, efficiency, and accountability in the management o f core public resources.

3. Project Components

18. The broader long-term reform o f Cameroon’s public finances i s so far camed out by the PFM Dialogue Steering Committee (PFMDSC) and i t s Technical Secretariat (PFMDTS), which has development partner support through the Multi-Donors Committee, (in French, Comite Multi Bailleurs [CMB]) (see box 1). PFMDTS i s overseeing development and implementation o f a P F M Reform Act ion Plan (PFMRAP). Seven thematic working groups, which are headed by respective administrative unit chiefs, were commissioned by PFMDTS to finalize PFM assessments and prepare action plans in the following areas: (i) Institutional and legal PFM environment; (ii) Budget planning, (iii) Budget execution, (iv) Debt and cash management, (v) C iv i l service and payroll, (vi) Tax reforms, and (vii) Judicial and administrative controls. Whi le the diagnostic work has registered some delays, GoC i s expected to finalize PFMRAP and implementation strategy by the end o f 2008. These documents will help GoC clarify i t s strategy on PFM reforms and spell out implementation arrangements, especially in the area o f donor coordination.

’ Public Financial Management Performance Measurement Framework. June 2005. PEFA Secretariat, World Bank, Washington D.C.

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19. Within this context o f multi-donor support and selectivity (see Table 2 below for summary o f donors’ intervention), four criteria were used to guide the choice o f IDA-proposed project components: (i) activities that consolidate and deepen achievements in public expenditure management and financial accountability accomplished during the recent years (new budget legal fiamework, Procurement); (ii) crosscutting issues o f PFMRAP (FMIS, Payroll, and Oversight and Controls) in which IDA has a competitive advantage; and (iii) coordination and M&E activities, in which building capacity in reform management and leadership i s critical for the country. Furthermore, results o f the January 2008 PEFA report and consideration for the other donors’ intervention played a role in the selection o f components.

20. The proposed PDO will be achieved through the following four project components which were identified during the appraisal mission and which reflect government priorities-for an estimated IDA financing o f US$l5.0 mill ion (including an advance Project Preparation Facility [PPF] o f US$0.7 million, and contingency fund o f $0.9 million): . .

. Component 3: Strengthening External Oversight and M&E (US$1.9M) . Component 1 : Improving Budget Management including Procurement (US$4. IM); Component 2: Integration and development o f the FMIS including the HRM and Payroll Management systems (US$5,9M);

Component 4: Support to the Project Focal Point for PFM reforms coordination (US$1.5M)

Component l-Improving Budget Management including Procurement (US$4.1M)

21. In line with the 2006 PEMFAR, and January 2008 PEFA reports recommendations, the objective o f this component would be to support the implementation and deepening o f the ongoing budget management reforms following the adoption o f the new Organic Law (adopted in December 2007) in a bid to improve and accelerate budget execution and to enhance budget controls.

22. Activities envisaped under the TACD proiect. In this component, focus will be mostly on giving support to revision o f processes, methods and regulations for budget programming, budget execution including procurement, budget monitoring and controls, and Treasury accounting in the context o f the new budget Organic Law, in order to primarily address deficiencies in capital budget management and limitation in the execution o f investment projects. Since the European Commission (EC), Germany, the African Development Bank (AfDB), and another IDA project (PRSP Trust Fund) are supporting the development o f a central MTEF and the extension o f the sector MTEFs to other ministries, the project therefore will not provide assistance to the MTEF work. Proposed activities under this component will include:

Assisting GoC implement the changes and reforms introduced by the new Organic Law and by the Procurement Code (adopted in 2004) through technical assistance, training, and provision of goods and equipment; Streamlining the expenditure chain as well as the public contract execution chain, including the implementation o f current regulations that govern multi-annual commitments authorization and annual payment appropriations for capital spending; Strengthening line ministries’ capacity for project identification, costing and planning through the design and implementation o f project preparation procedures and tools (Procedure manuals and guidelines, database, legal framework, etc.) and training on project cycle; Modernizing the Treasury through rationalization o f i t s current organization, revision o f the accounting chart, and professional development o f State accountants and Treasury internal auditors.

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23. Furthermore, in a bid to accelerate capital budget execution, the proposed project will focus o n improving the performance o f procurement system and procedure. This would be achieved mainly through implementation o f the action plan derived from the 2005 Country Procurement Assessment Review' (CPAR), and capacity building. Specific activities will include:

Contribution to the set-up o f a public contracts planning system by improving the capacity of 50 ministries and public bodies, to plan their procurement operations. This exercise i s expected to take place within the entire administration; and Assistance to 7 spending ministries and public bodies that consume most o f the public expenditure (Health, Education, Agriculture, Public Works, Finance, and the Douala and YaoundC Municipalities) to improve the efficiency and transparency o f their procurement units (optimize suppliers selection methods, optimize the preparation o f tender bids and requests for submissions, evaluation o f bids, negotiations, preparation o f contracts and the follow-up o f contract execution).

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24. The main beneficiaries o f this assistance will be the units responsible for budget planning and execution and procurement in the Ministry o f Finance (MINFI), the Ministry o f Economic Affairs, Programming and Regional Development (MINEPAT) and in line ministries: Budget Directorate, (in French, Direction Gknkrale du Budget [DGB]); Treasury Directorate (in French, Direction Generale du Tresor [DGT); Capital expenditures Directorate (in French, Direction de I 'Investissement); Financial Resources Management Directorate (in French, Direction des Aflaires FinanciBres, DRFq; and Planning Directorates (in French, Directions de la PlaniJcation); as wel l as the Douala and YaoundC Municipalities; and the Regulatory Agency for Public Procurement (in French, Agence de Regulation des Marchb Publics [ARMP]).

25. Expected outputs: By project-end, it i s expected that this component will provide GoC authorities with the minimum tools for faster and reliable budget execution, and a procurement system which ensures competition and efficiency in the use o f public resources. Progress in this area will be measured through gradual improvements made in the institutional framework to manage the budget with the following indicators: (i) Legal and regulatory texts to enforce the new budget l aw are signed and effective; (ii) the annual budget settlement law (in French, Loi de Reglement) i s prepared under the new format set forth by the new budget Organic L a w and includes comprehensive information and data on revenues, and expenses (first dimension o f PEFA indicator PI-25 which should improve from C in 2007 to B in 2012); (iii) Investment projects which are domestically financed in the annual budget are more and more compliant with new project's legal and procedures framework. In addition, enhancement o f expenditure controls will be monitored through (iv) the cut in number o f control steps in the expenditure chain; and (v) the increase in number o f contracts above threshold procured through open competition, in the 4 selected ministries (Health, Education, Agriculture, Public Works and Finance) supported by the project procurement activities.

Component 2-Integration and development of the F M I S including the HRM and Payroll Management (US%5.9M)

26. integration o f the FM Information applications and to upgrading o f the HRM and Payroll systems.

This component consists o f 2 sub-components related respectively to the development and

Country Procurement Assessment Report. Cameroon, Report No. 38669, August 2005. The World Bank, Washington, D.C.

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Sub-component 2-1: Integration and development of the FMIS (US$l. 7M)

27. MINFI-and more globally, the entire government4o not have a coherent long-term strategic framework for the development, use, and maintenance o f Information and Communication Technology (ICT). There i s also a lack o f capacity in MINFI for modem and professional management o f a PFM system in a decentralized environment where the emphasis i s on virtual collaboration between various governmental teams and structures. The objective o f this subcomponent i s to assist MINFI develop and implement a coherent ICT strategy and plan for incremental upgrades and linkage o f the key applications across the ministry (Treasury, Budget, Payroll, Debt, Tax, Customs, etc.) in order to enhance financial reporting and transparency.

28. Activities envisaped under the TACD proiect. The project will provide technical assistance to MINFI for ICT project management and implementation. The main activities will include support for: (i) definition and implementation o f a coherent ICT strategy and an action plan for continuous upgrade o f the FM system applications; (ii) set-up o f the appropriate institutional and adequate technical capacity into the ministry; (iii) design and installation o f new systems or enhancements to existing systems; (iv) purchase o f some hardware and software; (v) upgrade o f and interconnection among critical financial applications (Treasury, Customs, Tax, Debt Management, Budget, Payroll, etc.); and (vi) training and change management. In addition, the project will support the design and installation o f MINFI’s website and intranet in order to scale up the level o f collaboration and teamwork. The website will be a powerful transparency tool for providing information to public and interested groups about budget implementation and performance o f MINFI’s departments.

29. Essentially, the main focus in this component will be to provide strategic advice to GoC in organizing and managing a complex ICT project, devising and choosing appropriate options for the ICT (development and integration o f the existing applications versus turnkey solutions) and ensuring proper planning and procurement for the adopted option. Therefore, most o f this component funding will have to be secured from GoC’s own resources and other donors to purchase equipment, train staff, and develop applications. The project will mostly address critical ICT issues and solutions that are likely to be implemented within the framework o f PFM reform but are not currently financed by government or donors. All other enhancements that are needed outside this scope should be undertaken under a more focused IT project geared towards the implementation o f an online administration (E-Government) similar to projects carried out in Ghana, Rwanda, Sri-Lanka, Morocco and Vietnam.

30. Expected output. The result expected by project-end for this sub-component i s to enhance the production o f reliable, comprehensive, and timely budget and financial reports as mandated by financial regulations. The outcomes would be measured through improvements in timeliness o f the issue o f semi- annual budget reports (which correspond to second dimension o f PEFA indicator PI-24). The objective i s to enable the production o f the new semi-annual report mandated by the new budget Organic Law, in six weeks following end o f period, so to improve the current score from D in 2007 to B in 2012.

Sub-component 2-2: Modernization of the HRM and Payroll management systems (US$4.2M)

31. The objective o f this subcomponent will be primarily to enhance efficiency, transparency, controls, and checks and balances in the management o f personnel and payroll through improvement o f the current information system. Another important objective i s to contribute into accelerating the implementation o f the ongoing HRM reform, in particular the decentralization o f the personnel and payroll management database, which i s a key component o f PFM reform. To achieve this, the GoC, i s striving to install a new system for HRM and payroll management.

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32. Activities envisaped under the TACD uroiect. The project will focus o n assisting MINFI and the Ministry o f Public Service and Administrative Reforms (in French, Ministhe de la Fonction Publique et des Reformes Administratives [MINFOPRA]) to properly manage and implement the current HRM and payroll systems work program. Technical assistance will be provided to (i) conduct an audit o f the existing HRM system (the Computerized System o f Integrated Management o f State Personnel (in French, SystBme Informatique de Gestion Intdgrke des Personnels de 1 'Etat, [SIGIPESI) and payroll system (the Computerized System o f Administrative and Logistics Management for State Personnel (in French, Application Nationale pour le Traitement Informatique et Logistique des Personnels de I 'Etat [ANTILOPEI); (ii) accelerate and complete the ongoing efforts to clean up, harmonize, and secure personnel and payroll files to match budget appropriations for staf fs salaries with the actual number o f c i v i l servants; (iii) select, set up, configure, stabilize and deploy the most adequate integrated personnel and HRM tool in most o f the l ine Ministries; and (iii) develop administrative procedure manuals (APMs) which would be accessible on-line in order to increase transparency in public administration, and to strengthen collaborative work and reduce case fi le processing times. Training activities will be financed to strengthen the capacity o f staff involved in the implementation o f the HRM reform as wel l as the HR personnel o f the various ministries in the use and maintenance o f new HRM and payroll systems. Finally, some equipment will be provided to complete the network and broaden the availability o f the new HRM and payroll applications to key ministries.

33. Some analytical work o n c iv i l service remuneration will also be financed, but o n a very small scale, because this i s a very complex task, which cannot realistically, be achieved within the budget for the proposed project. However, i t i s expected that the work on c iv i l service remuneration would be moving in parallel with, or slightly in advance o f other IDA-supported operations, such as the Development Policy Lending (DPL), which would be used as a leverage instrument for in-depth c iv i l service reform and in-depth policy, fiduciary, and institutional transformation.

34. Exuected output. By project-end, this sub-component i s expected to y ie ld systems, processes, and tools that would enhance payroll controls and audits which ensure a better use o f core public resources since the salaries constitute the largest i tem o f public expenditures (40 percent). Progress would be measured through improvements f rom score D to B in 2012 in the degree o f integration and reconciliation between personnel records and payroll data (first dimension o f PEFA indicator PI-18) hence reflecting improvements in links and consistency between the personnel and payroll databases.

Component 3-Strengthening external oversight and M&E (US$1.9M)

35. The objective o f this component will be to enhance external oversight, communication, and M&E, because these are necessary to allow national stakeholders to carry out the effective management and use o f public resources, and fight corruption, while enabling the legislature and citizens the ability to exercise scrutiny and increase their demand for more accountability. Given the assistance already secured from other donors and geared to most fiduciary services: the IDA proposed project will focus o n strengthening the capacity o f the National Assembly and the Capital Budget Monitoring Local Committees (in French, Comi tb Locaux de Suivi des Investissements Publics) in monitoring the execution o f investment projects, (thereby complementing the CHOC" program, which i s supporting c iv i l society organizations that exercise budget oversight) and o f the National Institute o f Statistics (in French, Institut National de la Statistique [INSj) in carrying out the evaluation o f the public expenditure impact.

T h e EC and the AiDB are implementing on-going projects with technical assistance to the Chambre des Comptes while the Canadian are planning support in 2008 to the controls units within MINFI and other line ministries. lo Changer d 'Habitudes, s 'Opposer a la Corruption in French, meaning Change Habits, and Oppose Corruption

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36. Activities envisaged under the TACD project. First, the project i s expected to provide support to the National Assembly to strengthen legal oversight on use o f public resources, in particular to the NAFBC, given i t s primary role in this regard. This will involve working in close collaboration with the Secretariat General o f the National Assembly in order to provide strategic and technical support to the N A F B C itself and to the Secretariat General’s staff. This will also involve the development o f effective procedures for the NAFBC, in particular in examining the Loi de RGglement. T h i s will take the form o f consultancy advice, training, and office equipment including establishment o f a web-site to provide information to the public o n the Commission’s works and reports. T o that end, preparatory work wil l be undertaken under the PPF to diagnose and propose strategic options for the NAFBC, in the context o f the new Organic Law.

37. Second, to increase demand side for transparency and accountability, the project will also promote consultative mechanisms between the legislature, c iv i l society organizations, the media and other users o f information. In this regard, one key action would be to support the development o f the Local Committees in monitoring the execution o f investment projects in local districts. Local Committees, which were set-up in 2006 in al l Cameroonian provinces, involve local government authorities, elected personnel, and c iv i l society organizations, and i s s t i l l developing, The TACD project will assist in assessing the efficacy o f the Local Committees, as wel l as feasibility o f the expansion o f i t s role to other categories o f expenditure (recurrent budget) and in ensuring publication o f its reports to the public. T h i s would link to, and reinforce the transparency dimensions o f the first three components o f the project.

38. Finally, dissemination o f budget and financial information among ordinary citizens will be critical to transparency and accountability and to consolidation o f external oversight. Since at present, the information available to internal and external stakeholders i s limited, the project would support the development and implementation o f an M&E framework involving systematic and timely production and publication o f user-friendly communications including key information, analysis, progress reporting and performance measures in the use o f public resources. To this end, the project will assist in strengthening and extending the tracking o f public expenditures, which i s a powerful tool for identifying whether intended resources reach the front l ine service providers. Funds will therefore be provided to INS to develop i t s methodology for public expenditure tracking surveys, and to deliver training o n the methodologies to practitioners in the public sector and c iv i l society. Support will also be granted for increased public access to information regarding P F M performances, principally v ia population o f MINFI, A M P , and National Assembly websites with reference to key international standards such as the PEFA and the IMF Code o f Good Practice on Fiscal Transparency. Other measures would include improving the publication o f information o n public finances through other available government web- sites.

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39. ExDected outmt. T h i s component i s expected to yield a better functioning oversight system, especially at the level o f the National Assembly, which exercises external audits and controls mandated by existing financial regulations. In addition, it i s expected to increase availability o f budget and financial information to the public. Performance for this component would be monitored through (i) extension o f the legislative scrutiny to fiscal policies and aggregates for the coming year as wel l as detailed estimates o f expenditure and revenues, to improve the score f rom C to B in 2012 o f the first dimension o f the PEFA indicator PI-27. The last indicator relates to timeliness o f the release o f the regularly produced semi- annual budget reports, o n available media (government websites and national newspapers), to improve access to interested citizen.

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Table 2: Existing or future donors’ intervention in support o f PFM reforms in Cameroon. in USS.000 and I US$ = 450 FCFA

IC? systems EC GTlP 186.7

France TER 466.7 IMF

20013-2008 2005 and 2007

2007 1 st sem.

CanadalSPIACR = CanadalSupport Program to Internal Audit and Control Reforms WBflACD = World BanklTransparency and Accountability Capacity Development Prqlect EClGTIP = European Commission/ Governance and Transparency Improvement Program EClSPPEDP = European Commission/ Support Reject to Priority Economic Development Proprams

France/ TER = France/ Transparence-Efficadte et Rigusw dans la pestion des finances publiques du Cameroun PEMFAR = Public Expenditura Management and Financial Accountability Report

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Component &Support to the Project Focal Point for PFM reforms coordination (US$l.SM)

40. Institutional arrangements for project preparation and implementation will be embedded in the country's systems to consolidate and sustain GoC's leadership in, ownership of, and commitment to the reforms envisaged. The main objective o f this component will be to support capacity building activities for MINFI and the P F M reforms structures to properly carry out their coordination, monitoring, and leadership roles in PFM reforms in line with Paris Declaration objectives.

41. Activities envisaped under the TACD proiect. In coordination with other partners involved in PFM reforms activities, the TACD project will provide technical assistance, equipment and training to PFMTS in order to manage the project as wel l as the upcoming PFMRAP with focus o n the following activities: (i) setting-up o f functioning and adequate organizational and implementation arrangements for PFM reforms including coordination o f donors' contributions; (ii) execution o f i t s fiduciary responsibilities (project financial and procurement management); (iii) coordination and monitoring day- to-day activities; and (iv) M&E activities, which are critical to effective PFM reforms management (see section C-3- M&E). The project will fund a study to explore the available options for pooling financial resources and deepen donors and government partnership around PFM reforms.

42. Expected output. The results expected in this component are satisfactory implementation o f the project and i t s FM in line with fiduciary standards set by IDA. This should come up from an adequate project management and an M&E system. T w o indicators will be monitored throughout project implementation: (i) the M&E plan for the IDA and PFMR4.P that i s to be adopted and regularly implemented; and (ii) satisfactory annual project audit reports are issued by the set deadline (June).

4. Lessons Learned and Reflected in Project Design

43. M a i n issues related to preparation and implementation o f past and ongoing projects in Cameroon, as highlighted in the last Country Portfolio Performance Review (CPPR) include: (i) Narrow and weak polit ical leadership and commitment to reforms; and (ii) fragmented and complex project agenda which lacks a clear operational focus and M&E systems. In addition, past experience from other country PFM projects suggests to the team to pay close attention (iii) to the project implementation arrangements in order to avoid Project Implementation Units flaws, and (v) to the strategy for introducing modern IFMIS which calls for prior development o f a clear vision and implementation plan before starting any meaningful investment in the system.

44. The Cameroon country team has recognized that continued IDA support for improvements in PFM could only be secured through strong polit ical commitment reflected in an operational action plan which i s agreed upon by al l donors. T o foster this political commitment and leadership, a PFM Platform led by GoC has been established to work with a l l P F M stakeholders (including c iv i l society and donors) to develop a credible PFMRAP and implementation strategy.

45. In addition, the Project Team has requested anchoring the reform program in the structures o f the Ministry o f Finance (MINFI) so to prevent the implementing agency from becoming an isolated enclave within the ministry, as i s true in many IDA-financed operations. The approach was discussed and agreed upon with the MINFI during the appraisal missions, and i s set as a condition for project effectiveness. Others donors including the E C and the AfDB also agreed to the proposal and are considering ways to j o i n the projected institutional arrangements. The Project Team in the field includes procurement and FM specialists, and the Task Team Leader i s conveniently located in neighboring Chad. The Project Team will supervise the activities on a continuous basis in coordination with other donors. Periodic supervision missions will be carried out jo int ly with specialists f rom Wor ld Bank headquarters.

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46. Component 4 o f the project will strengthen GoC’s own institutional arrangements for coordination o f PFMRAP to ensure adequate annual programming o f activities, budget costing, and M&E o f progress as well as satisfactory project FM. The future PFMRAP will be a basis for donor coordination in mobilizing financial support and for joint M&E o f progress. The project has addressed the need for an operational and effective M&E system which will be strategically designed upfront around the future government PFMRAP. The PEFA Report, completed in January 2008, will be the core tool around which a sound M&E system wil l be implemented with the coordination and harmonization o f all donors. The PPF will finance the establishment o f the M&E system within PFMTS before project effectiveness.

47. To overcome shortfalls o f the on-going ICT strategy, which heavily focuses on software development and equipment selection without careful assessment and clarification o f the available options, the proposed project will support the upfront adoption and implementation o f a well-defined strategy (see project component 3) before starting any meaningful ICT financing.

5. Alternatives Considered and Reasons for Rejection

48. The PFM long-term reform agenda in Cameroon includes improving resource mobilization and resource utilization. The IMF, the EC, and the French Cooperation are taking the lead on resource mobilization, helping to determine a desirable aggregate spending growth path consistent with the available resources. The EC and the French Cooperation are also assisting in strengthening public expenditure management and accountability institutions. The Bank’s contribution, through the proposed TACD project, would complement those efforts by focusing on resource utilization. One possibility would be to address public expenditures exclusively, which i s the “entry point” to enhance transparency and accountability in public resource utilization. However, such a narrow focus would not adequately address other critical issues related to personnel management that affect and contribute to the lack o f transparency and accountability in financial resources management.

C. IMPLEMENTATION

1. Partnership Arrangements

49. The proposed operation will be an IDA contribution to joint donor support to GoC in the implementation o f PFMRAP that i s currently under preparation. The support from this project would complement assistance planned and on-going from other donors in the areas o f PFM and HRM (see above, section B-3 on project components and Table 2). The minimum conditions are in place for effective partnerships. This follows efforts to implement the principles o f the Paris Declaration on aid effectiveness in Cameroon through the CMB (see Box 1 below) set up by donors interested in PFM reforms. However, i t i s agreed that donors should scale up and deepen those cooperation and collaboration efforts during PFM reforms implementation so as to minimize transaction costs for the GoC. In that regard, the Bank team will discuss and advocate for the future agreement on a form o f a Memorandum o f Understanding between donors in order to have a common framework for supervision and M&E and even a common basket funds provided adequate conditions are in place.

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Box 1 : Comitb Multi Bailleur and the PFM platform in Cameroon

Since Spring 2005, GoC has taken an emerging leadership role in implementing the Paris Declaration, and international partners have significantly stepped up their efforts to deliver more aligned support. The Bank i s playing a catalytic role in t h i s agenda, through encouraging the Government to participate at the Paris High Level Forum on Aid Effectiveness and at the Strategic Partnership for Africa annual meetings. In particular, the Bank helped in setting-up CMB in 2003, which brings together 14 donor partners for collaboration on PFM reforms. The preparation phase o f the upcoming TACD operation i s used to foster a Sector Wide Approach Program (SWAP) with a common results and implementation framework in this area. The PEFA report in preparation wi l l serve for setting up a common M&E system. On the implementation side, the donors have promoted the PFMDTS which i s a unit to be established within MINFI to ensure a concerted dialogue at the political level (through the PFMDSC), as well as at the operational level. The next steps should focus on accelerating the pace towards more alignment and harmonization in donors’ intervention with common tools in the financial and procurement areas (such as basket funds). The proposed project (through the PPF) will provide the GoC with the necessary equipment and resources to assume coordination activities and to undertake a study to prepare a proposal for a much stronger coordination and joint financial mechanism among development partners. The Bank will will consider the option o f pooling the project funds after careful assessment during the Mid-Term Review.

. Institutional and implementation arrangements

50. Cameroon has a number o f operating technical committees that have been very instrumental in coordinating government’s efforts towards economic reforms. In the PFM area, GoC established the PFM Dialogue Steering Committee (PFMDSC) in February 2007, which comprises representatives f rom GoC, f rom the donors and from c iv i l society to (i) further dialogue on PFM reforms, (ii) share common assessment o f the PFM system; and (iii) define an Act ion Plan which will be the common platform for intervention o f development partners as wel l as GoC. This entity could have been able to provide the technical leadership and institutional capacity needed to prepare and implement the proposed TACD project, as wel l as the other donors’ support. Still, i t s composition (ministers and ambassadors) and responsibilities are not adequate for operational needs.

5 1. Strategic and Overall Management. Therefore, GoC has agreed to set-up a new institutional arrangement with the Public Financial Management Steering Committee (PFMSC), which i s more involved in the execution o f the reforms, and PFMTS, which i s wel l endowed to coordinate the work o n the ground. Hence, the primary responsibility for the project preparation, execution, and monitoring would be vested in MINFI agencies, using their systems, structures, and procedures so to consolidate Government’s commitment and ownership, while strengthening i t s capacity and creating enabling conditions for sustainability o f the envisaged reforms.

52. Oversight and guidance o f project activities will be in MINFI, via PFMSC that will be headed by a Minister o f Finance representative. This entity will be created before project effectiveness and will comprise al l beneficiaries in and out MINFI at managerial level. Each year, PFMSC will approve an indicative three-year budget program that will have a clearly defined f i rs t year annual work program. I t wil l oversee progress in program implementation and take decisions on policy, institutional, and technical issues o f relevance to the project and to the PFMRAP. It i s also envisioned that a l l PFM reforms including other donors’ projects activities supervision will be brought under PFMSC responsibility once consensus i s reached within MINFI and between MINFI and donors. Therefore, PFMDSC will s t i l l exist but i t s responsibilities will need to be revised so to reflect the tasks trusted to the new PFMSC. The Bank team has suggested commissioning PFMDSC with PFM dialogue between donors and GoC and coordination o f PFM donors’ activities as wel l as M&E o f PFMRAF’.

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53. Coordination and implementation of technical activities. The focal point for the daily management o f project activities will rest upon a new P F M Technical Secretariat (PFMTS), to be set up into MINFI to coordinate and monitor al l the PFM reforms activities preparation and implementation under the PFMSC supervision. PFMTS i s integrated into MINFI structure to harmonize the reform process, assist in activity planning and budgeting, facilitate contracting, manage the activities and technical assistance from various donors, and play a critical role in M&E for both the IDA project and the future government PFMRAP. Headed by a coordinator, PFMTS will be staffed by technical experts who will specialize in the main areas o f the reform including inter alia: (i) Public Finance (Budget, Treasury, and Revenues); (ii) Information Systems; and (iii) Capacity Building. These three professional staff will have to be recruited, as a condition for project effectiveness. GoC has not yet made a decision on whether or not the current PFMDTS will merge into the new PFMTS.

54. Participating beneficiaries will be responsible for implementing project activities in their respective fields as defined in annual work plans. Specifically, beneficiaries are most o f the agencies at the central level involved in budget preparation and execution as wel l as financial control and audit (see target groups, section B.3-Project Components).

55. Institutional and management capacity in coordinating units (PFMTS and DRFi) as wel l as in implementing agencies i s weak. Therefore, l imited technical assistance and careful balancing will be required to ensure that project’s objectives can be achieved. The Japanese Policy and Human Resources Development (PHRD) grant will finance a capacity needs assessment for implementing agencies which will result in an action plan. This effort made during project preparation to build up capacity will be further reinforced during project implementation (component 4) with short term technical assistance.

56. FM and Procurement. The f l ow o f funds from the IDA credit and GoC will be managed by MINFI, in accordance with appropriate IDA rules and procedures in effect. T o ensure ownership and foster capacity building in project management, FM will be trusted to PFMTS while procurement management will rest upon MINFI’s DRFi, in line with their existing responsibilities in national budget management. A procurement specialist and an FM specialist, familiar with Wor ld Bank procedures are being hired, as condition for project effectiveness, to strengthen management capacities within the two units.

57. T o warrant timely and reliable f low o f funds, a Designated Account (DA) will be opened in a local commercial bank under conditions satisfactory to IDA. The DA will be replenished based on documentary evidence, justifying the payments made from the account for works, goods and services that are eligible for financing under the credit. All supporting documents will be made available for review by periodic Bank supervision missions and external auditors.

58. The Internal Audit Unit within the MINFI (in French, Inspection GBnBrale des Services) shall be responsible for the internal control o f the Project. It will prepare quarterly audits on project management and accounts. It will send i t s report to the MINFI with copies to the donors contributing to financing the PFMRAP. The internal audit capacity o f this unit will be suitably built during project implementation.

59. Qualified, experienced, and independent auditors will be appointed in accordance with terms of reference (TORS) approved by IDA to audit use o f IDA funds and government resources by PFMTS. The audits will be carried out once a year and will be financed under the project. The independent auditor mandate could be enlarged to other donor funds related to GoC’s PFMRAP, should it be necessary.

60. Bank Management. On the Bank side, the primary responsibility for project performance and management relies on a Task Team Leader who will work in close collaboration with a strong YaoundC- based team for local perspective and direct interface with the client.

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3. M&E of Project OutcomedResults

61. Goc has agreed to prepare an M&E plan so to track achievement o f the PFMRAP as wel l as project's objectives, targets, and outcomes on a regular basis. Wherever possible, improvements in PFM performance will be measured using the PEFA approach, enabling international benchmarking o f progress. The primary objective o f the M&E plan will be to help: (a) institutionalize M&E activities and build up national capacity to assess progress in improvements in the medium and long term o f PFM o n a regular basis beyond project life; and (b) foster participation among stakeholders and decision makers in PFM through enhanced dissemination o f results and information sharing.

62. Comprehensive PEFA performance reports will be prepared to facilitate monitoring and assessment o f progress in implementing PFMRAP and the project. The EC has taken the lead in financing the f irst report completed in January 2008, which will help constituting the baseline. The EC has also earmarked funds for PEFA exercises every two years over the l ifetime o f the project (2009, 2011 and 2013). Joint donor supervision and M&E missions will be regularly undertaken to streamline the supervision process and cut the transaction costs for the country and donors.

63. At the level o f the T A C D project, performance indicators have been carefully chosen to reflect expected results f rom the activities to be financed under the project. The project indicators matrix was agreed upon at project appraisal and completed during negotiations. Establishing the M&E system under the project i s a critical step towards developing the overall PFMRAP and M&E system. The project will finance a short-term consultancy to develop the M&E system and plan. He/She will help in complementing data, especially output indicators for each activity, and determining data collection frequency, and reporting instruments" before project effectiveness. He/She will assist also to outline the PFMRAP M&E arrangements and plan, including proposed mechanisms (i.e., institutional framework and information system), and the related training program. Specific training sessions will be financed under the project to ensure that focal points at a l l implementing agencies will be able to carry out data collection and analysis, as wel l as stakeholders (members o f PFMSC, PFM users, and so on) to validate and use the M&E system results.

64. The responsibility for providing relevant information and monitoring progress, using identified performance and output indicators, will be with designated beneficiaries. PFMTS will be responsible only for data consolidation, analysis o f the results, and dissemination o f approved M&E reports. In addition, PFMTS wil l be responsible for monitoring the overall implementation o f PFMRAP against approved annual work programs and budgets. In continuous consultation with participating beneficiaries, PFMTS will prepare quarterly progress reports on PFMRAP implementation.

65. An M&E Committee" will be established to include representatives o f PFMSC, donors, and other participants selected from PFM users. This committee will review and validate progress reports o n performance indicators and recommend corrective measures, should it be necessary.

66. A mid-term review will be conducted within 27 months f rom project effectiveness to assess progress and make recommendations for any changes in PDO, content o f components, allocation of project resources, and performance indicators, should it be necessary.

" The 2007 PEFA report helped scoring hal f out o f the 1 1 Project indicators. The remaining indicators w i l l be assessed before project effectiveness with help from a consultant financed under the PHRD Grant. l2 The existing Public Financial Management Dialogue Platform Committee (PFMDSC) could be tasked with these responsibilities.

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4. Sustainability

67. The fol lowing elements indicate that the proposed project will be implemented successfully and the impact o f expected outcomes will be sustainable. First, since the Paris High Level Forum o n aid effectiveness in March 2005, the Cameroonian Government has taken a leadership role in starting implementation o f the Paris Declaration, and international partners have significantly stepped up their collaboration. On PFM in particular, the establishment o f PFMDSC and i ts PFMDTS could be viewed as recognition by the GoC o f the severity o f the country’s governance issues and Government’s “commitment” to resolutely address them. Second, the design and preparation o f the proposed project are driven by the GoC, which would facilitate project implementation. In addition, the Minister o f Finance i s t ahng the lead to advance some critical action towards the full PFMRAP development. The PEFA Report was finalized in January 2008 following a much-appreciated participatory process. Meanwhile the new Budget Organic L a w setting the framework for budget reforms has been approved by the National Assembly since mid-December 2007. Based on this law, i t i s expected MINFI will meet i t s commitment to develop PFMRAP as wel l as i t s implementing strategy by the end o f 2008 to signal i t s political will in the process. Third, primary responsibility for project execution, monitoring, and accountability will re ly on government’s structures and agencies, which would consolidate country’s ownership.

5. Critical Risks and Possible Controversial Aspects

68. jeopardize the implementation o f the project. These r i sks include:

In addition to macro and sector level risks, there are specific operations-related r isks that could

Country ownership o f the progradproject that i s undermined by: (i) the absence o f political leadership and vision for GoC; (ii) resistance to reforms f rom some prominent ministerial officers; and (iii) weak capacity and lack o f financial resources at PFMDTS level. Technical design could be hampered, as in the past, by pressure f rom some government authorities to move ahead quickly, without the proper ICT implementation planning and studies required upfront as wel l as the adequate I C T institutional and legal framework. Project implementation and management capacity that i s lacking particularly in most MINFI directorates and external beneficiaries. FM, which i s hindered by l o w capacity and affected by corruption risk. T h i s i s a real concern given that various and multiple financing from development partners and national budget will be managed by PFMTS, which has l imited capacity. Procurement that i s also beset by corruption risk and l o w capacity in the DRFi.

T o mitigate these risks, the following measures are considered:

Strengthen Government’s commitment, ownership, and leadership o f PFM reforms, v ia establishment o f proper institutional and organizational frameworks. The Bank team has proposed creating PFMSC and PFMST within MINFI to bolster participation in and increase ownership and awareness o f the PFM reforms by the beneficiaries. In addition, GoC i s invited to accelerate the development o f PFMRAP and devise an implementing strategy that would give a clear political directions and guidance to the sector reform and program considered; Entrust project management to MINFI, agree on a set o f incentives for agencies and individuals achieving results, and build overall FM and procurement capacity where necessary during project preparation and by end o f 2008; Set-up systematic and robust M&E mechanisms and systems.

In addition, lessons from predecessor and ongoing Bank-funded projects and analytical work will provide a solid base o f mitigation options for emerging risks.

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6. Loadcredit Conditions and Covenants

71. Measures designed to create enabling conditions for effective and proper project implementation have been discussed with GoC. The authorities have agreed to undertake the following actions before project effectiveness:

Setting up o f the project institutional framework through establishment o f PFMSC and PFMTS in a form and substance that i s satisfactory to IDA with required functions and resources as wel l as clear mandate, governing arrangements, and responsibilities; Recruitment o f a procurement specialist and a FM specialist in line with Bank procurement guidelines and procedures; Appointment o f qualified and experienced staff for PFMTS (coordinator, three national experts responsible respectively for Budget Management reforms, ICT and Capacity Building) in a form and substance satisfactory to IDA; Adoption o f the TACD Project Operational Manual (POM), including two annexes: a Financial and Accounting Procedures Manual, and a Procurement Manual, in line with IDA rules and satisfactory to IDA. And installation o f an integrated accounting system for the project, satisfactory to IDA.

In addition, the GoC will take the following supplementary measures to increase project execution efficacy:

Adoption, by November 30 o f each year, o f the PFMRAP Annual Programs and related budget, procurement plan and monitoring and evaluation plan satisfactory to the Association. Appropriation o f the amounts o f the P F M W Annual Programs not financed by any donor in i t s draft annual Budget and ensure the availability o f such annual budgeted amount for the activities of the PFMRAP. Finalization o f contractual arrangements for the establishment o f a countrywide network system connecting a l l provinces, and a l l ministerial departments before the initiation o f the procurement process for the I C T system. Establishment o f core ICT teams within the beneficiary organizations with clear and specific incentive plans before the initiation o f the procurement process for the ICT system. Development, in consultation with the Bank staff, and adoption o f adequate legislative and regulatory framework regarding HRM and Payroll management (institutional and organizational framework, requirements for the use and access o f central database by line ministries, collection o f records, payroll checks and controls, etc.) before the initiation o f the new HRM/Payroll systems. Recruitment o f professional auditors staff, with experience and qualifications satisfactory to the Bank, for the Treasury internal audit office before initiation o f any action in the project activity # 1.4.3 “Assistance to the Treasury internal audit unit” featured in the project activity plan. Selection o f the project external auditor four (4) months after project effectiveness, and, Recruitment o f an assistant accountant with qualification and experience satisfactory to the Bank, to help in financial management, after his specific training in this area.

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D. APPRAISAL SUMMARY

1. Economic and Financial Analyses

73. Budget allocations and proper implementation in line with PRSP priorities for growth and poverty reduction and progressive improvements in public service delivery will enhance private sector productivity growth, increase incomes, enhance social welfare, and reduce poverty.

74. By promoting transparency and accountability in the management o f public resources, the project i s expected to significantly enhance economic management that would ensure an effective implementation o f the PRSP. Specifically, the project will have positive economic impact by:

e

e

e

e

e e e

75.

improving-in the area o f public finance legislation and accounting-the management o f appropriations; strengthening the responsibility o f line ministries; and enhancing the accountability o f public managers; reducing-in the area o f investment budget-the time-lag between budget appropriation and project execution; consolidating-in the areas o f budget tracking, monitoring, information and reporting-the implementation o f the FMIS; and enhancing M&E capacity o f the INS to track public spending; enhancing the internal auditing process and external auditing system; centralizing and facilitating cash f low management in the Treasury; establishing effective parliamentary oversight; and increasing discipline and sanctions in procurement procedures and operations, which are critical to expenditures effectiveness and budget planning and execution.

Improvements in budget execution and public procurement would reduce fiscal deficit, increase the predictability and f l ow o f allocated budget resources to PRSP priority sectors and activities, improve the quality o f public expenditure, and enhance accountability for public resources. Strengthening institutional arrangements and capacities to manage public expenditures is critical for operational efficiency and thus for expanded service delivery and development results in priority sectors.

2. Technical

76. The design o f the T A C D project i s based on the country’s PRSP and the Bank’s FY06-08 ISN, which were developed through a participatory process that ensured consideration o f stakeholders’ views and needs. I t s design responds to lessons learned from existing and predecessor capacity building interventions in Cameroon over the past 10 years, and draws heavily on the recommendations f rom the 2006 PEMFAR report and the 2007 PEFA report. I t also relies o n the undergoing PFM diagnostic carried out by PFMDTS through a consultative process to develop PFM reforms options that best suit national objectives and the country context. The proposed TACD project will concentrate on systems and institutions capacity building and emphasizes the link between public sector governance reforms and capacity building to ensure greater professionalism and enhance transparency and accountability in the use o f public resources.

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3. Fiduciary

77. Procurement and FM assessments have been conducted. All FM and procurement related issues have been recognized and mitigation measures have been clarified. The procurement assessment identified a high r i s k in the execution o f procurement under the proposed TACD project, given that staff involved has n o pr ior experience in Bank procurement procedures. Therefore, a series o f measures have been agreed upon, and include the recruitment o f a procurement specialist before project effectiveness. The procurement specialist will contribute to reinforce the capacity o f the existing procurement staff under DRFi. The init ial 18-month procurement plan was drafted and agreed upon with the Bank during negotiations. It will be updated as needed during project implementation with IDA’S consent.

78. The project FM risk i s considered substantial. FM arrangements will contribute to satisfy the Wor ld Bank’s minimum requirements under OPBP 10.02. An action plan to further improve these arrangements has been agreed upon, including strengthening PFMTS, by recruiting an FM specialist before negotiation and an accountant. An information system will be put in place including procedures and implementation manuals before project effectiveness. Furthermore, the project will be subject to internal and external audit. Therefore a private audit firm i s to be hired in the f i rst four-month period following project effectiveness while the MINFI internal audit unit, with improved capacities in the area, will be trusted with the internal controls.

4. Social

79. There i s n o specific social risk associated to the project implementation. The project i s not planned to cause staff redundancies. However, introduction o f new business procedures will require the staff to assume new responsibilities and develop appropriate sk i l l s through the training provided by the project. Change management activities will help address staff concerns regarding changes in business procedures and will provide necessary guarantee and support to that end.

5. Environment

80. The project category i s C and warrants n o particular environmental safeguard measure. The activities planned under the proposed IDA project do not include construction or utilization o f materials that present any environmental risk.

6. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPBP/GP 4.0 1) 11 [ XI Natural Habitats (OPBP 4.04) [ I [ XI Pest Management (OP 4.09) [ I [ XI Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) [ I [ XI Involuntary Resettlement (OPBP 4.12) [ I [ XI Indigenous Peoples (OD 4.20, being revised as OP 4.10) 11 [ XI Forests (OP/BP 4.36) [ I [ XI Safety o f Dams (OPBP 4.37) [ I [ XI Projects in Disputed Areas (OP/BP/GP 7.60) [ I [ XI Projects o n International Waterways (OPBP/GP 7.50) [ XI

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7. Policy Exceptions and Readiness

8 1. N o policy exceptions are required for this operation. There are some concerns o n the readiness o f GoC team for this project. PFMTS i s not fully equipped to concurrently develop PFMRAP and perform preparation tasks for the IDA project. It lacks proper staffing and project management sk i l l s even though there i s an ongoing EC assistance to PFMTS. A PHRD grant o f US$360,000 has been secured and a PPF o f US$700.000 has been granted to the GoC in order to not only further capacity building at PFMTS level, but also to undertake preparation studies required in many components. I t i s expected that the above financing will help GoC meet the schedule for project approval by the Board and complete effectiveness conditions by the end o f 2008.

21

Annex 1: Country and Sector Background CAMEROON- Transparency and Accountability Capacity Development Project

1. Cameroon has remarkable diversity on many aspects and has enjoyed political stability for most of the period since independence in 1960. Cameroon has a population o f about 18.5 million. It i s one o f Africa's most diverse countries, with a wide range o f climatic zones, ecological conditions, natural resources, population densities, ethnic groups, and traditional cultures. Indeed, Cameroon i s also known as Africa in miniature. The Anglophone part o f the country covers the Northwest and Southwest provinces, representing about 25 percent o f the population; the Francophone part accounts for the rest. Cameroon has more than 200 ethnic and linguistic groups, with the Beti, Douala, and Bassa dominant in the South and the center; the BamilCkC and Bamoun in the West; and the FoulbC, Borroros, Matakam, and Toupouri in the North. The country i s in the lower middle income group with an average per capita income o f US$1,080 in 2007. Cameroon has enjoyed a relative political and social stability, in contrast with the troubled history and more recent protracted civi l conflicts o f most o f i t s neighbors. The relative political stability, significant resources endowment, and excellent location with sea access all the more underline Cameroon's underachievement on the economic and social fronts. Poverty remains widespread and most social indicators compare poorly with countries at similar income levels.

Recent Economic Developments

2. The revival of the economy following major reforms in the mid-nineties-including the devaluation of the local currency in 199Gappears to be short-lived as growth performance i s loosing steam (see Table 3 below). Real GDP growth rate has decelerated recently with an average annual rate o f less than 3.0 percent in the period 2004-2007, down from 4.3 percent in the period 2000-2003. The non-oil sector has been performing poorly as a result o f several factors, including poor infrastructures, erosion in external competitiveness because o f the appreciation o f the Euro-to which the local currency i s pegged-against the US dollar, the unfriendly business environment evidenced by Cameroon's rank o f 155 in the Bank's Doing Business 2008 report, and low access to financing.

Table 3 : Cameroon recent macroeconomic performances. Cameroon: S%lected Macroeconomic Pndicators. 200-9

(Unib bKllcatQd) Sceneno

zc)(36 2007 -- 2009 2667 zbcx8 2009

EConomc qro"*M pnd Prices Re53 GOP 3 2 4 2 4.9 4 8 2 7 4.4 4 6

Orwtn& ncmoll 2 9 4 4 5 2 5 3 3 4 4 s 4 s

Prwam 011 pciw (U 5 dollars per tr%rrsx) 61.8 =A0 54.8 5'1 5 6 2 8 6 5 0 SS3 woss c1ozl)lbbtyc kmmtmsd 16s 20.1 2'l 5 228 184 194 2 0 0

cans- Dnao tper )~d p.*wap& 5.1 1 .a 1.8 2.0 1.5 3.3 2.0

193 1 7 7 179 176 I 8 6 184 185 138 138 $ 3 7 139 139 142 144 145 198 t 6 8 169 163 1 7 3 179 107 114 11 3 'I* 3 1 3 6 11 7 11 B 2 s 4 s 5 1 5 1 4 2 5.2 5 7 4 7 Y O 1 0 0 7 2 4 1 1 0 5

currant account I E X ~ grants) -07 4 0 4 8 - 5 8 - 2 6 3 1 -36 E x p a t w o l d 8 1 4 2 3.6 3 8 2 8 4 0 4 0

OCwtnrA nol1oll 8.7 s o 5 4 5 9 5 1 5.4 5 9 Import \notumd 6 8 5 4 5 s 5 s 9 6 3 7 3 3

Wn3Hm nORQ1l 2 4 7 2 8 7 6 0 8 5 3 s 4 s sou- Came-- -m-l-. end ihm Maff eetpnrstes and wojecM0v-m

currant account I E X ~ . grants) -07 4 0 E x p a t w o l d 8 1 4 2

Import \notumd 6 8 5 4 OCwtnrA nol1oll 8.7 5.0

Wn3Hm nORQ1l 2 4 7 2 sou- Came-- -m-l-. end ihm Maff eetpnrstes and wojecM0v-m

4 . 8 3.6 5.4 5.5 8.7

-5 8 3 8 5.9 5.9 6 0

-2 6 2 8 5.1 9.6 8 5

3 . 1 4.0 5.4 3.7 3.9

-3 6 4 0 5.9 3.3 4.9 -

3. Cameroon’s attainment of i ts HIPC completion point in 2006 has yet to translate into concrete development impact because of inefficient flow of funds mechanisms and weak P F M . Cameroon reached the completion point o f the HIPC Initiative in April 2006 and became eligible to receive additional re l ief under the Multilateral Debt Relief Initiative (MDRI) f rom the IDA, the IMF, and the AfDB. In July 2006, Cameroon also received additional debt rel ief f rom official bilateral creditors belonging to the Paris Club group o f countries. Annual debt service savings due to HIPC, MDRI, and bilateral debt relief beyond HIPC will average US$265 mi l l ion annually during 2006-15, decreasing to US$209 mi l l ion during 2016-25. So far, Cameroonian’s expectations for HIPC debt relief to translate into better public service delivery and improved l i fe are s t i l l being awaited.

Recent Poverty and Social Developments

The analysis of poverty dynamics i s constrained by the lack of recent reliable statistics but available information points to significant poverty incidence. Poverty headcount fe l l by 13 percentage points between 1996 and 2001, but remained high in 2001 with about 40 percent o f the population living under the poverty threshold. There are n o reliable estimates o f h o w the poverty headcount has evolved since then: a successor household survey i s being carried out and completion i s s t i l l expected. Given that actual economic growth rates have been wel l below the PRSP estimates o f performance that would have allowed a reduction o f poverty incidence, i t i s l ikely that any decline in poverty rate has been modest at best.

Cameroon i s currently off track for meeting most of the health MDGs. In the past five years, some indicators have gradually improved, but progress i s wel l below what i s needed to meet the MDG targets. Infant and child mortality rates have fallen to the levels o f the early 199Os, but they remain high, with an under-five mortality rate o f 142 per 1,000 l ive births- far higher than the 123 per 1,000 in the average low-income country. Malnutrition continues to be a significant problem, with about one third o f children in Cameroon chronically malnourished. Despite progress in the fight against HIV/AIDS, Cameroon continues to experience a generalized epidemic: the prevalence rate o f HIV i s 5.5 percent.

Access to safe water does not reflect the generally favorable natural conditions. Cameroon has an abundant water resource base, except in the Northern regions. However, inconsistent and unfavorable policies combined with weak sector governance in the last two decades, have resulted in limited access to water services. According to the last estimates o f the WHO/UNICEF Joint Monitoring Program, only 44 percent o f the rural population has access to safe water, whereas 25 percent o f the urban population i s connected to public services and 61 percent are supplied by private stand posts and vendors.

Cameroon i s likely to be on track to meet the MDG primary education completion rate; however, further improvement on governance, equity, and quality i s needed. Primary completion rates in Cameroon (70 percent) are about average for low-income countries (71 percent). Still, the education system needs to address three major challenges: narrowing gender and geographical disparities in education outcomes, strengthening administrative capacity and governance to ensure better and more transparent use o f l imited public resources, and improving the quality o f education.

23

Recent Political Developments

8. Recent elections in June gave President Biya a comfortable majority and helped him define strategic directions and objectives for the new government that took office in September 2007. Presidential elections took place in 2004, and President Paul B iya was reelected for a seven-year term. Parliamentary and municipal elections were held in July 2007, and the President’s Party (Cameroon People Democratic Movement ( in French, Rassemblement Democratique du Peuple Camerounais [RDPq) won an overwhelming majority o f the votes. President B i ya reshuffled the cabinet o n September 7, 2007. The President outlined three priorities for the new government: (i) promoting growth through initiation o f large-scale agricultural and industrial projects and a tax-friendly environment for private investment; (ii) improving living conditions, including education, health, access to clean water and housing; and (iii) fighting corruption. Still, the opposition l inked to the Constitution revision and the staple foods prices increases, spurred disruption and violence in some o f the major cities.

Cameroon’s Poverty Reduction Strategy

9 . Cameroon adopted a full PRSP in April 2003, following intensive consultations with a broad range of stakeholders, including the poor, civil society, the private sector, and development partners. The PRSP presents GoC’s vision and priority actions for fighting poverty, in line with the MDGs set for 20 15. The strategic framework o f the PRSP rests on seven pillars: (i) promoting a stable and growth-enhancing macroeconomic environment; (ii) strengthening growth through economic diversification; (iii) empowering the private sector as the main engine o f growth and a partner in social services delivery; (iv) developing basic infrastructure and natural resources in an environmentally sustainable manner; (v) accelerating regional integration within CEMA C framework; (vi) strengthening human resource development and bolstering social services; and (vii) improving governance, including in public administration and the legal and judicial system.

10. The 2003 PRSP contains several features of good practice. In their jo in t s ta f f assessment o f the PRSP,13 IMF and Bank staff noted several strengths including: (i) the breadth and depth o f poverty analysis; (ii) clear linkages o f PRSP targets to the MDGs; (iii) a comprehensive development framework for sustainable growth and poverty reduction; (iv) a careful identification o f the main priorities o f the regional integration agenda; and (v) an innovative approach for undertaking the costing o f sector strategies, considering both the resource needs (the cost o f reaching the sector/MDG) and resource availability (budgetary resource constraint coming f rom the macro framework).

11. Nevertheless, a number of shortcomings have impeded the implementation of the PRS. These shortcomings are discussed in length in the Joint Staff Assessment (JSA) o f the PRSP and in subsequent JSA Note (JSAN) o f Annual Progress report^'^ o n PRSP implementation. Chief among these shortcomings are the M&E system o f the PRS-including the lack of

~~ ~

l3 Cameroon: Poverty Reduction Strategy Paper and Joint Staff Assessment. Report No.26243- CM, 2003. World Bank Washington D.C. l4 Cameroon: Annual Progress Report and JSNJSAN. Reports Nos. 32375-CM,35299-CM, 35461 -CM, 41 753-CM. World Bank, Washington, D.C.

24

intermediate outcome indicators-and clear articulation o f how PRSP priorities and the related MTEF would form the basis for budgetary allocations.

12. In the JSAN of the fourth PRSP Annual Progress Report,15 IMF and Bank staffs have underlined several areas where PRS implementation could be strengthened. Overall, the upcoming PRS may need to focus more on results and addresses more forcef i l ly growth bottlenecks in Cameroon. Specific recommendations that are relevant to the proposed Bank’s operation include: (i) strengthen the link between the PRS and the budget: (ii) discuss budget execution during the reviewed period; (iii) assess the quality o f public investment; and (iv) track a set o f indicators that demonstrate progress in governance and anti-corruption efforts.

13. GoC has recognized the need to revise the strategy to address the limitations in the first PRS, and reflect new conditions. By and large, the implementation o f the f i rst PRS has come short o n expected results on growth and better governance. N e w developments since 2006 are offering a more favorable environment to launch the preparation o f a second generation PRS that will be more results-oriented. These developments include the surge in o i l wor ld prices that translate into additional substantial resources. I t includes also significant debt rel ief with the achievement o f the HIPC Completion Point, eligibil i ty to debt rel ief under the MDRI, and additional debt relief f rom bilateral creditors o f the Paris Club. They also embrace the donors’ overture for implementation o f the Paris Declaration on harmonization and alignment that aims at more effective development assistance. The completion o f the new PRS i s expected in 2008.

14. The challenge for the international development community and the World Bank Group i s to forge a new approach with GoC and national stakeholders for sustaining and accelerating improvements in governance and anti-corruption. Fostering institutional arrangements for more effective use o f the significant debt rel ief and o i l windfall will be essential. Increasing the effectiveness o f international assistance and overall government spending-in l ine with the Paris Declaration on aid effectiveness-will also be crucial.

PFM, anti-corruption and civi l service reform

15. Cameroon’s detrimental label of most corrupt country in the world in the first Transparency International Annual Report,16 1998 was a wake-up call for the Authorities who then started a series of initiatives to strengthen governance and public expenditure management (PEM). GoC adopted in December 1998 an action plan for improving public expenditure management, and in June 2000, they adopted a five-year (2000-05) PNG. The PNG (see B o x 2) i s a comprehensive package o f measures aimed at improving governance, which includes: fighting corruption, strengthening PFM, transparency, accountability and participation in public affairs, and improving justice and human rights. In November 2005, GoC adopted an updated PNG (PNGII) and i t s action plan, with its emphasis o n high-impact results to be measured through actionable performance indicators.

Is Cameroon: Fourth Annual Progress Report and JSAN Report No 41753,2007. World Bank, Washington D.C. Annual Report, 1998. Transparency International, Berlin.

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Box 2: The PNG-Strategic objectives and priority action plan.

The PNG strategic objectives are: (i) Support sustainable growth and development; (ii) Reduce the poverty and social exclusion which affect a large part o f the population; (iii) Build capacities for major actors, notably the decentralized territorial communities; (iv) Promote government/private sector/civil society partnership; (v) Strengthen the ru le o f law to better protect human rights, reform the judicial system; (vi) Introduce a real culture o f accountability in public affairs management; and (vii) Improve transparency in the functioning o f government apparatus, combat corruption.

To ensure effective implementation, GoC adopted in August 2000 a Priority Action Plan to improve governance and fight corruption. Actions are grouped in seven priority areas: (i) pursuing improved tracking o f public expenditure; (ii) strengthening social sector management, notably education and health; (iii) in-depth reform o f procurement procedures; (iv) enforcing the ru le o f law and ensuring the legal and judicial security o f investments; (v) improving citizens’ information on public management; (vi) intensifying the combat against corruption; and (vii) identifymg and executing community-level pilot programs, to be managed by local governments.

1 Source: Cameroon: Poverty Reduction Strategy Paper, April 2003

16. Because of the reforms under the PEM action plan and the PNG over the last decade, some gains have been achieved in the area of PFM, including procurement, and anti- corruption. Progress in PFM included decentralization o f budget management, a more comprehensive budget, adoption o f a functional budget classification, audit o f the accounts, and organizational and operational audit o f the National Oil Company, (in French, Sociite‘ Nutionale des Hydrocarbures [SNHI), and procurement system reforms (see Box 3 for more details). GoC has also established the institutional framework for fighting corruption. The implementation o f EITI i s continuing, focusing on the independent audit o f oi l revenues and the development o f oversight capacity by civi l society organizations.

17. Major reforms took place in the procurement area, including: (i) the creation in February 2001 o f A M P , a new procurement regulatory agency, to oversee public procurement function; (ii) the appointment o f independent observers in procurement commissions and recruitment o f independent auditors to audit procurement contracts upon their completion (annual audits o f public procurement contracts have been conducted by independent consulting f i r m s since 2001); (iii) the adoption o f a new procurement code in 2004 in line with international standards; and (iv) the undertaking in 2005 o f a CPAR,” using the baseline indicators developed by the Organization o f Economic Co-operation and Development-Development Assistance Committee (OECD-DAC). The CPAR scored 69 for the national procurement system on a scale o f 100. A specific procurement improvement action plan for the period 2006-2008 i s being implemented. A major aspect o f this action plan i s the need to strictly enforce sanctions on observed violations o f the procurement rules. GoC organized a workshop in November 2007 to assess the efficiency and transparency o f procurement operations and make recommendations for strengthening implementation further.

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Box 3: Progress on PFM

Budget formulation: the budget i s more comprehensive as it incorporates central government operations, the roads fund, and spending that used to be financed directly through SNH. Sector strategies and MTEFs have been developed, with World Bank support, for the ministr ies o f Education, Health, Rural Development, and Public Works to support budget preparation and align the budget to its strategic priorities. The preparation o f sector strategies and MTEFs for a number o f other min is t r ies (including justice, telecommunications, and social development) i s underway.

Budget execution: an integrated public finance information system, (in French, Systeme Integre‘ de gestion des Finances, [SIGEFfl), was introduced. I t has somewhat improved the tracking o f the f low o f resources through the budget execution chain, facilitated the preparation o f budget execution reports and the regular reconciliation o f receipts and payments, and improved the transparency o f budget management to some extent.

The payroll management i s being decentralized in order to make l ine ministr ies more accountable for the daily management o f their personnel. An information management system (SIGIPES) has been introduced to facilitate and coordinate this decentralization. This program i s now operational within several pilot ministries-primary and secondary education, health, finance and civi l service. The Authorities were trying to tighten the security o f the payroll management system against fraud and mismanagement before extending decentralization process to other ministries.

Treasury and debt management: The majority o f government accounts held in commercial banks have been closed and their balances transferred to the Single Treasury Account at the Bank o f Central African States (in French, Banque des Etats de I’Afiique Centrale [BEACj). Procedures have been adopted to centralize cash management through the creation o f a permanent committee in charge o f managing the treasury. An independent audit o f domestic debt was undertaken and a new debt service schedule for 2006 and beyond i s being implemented.

Fiscal reporting has improved in quality and timeliness. Monthly fiscal data are now available within one month o f the reporting period. GoC i s publishing monthly budget execution monitoring documents on a regular basis since mid-2005. The accounting nomenclature has been adapted and harmonized with the budget nomenclature, thus facilitating the preparation o f financial accounts. The Chamber o f Accounts became operational in January 2006 and has issued its first report on government financial accounts.

Sources: Cameroon, Enhanced HIPC Debt Initiative- Completion Point Document, Report No.40309-CM, 2006; and PEMFAR, Report no. 38179-CM, 2006.

18. The Priority Action Plan of the National Governance Program includes measures to curb corruption among civil servants. GoC has established anti-corruption units in al l ministries and in some public agencies. Their membership includes the c iv i l society and c iv i l servants. A national Anti-corruption Observatory under the authority o f the Prime Minister coordinates their activities. More recently, the Authorities created the National Anti- corruption Commission (in French, Commission Nationale Anti-Corruption (CoNAq), an independent agency to spearhead the anti-corruption drive, and approved a bill that requires asset declaration by senior public officials. Several public managers have been convicted o f mismanagement or financial embezzlement and put under arrest.

19. Despite these achievements, Cameroon st i l l has a long way to go to create an environment of strong governance and reduced corruption conducive to economic development. Although the country’s Transparency International corruption rating rose from last place in the late 1990s to 138th o f 163 countries surveyed in 2006, corruption remains a serious problem. Cameroon’s CPIA rating o f 3.2 for 2006 i s close to the Sub-Saharan Afr ica

27

average o f 3.3, but ratings for transparency, accountability, and corruption in the public sector as wel l as property rights and rule-based government are a mere 2.5. These ratings are consistent with the WE31 Worldwide Governance Indicator for Cameroon. GoC recognizes the governance challenge and has requested further support f rom international development partners to improve governance and strengthen the fight against corruption by fostering public sector management reforms specifically in the P F M sector.

20. M a n y challenges are s t i l l ahead for Cameroon to improve the PFM efficiency and transparency and therefore enhance economic growth prospects and reduce poverty. As pointed out by the 2006 PEMFAR report, the growth prospects o f the Cameroonian economy and i ts ability to deliver o n the poverty reduction objectives o f the PRSP will be substantially enhanced if Cameroon makes progress on i t s PRS priorities o f improving governance, strengthening human capital, rebuilding infrastructure, improving the climate for private sector investment, and promoting regional integration.

21. The public sector has a major role to play in these areas and the budget i s a key instrument for public actions in fostering progress. The recent PEFA report, released in January 2008, stressed several weaknesses in the six core dimensions o f PFM performance:

(0

(ii)

(iii)

(iv)

(vii)

Budget credibility remains questionable because gaps between actual out-turns and originally budgeted expenditures remain significant (20 percent less in 204 and 2005) while actual exceed projected revenues (103 percent in 2005). In addition, the PEFA reports considerable extra-budgetary expenditure, and it indicates that the stock o f arrears are somewhat hard to determine. The PEFA goes further to observe that. arrears stock was not reduced over the last 2 years mirroring difficulties in controlling the budget; Comprehensiveness and transparency i s s t i l l l imited since ha l f o f the budget operations (and most o f donors’ funded projects) are not properly covered, transfers to decentralized entities are not reported, and budget reports made public are either incomplete or unreliable. The data regarding the State Owned Enterprises and local municipalities are not consolidated and are not released; Policy-based budgeting i s weak though formal budget preparation based on MTEF and a budget calendar i s applied, and line ministries are involved in preparation process and the National Assembly approves the budget before fiscal year begins. Actual budget calendar i s too compressed and does not allow line ministries to participate meaningfully in the budget process. Furthermore, i t does not seem that sector strategies guide the resources allocation process, and disconnect between capital and recurrent budget remains; Arrangements for controls of budget execution and stewardship in the use o f funds are not fully effective. Payroll represents more than 40 percent o f domestically- financed spending, but i t s control i s impaired by weaknesses in the HR and payroll management systems, raising concerns over the reliability and security o f the wage bill, salary arrears and size o f the personnel. Complexity and fragmented nature o f the expenditure chain translate into long spending procedures, excessive use o f ad hoc regulations and exceptional procedures-such as cash budgeting and advance payments-that tend to distort the processes. Procurement controls system does not prevent improper use o f sole source service and contracts splitting. Accounting, recording, and reporting are among the weakest part o f the PFM due to obsolescence and partial integration o f the existing Financial Management Information System (FMIS). Whi le the Treasury balance and budget settlement law (in French, L o i de Reg1ement)-which represent the budget and state financial

28

22.

reports-are regularly produced, their quality and reliabil i ty remain below international standards. External scrutiny and audit is formally organized around the Chamber o f Accounts and the N A F B C but their independence and effectiveness are s t i l l questionable. They a l l face dearth o f capacity and lack o f proper strategy to oversee the P F M and they are s t i l l not fully operational.

(v)

GoC recognizes the governance challenge and the major role o f the public sector in tackling these challenges, including using budget management as a showcase in fostering overall progress. Addressing such development agenda requires a coordinated effort f rom Government and i t s partners, and agreement was reached between these parties to jo int ly undertake a review o f P F M institutions, policy and performance, and to develop a shared action plan for PFM improvement. T o that end, the Authorities set-up PFMDSC in February 2007 to (i) promote dialogue among stakeholders in Cameroon on the importance o f effective PFM systems and good governance; and (ii) contribute to the formulation o f an action plan for improving PFM in Cameroon. This lays the framework for the donors to be involved in the P F M discussions and diagnostic, as wel l as in the financing o f PFMRAP which would focus o n fostering fiscal discipline, consolidating strategic allocation of resources and increasing operational efficiency and delivery o f service.

The proposed Transparency and Accountability Capacity Development project

23. The proposed project will provide assistance, in coordination with international partners, for implementing GoC PFMRAP for strengthening PFM, including procurement. Emphasis will be placed o n strengthening the transparency o f public accounts and sharpening the focus on accountability and oversight. Progress on PFM reform will be tracked using the PEFA approach (where possible), enabling international benchmarking of progress. The project will also support streamlining and strengthening o f personnel and payroll management.

29

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies CAMEROON- Transparency and Accountability Capacity Development Project

m US$ mrlfton US$ = 456 FCFA

I

30

31

Annex 3: Results Framework and Monitoring CAMEROON- Transparency And Accountability Capacity Development Project

Project Development Objective

Contribute (Q to enhance transparency in public

FM, and (io to strengthen accountability

in the use of public resource

IMPROVINt Intermediate Outcome

Outcome I-A. Suitable legal and regulatory framework to manage budget and project are in place and properly applied

Outcome I-B. Controls of expenditures including procurement are adequate.

Result Indicators

Indicator 1 ( TransDarencv) Availabi l i ty o f information on resources received by service delivery units (PEFA PI-23)

ndicator 2 (Accountabilitv) Public access to key fiscal information (PEFA PI-I 0)

COMPONENT 1 BUDGET MANAGEMENT INCLUI

Intermediate Outcome Indicators Indicator 3 Legal and regulatory texts to enforce the new Budget L a w are signed and effective. Indicator 4 Completeness o f the financial statements (in French, Loi de Reglement) (PI-25 i)

Indicator 5 Percentage o f investment projects which are domestically financed in annual budget, compliant w i th the new project legal and procedures framework.

Indicator 6 Number o f control steps in expenditure chain.

Indicator 7 Percentage o f contracts above threshold procured through open competition, in selected ministries (Health, Education, Agriculture, Public Works, and Finance) and Municipalities (YaoundB and Douala). (P I - I9 i, modifled)

IJse o f Outcome Informat ion

This indicator will help measure the impact o f project activities in GoC ability to effectively implement the budget supporting the service delivery in critical priority sectors (limited to Health and Education). T h i s indicator will capture how the project i s influencing the extent to which the general public and interest groups have access to relevant and quality fiscal plans, and performance during and after project imdementation.

NG PROCUREMENT

This indicator measure whether the new Budget Organic Law i s implemented as intended.

New arrangements introduced by Organic Law for accountability o f public finance officials are operating.

This indicator will track the impact o f the effective application o f the new project cycle regulatory framework in selection, planning and budgeting o f capital spending.

U s e o f Outcome Information

This indicator will track improvements introduced by controls streamlining in procurement o f goods and services as well as in budget spending processes. This indicator w i l l show if arrangements for the exercise o f control and stewardship in the use o f public funds are in place and operating in key spending ministries.

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SUB-COMPONENT 2.1 INTEGMI'ION Ah'D ~ ~ V ~ L O ~ ~ ~ ~ T OF THE FINCANCIAL AND ~ A N A ~ ~ ~ E N T

SYSTEMS

Outcome 2-A Budget andfinancial reports mandated by financial regulation are

Timeliness o f the issue o f semi- annual budget reports (PI-24 ii)

ced, and disseminated to

gement, and reporting

S ~ - C O ~ P O N E N T 2.2 M O D ~ ~ ~ ~ O N OF HR M ~ A ~ E M ~ N T ANI) PAYROLL SYSTEMS

Intermediate Outcome Outcome 2-B Payroll controls and audits are regularly and efficiently performed.

STRI! Intermediate Outcome

Outcome 3 Oversight and external audits mandated by financial regulations are regularly and efficiently implemented by relevant institutions

Intermediate Outcome Indicators IJse o f Outcome Information

orderly and predictable manner and there are arrangements for the

Degree of integration and

CQMPONENT 3 [GTWENTNG EXTERNAL OVERSIt

Intermediate Outcome Indicators Indicator 10 Scope of the legislature scrutiny o f the annual budget law. (PI-27i)

Indicator 11 Timeliness o f the release o f semi- annual budget reports on available media (government websites, national newspapers)

HT AND M&E Use o f Outcome Informat ion

Arrangements mandated by the new Organic L a w for scrutiny o f public finances and fo l low up by Darliament are oueratine. Adequate financial records and information are produced, and disseminated to meet broad external oversight needs.

* P I i s PEFA Indicator.

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Annex 4: Detailed Project Description CAMEROON- Transparency and Accountability Capacity Development Project

1. In recent years, GoC has been able to stabilize its economy and better its growth prospects following the achievement of the completion point of the HIPC in April 2006 and with the spillover o f substantial increase in o i l revenues. In addition to actions geared towards promoting private investment, the Authorities are striving to increase efficient use o f public resources through the scaling up o f PFM reforms.

2. The broader long-term reform of Cameroon’s public finances i s carried out by PFMDSC and PFMDTS, which has development partner support within the framework o f the CMB (see Box 1). PFMDTS i s so far overseeing development o f PFMRAP. Seven thematic working groups, which are headed by respective administrative unit chiefs, were commissioned by PFMDTS to finalize P F M assessments and prepare action plans in the following areas: (i) Institutional and legal P F M environment; (ii) Budget planning, (iii) Budget execution, (iv) Debt and cash management, (v) Civil service and payroll, (vi) Tax reforms, and (vii) Judicial and administrative controls. Whi le the diagnostic work has registered some delays, GoC i s expected to finalize PFMRAP and implementation strategy by the end o f December 2008. These documents will help GoC clarify i t s strategy o f PFM reforms and spell out implementation arrangements, especially in the area o f donor coordination.

3. The TACD project i s intended to support implementation of key aspects of this future government PFMRAP with a focus on transparency and accountability activities so to respond to (i) the necessity to improve the quality o f the spending through enhanced strategic allocation and operational efficiency in PFM, and (ii) the need for more transparency and accountability in the use o f public resources through financial information dissemination to the public and interested groups.

4. To this end, the IDA-proposed project components have been selected using the following criteria: (i) activities that consolidate and deepen achievements in public expenditure management and financial accountability accomplished during the recent years (new budget legal framework, Procurement), (ii) crosscutting issues o f the h t u r e PFMRAP and long awaited actions (FMIS, Payroll, and Oversight and Controls) in which IDA has a competitive advantage, (iii) coordination and M&E activities, in which building capacity in reform management and leadership i s critical for the country. Furthermore, the IDA supported activities have been chosen (i) with respect t o the PFM dimensions where the 2007 PEFA report scores are the least favorable, and (ii) with due consideration for the other donors’ intervention.

5. The proposed PDO will be achieved through four project components-which have been identified during pre-appraisal mission and which reflect government priorities-for an estimated IDA financing o f US$lS.OM (including an advance PPF o f US$0.7 mi l l ion and a contingency fund o f $0.9 mi l l ion ):

. Component 1 : Improving Budget Management including Procurement (US$4.1M); . Component 2: Integration and development o f the FMIS including the HR and Payroll . Component 3 : Strengthening External Oversight and M&E (USS1.9M) Management (US $5.9M);

Component 4: Support to the Project Focal Point for P F M Reforms coordination (US$15M).

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Component 1-Improving Budget Management including Procurement (US4.1 million)

Prevailing situation. Over the last seven years, Cameroon has undertaken many reforms to improve PFM. These reforms were given greater focus and urgency with the adoption o f the PRS in April 2003 as the policy framework for public actions. The main thrust o f the reforms has been to improve transparency and effectiveness o f the public financial system so that public expenditures can be a more effective instrument for poverty alleviation. T o this end, the Authorities have taken notable initiatives, particularly in budget preparation as wel l as budget execution even though these reforms were not as rewarding as expected.

With respect to budget preparation, the key reforms included introduction of the MTEF in Cameroon in 2000. As pointed out in the 2006 PEMFAR report, the MTEF, prepared with heavy donor involvement, particularly the Wor ld Bank, consists o f three main components: a 3-year planning period, a detailed costing o f various programs in priority sectors, and detailed income and revenue projections, that includes GoC budget, as wel l as donor and H P C resources. However, the progresses in expanding the scope o f this exercise and as wel l as introducing MTEF concepts to the broader budget preparation process have been slow until now. The MTEF continues to play l imited role in informing the annual budget presented to the legislative body. Given the r isks that the MTEF reforms would not be sustained if ownership was not widespread and that significant investment has already been made on the MTEF, donors have encouraged a rapid move to a global MTEF. As a result, the National Assembly has adopted the P F M Organic L a w that would allow for a budget process including a medium term perspective. For the donors involved in MTEF area (the Wor ld Bank, the EC, France, and Germany), the challenge nowadays i s to assist GoC in enforcing the Organic Law, equipping i t s teams with the required tools and instruments that will help in gradually mainstreaming MTEF in the budget process.

Various institutional and technical factors hamper budget execution, including the nature o f the expenditure chain, the use o f ad hoc regulations and exceptional procedures that tend to distort the process-such as cash budgeting and advance payments, and the shortcomings in capital budget and investment project preparation. The complexity o f the expenditure chain, reflected in partially integrated FMIS, slows down the budget execution process with a negative effect o n operational efficiency and the delivery o f public services.

As a result of weak budget execution processes, investment projects implementation i s slow and bears heavily upon economic growth. Capital spending i s usually far below target owing primarily to cumbersome spending and procurement procedures as wel l as poor planning and appraisal of investment projects, raising concerns about achievement o f the faster growth needed to substantially lessen poverty. A key factor for poor capital budget outcomes i s the absence o f adequate institutional arrangements and instruments ensuring rigorous identification, evaluation, and selection o f projects for the budget as wel l as monitoring projects under implementation.

10. Additional challenges to budget management relate to procurement inefficiency. As concerns the reform o f PFM from a broader perspective, it seems that procurement planning i s often taken for granted. Absence o f planning i s relatively common among the entire Administration due to delays in the adoption o f budgets and uncertainty as to the amounts to be allocated. A second problem i s insufficient knowledge o f procurement techniques. A good number o f errors arising f rom an inadequate control o f technical aspects have been pointed out by independent observers and by specialized public contracts control boards. The main factor explaining this issue i s the absence o f data processing tools, instruments that, if available, would reduce the amount o f time needed for preparing tender files, comparing the prices proposed by various suppliers or for comparing prices for similar goods or services in various geographical areas.

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11. Finally, budget management and especially capital spending, are hindered by weaknesses in the Treasury department. Important level o f expenditure without pr ior commitment and authorization or sufficient budget allocations, translates into an accumulation o f arrears at the level o f treasury and into significant r isks o f budgetary slippages, as those experienced in 2004. Whi le a new system i s in place for the management o f bank accounts in real time, with the installation o f a computer network linking BEAC, the primary commercial banks, and the main Treasury offices, some difficulties are s t i l l encountered in the daily transactions, transfer o f funds, presentation and cashing checks, as wel l as for cash management due to weak capacity.

12. The January 2008 PEFA report confirmed these pervasive PFM weaknesses through a l l critical budget management dimensions (see Annex 1 paragraph 21 and page 28 ).

13. Objectives. In line with the PEMFAR and PEFA reports recommendations, the objective of this component would therefore be to support implementation and deepening of the ongoing budget management reforms, following the adoption of the new Organic Law, in a bid to improve and accelerate budget execution especially for the capital spending.

14. Activities envisaged under the TACD uroiect. In this component, focus will be mostly on giving support to revision of processes, methods and regulations for budget programming, budget execution including procurement, budget monitoring and controls, and Treasury accounting in the context o f the new budget Organic Law, in order to primarily address deficiencies in capital budget management and limitation in the execution o f investment projects. Since the EC, Germany, AfDB and another IDA project (PRSP Trust Fund) are supporting the development o f a central MTEF and the extension o f the sector MTEFs to other ministries, the project therefore will not provide assistance to the MTEF work. Proposed activities under this component will include:

0 Assisting GoC implement the changes and reforms introduced by the new Organic L a w and by the Procurement Code (adopted in 2004) through technical assistance, training, and provision o f goods and equipment; Streamlining the expenditure chain as wel l as the public contract execution chain, including the implementation o f current regulations that govern multi-annual commitments authorization and annual payment appropriations for capital spending; Strengthening line ministries’ capacity for project identification, costing and planning through the design and implementation o f project preparation procedures and tools (Procedure manuals and guidelines, database, legal framework, etc.) and training o n project cycle; Modernizing the Treasury through rationalization o f i t s current organization, revision o f the accounting chart, and professional development o f State accountants and Treasury internal auditors.

0

0

0

15. Furthermore, in a bid to accelerate capital budget execution, the proposed project will focus on improving the performance of procurement system and procedure. This would be achieved mainly through implementation o f the action plan from the 2005 CPAR, and capacity building. Specific activities will include:

0 Contribution to the set-up o f a public contracts planning system by improving the capacity o f 50 ministries and public bodies, to plan their procurement operations. This exercise i s expected to take place within the entire administration; and Assistance to 7 spending ministries and public bodies that consume most o f the public expenditure (Health, Education, Agriculture, Public Works, Finance, and the Douala and Yaoundt Municipalities) to improve the efficiency and transparency o f their procurement units (optimize

0

39

suppliers selection methods, optimize the preparation o f tender bids and requests for submissions, evaluation o f bids, negotiations, preparation o f contracts and the follow-up o f contract execution).

16. The main beneficiaries of this assistance will be the units responsible for budget planning and execution and procurement in the MINFI, the MINEPAT, and in line ministries: DGB; DGT; Capital expenditures Directorate; DRFi; and Planning Departments, as wel l as the Douala and Yaounde Municipalities, ARMP.

17. Expected outputs: By project-end, it i s expected that this component will provide GoC authorities with the minimum tools for faster and reliable budget execution, and a procurement system which ensures competition and efficiency in the use of public resources. Progress in this area will be measured through gradual improvements made in the institutional framework to manage the budget through the following indicators: (i) Legal and regulatory texts to enforce the new budget l aw are signed and effective; (ii) the annual budget settlement l aw (in French, Loi de Reglement) i s prepared under the new format set forth by the new budget Organic L a w and includes comprehensive information and data on revenues, and expenses (first dimension o f PEFA indicator PI-25 which should improve from C in 2007 to B in 2012); (iii) Investment projects which are domestically financed in the annual budget are more and more compliant with new project’s legal and procedures fi-amework. In addition, enhancement o f expenditure controls will be monitored through (iv) the cut in number o f control steps in the expenditure chain; and (v) the increase in number o f contracts above threshold procured through open competition, in the 4 selected ministries (Health, Education, Agriculture, Public Works and Finance) supported by the project procurement activities.

Component 2-Integration and Development of FMIS including HR and Payroll Management

18. Prevailing situation. The issue of the integration of the F M I S in Cameroon i s critical to the PFM improvements and development. Indeed, MINFI has haphazardly developed various applications during the last 30 years that are not interlinked. These applications include SYDONIA for the Customs; MESURE for Tax Department; IBIS and DEPMI for the budget units in MINFI and other ministries; ANTILOPE and SIGIPES for HR and payroll; CADRE and PATRIOT for Treasury (see Appendix to this Annex). This fragmented approach to data processing within the Ministry, coupled with the absence o f vision and adequate institutional arrangements, as well as shortage in maintenance, security, and financial resources, make the situation almost unmanageable and frustrating for decision makers in MINFI. They are confronted daily with information needs, financial control, reporting needs, and management decisions which the existing tools cannot deliver. MINFI attempted to overcome this situation in many ways, for instance trying unsuccessfully to combine the various systems into a meaningful and functioning instrument, SIGEFI.

(Uss5.9M)

19. A well-thought and comprehensive strategy i s needed for the development of integrated FMISs in MINFIN. An audit o f SIGEFI and o f a l l the ancillary systems used in MINFI was carried out during the last quarter o f 2007. The audit looked at the MINFI’s existing information systems and the way in which they exchange information through SIGEFI. The audit concluded that there i s a need to design and implement a comprehensive strategy and action plan for an integrated information system in MINFI. This integrated system will ultimately make i t possible for a l l applications in MINFI and the l ine ministries to operate o n a common platform which would facilitate computer links to the accounting and budgetary reporting (yielding consistency at DGT and DGB), as wel l as the data links between the revenue collection (Customs through SYDONIA), taxation (through MESURE), accounting (Treasury through CADRE and PATRIOT) and budget expenditure (through IBIS and DEPMI) departments. These improvements should lead to efficiencies and productivity through reliable and transparent exchange o f data.

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20. The current initiative by the Authorities to upgrade and link the HRM system, SIGIPES, and the payroll system, ANTILOPE, has failed to meet expectations. Hence, the necessity to take a step back and start f i rst with the development o f a long-term strategic plan for an integrated information system rather than having a piece meal approach. SIGIPES was developed in 1994 under MINFOPRA sponsorship and built on clienthewer architecture (ORACLE database) while ANTILOPE, based on an IBM mainframe, i s managed by MINFI since 1985. Because o f disparity in the supporting platform, divergences o f promoter departments, absence o f functioning IT network infrastructure, and lack o f clear government IT strategy, these two systems have never been coupled to form the much needed instrument for efficient HRM.

21. Today, as in the past, each of the systems i s still being used to manage some aspects of HR (recruitment, promotion, and assignments with SIGIPES and payroll with ANTILOPE) but they fail to exchange files and data with each other. Consequently, they a l l lack critical and needed functionalities for GoC to properly control salaries and manage HR in Cameroon. As a result, the payroll, which represents a hefty share o f the overall government expenditure, as wel l as government staffs are out o f any meaningful control and the Authorities are striving to fix this uncomfortable situation through personnel data clean up and extension o f SIGIPES to most ministries.

22. However, these efforts to clean up HR data and extend SIGIPES have not been successful. Indeed, despite important financial resources spent until now, and considerable efforts undertaken to clean the database and link the l ine ministries with MINFOPRA and MINFI, the expected results are yet t o be met. There i s s t i l l much work that needs to be done to clean up the HR data and synchronize SIGIPES with the payroll system. There i s n o w a consensus among key stakeholders, that both SIGIPES and ANTILOPE should be replaced by a new and integrated HRPayro l l system. The replacement should not be viewed as a zero-sum game, since the current network system being developed to support SIGIPES would be used for the future system.

23. The challenges in FM systems in Cameroon look daunting; but this country, unlike many Sub- Saharan African countries, has some key advantages in ICT that could be leveraged to tackle the existing shortcomings. The infrastructure environment i s conducive to quality IT and there are appropriate and qualified people and corporations in the sector. The major deficiency i s the absence o f a clear vision and structured approach to the implementation o f government IT projects.

24. Taking into account the identified weaknesses o f the on-going operations; and given the objectives in the FM systems; as well as the particularities related to HRM, this project component has been devised into 2 sub-components supporting respectively the integration and development o f the current FMIS, which i s primarily focused in MINFI, and the renovation o f the HR and Payroll management systems which encompass al l the ministries.

Sub-component 2-1: Integration and development of FMIS (US$l. 7M)

25. Obiectives. The objective of this subcomponent i s to assist MINFI develop and implement a coherent Information and Communication Technology (ICT) project through strategic advice on ICT project management and project implementation in order to enhance financial reporting and increase information production, publication, and access, which are critical to sound and transparent public FM.

26. Activities envisaged under the TACD uroiect. The project will provide technical assistance to MINFI for ICT project management and implementation. The main activities will include support for: (i) definition and implementation o f a coherent ICT strategy and an action plan for

41

continuous upgrade o f the FM system applications; (ii) set-up the appropriate institutional and adequate technical capacity into the ministry; (iii) design and installation o f new systems or enhancements to existing systems; (iv) purchase o f some hardware and software; (v) upgrade o f and interconnection among critical financial applications (Treasury, Customs, Tax, Debt Management, Budget, Payroll, etc.); and (vi) training and change management. In addition, the project will support the design and installation o f MINFI's website and intranet in order to scale up the level o f collaboration and teamwork. The website will be a powerful transparency tool for providing information to public and interested groups about budget implementation and performance o f MINFI's departments.

27. Essentially, the main focus in this component will be to provide strategic advice to GoC in organizing and managing a complex ICT project, devising and choosing appropriate options for the ICT (development and integration o f the existing applications versus turnkey solutions) and ensuring proper planning and procurement for the adopted option. Therefore, most o f this component funding will have to be secured f rom GoC own resources and other donors to purchase equipment, train staff, and develop applications. The project will mostly address critical I C T issues and solutions that are l ikely to be implemented within the framework o f PFM reform but are not currently financed by government or donors. All other enhancements that are needed outside this scope should be undertaken under a more focused IT project geared towards the implementation o f an online administration (E-Government) similar to projects carried out in Ghana, Rwanda, Sri-Lanka, Morocco and Vietnam.

28. ExDected outmt. The result expected by project-end for this sub-component i s to enhance the production of reliable, comprehensive, and timely budget and financial reports as mandated by financial regulations. The outcomes would be measured through improvements in timeliness o f the issue o f semi-annual budget reports (which correspond to second dimension o f PEFA indicator PI- 24). The objective i s to enable the production o f the new semi-annual report mandated by the new budget Organic Law, in six weeks following end o f period, so to improve the current score f rom D in 2007 to B in 2012.

Sub-component 2-2: Modernization of the HR and Payroll management systems (US$4.2M)

29. Objectives. The objective of this subcomponent will be primarily to enhance efficiency, transparency, controls, checks and balances in the management of personnel and payroll information through improvement of the existing information system. Another important objective i s to contribute into accelerating the implementation o f the ongoing HRM reform, in particular the decentralization o f personnel and payroll management database, which i s a key component o f the PFM reform.

30. Activities envisaged under the TACD Project. The project will focus on assisting MINF'I and MINFOPRA to properly manage and implement the current HRM and payroll systems work program. Technical assistance will be provided to (i) conduct an audit o f the existing HRM system, SIGIPES, and payroll system, ANTILOPE (ii) accelerate and complete the ongoing efforts to clean up, harmonize, and secure personnel and payroll files to match budget appropriations for s ta f fs salaries with the actual number o f c iv i l servants; (iii) select, set up, configure, stabilize and deploy the most adequate integrated personnel and HRM tool in most o f the l ine Ministries; and (iii) develop administrative procedure manuals (APMs) which would be accessible on-line in order to increase transparency in public administration, and to strengthen collaborative work and reduce case fi le processing times. Training activities will be financed to strengthen the capacity o f staff involved in the implementation o f the HRM reform as wel l as the HR personnel o f the various ministries in the use and maintenance o f new HRM and payroll systems. Finally, some equipment will be provided to

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complete the network and broaden the availability o f the new HRM and payroll applications to key ministries .

31 Some analytical work o n c iv i l service remuneration will also be financed, but o n a very small scale, because this i s a very complex task which cannot realistically be achieved within the budget for the proposed project. However, it i s expected that the work on c iv i l service remuneration would be moving in parallel with, or slightly in advance o f other IDA-supported operations, such as the DPL, which would be used as a leverage instrument for in-depth c iv i l service reform and in-depth policy, fiduciary, and institutional transformation.

32. Exvected outvut. By project-end, this sub-component i s expected to yield systems, processes, and tools that would enhance payroll controls and audits which ensure a better use’ of core public resources since the salaries constitute the largest item of public expenditures (40 percent). Progress would be measured through improvements f rom score D to B in 2012 in the degree o f integration and reconciliation between personnel records and payroll data (first dimension o f PEFA indicator PI-1 8) hence reflecting improvements in l i n k s and consistency between the personnel and payroll databases.

Component 3-Strengthening External Oversight and M&E (US%1.9M)

33. Prevailina situation. Budget execution in Cameroon i s subject to three sets of controls- administrative, judicial, and legislative-that constitutes the main framework for internal and external controls o n the use o f public resources. Administrative controls are carried out internally within the executive either before the expenditure payment (ex ante) or after the payment (ex post). The highest internal control units are CONSUPE and CDBF which are anchored to the Presidency. General Inspectorate services are located in most o f the ministries while MINFI i s host to al l ex ante controls agencies: Financial Controller, DGB, Inventory Directorate, Payroll and Pension Control Bureau, and DGT as wel l as some o f ex post spending controls: Budget Operations Control Unit and the Investment Budget Control Bureau. External controls, deemed independent f rom executive power, are exercised by the Chamber o f Accounts within the Supreme Court’s (judicial controls) and by the Parliament (legislative or polit ical controls).

34. I n addition, Cameroon has established various ad hoc control and audit entities especially during implementation of the HIPC program to respond to pressures f rom donors or c iv i l society groups asking for evidence o f the authorities’ commitment in the fight against corruption. Created in this framework were the Anti-corruption Observatory in 2000 (in French, Obsewatoire de Lutte contre la Corruption), the Ad Hoc Commission to Fight Corruption (in French, Commission ad hoc de Lutte contre la Corruption), the Ministerial Committees to Fight Corruption (in French, Comites Ministeriels de Lutte contre la Corruption), and more recently, the Financial Intelligence Agency (in French, Agence Nationale d ’Investigations Financieres [ A N I q ) in 2005, and CoNAC in 2006.

35. Despite the existence of this range of bodies and entities involved in PFM internal and external audit and oversight in Cameroon, controls appear to be ineffective due to the lack of performance and significant weaknesses of these institutions. GoC’s recent review18 o f the P F M controls-in the framework o f the PFM reform platform dialogue-has deplored the multiplicity o f internal controls functioning in silos, with overlapping responsibilities, insufficient methods, and inadequate procedures resulting in poor activity planning and implementation, weak capacities, and lack o f autonomy. Furthermore, GoC’s review reckons external controls such as the Chamber o f Accounts and CONSUPE fa i l t o meet most o f the requirements o f the PFM controls set by the

Carried out during December 2007 but the Report i s yet to be validated.

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International Organization o f Supreme Audit Institutions (INTOSAI) whether o f ethical, operational, or reporting standards. Besides, the Chamber o f Accounts-which i s relatively recent (2006)-is striving to become operational with technical assistance and financial resources provided by the EC. So far, only a slight percentage o f the required 2004 and 2005 financial statements (150 out o f 954) have been submitted to the Chamber and n o audit has been completed yet-compromising i t s credibility.

36. In addition, GoC review pointed out the limited controls exercised by NAFBC over the budget despite appropriateness of the existing legal framework. Weak capacities o f parliamentarians and lack o f adequate financial and technical resources compromise budget review and approval. Furthermore, the in i t ia l budget examination i s obscured by complex budget documentation that makes it challenging to access by an ordinary parliamentarian whi le the Loi de Riglement i s shrunken to budget summary tables without any meaningful explanations or development o f accounts. Under these conditions, it i s not surprising the January 2008 PEFA Report characterizes PFM external scrutiny and oversight as dysfunctional, ineffective, and irrelevant.

37. Bringing the PFM external and internal oversight system in line with international standards i s a priority and will be reflected in the future PFMRAP. T o address the need o f effective check and balances in PFM, the Authorities have taken measures to increase transparency and accountability through strengthening the oversight and audit institutions. In this regard, they have started providing additional human and financial resources to CONSUPE and CDBF. Concurrently, MINFI i s stepping up actions to timely produce the Treasury balance and the Loi de Riglement according to existing regulations. However, much remains to be done to substantially improve availability o f budgetary information. The January 2008 PEFA report underscored the weak accounting, recording, and reporting functions in the PFM. It has also recommended strengthening the Chamber o f Accounts and the N A F B C in order to increase transparency and accountability.

38. Complementing the authorities, most of the donors have secured assistance to bolstering the oversight functions and institutions. The EC i s implementing an 11 mi l l ion euros PFM project with a 5.6 mi l l ion euros component devoted to strengthening the internal controls in MINFI, the MINEDUC, the Ministry o f Infrastructures, and the Ministry o f Health as wel l as the external audit at the Chamber o f Accounts. The EC project component objective i s to make the controls bodies and the Chamber o f Accounts more operational and effective through capacity-building activities over a 3- year period. In addition, Canada and AfDB are planning to support respectively the internal and the external controls, including the Chamber o f Accounts and marginally the NAFBC. Reckoning these interventions, the Bank will direct i t s support to external oversight and audit areas where there i s not (or enough) assistance from donors, calling attention to areas where there i s high fiscal risk or opportunity to enhance and fortify demand-side for better PFM governance and transparency.

39. Obiectives. The objective of this component will be to enhance external oversight, communication, and M&E, which are necessary to enable national stakeholders to support effective management and use of public resources, fight corruption, and enable the legislature and citizens to exercise scrutiny and increase demand for more accountability. Given the assistance already secured from other donors and geared to most fiduciary services19, the IDA proposed Project will focus o n strengthening the capacity o f the National Assembly. In addition, project support would be provided to build the capacity o f Local Committees (Cornitis locaux de suivi d 'investissements publics) in monitoring the execution o f investment projects, thereby

l 9 <<The EC and the AfDB are implementing on-going projects with technical assistance to the Chambre des Comptes while the Canadian are planning support in 2008 to the controls units within MMFI and other line ministries.

44

40.

41

42.

43.

complementing the CHOCZ0 program, which i s supporting c iv i l society organizations to exercise oversight and o f the INS in carrying out the evaluation o f the public expenditure impact.

Activities envisaged under the TACD Proiect. First, the project i s expected to provide support to the National Assembly to strengthen legal oversight on use o f public resources, in particular to the NAFBC, given its primary role in this regard. This will involve working in close collaboration with the Secretariat General o f the National Assembly in order to provide strategic and technical support to the N A F B C itself and to the Secretariat General’s staff. This will also involve the development o f effective procedures for the NAFBC, in particular in examining the Loi de Rgglement. This will take the form o f consultancy advice, training, and office equipment including establishment o f a web-site to provide information to the public o n the Commission’s works and reports. T o that end, preparatory work will be undertaken under the PPF to diagnose and propose strategic options for the NAFBC, in the context o f the new Organic Law.

Second, to increase demand side for transparency and accountability, the project will also promote consultative mechanisms between the legislature, civil society organizations, the media and other users o f information. In this regard, one key action would be to support the development o f the Local Committees in monitoring the execution o f investment projects in local districts. Local Committees, which were set-up in 2006 in al l Cameroonian provinces, involve local government authorities, elected personnel, and c iv i l society organizations, and i s s t i l l developing. The T A C D project will assist in assessing the effectiveness o f the Local Committees, as wel l as feasibility o f the expansion o f i t s role to other categories o f expenditure (recurrent budget) and in ensuring publication o f i t s reports to the public. This would link to, and reinforce the transparency dimensions o f the f irst three components o f the project.

Finally, dissemination of budget and financial information among ordinary citizens will be critical to transparency and accountability and to consolidation of external oversight. Since at present, the information available to internal and external stakeholders i s limited, the project would support the development and implementation o f an M&E framework involving systematic and timely production and publication o f user-friendly communications including key information, analysis, progress reporting and performance measures in the use o f public resources. T o th is end, the project will assist in strengthening and extending the tracking o f public expenditures, which i s a powerful tool for identifying whether intended resources reach the front l ine service providers. Funds will therefore be provided to INS to develop i t s methodology for public expenditure tracking surveys, and to deliver training o n the methodologies to practitioners in the public sector and c iv i l society. Support will also be granted for increased public access to information regarding PFM performances, principally via population o f MINFI, A M P , and National Assembly websites with reference to key international standards such as the PEFA and the IMF Code o f Good Practice on Fiscal Transparency. Other measures would include improving the publication o f information on public finances through other available government web-sites.

Exvected outvut. This component i s expected to yield a better functioning oversight system, especially at the level of the National Assembly, which exercises external audits and controls mandated by existing financial regulations. In addition, i t i s expected to increase availability o f budget and financial information to the public. Performance for this component would be monitored through (i) extension o f the legislative scrutiny to fiscal policies and aggregates for the coming year as wel l as detailed estimates o f expenditure and revenues, so to improve score f rom C to B in 2012 o f the f i r s t dimension o f the PEFA indicator PI-27. The last indicator relates to timeliness o f the release

*’ Changer d’Habitudes, s’Opposer a la Corruption in French, meaning Change Habits, and Oppose Corruption

45

o f the regularly produced semi-annual budget reports, on available media (government websites and national newspapers), so to improve access to interested citizen.

Component &Support to the project Focal Point for PFM reforms coordination. (US$l.SM)

44. Obiectives. Institutional arrangements for project preparation and implementation will be embedded in the country's systems to consolidate and sustain Government's leadership in ownership and commitment of the reforms envisaged. The main objective o f this component will be to support capacity building activities for the P F M platform structures, especially the TS to properly carry out i t s coordination, monitoring and leadership roles in PFM reforms in line with the Paris Declaration objectives.

45. Activities envisaped under the TACD uroiect I n coordination with other partners involved in PFM reforms activities, the TACD project will provide technical assistance, equipment, and training to PFMTS in order to manage the project as well as the upcoming PFMRAP with focus on the following activities: (i) setting-up o f functioning and adequate organizational and implementation arrangements for PFM reforms including coordination o f donors' contributions; (ii) execution o f i t s fiduciary responsibilities (project financial and procurement management); (iii) coordination and monitoring day-to-day activities; and (iv) M&E activities, which are critical to effective P F M reforms management (see section C-3- M&E). The project will fund a study to explore the available options for pooling financial resources and deepen donors and government partnership around P F M reforms.

46. Exuected outuut. The results expected in this component are satisfactory implementation of the project and its FM in line with fiduciary standards set by IDA. This should come up from an adequate project management and an M&E system. T w o indicators will be monitored throughout project implementation: (i) the M&E plan for the IDA and PFMRAP that i s to be adopted and regularly implemented; and (ii) satisfactory annual project audit reports are issued by the set deadline (June).

46

Appendix to Annex 4 Mapping of existing FM systems in the MINFI

Payroll Management

Human Resources Management

N O - I

II

III

IV

V

SEBIC

PREBIC

ANTILOPE

SISPER

SIGIPES

DOMAINE

MANAGE MENT

PAYROLL AND PERSONEL MANAGE MENT

REVENUE

ACCOUN TANCY

GENERAL AFFAIRS

MAPPING OF SOFTWARES CURRENTLYAVAILABLE AT MINFI

STRUCTURE/ APPLICATIONS DIRECTORATE

Budget

DEPMI r

Tax I

I PAGODE Customs

Treasury I CADRE

I I PATRIOT

Inventory I IPAME I AUTOMOBILE

I EVACUATION I TRANSPORT I TICKETS

FUNCTIONS

Budget Execution

Spending Authorization (in French, Ordonnancement) and Execution Budget monitoring

Budget preparation

Payroll processing

Payroll data analysis

Personnel management

Processing o f taxes on Personal Computer Processing o f taxes (at Large Taxpayers Unit)

Taxpayers database

Management o f property tax

Custom Tax processing

Customs operations Management Auxiliary accounting

Accounting management (General Ledger)

HIPC payments management

on-going development Management of auto fleet (position transferred to MINDAF) Management o f evacuees (manually administrated ) Administration o f travel tickets and perdiems (manually

CONFIGURATION

Mainframe DPS 7000 GCOS7 ORACLE 9i Batch fi les Windows Server SQL-Server Visual Basic Windows Server SQL-Server Visual Basic Windows Server SOL-Server Visual Basic IBM MULTIPRISE IDEAL DATACOM Windows Server SQL-Server Visual Basic Windows NT ORACLE 8.05 Visual Basic UNIX sco INFORMIX Windows Server N T DELPHI STUDIO ARCHITECT V7 BOFUAND INTERBASE v ;7 ;5 UNIX sco INFORMIX UNIX sco INFORMIX Mainframe IBM Fichier stquentiel I S A M LINUX ORACLE Windows Server SQL-Server Visual Basic Windows Server SQL-Server Visual Basic Windows Server ACCESS

47

N O

BUDGET FORECAST AND ECONOMIC MONITORIN G

DECISIONAL

V I Budget

Treasury

CAEVMINFI

Information Technology

VI11

MAPPING OF SOFTWARES CURRENTLY AVAILABLE AT MINFI

DOMAINE STRUCTURE/ NAME 1 DIRECTORATE

APPLICATIONS

AND PERDIEMS LEAVE

TABORD

BALANCE OF

INTRANET

SIGEFI, ECOFI

HIGH LAYER AND LOW LAYER GESCOUR

FUNCTIONS

administrated)

Administration of public servants and diplomats leave benefits (manually administrated) Scoreboard on Budget execution

Implementation transferred to BEAC Website SET UP ongoing

Management of public finance integrated system

Management of data transfer.

Mail management

CONFIGURATION

Windows Server ORACLE 9i

Windows Server

Windows Server

LINUX Server

On-going

Source: MINFI

48

Annex 5: Project Costs CAMEROON- Transparency and Accountability Capacity Development Project

ID Project Costs by Components (including provisions for miscellaneous)

I 1. Improving Budget Management including Procurement 2. Integration and Development o f FMIS, including HR and Payroll Management Systems

2.1 Integration of FMIS 2.2 Payroll and HR management

3. Strengthening. External Oversight and M&E

4. Support to the Project Focal Point for PFM reforms coordination

5. Contingency Fund

Total Baseline Cost (1+2+3+4+5)

1 Project Preparation Facility

Total Financial Required

1.7 2.2 2.0 4.2

0.1 0.8 0.9

6.2 I 8.1 I 14.3 I 0.2 1 0.5 1 0.7 I

I

6.4 8.6 15.0

Exchange rate 1 US$ = CFAF 450

49

Annex 6: Implementation Arrangements CAMEROON- Transparency and Accountability Capacity Development Project

1. Cameroon has a number of operating technical committees that have been very instrumental in coordinating GoC’s efforts towards economic reforms. In the P F M area, GoC had established PFMDSC in February 2007, which comprises representatives f rom GoC, f rom the donors and from c iv i l society to (i) further dialogue o n P F M reforms, (ii) share common assessment o f the P F M system; and (iii) define an Action Plan which will be the common platform for intervention of development partners as wel l as GoC. T h i s entity could have been able to provide the technical leadership and institutional capacity needed to prepare and implement the proposed TACD project, as wel l as the other donors’ support. Still, i t s composition (ministers and ambassadors) and responsibilities are not adequate for operational needs and reforms management. Hence, i t has been requested to set-up a new institutional arrangement with PFMSC that i s more involved in the execution o f the reforms and PFMTS, which i s wel l endowed to coordinate the work on the ground. Therefore, PFMDSC will s t i l l exist but i t s responsibilities will need to be revised so to reflect the tasks trusted to the new PFMSC. The Bank team has suggested commissioning PFMDSC with PFM dialogue between donors and GoC, and coordination and monitoring o f P F M donors’ activities as wel l as M&E o f PFMRAP.

2. The IDA-financed project will be implemented through GoC’s own institutional arrangements devised for the PFM reforms. MINFI will be responsible for coordination o f implementation o f the IDA project, and it will rely on i t s internal structures and staff to ensure that implementation i s undertaken as planned in the context o f the broader government program. The following implementation arrangements (see also Appendix to this Annex for more details) are envisaged.

3. Strategic Orientation. Strategic coordination of implementation and monitoring of progress of the project will be ensured under PFMSC to be established before project effectiveness to lead the diagnostic over PFM reforms, propose the related PFMRAP, monitor and evaluate reforms as wel l as performance in PFM, and coordinate donors’ support to P F M activities. I t i s chaired by the Minister o f Finance representative. PFMSC would comprise the general managers o f beneficiaries within MINFI. Since the reforms will encompass al l critical aspects o f PFM, such as procurement, internal and external audits, which are under the responsibility o f autonomous agencies, PFMSC needs to be enlarged to include general managers o f a l l participating agencies, outside MINFI.

4. This PFMSC i s vested with the operational coordination and follow-up of the project activities. It will be responsible for approving strategic and operational guidelines during the project implementation and will annually approve the multiyear expenditure program, including the budget for the upcoming year, which will be part o f the overall government budget. I t will review progress in program implementation and assess results against the agreed upon indicators framework. It i s also the forum for crosscutting studies results and reports vetting and adoption. It i s expected that al l PFM reforms intervention will be managed through this PFMSC and other donors who have expressed the need to ensure coordination in P F M reforms, would j o in it once consensus i s reached in MINFI.

5 . Technical activities and FM. The focal point for the daily management of project activities will rest upon PFMTS, set up into MINFI to coordinate and monitor all the PFM platform activities preparation and implementation. PFMTS i s integrated into MINFI structure to harmonize the reform process, assist in planning o f activities and budget, facilitate contracting, manage activities and technical assistance from various donors, and play a critical role in M&E for both the IDA project and the future government PFMRAP. Headed by a coordinator, PFMTS will be staffed by technical experts who will specialize in the main areas o f the reform including (i) Public Finance (Budget, Treasury, and Revenues); (ii) Information Systems; and (iii) Capacity Building.

50

6.

7.

8.

9.

PFMTS will help general directorates prepare their annual work programs. I t will consolidate the work programs into an overall program, which will be submitted to PFMSC. It will provide technical support as required by general directorates for the implementation o f their work programs and M&E system. It will monitor progress in implementation on a regular basis. FM o f the proposed project, like in most o f the donors’ intervention for P F M reforms, will rest upon PFMTS. I t will be supported in project procurement activities by MINFI’s DRFi.

The MINFI i s currently supported by EC technical assistance which will be strengthened under the IDA-financed project to enable it to better fulfill its mandate. Under i t s ongoing Transparency and Governance Assistance Project, the E C has already dispatched 2 technical assistants to help PFMDTS Coordinator organize and manage the unit. However, once a consensus i s reached in the MINFI about the existence o f PFMDTS and PFMTS, IDA wil l complement this support in hiring (i) an FM specialist, familiar with Bank procedures, to assist in FM o f the project; and (ii) short term external expertise in the fields o f training and capacity development, PFM, and M&E, during the f i rs t two years o f project implementation to further develop the capacity o f the MINFI.

The general directorates concerned will be responsible for preparation and implementation of their work programs. The proposed IDA-financed project will be implemented by al l agencies at the central government level involved in budget preparation and execution (DGB, Direction des Investissements, DRFi, and line ministries, General Directorate o f Treasury, Directorate o f Payroll, the MINFI’s I C T Unit { in French, Division des Sewices Informatiques}, and MINFI’s Secretary- General), and in external audits and M&E (NAFBC and INS). Each general directorate and agency will prepare an annual work program, including a procurement plan. I t will implement i t s procurement plan with assistance from DRFi. They will prepare TORS for the recruitment of consultants and define specifications for equipment and office technology needed. They will formulate the training needs o f their staff and prepare a training program with the help o f PFMTS. A focal person will be appointed in each general directorate to work closely with PFMTS on technical and FM aspects, and with the DRFi for procurement aspects.

Procurement. MINFI will have the entire responsibility of the procurement o f the project through its Procurement Unit within the DRFi. The Procurement Unit in the DRFi will bear the fiduciary responsibility for consultancies and goods procured under the project. DRFi will provide support to general directorates on procurement management issues. DRFi will be responsible for the project procurement activities in line with i ts current mandate in MINFI. Recently created, the DRFi has yet to develop relevant experience and institutional sk i l l s in FM and procurement. The project will finance a procurement specialist with good knowledge o f Bank procedures who will be accountable for a l l procurement matters under the project. H e wi l l also provide on-the-job training to the team o f 6 procurement s taf f o f DRFi with the objective to build their capacities to effectively carry out their mission and meet national procurement regulation as wel l as best international practices.

10. Audit and control. The project will be subject to internal and external audits. The MINFI Internal Audit Unit (in French, Inspection GtMraZe des Services) will be responsible for internal control. Hence, it will prepare quarterly audit reports on project management and accounts. Given experience under other Bank projects, i t i s important to assess on a regular basis the quality o f project management and review accounts. I t will review expenditures made under the project, the procedures used, and the quality o f services rendered. I t wi l l send i t s report to MINFI within a month o f the end o f the quarter, with copies to IDA and other donors contributing to financing GoC’s PFMRAP. To assist the Inspection Generule properly undertake i t s new mandate, the project will finance i t s capacity building activities in internal audit.

5 1

1 1. Qualified, experienced, and independent auditors will be appointed in accordance with terms of reference (TORS) approved by IDA to audit use of IDA funds and government resources by PFMTS. The audits will be carried out once a year and will be financed under the project. The independent auditor mandate could be enlarged to other donor funds related to GoC's PFMRAP, should i t be necessary.

APPENDIX TO ANNEX 6- IMPLEMENTATION ARRANGEMENTS FOR THE TACD

52

Annex 7: FM and Disbursement Arrangements CAMEROON- Transparency and Accountability Capacity Development Project

Introduction

1. This i s a record o f the results o f the assessment o f the proposed FM arrangements for the TACD project implemented by MINFI. Based on project implementation arrangements, the overall responsibility for FM will remain with PFMTS integrated to MINFI. The objective o f the assessment i s to determine: (a) whether PFMTS has adequate FM arrangements to ensure that the TACD funds will be used for purposes intended in an efficient and economical way; (b) the T A C D financial reports will be prepared in an accurate, reliable and timely manner; and (c) the project’s assets will be safeguarded. The FM assessment was camed out in accordance with the Financial Management Practices Manual issued by the Financial Management Sector Board on November 3,2005.

A. Countrv issues

2. Cameroon i s formulating a P F M Reform Strategy that i s supported by various development partners. The overall objective o f the PFM Reform Strategy i s to improve the efficiency and effectiveness o f Central and Local Government P F M and accountability processes, including an increase in transparency in the use o f public funds and reduced opportunities for corruption.

3. A PEMFAR was conducted and issued in June 2006. The PEMFAR (incorporating PER, C F A A and CPAR) recognized that substantial fiduciary r isks remain in the following areas: (a) absence o f controls o f the materiality o f expenditures in the administrative phase o f spending; (b) adequate controls are not implemented at the payment phase o f spending; (c) recurrent risk related to the payroll; (d) excessive use o f exceptional procedures in budget expenditures. In addition, the combination o f weak internal control and weak financial reporting leads to a high fiduciary risk. The r i s k i s systemic on treasury management since there i s not independent and effective internal control. Conversely, progress has been registered with the implementation o f MTEF in some key ministries during the last decade.

4. On governance and corruption issues, GoC has initiated a series o f initiatives to strengthen Governance through the adoption o f a five-year National Governance program (PNG). GoC has established anti-corruption units in al l ministries and in some public agencies. Their activities are coordinated by the Anti-corruption Observatory, under the authority o f the Prime Minister office. Moreover, various anti-corruption institutions have been set-up in the framework o f the HIPC program completion. Still, Cameroon has a long way to go to overcome endemic corruption and improve governance as well as PFM.

B. Risk Assessment and MitiPation

5. In addition to the TACD project FM system objectives stated above, the following features o f a strong FM system will be required:

the internal control system should ensure the conduct o f an orderly and efficient payment and procurement process, and proper recording and safeguarding o f assets and resources; the accounting system should support the project’s requests for funding and meet i t s reporting obligations to fund providers including IDA, and other donors; the system should be able to provide financial data to measure performance when linked to the output o f the project; and

0

0

0

53

0 an independent, qualified auditor should be appointed to review the project’s financial statements and internal controls for a l l directorate and agencies involved in the project .

Entity Level

6. The table Risk Rating Summary below shows the results o f the risk assessment conducted for the TACD. This identifies the key r isks that project management may face in achieving project objectives and provides a basis for determining how management should address these risks.

ISubstantial

Table 5: FM Risks Ratiw Summarv

Substantial

nherent Risk

PFMTS should set up an appropriate budgeting system. The P H R D grant will be used to help in setting up t h i s budgeting system.

Country Level H i g h

Project Level Substantial

Overall inherent risk

The 2006 I S N which proposes a support strategy in FY07-08 i s primari ly focusing in addressing governance issues, including conuption. A Bank Economic and Sector Work (ESW) in preparation is meant to contribute to t h i s effort. The P F M reforms action plan currently under development with support f rom main partners i s intended to strengthening the overall FM in Cameroon. The TACD project will contribute to that objective.

Carry out institutional assessment and identify capacity building needs for the relevant implementing agencies (PFMTS, NABFC, DRFi, DGB, DGT, ARMP, etc.).

Design clear implementation arrangements for the TACD project, delineating responsibilities between a l l and each o f the entities.

With financing f rom the PHRD grant, the Bank i s helping to ensure effective FM within PFMTS whic l i s entrusted with FM responsibility.

:ontrol Risk Budgeting

54

Risk Risk Risk Mitigating Measures Rating Incorporated into Project

Design

#ubstantial Acquisit ion and installation o f integrated FM software with proceed f rom the PHRD;

Recruitment o f an FM specialist with proceeds f rom the PHRD and project financing.

Selection o f an accountant among the c i v i l service staff o f the Min is t ry o f Finance to perform under the supervision o f the FM specialist. The selected accountant wil l provide qualification acceptable to

Accounting

Condition of Negotiations

or Effectiveness P/W

Condition o f project effectiveness

Condition of Project effectiveness

No

Internal Control Substantial

Substantial

Substantial

Funds F l o w

IDA and be subject to at least one month professional training in an audit fm.

Development of a robust FM Manual for the project Condition of project during preparation. effectiveness

Use o f Bank fiduciary standard, and safeguards in the financial and procurement activities. The future integrated FM software including an adequate accounting system wil l help in achieving reporting requirements.

Financial Reporting

Substantial Auditing Selection o f independent auditors satisfactory to months after project Bank staff ffectiveness

Overall control risk

Overall Risk Rating

Residual risk rating

2 3

4 5

TORS for external auditors. negotiation Development o f a robust FM Manual for the project Credit effectiveness PFMTS Selection o f independent auditors Four months after PFMTS

Credit effectiveness Recruitment o f a FM specialist Credit effectiveness PFMTS Procure, install and train staff in the use o f a computerized Credit effectiveness PFMTS accounting system.

iubstantial

kbstantial

iubstantial

7. Following the assessment, the below action plan has been developed and indicates the actions to be undertaken to strengthen FM o f the project and due completion dates.

Table 6: FM Action Plan

55

C. Strengths and weaknesses o f the FM Svstem

8. Whi le there are n o direct strengths, the project FM i s weakened by the following salient features: The accounting personnel are not experienced in Wor ld Bank procedures; There i s not yet a good understanding o f the financial reporting requirements given that the project accountant has not implemented any Wor ld Bank projects before and has not been trained in the FM and disbursement procedures o f the Wor ld Bank; and There i s n o accounting software in PFMTS. There are a large number o f implementing agencies involved in the project.

0

0

0

0

(a) Institutional and implementation arrangements

9. The IDA-financed project will be implemented through GoC’s own institutional arrangements devised for the PFM platform. MINFI will be responsible for coordination o f implementation of the IDA project, and it will rely on i t s internal structures and staf f to ensure that implementation i s undertaken as planned in the context o f the broader government program. The following implementation arrangements are envisaged:

0

0

A PFMSC i s to be set-up within MINFI i s vested with the operational coordination and follow-up o f the project activities. Day-to-day operational coordination o f the proposed project will be ensured by PFMTS integrated in MINFI structure to oversee the reform process, assist in planning o f activities and budget, facilitate contracting, coordinate activities and technical assistance from various donors, and also play a critical role in M&E for the broader upcoming PFMRAP. During project execution PFMTS shall coordinate and manage: 0

(i) Procurement, including purchases o f goods, work and consulting services, in consultation with DRFi who i s in charge o f these responsibilities;

(ii) Project monitoring, reporting and evaluation; (iii) Contractual relationship with IDA and other co-financiers; (iv) FM and record keeping, accounts and disbursements, and (v) Coordinate the work program o f the implementing agencies.

@) Budgeting Arrangements

10. The proposed IDA-financed project will be implemented by al l agencies at the central government level involved in budget preparation and execution (DGB, DRFi, in line ministries, INS, DGT, I C T Division, and the MINFI General Secretary Office), and in external audits and oversight (NAFBC, Local Committees) and in the National Procurement Regulatory Agency (ARMP). Each general directorate and agency will prepare an annual work program, including a procurement plan. A focal person will be appointed in each general directorate to work closely with PFMTS on technical and FM aspects, and with the DRFi for procurement aspects.

11. The capacity o f the accounting staf f to fulfill the budgeting needs o f the project i s inadequate in PFMTS and the implementing agencies. Therefore, PFMTS should ensure that i t s budgeting arrangements are acceptable to IDA. In addition, the staff in PFMTS and implementing agencies needs to be trained in budgeting activities.

56

(c) Accounting Arrangements

12. The general directorates concerned will be responsible for preparation and implementation o f their work programs. The supporting documentation will be regularly collected and keyed in the accounting system installed in PFMTS.

Books of accounts and list of accounting codes

13. PFMTS will maintain an accounting system similar to those operating for other IDA funded projects. The project specific accounting books have to encompass: a cash book, ledgers, journal vouchers, f ixed asset register, and a contracts register.

14. This accounting book will be updated electronically, A l i s t o f accounts codes (chart o f accounts) for the project should be drawn up. This should match with the classification o f expenditures and sources and application o f funds indicated in the Financing Agreement. The chart o f accounts should be developed in a way that allows project costs to be directly related to specific work activities and outputs o f the project.

15. The chart o f accounts and the accounting books to be used for the project need to be completed in accordance with the requirements o f the Financing Agreement.

Information systems

16. The IDA funds will be handled in a separate database and i t s specific financial statements will be consolidated for reporting purposes. A fully functioning FM system satisfactory to the Bank i s a condition o f project effectiveness.

Staflng Arrangements

17. T o ensure the project i s effectively implemented, MINFI needs to guarantee appropriate staffing arrangements for the whole project life. PFMTS will have an accounting unit including a Financial Specialist - to be recruited - who wil l be responsible for keeping IDA-related accounts. The financial specialist will be assisted by a project accountant selected among the c iv i l servants. Staffing arrangements are therefore adequate for the project to ensure that IDA funds are wel l managed.

(d) Internal Controls and FM Manual

18. A POM should be developed in PFMTS. The POM will describe the accounting system: the major transaction cycles o f the project; funds f low processes; the accounting records, supporting documents, and specific accounts in the financial statements involved in the processing o f transactions; the chart o f accounts; the accounting processes from the initiation o f a transaction to i t s inclusion in the financial statements; authorization procedures for transactions; the financial reporting process used to prepare the financial statements and interim financial reports, including significant accounting estimates and disclosures; financial and accounting policies for the project; budgeting procedures; financial forecasting procedures; procurement and contract administration monitoring procedures; procedures undertaken for the replenishment o f the Designated Account; and auditing arrangements.

57

(e) Funds of Flow arrangements

IDA

Bank Accounts.

GoC Fund appropriated for

the project

19. The following Bank accounts will be maintained for the purposes o f implementing the project:

Designated account in commercial bank denominated

in FCFA and managed by C A A

0 A Designated Account (DA) for the project will be kept by PFMTS and managed by the Debt Management Unit (in French, Caisse Autonome d 'Amortissement [CAA]) in accordance with the current Cameroon external financing management regulations. The bank account shall be opened in local currency in a commercial bank acceptable to IDA in accordance with the Disbursement Letter. It will be used to cover eligible project expenditures incurred by the implementing agencies. Disbursements from the IDA Credit will be deposited into this specific account. The DA ceiling i s set at FCFA 270 mil l ion equivalent to four months o f disbursement following the project disbursement schedule for local expenditures.

Project account in commercial bank denominated in

FCFA and managed by C A A

0 A uroiect account: Funds appropriated in the national budget for the P F M reforms activities will be deposited into the project account in line with project activities needs.

Implementing agencies

TACDP FUNDS FLOW CHART

Initial Advance.

20. IDA will make an init ial advance disbursement f rom the proceeds o f the Credit by depositing into the Borrower-operated DA. Actual expenditures will be reimbursed through submission o f Withdrawal Applications and against Statements o f Expenditure (SOEs), which will be approved in accordance with internal control measures applied to the IDA funds.

58

Disbursement Arrangements

21.

22.

Disbursements from IDA would be init ially made based on incurred eligible expenditures (transaction based disbursements). An IDA advance to the DA would be used by the Borrower to finance eligible project expenditures under the proposed Credit. Another acceptable method o f withdrawing funds from the Credit i s the direct payment method, involving direct payments f rom the Credit to a third party for works, goods, and services upon the Borrower’s request. Payments may also be made through the commercial bank for expenditures against IDA special commitments. IDA’S Disbursement Letter stipulates a minimum application value for reimbursement, direct payment and special commitment procedures.

Upon credit effectiveness, PFMTS will be required to submit a withdrawal application for an init ial deposit to the DA, drawn from the IDA Credit, in an amount up to the ceiling specified in the Disbursement Letter and paragraph 19 above. Replenishment o f funds from IDA to the DA will be made upon evidence o f satisfactory utilization o f the advance, reflected in Statements o f Expenditures (SOEs) and/or on full documentation for payments above SOE thresholds. Replenishmentheimbursement applications would be required to be submitted regularly on a monthly basis. If ineligible expenditures are found to have been made from the DA, the Borrower will be obligated to refund the same. If the DA remains inactive for more than six months, the Borrower may be requested to refimd IDA amounts advanced to the DA.

Use of Statement of Expenditures (SOEs)

23. Disbursements for eligible expenditures under components o f the project would be made against full documentation, except for the following items o f expenditures: (a) contracts for works in an amount inferior to US$lOO,OOO; (b) contracts for equipment and goods in an amount inferior to US$ 100,000; (c) contracts for consulting f i rms in an amount inferior to US$lOO,OOO equivalent per contract, and contracts for individual consultants in an amount inferior to US$50,000 equivalent per contract, as wel l as all operating costs, which would be claimed on the basis o f SOEs. All supporting documentation for SOEs would be retained at PFMTS to be readily accessible for review by periodic IDA supervision missions and internal and external auditors.

24. IDA will have the right, as reflected in the Financing Agreement, to suspend disbursement o f funds if reporting requirements are not complied with. T o move from transaction based disbursement to report based disbursement where six monthly expenditure forecasts are quarterly made available on the DA, PFMTS would have to meet the following requirements: (a) sustain satisfactory FM rating during the project’s supervision; (b) submit Interim Financial Reports (IFRs) consistent with the agreed form and content within 45 days o f the end o f each reporting period; and (c) submit the expected Audit Reports by the due date, namely the report on Financial statements and the management letter.

25. During the mid-term review the possibility could be considered to shift to a basket funding, pooling donors and government financing, provided proper requirements are met and specific arrangements are made.

( f ) Financial Reporting Arrangements

26. Formats o f the various periodic financial monitoring reports to be generated from the FM system will be developed. There will be clear linkages between the information in these reports and the chart o f accounts. The financial reports will be designed to provide quality and timely information to the project management, implementing agencies, and various stakeholders monitoring the project’s performance.

59

27. The following quarterly IFRs will be produced by PFMTS:

0

0

0

Sources and Uses o f Funds Uses o f Funds by Project Activity/Component DA reconciliation statement including Bank Statement

28. The formats have been defined and agreed upon during negotiations and PFMTS must demonstrate i t s ability to produce these IFRs.

29. The financial statements should be prepared in accordance with International Public Sector Accounting Standards (which inter alia includes the application o f the cash basis for recognition of transactions). The Financing Agreement will require the submission to IDA o f audited financial statements for the funds provided within six months after the end o f the year.

30. The Financial Statements for the funds provide by IDA wil l comprise:

0 A Statement of Sources and Uses of Funds/Cash Receipts and Payments, which recognizes all cash, receipts, cash payments and cash balances controlled by the PFMTS; and separately identifies payments by third parties on behalf o f the entity. The Accounting Policies Adopted and Explanatory Notes. The explanatory notes should be presented in a systematic manner with items on the Statement o f Cash Receipts and Payments being cross-referenced to any related information in the notes. Examples o f this information include a summary o f f ixed assets by category o f assets, and a summary o f SOE Withdrawal Schedule, listing individual withdrawal applications; and A Management Assertion that IDA funds have been expended in accordance with the intended purposes as specified in the relevant Financing Agreement.

0

0

31. Indicative formats o f these statements will be developed in accordance with IDA requirements and agreed with the Country Office FM Specialist by project effectiveness.

(g) Auditing

32. The Bank requires that the audit scope and TORs, the auditor, and the audit standards applied to be acceptable to it. Private auditing f i r m s will undertake audits. IDA funding may be used to pay for the audit. Audits need to be done in accordance with International Standards o f Auditing (ISA).

33 . Any firm o f auditors contracted to carry out the audit should meet IDA’S requirements in terms o f independence, qualifications, and experience.

34. The arrangements for the external audit o f the financial statements o f the funds provided by IDA should be communicated to IDA through agreed TORs. TORS specify what the auditor i s required to prepare. Appropriate TORS for the external auditor should also be developed and selection of the auditor made within four months o f project effectiveness.

35. The new Audit Policy Guidelines allows the project to provide two separate audit reports: (1) the report on financial statement with a unique opinion on financial statements, and may include a special opinion on the SOEs or interim reports and DA; and (ii) the management letter.

60

36. The audit report for IDA funds and the management letter must be submitted to IDA within six months after the end o f each fiscal year.

D. Conclusion of the assessment

37. Description o f the project’s FM arrangements above indicates that although they do satisfy the Bank’s minimum requirements under OP/BP10.02, there remain improvements to be effected for the system to be adequate and provide, with reasonable assurance, accurate and timely financial information on the status o f the project as required by IDA. The recommended improvements are detailed in the FM Action Plan (see above).

E. Supervision plan

38. Supervision missions will be conducted at least three times a year based on the risk assessment o f the project. The mission’s objectives will include the evaluation o f FM systems. A review will be carried out regularly to ensure that expenditures incurred by the project remain eligible for IDA funding. The Implementation Status Report will include FM ratings that are prepared by the Country Office FM Specialist.

61

Annex 8: Procurement Arrangements CAMEROON- Transparency and Accountability Capacity Development Project

A. General

Procurement Environment

1. The adoption o f the new procurement code, approved on September 24, 2004, improved the legal and institutional frameworks. N o special exceptions, permits or licenses need to be specified in the Financial Agreement since the new procurement code allows IDA procedures to take precedence over any contrary provisions in local regulations. However, the latest audits o f public contracts by independent experts revealed persistent weaknesses in procurement operations and practices

2. The CPAR conducted in 2005 indicates significant achievements in the procurement reform undertaken over the past five years. Given that the four pillars o f the systems are in place and functioning (rating o f the Baseline Indicators System i s 69 percent), GoC should now focus on capacity building as wel l as on M&E o f the performance o f the system in both the public and private sectors. GoC’s action plan, adopted at the end o f 2005, includes (i) preparation and adoption o f a procurement capacity building program; (ii) implementation o f a procurement computerized system to better manage planning, execution and M&E o f procurement operations; (iii) building capacity to supervise and follow-up contract execution and (iv) implementation o f specific actions to ensure compliance with and sanctions o f infractions o f the Procurement rules and regulations.

Guidelines

3. Procurement for this project would be carried out in accordance with the Wor ld Bank “Guidelines: Procurement under IBRD Loans and IDA Credits” dated M a y 2004 and revised in October 2006; and “Guidelines: Selection and Employment o f Consultants by Wor ld Bank Borrowers” dated M a y 2004 and revised in October 2006, and the provisions stipulated in the Legal Agreement. Procurement (goods and non-consulting services) or consultant selection methods, estimated costs, prior review requirements, and time-frame would be agreed upon in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation. The Bank’s Standard Bidding Documents (SBDs)<<add to list>>, or Cameroon’s National Standard Bidding Documents (NSBD) if satisfactory to the Bank, will be used.

Advertising

4. A comprehensive General Procurement Notice (GPN) will be prepared by the Borrower and published in the United Nations Development Business online (UNDB online) and in the Development Gateway Market (dgMarket) following Board Approval, to announce major consulting assignments and any International Competitive Bidding (ICB) The GPN shall include al l I C B for goods contracts and all large consulting contracts (i.e., those estimated to cost US$200,000 or more). In addition, a specific procurement notice i s required for al l goods to be procured under I C B in dgMarket and UNDB online. Requests for expressions o f interest for consulting services expected to cost more than US$200,000 shall be advertised in UNDB online and in dghlarket. An Expression o f Interest (EOI) i s required in either the national gazette, a national newspaper, or in an electronic portal o f free access for all consulting firm services regardless o f the contract amount. In the case o f National Competitive Bidding (NCB), a specific procurement notice will be published in the either a national gazette, a national newspaper, or an electronic portal o f free access. Contracts awards will also be published in UNDB and dgMarket, in accordance with the Bank’s Procurement Guidelines (para. 2.60) and Consultants Guidelines (para. 2.28).

62

Procurement of Works

5. The procurement will be done using the Bank’s procedures agreed with or satisfactory to the Bank

Only minor office rehabilitation and c iv i l work are envisaged to be procured under this project.

Procurement of Goods

6. Goods procured under this project would include: vehicles, furniture, and office equipment. T h e procurement will be done using the Bank’s SBD for al l I C B and a National SBD agreed with or satisfactory to the Bank.

7. In the absence o f national standard bidding documents, the Bank SBD will be used for NCB, with appropriate modifications relating to provisions for “advertising and notification”, “currencies o f bid and payment”, “settlement o f disputes”, deletion o f the domestic preference provision, etc. This should ensure that: (i) methods used to evaluate bids and award contracts are known to all bidders and not applied arbitrarily; (ii) all bidders have adequate response time (four weeks) to prepare and submit bids; (iii) bid evaluation and bidder qualification are clearly specified in bidding documents; (iv) n o preference margin i s granted to domestic manufacturers; (v) eligible f i r m s are not excluded from participation; (vi) awards are made to the lowest evaluated bidder in accordance with pre-determined and transparent methods; (vii) bid evaluation reports clearly state the reasons for the rejection o f any non-responsive bid.

8. Procurement o f readily available off-the-shelf goods that cannot be grouped into bid packages o f US$50,000 or more may be procured through shopping in conformity with the clause 3.5 o f the procurement guidelines.

Procurement of non-consulting services

9. Non-Consulting services under this project include maintenance o f the office supply and electronic equipment and other services such as printing and editing. Non-Consulting services are l ikely not to exceed the equivalent o f US$50,000 per contract. Procurement o f such services will be done using prudent shopping procedures in conformity with the clause 3.5 o f the procurement guidelines.

Selection of Consultants

10. Consulting services will be for the following activities: (i) technical assistance, (ii) technical studies, (iii) financial studies, (iv) studies on the f low o f expenses, (v) design o f management information system, (vi) assistance to the modernization o f the HR and Payroll management systems, (vii) selection, setting up, configuration, stabilization and deployment o f the HRM and Payroll tool in al l l i ne Ministries, (viii) capacity building for c iv i l servants involved in the implementation o f the HRM reform as wel l as the HR personnel, (ix) elaboration o f a legal framework and a manual o f procedures for investment projects’ management; These consulting services will be procured with the most appropriate method among the following which are allowed by Bank guidelines and included in the approved procurement plan: Quality- and Cost-Based Selection (QCBS), Quality-Based Selection (QBS), Selection under a Fixed Budget (SFB), Least-Cost Selection (LCS). Selection Based on Consultants’ Qualifications (CQ) will be used for assignments that shall not exceed US$lOO,OOO. Single Source selection shall also be used in accordance with the provisions o f paragraphs 3.9 to 3.13 o f the Consultant Guidelines, with IDA’S prior agreement. All TORS will be subject to IDA prior review.

63

11. Short l is ts o f consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely o f national consultants in accordance with the provisions of paragraph 2.7 o f the Consultant Guidelines.

12. Assignments in excess o f US$200,000, and specialized technical assistance assignments, must be procured based on international short-lists after appropriate advertisement in UNDB on line, DgMarket and in either the national gazette, a national newspaper, or in an electronic portal o f free access.

13. Consultants for services, meeting the requirements o f section V o f the consultant guidelines, will be selected, under the provisions for the Selection of Individual Consultants, through comparison of qualifications among candidates expressing interest in the assignment or approached directly.

Operational Costs

14. Sundry items and other incremental recurring costs that would be financed by the project would be procured using one o f the project’s financial and administrative procedures manuals, which wi l l be reviewed by the Bank. For efficiency purpose, office supply will be procured based on 6 to 12 months’ need, through a competitive process. With respect to services (car maintenance, computers maintenance, etc.), the project will procure by contracting service for a defined period.

Trainings, Workshops, Seminars and Conferences

15. Training, workshops, seminars and conferences attendance, and study tours will be carried out on the basis o f approved annual programs that will identify the general framework o f training and similar activities for the year, including the nature o f traininghtudy tours/workshops, the number o f participants, and cost estimates.

B. Assessment of the borrower’s capacity to implement procurement

Procurement capacity

16. During the project pre-appraisal, the procurement capacity o f MINFI, which wil l have the entire responsibility o f the procurement o f the project, was assessed. This concluded to the fact that there was n o adequate capacity at the Procurement Unit (in French, “Service des Murchb”) located inside the DRFi o f MINFI especially regarding Wor ld Bank procurement procedures. Furthermore, a qualified procurement officer, planned to be recruited through the PHRD Grant, was not on board at the time o f project pre-appraisal. The key issues and risks concerning procurement for implementation o f the project have been identified and used to prepare an action plan (see table below).

17. The overall project r i sk for procurement i s high especially because o f the l o w capacity in Wor ld Bank procedures o f (i) the staff o f the Procurement Unit o f MINFI, and (ii) the members o f MINFI’s procurement commission.

64

l a

x

t" * d 0 .3 Y

+? E 8

U

m

Procurement institutional responsibility and implementation arrangements

18. the project.

DRFi, through i t s Procurement Department, will have the overall procurement responsibility of

19. A procurement specialist wel l acquainted with Wor ld Bank procurement procedures to be recruited will be located at the DRFi Procurement Department and will have the main responsibility for procurement activities within the project. The specialist needs to have extensive experience in procurement, including capacity building and implementing Bank- or donor-financed projects. He/she shall be a member o f a l l the Sub-Commissions for technical evaluations.

20. The procurement specialist will be responsible for training key staff o f the DRFi and members o f the procurement commission o f MINFI in order to enhance their efficiency and to assist them optimize (i) procurement methods, (ii) preparation o f the bidding documents and request for proposals, (iii) evaluations o f bids, (iv) contracts negotiations, and (v) contract preparation and monitoring of contracts execution.

21. commissions shall evaluate proposals using a minimum o f three specialists in the sector.

Regarding the evaluation o f technical proposals for consulting services assignment, all the sub-

22. All contract awards will be realized in due respect o f GoC public contract code regarding the composition and the mandates o f the members o f the procurement commissions such as: (i) tender board (Procurement Commission) established by a decree fi-om the Prime Minister; and (ii) the specialized public tender board. Procuring entities are responsible for ensuring that the necessary national clearances and approvals have been received before the No-Objection requests are transmitted to the Wor ld Bank. Procurement steps at national level that need approval fi-om particular public tenders boards, with respect to specific price thresholds, will be defined in the project’s Administrative Financial and Accountant Manual.

Procurement Plan

23. At appraisal, the Borrower prepared a procurement plan for project implementation providing the basis for the procurement methods. This plan, covering the f irst 18 months o f project implementation, was discussed and agreed upon by the Borrower and the Project Team at negotiations. It will be available in the project’s database and a summary will be disclosed on the Bank’s external website once the project i s approved by IDA Board o f Executive Directors. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvement in institutional capacity.

C. Frequency of Procurement Supervision

24. to v is i t the field at least twice a year to carry out post review o f procurement actions.

The capacity assessment o f the implementing agencies has recommended supervision missions

D. Details of the Procurement Arrangements

1. Works, Goods, and Non Consulting Services

25. L i s t o f contract packages to be procured:

67

1 2 3 4 5 6 7

EStim&!d Cost Pre- Domestic Review

Ref. Contract (US OOO Procure- quali6- Pref- by Bank No. (Description) equiva- ment cation erence (Prior /

Com Jonent 1 1 Office equipment 150 ICB N O N O Prior

lent) Method (yedno) (yedno) Post)

for the Treasury department

26. I C B Contracts estimated to cost above US$150,000 for US$150,000 for goods per contract, the f irst three N C B contracts to be executed, and al l Direct Contracting wi l l be subject to prior review by the Bank.

8 9

Ex-pected Bid- Comment/

Opening Completion Date Date

June 2010 November 2012

2. Consulting Services

1 2 3 4 5 6

27. L i s t o f consulting assignments with selection methods and time schedule.

7

1 Assistance for the implementation to the 187 Individual Prior Year 2

2 Assistance for the implementation o f the 187 I C Prior Year 2

3 Elaboration o f a legal framework and a 213 QCBS Prior Year 3

new organic law Consultant (IC)

new financial model

manual o f procedures for projects' management

in accordance with the new Budget 4 Reorganization o f the treasury department 107 QCBS Prior Year 3

Ref. No.

121 2012

121 2012

121 2010

061 2012

Description of Assignment

6 Assistance for the definition and 600 I C Prior implementation o f the project related to the computerization o f the public finances

up the payroll f i les and civi l servant Assistance to the modernization o f the 340 QCBS Prior HR and Payroll management systems

7 Assistance for the organization to clean 360 QCBS Prior

Esti- mated cost

(us$ooo e q u i v a 1 en

Year 1 121 2012

Year 2 121 2010

121 2012 Year 2

Selection Method

Review Expected by Bank Proposals Comments/ (Prior / Submission Completion Post) 1 Date 1 Date '

I OrganicLaw -

5 I Assistance on the inspection o f the I 213 I QCBS I Prior I Year5 I 1212012

68

I Selection, setting up, configuration, I 220 I QCBS I Prior I Year2 I 12/2012

Assessment o f the capacity o f the fiiance 53 I C Prior Year 1 commission and elaboration o f a mid- term action plan for their capacity building Assistance on the implementation o f the 80 I C Prior Year 2 capacity building action plan o f the finances’ commission Assistance to the Institut National de la 53 I C Prior Year 2 Statistique (INS) to develop i ts methodology for public expenditure tracking

stabilization anddeploymeit o f the recent integrated personnel and HRM

111 2008

031 2012

031 2012

I

Technical assistance on reforms for the 348 I C Prior Year 1 Technical Secretariat o f the Public Financial Management Dialogue Steering Committee (PFMDSC) Procurement Specialist 197 I C Prior Year 1 Financial Management Specialist 197 I C Prior Year 1

I tool in al l l ine Ministries; I Capacity building for c iv i l servants I 180 I QCBS I Prior I Year2 I 1212012

121 2012

121 2012 121 2012

I involved in the imlementation o f the I I I I I I HRM reform as wkl l as the HR personnel I I Contribution to an integrated and a I 180 I QCBS I Prior I Year2 I 1212012 I reliable networking cokun ica t i on I I I I I I between the existing IT systems 1 Studv on the public service and HRM I 180 I QCBS 1 Prior I Year2 I 1212010

28. Consultancy services estimated to cost above US$lOO,OOO for f i r m s and US$50,000 for individuals per contract, and Single Source selection o f consultants ( f i rms and individuals) will be subject to prior review by the Bank, as wel l as the first three contracts o f consulting f i r m s and the f i rs t three contracts o f individual consultants regardless o f contract amount to be executed.

29. Short l i s t s composed entirely o f national consultants: Short l is ts o f consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

69

Annex 9: Economic and Financial Analysis CAMEROON- Transparency and Accountability Capacity Development Project

I.

1.

11.

2.

3.

4.

5.

Project Objectives

The PDO i s to enhance transparency, efficiency, and accountability in public resources utilization.

Current issues

The issues with public resources management have been wel l documented in a number o f recently undertaken analytical reports. Addressing these issues as sought under the project objectives will yield significant returns. These issues and their costs are illustrated by three examples below.

Corruption and unpredictable public regulation and processes are severe constraints to growth and development. The Investment Climate Assessmen?l (ICA) carried out by the Bank in 2006 has indicated that corruption i s a serious concern for 47-53 percent o f the entrepreneurs in the formal sector and 40 percent o f the informal urban operators. According to the ICA, corruption costs range between 4.3-6.5 percent o f f irm's turn-over. The ICA also points to the unpredictability o f and heavy burden associated with the regulatory framework. An overwhelming majority o f business people (77- 92 percent) considers that the interpretation and application o f regulations by c iv i l servants are unpredictable. Managers spend about 12-1 5 percent o f their time to solve administrative issues. While corruption and regulations span more than the areas addressed by this project, the overlap i s significant.

Poor budget execution i s resulting in additional costs to the State and private suppliers, as wel l as in lower growth because o f l ow execution rate o f the public investment program. The 2006 PEMFAR notes that delayed payments to suppliers o f goods and services to GoC result in (i) prices raised unduly, (ii) suppliers work to circumvent the system in collusion with public servants, and (iii) some suppliers are not interested in bidding for government contracts, which in tum encourages oligopolistic practices and prices. The PEMFAR also notes that actual public investment as a proportion o f GDP has been l o w in Cameroon in comparison with other countries in Sub-Saharan Africa: 1-2 percent o f GDP in recent years against 4.6 percent for SSA countries. The issue i s more about the l o w execution rate because planned public investments are in the range o f 5 percent o f GDP. The l o w level o f public investment i s compounded by the less than optimal quality o f actual investments which constrain private sector development and make it unlikely to achieve the PRSP growth targets.

The delivery o f social services has been ham ered by the poor governance in public resources management, including procurement operations%. A tracking exercise in the health sector in 2003 found that while budget allocation i s reaching the intended budget holders (effective leakage estimated at 2%), overpricing and side contracts were such that budget holders evaluate the worth o f their budgets between 67-75 percent if i t s face value. Overpricing arises as local suppliers (i) anticipate delays and uncertainties into converting their bills in cash at the regional treasury; and (ii) price the eventuality o f side payments at the treasury level to receive their payments. Another illustration o f the high opportunity cost o f poor procurement i s the high unit cost o f a well-equipped classroom in Cameroon (US$12,000), wel l above the EFA international benchmark (US$S,OOO). With such a high per unit cost, the needed expansion in the number o f schools and classrooms to achieve universal primary education i s not financially sustainable.

21 Investment Climate Assessment. Report No. 38369-CM. 2006. World Bank, Washington D.C. 22 Cameroon: Development Policy Review. 2006. World Bank, Washington DC.

70

Economic Benefits

6. The economic benefits mirror the issues discussed above.

0 Budget allocations and proper implementation in line with PRSP priorities for growth and poverty reduction and progressive improvements in public service delivery will enhance private sector productivity growth, increase incomes, enhance social welfare, and reduce poverty. Furthermore, the integration o f the PRSP principles o f focus on poverty reduction, transparency, accountability and results orientation into PFM will foster progress in governance in Cameroon and encourage the much needed global private investment flows and official development assistance.

0 A better execution o f public investment (level and quality) will have direct and indirect impacts o n growth prospects. Indirect impacts will come from the multiplier effect on private investments. Conservative estimates put the combined impact at close to 1 percentage point o f GDP growth rate.

A more credible budget preparation and execution will reduce payment delays, thus improving the cash-flow o f private suppliers and allowing them to better optimize the use o f scarce working capital. Small and medium enterprises-particularly in public works-are the most l ikely to benefit from reforms in that area.

0 Procurement reforms under the project wi l l foster a greater competitive environment, which will bring in new suppliers with better sk i l l s and innovation. That, in turn, will increase growth prospects.

0 As a result o f a more efficient c iv i l service and transparent budget execution procedures, users o f public services will be able to cut transaction costs o f dealing with the administration, and therefore will save time that could be spent in productive uses.

0 The reduction in irregular out-of-pockets will increase access to health and education services with significant impact on long-term growth.

Financial Benefits

7. An effective governance structure will allow private investor to eliminate side payments and other informal payments. In turn, a more credible budget wi l l benefit the State as private suppliers align their prices on market prices.

Intangible benefits

8. Increased oversight and greater transparency and accountability should result in improved services delivery.

71

Annex 10: Safeguard Policy Issues CAMEROON- Transparency and Accountability Capacity Development Project

NOT REQUIRED

72

Annex 11: Project Preparation and Supervision CAMEROON- Transparency and Accountability Capacity Development Project

Planned Actual PCN review 05/29/2007 Initial PID to PIC 06/16/2007 Initial ISDS to PIC 06/13/2007 Appraisal 02/18/2008 03/18/2008 Negotiations 04/29/2008 0511 212008 BoardIRVP approval 06/24/2008 Planned date o f effectiveness Planned date o f mid-term review Planned closing date

Key institutions responsible for preparation o f the project: Cameroon MINFI, MINFOPRA, MINEPAT, National Assembly,

End o f December 2008 Mid-October 2010

End o f December 2012

Bank staff and consultants who worked on the project included:

73

Bank funds expended to date on project preparation: 1. 2. Trust funds:$0.00 3. Total: $ 642,901.58

Bank resources: $577,654.86 + 65,246.72 = $642,901.58

Estimated Approval and Supervision costs: 1. 2.

Remaining costs to approval: $184,753.28 Estimated annual supervision cost: $80,000

74

Annex 12: Documents in the Project File CAMEROON- Transparency and Accountability Capacity Development Project

A. Proiect Implementation Plan + Procurement Plan 2009-20 10 + Cost Tables by component and by year (2008-2012)

B. Bank Staff Assessments + Minutes o f PCD Review Meeting, May, 2007 + Aide-Memoire and Back to Office Report, July 2007 + Aide-Memoire and Back to Office Report, November 2007 + Aide-Memoire and Back to Office Report, March 2008 + Minutes o f QER Meeting, October 2004 and February 2008 + Minutes o f Decision Meeting, March 12,2008 + Public Expenditure Management and Financial Accountability Review. Report No. 38 179-

CM, 2006 The Wor ld Bank, Washington, D.C. + Cameroon : Country Procurement Assessment Review, August 12,2005

C. Multi Donors Assessments + Public Expenditure and Financial Accountability Report. January 2008. Commission

EuropCenne, Cameroun, YaoundC.

D. Others + Evaluation report o f SIGIPES and ANTILOPE + Action plan for effective and efficient SIGIPES and ANTILOPE systems + The country’s PRSP, April 2003 + the Program o f National Governance, June 2000 + the Bank’s FY04-06 Country Assistance Strategy (CAS) + The Interim Strategy Note for the Republic o f Cameroon, November 2006, the Wor ld Bank + the 200 1 Country Procurement Assessment Review (CPAR) + the 2002 Country Financial Accountability Assessment (CFAA) + the 2003 Technical study o f the justice system + the 2004 Public Expenditure Tracking Survey (PETS) in the health and education sectors + the 2004 Development Policy Review (DPR) which has benefited f rom important analytical

work done at the Bank and in Cameroon within the context o f the PRSP, namely: a study on the Sources o f Growth; a comprehensive GrowthRoverty modeling experiments;

’ preparation o f a medium-term expenditure framework (MTEF); and . Sector assessment papers produced by the Bank (health, rural, education, urban sector, etc.)

The Devolution of the Management of State Human Resources and SIGIPES H o w far have we gone? What steps to take next?, published by the Ministry o f Public Service and Administrative Reforms, under the supervision o f the Permanent Secretariat for Administrative Reforms (SPRA), YaoundC, November 2003. Cameroon Public Administration: Analysis and Prospects, published by the Ministry o f Public Service and Administrative Reforms, under the supervision o f Benjamin Amama, prefaced by Rene Ze Nguele, MINFOPRA Cameroon, 2003, 351p.

+

+

75

Annex 13: Statement o f Loans and Credits CAMEROON- Transparency and Accountability Capacity Development Project

(as of 11/28/2007)

Project ID FY Purpose

Orieinal Amount in US$ Millions

Difference between expected and actual

disbursements IBRD I D A SF Grant Cancel. Undisb. Orig. FrmRev'd

PO48204 PO73629 PO74490 PO75964 PO70656 PO65927 PO54786 PO84002

PO73020 . .

PO89289 2006 GEF Sst AgroPastor & Land Mgmt (FY06) 0.00 0.00 0.00 6.00 0.00 5.03 0.00 0.00 ~ ~ b l : 0.00 247.61 0.00 16.00 00.00 16.00 183.17 9.35

2000 2004 2003 200s 2006 2000 2003 2007

2006

(Pipeline) CM-CAPECE Env Oi l T A (FYOO)

CM-Com Dev Prog Sup APL (FY04) CM-Douala Infrastructure (FY03) CM-Edu Dev CB (FY05) CM-Forestry & Env DPL (FY06) CM-PubPriv Partnership & Growth (FYOO) CM-Railway Concession SIL (FY03) CM-Urban and Water D. SIL (FY07)

Forest & Env DPL (FY06)

0.00 0.00

0.00 0.00

0.00 0.00 0.00 0.00 0.00

5.77 20.00

56.35 18.20

25.00 20.90 21.39 80.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10.00

0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

1.07 7.96

36.00 15.91

15.96 6.28 4.48

84.27

6.20

0.45 O.O0 -1.40 0.00 15.32 4.65 7.61 0.00

-0.24 0.00 4.70 4.70 0.63 0.00 2.27 0.00 0.00 0.00

CAMEROON STATEMENT OF IFC's (as o f 10/3 1 /2007)

Held and Disbursed Portfolio In Millions of U S Dollars

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

2006 Aef 3 t Cameroun 1.32 0.00 0.00 0.00 1.32 0.00 0.00 0.00 2000 Aef Hobec 0.53 0.00 0.00 0.00 0.22 0.00 0.00 0.00 200s Aef Nosa iii 1.15 0.00 0.00 0.00 0.68 0.00 0.00 0.00 1996 Aef Notacam 0.99 0.00 0.00 0.00 0.99 0.00 0.00 0.00 2006 Aes Sonel 100.92 0.00 0.00 0.00 31.58 0.00 0.00 0.00 2000 Bicec 0 0.90 0.00 0.00 0.00 0.90 0.00 0.00 2000 Cotco 2008 Fme-Gaz

40.64 0.00 0.00 40.64 40.64 0.00 0.00 40.64 2.74 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1998103 Pecten Cameroon 27.57 0.00 0.00 36.06 27.57 0.00 0.00 36.06

Total Portfolio: 175.86 0.90 0.00 76.70 103.00 0.90 0.00 76.70

Approvals Pending Commitment F Y Approval Company Loan Equity Quasi Partic.

2000 AEF Complexe I1 0.00 0.00 0.00 0.00

76

Annex 14: Country at a Glance CAMEROON- Transparency and Accountability Capacity Development Project

P O V E R T Y a n d S O C I A L

2 0 0 5 P o pula t io n, m id-year (m illio n s j 16.3

1,o 10 GNI(At las method,US$ billions) 16.5

A v e r a g e a n n u a l g r o w t h , 1 9 9 9 - 0 5

C a m e r o o n

GNI per capita (Atlas method, US$)

Populat ion (36) 1.9 Labor force (56) 1.6

M o a t r e c e n t e s t l m a t e ( i a t e a t y e a r a v a i l a b l e , 1 9 0 9 - 0 5 )

Pover t y (% o fpopulat ion below nat lonalpoverty line) 40

Life expectancyat birth (years) 46 Infant mortality(per 1,000 live births) 67

18 Access to an improved watersource (Wofpopulat ion) 66 Li teracy(%ofpopuIat ion age 15+) 68

I V Ma le 126 Female 10 7

Urban population ( % o f totalpopulation) 55

Child malnutrit ion ( % o f children under5)

Gross primary enrollm ent (% o f school-age population)

K E Y E C O N O M I C R A T I O S a n d L O N G - T E R M T R E N D S

I 9 8 5 1995

GDP (US$ billions) 8.1 6.0

Exports o f goods and serviceslGDP 33.4 25.7 Gross domest ic savingslGDP 26.7 19,5 Gross national savingsiGDP 24.1 13.8

Current account balanceiGD P -1.9 -0.9 Interest paymentsiGDP 1.8 2.2 To ta ldeb t IGDP 38.9 118.5 To ta l debt servicelexports 23.4 20.9 Present value o f debtlGDP Present value o f debtiexports

Gross capital l o rm atio niGD P 24.9 14.5

1985 .95 1 9 9 5 - 0 5 2 0 0 4 (average annoalgro wth) GDP -3.2 4.3 3.7 GDP percapi ta -5.8 2.2 1.8 Exports o f goods and services -2.1 4.5 1.7

S u b - L o w e r - S a h a r a n m i d d i o -

A f r i c a i n c o m e

741 2,475 745 1,9 18 552 4,747

2.3 1.0 2.3 1.4

35 50 46 70 IO0 33 29 12 56 82

89 93 114 99 115 87 1B

2 0 0 4 2 0 0 5

15.8 17 .O 18.9 19,7 19.4 24.7 18.5 19 .e 18.9 18.1

-3.4 -1 5 1.4

60.2 17.4 14.6

62.4

2 0 0 5 2 0 0 5 - 0 9

2.6 4.6 0.8 2.7 3.1 1.4

D e v e l o p m e n t d l a m o n d *

Life expectancy

Gross primary

enro Ilm ent per capita GN i Q \ /

Access to improved watersource

-Cameroon Lower-middle-income gro UP

E c o n o m i c r a t i o s '

Trade

Capital l o rm atio n

Domest ic savings

lnde btednes s

-Cameroon -Lo wer-middle-income group

S T R U C T U R E o f t h e E C O N O M Y

( % o f G D P ) Agriculture Industry

Services

Household final consum pt ion expenditure General gov ' t final consumption expenditure imports o f goods and services

M anufacturing

(average annualgrowth) Agriculture Industry

S e rv ic es

Household final consumption expenditure General gov' t final consum ption expenditure Gross capital format ion Imports o f g o o d s andservices

M anufacturing

1985 1895 2 0 0 4 2 0 0 5

21.6 40.2 41.1 40.8 38.0 23.9 14.6 14 .O

11.5 10.2 7.4 7.1 42.5 38.0 44.3 45.2

64.3 7 1.8 7 1.4 70.1 9 .o 8.8 10.2 10.3

31.6 20.7 19.8 24.8

W 8 5 - 9 5 1995 .05 2 0 0 4 2 0 0 5

0.5 5.0 4.4 3.0 -5.8 3.3 -0.2 -1.3 -1.4 6.6 4.0 4.7 -4.2 4.1 6.7 5.5

-2.6 5.0 3.2 3.4 -1.5 5.6 3.9 8.3

/ G r o w t h o f c a p i t a l a n d G D P (Oh) 1

10

30

20

0 I 1 00 01 02 03 04 05

/ G r o w t h o f e x p o r t s a n d i m p o r t s ( % ) 1

-10.8 8.1 9.9 6.7 - E x p o r t s - Imports -4.8 8.9 4.1 4 .8

No te : 2005 data are preliminaryestimates. This table was produced from the Development Economics LDB database. 'The diamonds showfourkeyindicators in the country( in bo ld )compared with its income-groupaverage. i f data are missing,the diamond will

be incom piete.

77

B A L A N C E o f P A Y M E N T S

( U S $ mii i ions j Exports o f g o o d s and services Imports o f g o o d s and services Resource balance

Ne t i ncome Ne t current transfers

19 8 5

2,725 2,573

15 3

-352 47

Current accoun t balance -153

Financing i tems (net) Changes in net reserves

12 1 32

M e m o : Reserves including go ld (US$ mii i ions j Convers ion rate ( D E C , ioca i /US$j 471.1

E X T E R N A L D E B T a n d R E S O U R C E F L O W

( U S $ mil l ions) To ta l debt outs tanding and disbursed

IBRD ID A

To ta ideb t serv ice IBRD ID A

C o m p o s i t i o n o f net resourcef lows Off icial grants Off icial creditors Pr ivate creditors Fore ign direct investment (net inf lows) Por t fo l i o equi ty(net inf lows)

World Bank program C o m m itm ents Disbursements Principal repayments Ne t f lows Interest payments Ne t transfers

S 19 8 5

3,167 280 227

654 34

3

43 103

-241 3 16

0

159 47 16 31 21 10

1 9 9 5

2,045 1,645 400

-528 57

-7 1

64 -13

13 518.6

1 9 9 5

9,425 624 443

430 14 6

8

205 I7

-65 7 0

53 41 95

-53 58

-112

2 0 0 4

3,652 3,936 -264

-403 150

-538

612 -76

119 528.3

2 0 0 4

9,496 117

1,083

645 42 19

588 -131 2 4

0 0

20 112 4 5 67 16 51

2 0 0 5

4,200 4,217

-17

-463 2 17

-262

338 -76

12 4 527 5

2 0 0 5

84 1,032

37 20

31 44 - 13 13

-2 6

/ C u r r e n t a c c o u n t b a l a n c e t o G D P ( Y e ) I 1

- 2

- 3

- 4

- 5

- 0

: o m p o s l t l o n o f 2 0 0 4 d e b t ( U S $ mi l l . ]

A ' 117 G.606 B 1 0 8 3

E; 6.103

\ - I B R D E - Bilateral I . IDA D -Other multilateral F - Private : - I M F G - Short-ter

N o t e : T h i s table was produced f rom the Development Economics LDB database. 8/12/06

Cameroon

P R I C E S a n d G O V E R N M E N T F I N A N C E

D o m e s t i c p r i c e s I% change) Consumer prices Implicit GDP deflator

G o v e r n m e n t f i n a n c e (%of GDP, includes current grants} Current revenue Current budget balance Overall surplusldefici t

T R A D E

(US$ mii l ions j Tota lexpor ts ( fob)

Oil and refined o i l C o c o a beans, butter, cake Manufactures

To ta l impor ts (ci f) F o o d Fuel and energy '

Capital goods

Export price index (2000=100j Import price index (2000=100j Terms o f trade (2000=100/

1985

6 5 11.2

210 9.5 -1.6

1985

2,339 1.6 10 237 207

1,231 92

8 382

75 44

17 3

1 9 9 5

9.1 16.9

13.0 -2.1 -3.2

1 9 9 5

1,655 58 1 2 15 259

1,074 12 3 139 3 15

10 0 99 10 1

2 0 0 4

0 2 11

I 7 2 3 7 0 9

2 0 0 4

2,627 378 537 470

2,635 255

51 430

107 M 3 M 4

2 0 0 5

2 0 4 8

17 7 5 2 2 2

2 0 0 5

3,026 348 569 506

2,765 265

48 435

114 109 10 4

4

2

0 I 00 01 02 03 04 05

nmmn-.GDP deflator -CPI

E x p o r t a n d I m p o r t l e v e l s ( U S $ mill . )

4.000 T

O5 I 8 8 00 01 02 03 04

I Exports enlmports

78

Map section

1963 Level1973 Level

2001 Level

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MMttss MMbbaanngg..

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N O R D -N O R D -O U E S TO U E S T

S U D -S U D -O U E S TO U E S T

O U E S TO U E S T

L I T T O R A LL I T T O R A L

C E N T R EC E N T R E

S U DS U D

E S TE S T

A D A M A O U AA D A M A O U A

N O R DN O R D

E X T R E M EE X T R E M E

N O R DN O R D

EchambotEchambot

MouloundouMouloundou

Abong MbangAbong Mbang

LokomoLokomo

YYolaola

BatouriBatouriYYabassiabassi

LimbeLimbe AkonolingaAkonolinga

FotokolFotokol

MaltamMaltam

MoraMora

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NgaoundalNgaoundal

BBéélabolabo

NangaNangaEbokoEboko

SangbSangbééBankimBankimKumboKumbo

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BafangBafang

NkongsambaNkongsamba

TTikoiko

EdeaEdea

EsEséékaka

SangmSangméélimalima

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MbalmayoMbalmayo

KribiKribi

DschangDschang

KumbaKumba

MamfeMamfeFoumbanFoumban

YYokooko

NtuiNtuiBueaBueaDoualaDouala

EbolowaEbolowa

BertouaBertoua

BafoussamBafoussam

BamendaBamenda

NgaoundNgaoundéérréé

GarouaGaroua

MarouaMaroua

YYAOUNDAOUNDÉÉ

N O R D -O U E S T

S U D -O U E S T

O U E S T

L I T T O R A L

C E N T R E

S U D

E S T

A D A M A O U A

N O R D

E X T R E M E

N O R D

Echambot

Mouloundou

Abong Mbang

Lokomo

Yola

BatouriYabassi

Limbe Akonolinga

Fotokol

Maltam

Mora

Yagoua

Kaélé

Figuil

Mbé

Banyo

Ngai

Touroua

Tibati

Garoua Boulai

Ngaoundal

Bélabo

NangaEboko

SangbéBankimKumbo

Wum

Bafang

Nkongsamba

Tiko

Edea

Eséka

Sangmélima

Ambam

Mbalmayo

Kribi

Dschang

Kumba

MamfeFoumban

Yoko

NtuiBueaDouala

Ebolowa

Bertoua

Bafoussam

Bamenda

Ngaoundéré

Garoua

Maroua

YAOUNDÉ

N I G E R I A

CHAD

CENTRAL AFRICANREPUBLIC

CONGOGABONEQUATORIALGUINEA

EQUATORIALGUINEA

Bénoué

Vina

Djérem

Kade

i

Boumba

DjaKom

Nyong

Mbam

Mbu

Faro

Lom

Wouri

Gul f ofGuinea

LakeChad

To Maiduguri

To Maiduguri

To Massaguet

To Mandélia

To Guelengdeng

To KimTo

PalaTo Leré

To Bouar

To Oyem

To Ikom

Adamaoua

Mts

.

Mts Mbang.

Man

daraMts.

Mt. Cameroon(4,095 m)

10°E 12°E 14°E 16°E

12°E 14°E 16°E

2°N

4°N

6°N

8°N

10°N

2°N

4°N

6°N

8°N

10°N

12°N

CAMEROON

0 40 80 120

0 40 80 120 Miles

160 Kilometers

IBRD 33382

SEPTEMBER 2004

CAMEROONSELECTED CITIES AND TOWNS

PROVINCE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endorsemen t or a c c e p t a n c e o f s u c h boundaries.