FINANCIAL MANAGEMENT IN
WORLD BANK OPERATIONS:
ANNUAL REPORT FOR FY07
Operations Policy and Country Services
OPCFM
December 28, 2007
ABBREVIATIONS AND ACRONYMS
AFR
CFAA
COSO
CPAR
CPIA
CSR
EAP
ECA
FM
FMSB
FY
GAC
IASB
IBRD
IDA
IDF
IEG
IFAC
IPSASB
IFRS
INTOSAI
IPSAS
ISA
LCR
LOA
MDB
MNA
OECD–DAC
Africa Region
Country Financial Accountability Assessment
Committee of Sponsoring Organizations (Treadway Commission)
Country Procurement Assessment Report
Country Policy and Institutional Assessment
Controller’s Strategy and Resource Management
East Asia and the Pacific Region
Europe and Central Asia Region
Financial management
Financial Management Sector Board
Fiscal year
Governance and anticorruption
International Accounting Standards Board
International Bank for Reconstruction and Development
International Development Association
Institutional Development Fund
Independent Evaluation Group
International Federation of Accountants
International Public Sector Accounting Standards Board (IFAC)
International Financial Reporting Standard
International Organization of Supreme Audit Institutions
International Public Sector Accounting Standard
International Standard on Auditing
Latin America and Caribbean Region
Loan Department
Multilateral development bank
Middle East and North Africa Region
Organization for Economic Co-operation and Development – Development Assistance
Committee
OP/BP
Operational Policy/Bank Procedures (statements)
OPCFM
Financial Management Unit, OPCS
OPCS
Operations Policy and Country Services
PEFA
Public Expenditure and Financial Accountability Program
PEMFAR
Public Expenditure Management and Financial Accountability Review
PFM
Public financial management
PREM
Poverty Reduction and Economic Management Network
PRIMA
Portfolio Risk Management System
QAG
Quality Assurance Group
QSA
Quality of Supervision Assessment
RAPMAN Risk and Portfolio Management System
ROSC A&A Report on the Observance of Standards and Codes – Accounting and Auditing
(assessment)
SAI
Supreme audit institution
SAR
South Asia Region
SWAp
Sectorwide approach
FINANCIAL MANAGEMENT IN WORLD BANK OPERATIONS:
ANNUAL REPORT FOR FY07
CONTENTS
Executive Summary ..................................................................................................................... iii
I. Introduction ...............................................................................................................................1
II. The FM Sector: FY07 in Review ...........................................................................................1
A. Improving Partner Countries’ Financial Management...................................................2
B. Providing Reasonable Assurance ...................................................................................8
C. Global Partnerships ......................................................................................................12
III. The FM Sector: FY07 Institutional Agenda .....................................................................14
A. Staff Development .......................................................................................................15
B. Policies, Procedures, and Guidelines ...........................................................................17
IV. Looking Forward: Priorities and Challenges ...................................................................19
Annexes
Annex A:
Annex B:
Annex C:
Annex D:
FM Economic and Sector Work, FY07 ........................................................................21
ROSC Accounting and Auditing Status Report, FY07 ................................................23
FM Institutional Development Fund Grants.................................................................25
FM Committees and Working Groups .........................................................................27
Boxes and Tables
Box 1. South Asia gap analysis.......................................................................................................2
Box 2. Regionally coordinated approaches to capacity building ....................................................3
Box 3. LCR: Taking stock of the use of country FM systems .......................................................4
Box 4. Innovative transition to the use of country systems ............................................................5
Box 5. A pilot project to improve Kenya’s internal audit systems .................................................5
Box 6. Innovative arrangements for audit effectiveness .................................................................6
Box 7. Using corruption risk scan tools ..........................................................................................7
Box 8. In-depth fiduciary review ....................................................................................................7
Box 9. Efforts to improve audit compliance in MNA ..................................................................11
Box 10. Audit exemptions granted during FY07 ..........................................................................12
Box 11. Summary achievements of Joint Venture on Public Financial Management..................13
Box 12. Achievements through partnerships with standard-setting bodies ..................................15
Box 13. Regional knowledge and learning sessions .....................................................................17
Table 1.
Table 2.
Table 3.
Table 4.
Table 5.
World Bank lending for public financial management reform .........................................3
Financial management performance in QAG review .......................................................8
Timeliness of audit reports due in FY07 ........................................................................11
FM Sector staffing ..........................................................................................................16
FM Sector – formal learning activities for FY07 ...........................................................16
iii
FINANCIAL MANAGEMENT IN WORLD BANK OPERATIONS:
ANNUAL REPORT FOR FY07
EXECUTIVE SUMMARY
1.
The objective of the World Bank’s work in the Financial Management (FM) Sector is to
support the achievement of development results by helping partner countries improve their
financial management and providing reasonable assurance on borrowers’ use of Bank funds.
While substantial challenges remain, the FM Sector made encouraging progress in carrying out
this mandate during FY07.
2.
Improving Partner Countries’ Financial Management. The FM Sector completed a
range of analytic and diagnostic reviews in financial management, and worked with partner
countries to implement the findings of those reviews. Through dialogue, technical assistance,
and financing, it assisted countries in strengthening their FM systems. It also intensified its work
on governance and anticorruption.
3.
Providing Reasonable Assurance. FM is fully integrated into Bank project teams
supporting about 1,500 operations with a total commitment of approximately US$100 billion.
Quality Assurance Group and Independent Evaluation Group assessments continue to confirm
the quality of FM work. During the year the Sector launched RAPMAN-PRIMA, a management
information system that, when fully operational, is expected to provide ready access to
information that staff can use to enhance the consistency and quality of FM practices,
procedures, and documentation. Looking forward, the IDA14 Internal Controls Review and a
review of the FM Sector’s quality arrangements are yielding findings that the Sector is using to
further improve quality and will incorporate into the upcoming revision of the FM Practices
Manual and its supporting guidelines.
4.
Global Partnerships. The FM Sector continued its involvement with bilateral and
multilateral donors on FM issues of mutual concern—particularly harmonization of approaches
and preparation for the Accra High-Level Forum on Aid Effectiveness. The Sector also
continued its work with key international accounting and auditing organizations to promote the
development, dissemination, and use of high-quality international standards.
5.
Institutional Agenda. Internally, the Financial Management Sector Board has overall
responsibility for FM in Bank operations, including strategy, quality, human resources,
knowledge and learning, and partnerships. During the year it established a new committee and
working group structure to help it carry out its responsibilities. Among other achievements, the
year saw the issuance of policies, procedures, and related guidance; the development of a
database on sectorwide approaches; the delivery of a range of innovative learning events and
opportunities; and reintroduction of the “FM Sector News”.
6.
Priorities and Challenges. In spite of this record of achievement, the Sector recognizes
that much remains to be done. During FY08—and well into the future—it expects to give
particular attention to the following areas:
iv

Strategic Approach. The Financial Management and Procurement Sector Boards
have agreed that, rather than updating their strategies independently, during FY08
they will prepare a joint strategy, consistent with the Bank’s Long-Term Strategy and
its renewed emphasis on governance and anticorruption.

Use of Country Systems. While it is widely understood that the use of country FM
systems in Bank-funded operations is the Bank’s default option when circumstances
permit, the challenge for the FM Sector is to deepen and accelerate the use of such
systems. To promote and facilitate this activity, the FM Sector is preparing detailed
guidance to help FM staff in assessing the adequacy of country FM systems for use in
Bank-supported operations. The Sector will also continue collaborating with other
Bank groups in providing follow-up support for public financial management (PFM)
reforms through stand-alone technical assistance, components of investment projects
and sectorwide approaches, and development policy lending linked to PFM reform
actions. As a measure of progress in PFM reforms in partner countries, the FY08
annual report will include a trend analysis of PFM performance.

Governance and Anticorruption. Drawing on “Financial Management Sector:
Approach to Governance and Anticorruption,” the FM Sector expects to intensify its
governance and anticorruption (GAC) work at the operational level—assisting partner
countries to improve their FM systems, strengthening fiduciary practices in Bankfinanced projects, and working with global partners. The newly established FM GAC
Working Group will provide guidance in this area, building on Regional initiatives.

Quality Enhancement. As the Sector completes the process of populating the
RAPMAN-PRIMA system with data, the system is expected to become an
increasingly important tool in support of the Sector’s quality assurance arrangements.
In addition, during FY08, reviews of internal controls over IDA operations and of the
FM Sector’s quality arrangements are yielding findings that the Sector is using to
further improve quality and will incorporate into the upcoming revision of the FM
Practices Manual and its supporting guidelines. Management will also give increasing
attention to enhancing the quality of PFM work.

Staffing Issues. In the coming months and years, while the FM Sector will continue
carrying out diagnoses, it will give particular emphasis to implementation. As it
works on the agenda set out in this paper and looks ahead to likely future
expectations, it needs to ensure that the Bank has the necessary skills—particularly
skills in public financial management—to adequately support this work and ensure its
quality. Besides continuing to provide innovative learning opportunities for its highly
decentralized staff, the Sector needs to inventory the skills available, identify skills
gaps, and develop practices and procedures to attract and retain staff with the
appropriate skills.
1
FINANCIAL MANAGEMENT IN WORLD BANK OPERATIONS:
ANNUAL REPORT FOR FY07
I. INTRODUCTION
1.
The objective of the Bank’s work in the Financial Management (FM) Sector is to support
the achievement of development results by helping partner countries improve their financial
management and providing reasonable assurance on borrowers’ use of Bank funds. In carrying
out this mandate in FY07, the FM Sector focused on capacity building. It accelerated capacitybuilding initiatives in public financial management (PFM) by helping partner countries to
continue strengthening their systems and to develop the accountancy profession. At the same
time, it effectively discharged its fiduciary oversight responsibilities by building Bank staff
capacity through regular guidance, robust quality assurance and monitoring arrangements, and
knowledge, learning, and outreach activities. In addition, the Sector maintained strategic
partnerships with global development agencies and professional institutions.
2.
Purpose and Structure of Paper. This paper reports on the FM Sector’s activities and
accomplishments during FY07. Section II summarizes the year’s achievements; Section III
describes the Sector’s institutional agenda; and Section IV sets out the FM priorities and
challenges for FY08.
II. THE FM SECTOR: FY07 IN REVIEW
3.
The FM Sector’s Annual Report for FY061 identified the need for prioritized focus on
four key areas:
1

Implementation: supporting implementation of the FM Practices Manual, particularly
on issues of fiduciary risk management and quality assurance arrangements;
operationalizing PFM reforms as a follow-up to diagnostic work; and mainstreaming
Reports on the Observance of Standards and Codes—Accounting and Auditing
(ROSC A&A) assessments into Bank operations.

Governance and anticorruption: setting out an approach to governance and
anticorruption issues in operational work, building on the current FM operating model.

Use of country systems: taking stock of progress and challenges in expanding the use
of country FM systems, using more examples at the country and project level.

Capacity building: delivering learning opportunities tailored to borrowers’ needs, and
expanding learning opportunities to field-based Bank staff.
See Financial Management in World Bank Operations, Annual Report for FY06 (SecM2007-0064), February
16, 2007.
2
This report shows that in carrying out its two-part mandate during the past fiscal year, the Sector
has made significant achievements in each of these areas.
A. Improving Partner Countries’ Financial Management: Support for Reform and
Capacity Development
4.
Last year’s FM Annual Report acknowledged that, in recent years, a great deal of the Bank’s
FM work had been focused on diagnosing areas in need of work, and it heralded a switch to focusing
on implementation. In FY07, while work on diagnostics continued, it was complemented by the
follow-up that is crucial to helping countries address weaknesses in their PFM systems. In addition,
the FM Sector has continued its work on the use of country systems and has assumed an increasingly
important role in the Bank’s enhanced attention to issues of governance and anticorruption.
1. From Diagnostics to Implementation
5.
By the end of FY07, analytic reviews of PFM systems had been completed for more than 100
partner countries: Country Financial Accountability Assessments (CFAAs), Country Integrated
Fiduciary Assessments, Public Expenditure and Financial Accountability (PEFA) assessments,
Public Expenditure Management and Financial Accountability Reviews (PEMFAR), gap analyses of
public accounting and auditing standards, and institutional FM capacity assessments. (Annex A lists
recently completed reviews, and Box 1 describes the South Asia Region’s approach to analyzing the
gap between national public sector accounting and audit standards and international standards.)
Increasingly, FM reviews were conducted jointly with development partners; reforms were supported
under joint programs of activities and funding; and a shared set of performance indicators developed
by the PEFA partnership program2 was used to monitor progress on implementation.
Box 1. South Asia gap analysis
In FY07, the South Asia FM team assessed gaps in compliance with international public sector accounting and auditing
standards in Bangladesh, Bhutan, Maldives, Nepal, Pakistan, and Sri Lanka. The assessments were intended to (a)
inform a country’s accounting and audit authorities and other stakeholders where local practices stand relative to
international standards for financial reporting and audit; (b) assess variances; (c) chart paths to reduce the variances;
and (d) provide a basis for measuring improvements. The findings of assessments were discussed with country
authorities, and remedial action plans were agreed. Country reports are available on the South Asia FM website.
6.
Support for Reforms. The FM Sector has collaborated with other Bank groups—
particularly the Poverty Reduction and Economic Management Network (PREM) and the
Procurement Sector—in providing follow-up support for PFM reforms through stand-alone
technical assistance, components of investment projects and sectorwide approaches (SWAps),
and development policy lending linked to PFM reform actions. As Table 1 shows, Bank funding
for PFM reform has increased by about 46 percent over the past five years. FY07 capacitybuilding results included numerous examples: better budget preparation in Mali; improved
treasury and cash management in Guatemala, Liberia, and Madagascar; use of automated
systems for financial accounting and reporting in Afghanistan, Burkina Faso, Colombia, and
Tanzania; a more effective internal audit function in Kenya; and a more capable supreme audit
2
According to an unpublished PEFA update report Overview on the Status on Applications of PEFA
Performance Measurement Framework, August 29, 2007, 45 country assessments were complete, 20 were
substantially complete, and 37 were in progress.
3
institution in Senegal. In Ghana, the budget proposals now provide substantial information to the
public; monthly financial reports, consistent with international standards, are now available in a
timely manner; an internal audit function has been established in ministries; and audits of the
consolidated fund are up to date, enabling more effective oversight by the legislature.
Table 1. World Bank lending for public financial management reform
(US$ millions)
IBRD/IDA Commitment
Lending area
FY03
FY04
FY05
FY06
Public sector governance
2,464.06
3,373.90
2,636.36
3,820.88
Development policy lending
1,426.69
1,882.34
1,572.31
2,048.07
Investment lending
1,037.37
1,491.57
1,064.05
1,772.81
Public expenditure/public
financial management
Development policy lending
Investment lending
Source: Business Warehouse.
768.96
681.49
87.47
1,106.34
901.15
205.19
1,001.05
857.52
143.53
1,529.08
1,279.43
249.65
FY07
3,389.65
2,110.59
1,279.06
1,319.65
1,148.73
170.93
7.
Training. FY07 saw growth in the use of regional and in-country FM training institutes for
PFM capacity building. These institutes provide country-specific training curricula, significant savings
in per capita training costs, and sustainable training over the long term (Box 2 provides examples).
Box 2. Regionally coordinated approaches to capacity building
Africa. The Capacity Development Management Action Plan, a regional initiative that incorporates actions from
the Africa Action Plan as well as from specific country Poverty Reduction Strategy Papers (PRSPs) and Country
Assistance Strategies (CASs), helps partner countries to (a) improve their PFM systems, (b) increase the number of
qualified financial management personnel, and (c) develop the capacity of country and regional training and
accreditation institutions. The CDMAP will be delivered in collaboration with several regional PFM organizations.
An FM training and accreditation program will be launched in FY08.
Europe and Central Asia (ECA). The Public Expenditure Management-Peer Assisted Learning Program,
supported by multiple donors, creates a network of public expenditure management professionals in ECA, providing
opportunities for peer learning and knowledge transfer. Under the program, the ECA FM and PREM teams helped
deliver workshops for the Internal Audit Community of Practice. The workshops, which were attended by
representatives from 20 ECA countries, applied internal audit capacity assessment frameworks and established
capacity building and knowledge sharing activities, including a website (www.pempal.org).
8.
Accountancy Profession. During FY07, 10 ROSC A&A reviews were completed,
bringing to 73 the total number completed (see Annex B) and to 55 the number published.
Following up on these reviews, the FM Sector worked with partner country institutions to
implement accountancy reform and development action plans; modernize the statutory
framework for accounting and auditing; strengthen the institutional capacity of national
professional accountancy bodies; put in place high-quality education and training, including
practical training in international standards; and develop independent monitoring and
enforcement arrangements to ensure compliance with applicable standards. Implementation of
review recommendations was supported by the Financial Sector Reform and Strengthening
(FIRST) initiative in Albania, Botswana, Georgia, the Maldives, and Tanzania. In addition, IDF
grants were used to establish and strengthen FM institutions: 23 projects (including a number of
4
ROSC-related activities) were approved during the year, a significant addition to the 44 projects
that were ongoing (Annex C lists IDF grants for FM institutional reforms as at June 30, 2007).
2. Use of Country Systems
9.
The Bank’s Operational Policy (OP) 10.02, Financial Management, provides that Banksupported operations should use the country’s own PFM system, if it is acceptable, as the default
option for financial management. Moreover, Bank management has committed to making further
progress on the Paris Declaration targets for aid effectiveness, which include a reduction in aid flows
outside partner countries PFM systems. The Bank’s Governance and Anticorruption Strategy
recognizes the importance of country systems by explicitly stating that the Bank Group will strive to
strengthen, rather than bypass, country systems.3 For all these reasons, the FM Sector is fully
committed to accelerating and deepening the use of country systems in Bank-supported operations.4
10.
FY07 Achievements. As Box 3 illustrates for one Region, the Bank is increasingly using
country PFM systems when circumstances permit. Country PFM systems comprise several
elements: planning and budgeting; accounting, reporting, and management information; internal
audit; and external audit. The following summarizes the progress made.
Box 3. LCR: Taking stock of the use of country FM systems
In FY07, the LCR FM team conducted a comprehensive stocktaking of the status of use of country systems. The results
showed that as of November 2006, 90 percent of the Region’s 284 investment projects were using country planning
and budget systems; 80 percent were executed using the country’s regular budget execution procedures; 61 percent
used country accounting and reporting systems; and 32 percent were audited by the country’s supreme audit institution.
The Region has developed a structured approach to increasing the use of country FM systems, which includes (a) a
systematic review of information in existing country FM assessments; (b) an analysis of operational realities/impacts
based on portfolio experience; and (c) collaboration with each country management unit in developing an action plan.
3
4
5

Planning and budgeting. Bank disbursements for both development policy and
investment lending operations were increasingly channeled through country budgeting
systems. According to the Paris Declaration monitoring survey, virtually all IDA
disbursements were reflected in governments’ budget estimates (97 percent, compared to
91 percent for all development partners).5

Accounting, reporting, and management information. In many countries, government
accounting and reporting systems are being modernized and automated with the support
of Bank-funded PFM reform programs and IDF grants (Box 4 provides examples).
See Strengthening World Bank Group Engagement on Governance and Anticorruption (DC2007-0005), March
29, 2007, Principle 6: “The WBG will strive to strengthen, rather than bypass, country systems—better national
institutions are the more effective and long term solution to governance and corruption challenges and to
mitigating fiduciary risk for all public money, including that from the Bank”; accessible at
http://go.worldbank.org/QNKKDXE1N0).
Meeting in June 2007, the Multilateral Development Banks’ FM Harmonization Group, chaired by the World
Bank, also endorsed the use of country PFM systems as the default option, when circumstances permit.
See IDA’s Role in Enhancing Country-Level Effectiveness: Strengthening Harmonization and Alignment
(Operations Policy and Country Services, October 2007). The Paris Declaration Baseline Survey covered 34
self-selected countries, 30 of which are IDA-eligible; for more information, see 2006 Survey on Monitoring the
Paris Declaration—Overview of the Results (OECD-DAC, 2007).
5
Box 4. Innovative transition to the use of country systems
Georgia. National-level migration to country systems. The Government is (a) moving designated
bank accounts into the Treasury to begin integrating the Bank-financed project into country systems,
and (b) integrating project staff into the line ministries under an agreed transformation plan.
Nigeria. Establishment of project financial management units. State-level project financial
management units, staffed with civil servant accountants, were established to provide common
accounting, disbursement, and reporting services for all donor-funded projects. Through an IDF grant,
the Bank has helped to develop staff capacity and to install an integrated computerized accounting
system. Results have been evidenced in improved fiduciary arrangements, integration of donorsupported activities in Government budgets, and consistent compliance with donor fiduciary
safeguards and reporting requirements. The Government is now seeking to expand the mandate of the
project financial management unit to include Government debt monitoring support.
Pakistan. PIFRA II, a PFM reform project, enabled 65 percent of overall Government expenditures to
be made through a state-of-the-art SAP integrated financial management information system in FY07.
In addition, the country adopted a risk-based public audit methodology. As a result, federal financial
statements—prepared using the International Public Sector Accounting Standards (IPSAS) cash basis
of financial reporting—were finalized and submitted within 12 months of the end of the fiscal year.
The project’s monitoring and evaluation components also helped strengthen the Government’s focus
on project results and outcomes.

Internal audit. In many countries, the adoption of professional practice standards,
including risk-based internal audit methodologies, has enhanced the independence of
internal audit units (Box 5 provides an example). Ministerial audit committees are
increasingly recognized as country-based tools for strengthening governance. Several IDF
grants to support internal audit reform initiatives were approved and implemented during
the year—for example, in Armenia, Burkina Faso, Djibouti, Ghana, Lebanon, and Mali.
Box 5. A pilot project to improve Kenya’s internal audit systems
The Institute of Internal Auditors and the Bank’s FM and Internal Audit Departments supported
Kenya’s adoption of a risk-based internal audit methodology through a pilot project included in the
Kenya Government’s PFM reform program. The program supports establishing ministerial audit
committees, whose mandate corresponds with professional practice standards for corporate
governance. Once Kenya adopted an audit methodology that complies with these standards, the
Government’s Internal Audit Unit was engaged to audit Bank-funded projects—for example, the
independent review of a claim for US$20 million in retroactive financing for drought-related expenses
under an emergency project. This work was undertaken successfully with technical guidance from the
Bank’s FM team. Relying on the country’s system not only enhanced the technical capacity of the
Government unit, but also translated into significant savings in consultant costs.

External audit and oversight. The FM Sector provides dialogue and technical
support to help supreme audit institutions (SAIs) adopt professional practice
standards. In FY07, 23 IDF grants (details included in Annex C) directly supported
SAI reforms in the Regions, and others supported strengthening parliamentary
oversight committees—for example, in Burkina Faso and Pakistan. Innovative
practices—such as twinning arrangements between less experienced SAIs and highly
experienced counterparts, and collaboration between private sector auditors and
government auditors in joint audits of Bank-funded projects—resulted in the costeffective transfer of knowledge and experience (see Box 6).
6
Box 6. Innovative arrangements for audit effectiveness
Kyrgyz. Audit arrangements for the Kyrgyz Health SWAp include a twinning arrangement between
the country’s SAI and a well-established national audit office in the region to allow the use of the
country audit system for the Bank-supported project. This arrangement enhances audit effectiveness,
builds capacity, and facilitates the transfer of technical skills.
Peru and Ecuador. Memoranda of understanding between the Bank and the countries’ SAIs provided
standard audit terms of reference, as well as audit process arrangements, to improve audit quality and
compliance in Bank-funded projects.
11.
Staff Guidance. As the recent paper Use of Country Systems in Bank-Supported
Operations: Status Report observed, the challenge for the FM Sector is to deepen and accelerate
the Bank’s use of country systems when circumstances permit.6 Accordingly, the FM Sector is
preparing detailed guidance to help FM staff to assess the adequacy of a country’s PFM system
for use in Bank-supported operations. This guidance will not require staff to undertake new
diagnostics, but will show how the existing diagnostics, particularly PEFA assessments, should
be used to perform the fiduciary risk analysis required under Bank policies.
3. Governance and Anticorruption
12.
Because of the nature of its work, the FM Sector has always been heavily involved in
governance and anticorruption (GAC) issues. Thus, during FY07, it was well placed to
contribute to developing the Bank’s strategy to help member countries enhance governance and
fight corruption,7 as well as to drafting the GAC Implementation Action Plan.
13.
Sector Approach. In June 2007, the Financial Management Sector Board approved a
paper8 outlining the Sector’s approach to the GAC agenda: (a) to assist partner countries in
improving governance and reducing corruption risk by strengthening their PFM systems,
improving their corporate financial reporting standards and practices, and increasing the number
of qualified FM professionals to work in the public and private sectors; (b) to strengthen
fiduciary practices in Bank-financed projects; and (c) to work with global partners to support
partner countries in this area, harmonize practices, and support development of international
standards. In these activities, the Sector will work in close collaboration with internal partners
(e.g., PREM, Controller’s Strategy and Resource Management, Department of Institutional
Integrity, Legal, Procurement, Sectors, country management units) and external partners (e.g.,
multilateral development banks, bilateral donors, and global accounting and auditing bodies, as
well as contributing to global initiatives such as the Stolen Asset Recovery Program). The Sector
recognizes that the challenge is to implement this approach; in September 2007, it established an
FM GAC Working Group and developed an action plan—“FM Activities in Support of GAC
Implementation”—to implement anticorruption initiatives and promote consistent approaches
across the Regions, where a number of innovative initiatives are already under way.
6
7
8
See Use of Country Systems in Bank-Supported Operations: Status Report (R2007-0079/4), October 15, 2007.
See Strengthening Bank Group Engagement on Governance and Anticorruption (DC2006-0017), September 8,
2006; accessible at http://go.worldbank.org/6HHK3NDGL0.
See Financial Management Sector: Approach to Governance and Anticorruption, Financial Management Sector
Board, June 8, 2007, accessible at http://go.worldbank.org/LLPAE9S320.
7
14.
FY07 Achievements. GAC-related achievements at the country level during FY07
included extensive analytic and advisory work on fiduciary issues, specifically designed to provide
a more holistic view of GAC issues. In conducting joint fiduciary compliance reviews, FM teams
collaborated with colleagues in Procurement and PREM, especially in high-risk operations and
corruption risk assessments. Following up on these reviews, FM teams have worked with
countries to develop country-, sector-, and project-specific remedial plans and monitor their
implementation (Box 7 illustrates the use of corruption risk scan tools). Increasingly, the Bank is
also following up such studies with support for critical institutions that combat corruption,
including supreme audit institutions; computerization of government financial systems;
strengthening of public sector internal controls and internal audit; improved financial reporting and
audit in the private sector and state-owned enterprises; and enhanced legislative scrutiny of public
finances. Countries in which such initiatives have been supported include Afghanistan, Argentina,
Armenia, Azerbaijan, Burkina Faso, Belarus, Bhutan, Bolivia, Cambodia, Cape Verde, Ecuador,
Ghana, Indonesia, India, Kenya, Lao PDR, Mongolia, Pakistan, Peru, Philippines, Sri Lanka,
Thailand, Venezuela, and Vietnam (Box 8 provides an example). At the project level, FM
technical support was provided for the adoption of risk-responsive audit methodologies, the
increased use of public information and complaint handling mechanisms in community-based
projects, and the improvement of institutional risk management and oversight arrangements.
Box 7. Using corruption risk scan tools
ECA. A corruption risk scan module incorporated in arrangements for monitoring projects’ FM performance enables
fiduciary staff to track high-fiduciary-risk projects in real time. The module adapts corruption risk indicators and
draws upon data from several sources, including the Business Environment and Enterprise Performance Survey
(BEEPS), World Wide Governance, Department of Institutional Integrity cases, procurement complaint databases,
and Country Policy and Institutional Assessment (CPIA) ratings (PFM and corruption).
Argentina. The Integrated Fiduciary Action Plan assesses the FM and procurement performance of projects using an
easy-to-understand color-code rating—red (significant shortcomings in FM or procurement performance that could
substantially compromise project implementation); yellow (moderate shortcomings that could compromise project
implementation but are likely to be resolved); and green (minor shortcomings, or none). These indicators are
presented and discussed at quarterly country portfolio review meetings. Although the indicators are applicable to
particular projects, they can also be aggregated at the portfolio level.
Box 8. In-depth fiduciary review
Cambodia. The Cambodia fiduciary review team comprised Department of Institutional Integrity forensic
investigators and procurement and FM specialists. The review included detailed examinations of the procurement,
financial management, disbursement, and contract administration and supervision processes; the quality and
effectiveness of project outputs; and project preparation and design with regard to corruption risks. Key fraud and
corruption risks were assessed, and mitigation measures identified. The review also examined the effectiveness of
existing systems and controls, including audits. Measures for improvement included establishing strong internal
controls and compliance monitoring arrangements; expanding terms of reference for project audits to include indepth audit of financial internal controls and systems, and bundling most project audits under a single contract. A
fiduciary action plan is now being implemented for the portfolio.
Indonesia. Over the past two years the Inspectorate General of the Ministry of Health has been leading
investigations of fiduciary compliance issues in Bank-supported operations. Collaboration with Bank teams has
helped build Government ownership of processes and facilitated implementation of recommendations.
8
B. Providing Reasonable Assurance
15.
Arguably the FM Sector’s most notable achievement of FY07—or of any year—is that
financial management is fully integrated into Bank project teams supporting about 1,500
operations with a total commitment of approximately US$100 billion.9 The FM Sector evaluates
how well it has carried out the second part of its mandate—to provide reasonable assurance on
the use of the Bank’s funds—in several ways: through independent quality reviews, internal
quality assurance, and portfolio reviews.
1. Independent Quality Reviews
16.
One of indicators used to
monitor FM performance is the
Quality of Supervision reports issued
by the Quality Assurance Group
(QAG).
The Seventh Quality of
Supervision Assessment (QSA7) was
carried out during FY07, covering
disbursements for FY05 and FY06. Of
the 130 operations sampled, 94 percent
were rated Moderately Satisfactory or
better for the FM aspects of
supervision (see Table 2).
Table 2. Financial management performance in QAG review
(percent rated Moderately Satisfactory or better)
QSA4
QSA5
QSA6
QSA7
Region
(FY00) (FY01) (FY03 and 04) (FY05 and 06)
AFR
83
n.a.
86
92
EAP
79
n.a.
80
91
ECA
88
n.a.
97
97
LCR
77
n.a.
100
100
MNA
100
n.a.
90
87
SAR
91
n.a.
93
100
Bank overall
86
78
91
94
Source: Quality Assurance Group, QSA7.
17.
IDA14 Internal Controls Review. In response to a request from the IDA Deputies,10
Bank Management launched an independent assessment of the internal controls over IDA
operations and compliance with the Bank’s charter and policies. The assessment focuses on the
design and operational effectiveness of controls over IDA operations at the transaction level, and
on entity-level controls and the overall effectiveness and efficiency of the internal controls
framework for operations. The assessment entails management self-assessment; review by the
Internal Audit Department (IAD); and an evaluation of the overall process by the Independent
Evaluation Group (IEG), in accordance with the Treadway Commission’s Committee of
Sponsoring Organizations (COSO) paper on internal controls. 11 Part IA, mapping controls and
assessing design effectiveness, was completed in October 2006; Part IB, testing compliance with
controls in a sample of documents related to CAS, investment lending, and development policy
lending, was completed in May 2007. Among the key findings of these reviews are that (a) there
are significant deficiencies in the timely accessibility of relevant documents and the relevance of
regional variances in FM guidelines issued to staff; and (b) there is a need to examine the quality
9
10
11
See Status of Projects in Execution (SOPE) Report – Fiscal Year 2007 (SecM2007-0439; IDA/SecM20070591), October 10, 2007.
See para. 39 in Additions to IDA Resources: Fourteenth Replenishment—Working Together to Achieve the
Millennium Development Goals, Report from the Executive Directors of the International Development
Association to the Board of Governors (IDA/R2005-0029), February 28, 2005.
The COSO framework is a process that covers all aspects of internal control of an organization’s operation.
It evaluates not only formal controls, but also informal controls, including ethics, trust, communication,
organization behavior, and leadership. It incorporates “top-down” as well as “bottom-up” analysis. The
COSO Framework is accessible at http://go.worldbank.org/ROAMGCMG00.
9
control aspects supporting FM staff inputs to investment operations. Part II, currently in
progress, is following up on the issues identified in Parts IA and IB. Once Part II is completed in
December 2007, the final report will be made available to the public in accordance with IEG
disclosure procedures. The FM Sector has already begun using these findings to enhance the
quality of its work—for example, RAPMAN-PRIMA is improving timely accessibility to
documents—and it will use them in revising the FM Practices Manual and its supporting
guidelines.
18.
Independent Evaluations Group Review. In FY07, IEG examined CFAAs undertaken
between July 1999 and December 200412 and found them to have been highly relevant to the
Bank’s work and to have contributed substantially to positive development outcomes in the 10country sample. Of the CFAAs evaluated, 71 percent were assessed to be of satisfactory quality,
and the reviewers noted steady improvements in CFAA quality over the period under study. The
report observed that CFAAs had fostered the integration of FM issues into Country Assistance
Strategies and increased the availability of resources for PFM reform in several of the sampled
countries. It also observed that donor collaboration on CFAAs increased over the evaluation
period, leading to preparation and support of joint action programs in some countries. Bank
Management welcomed the IEG evaluation report, noting that a memorandum to staff in July
2005 had addressed many of IEG’s recommendations.13 Management agreed on the need for
increased attention to prioritizing and sequencing PFM reforms; disseminating PFM analytic
work findings; providing more empirical data and sharper analysis in PFM analytic work;
establishing better linkages with corruption issues in PFM work; supporting partner countries’
PFM reform programs in an integrated and harmonized way; providing staff training and more
guidance to staff on internal processes and mechanisms for coordination on PFM issues in the
Bank; and working with partners to increase the public availability of CFAAs and Country
Procurement Assessment Reports (CPARs) on a more timely basis. Work in these areas is part of
the Sector’s FY08 work program.
2. Internal Quality Assurance
19.
A range of recent internal reports have evaluated the quality of the FM Sector’s
contribution to the Bank’s work.
20.
Reviews of High-Risk Operations. In light of the heightened institutional focus on
governance and anticorruption and the need to strengthen management oversight of
multidimensional project risks, in FY07 the Office of the Managing Director launched an OPCS
review of high-risk projects.14 This review focused on projects at a very advanced stage of
preparation, either before Board review or before project negotiations. The FM component of
this review, aimed at possible shortcomings or omissions in FM due diligence, sought assurance
that FM risk ratings were consistent with macroeconomic and country contexts, and that FM
12
13
14
See Country Financial Accountability Assessments and Country Procurement Assessment Reports—How
Effective are World Bank Fiduciary Diagnostics? (CODE Report 2007-001), February 16, 2007.
See Memorandum from Danny Leipziger and James Adams, “Strengthening the Bank’s Public Financial
Management Work,” July 21, 2005.
The report—Strengthening Bank Group Engagement on Governance and Anticorruption (DC2006-0017),
September 8, 2006 —was initiated because of high systemic corruption, as identified by the Country Policy and
Institutional Assessment, the World Bank Institute, or the Regions.
10
arrangements and proposed mitigation measures were appropriate to the assigned risk. The
reviews found that the most of the selected projects’ risks had been adequately assessed and the
proposed mitigation arrangements were adequate to manage them.15
21.
Management Review of Investment Lending. The Management Review of Investment
Lending16 mechanism, introduced during FY07, promotes a complete and consistent approach to
risk assessment in Bank investment lending and helps ensure that levels of management review
are aligned with levels of risk. The FM Sector provides input to this process during Regional
Operations Committee/Operations Committee meetings.17
22.
Evaluation of FM Sector Quality Arrangements. The FM Sector has worked with
Controller’s Strategy and Resource Management Unit (CSR) to develop a proposal for a
framework and methodology for evaluating FM Sector quality arrangements. The joint
evaluation would focus on the following dimensions of FM work: (a) compliance—whether the
Regions’ quality arrangements and FM work are consistently being implemented as designed and
in accordance with the FM Practices Manual; (b) quality—whether the judgments being made
(i.e., conclusions reached and recorded in accordance with the FM Practices Manual) are
properly supported by evidence; and (c) efficacy—whether the FM work being carried out is
sufficiently robust (i.e., compliant and of good quality) that CSR can rely on it as one element of
its plans to reduce its ex-ante disbursement requirements and simplify disbursement processes.
The results of the review would support the Controller in making an assertion in the Bank’s
annual COSO report with respect to the adequacy of arrangements to ensure that loan funds are
used for intended purposes. The methodology is being tested in the context of the IDA14
Internal Controls Review.
3. Portfolio Management
23.
March 2007 saw the rollout of an integrated financial management information system
(known as RAPMAN-PRIMA) for tracking and monitoring FM project performance, such as
risk profile and portfolio management.18 The successful development and ongoing
implementation of RAPMAN-PRIMA across the Bank portfolio represents an important
milestone in support of the FM Practices Manual.19 This system enables tracking and monitoring
of the FM aspects of the investment and development policy lending portfolios throughout the
project cycle; establishes systematic workflows to ensure timely processing of key FM fiduciary
15
16
17
18
19
Of the 50 operations reviewed, fewer than 5 were stopped or referred back to the Region for further work.
See Guidance Note on the Management Review of Investment Lending, OPCS, June 29, 2007.
The Sector is also involved in the quality of FM in development policy operations; see Financial Management
in World Bank Operations – Annual Report for FY06 (SecM2007-0064), February 15, 2007.
The Risk and Portfolio Management system (RAPMAN) developed and used by ECA and MNA since FY04
was modified during FY07 to meet the requirements of the other four regions. The resulting system is called
PRIMA (Portfolio and Risk Management system). RAPMAN/PRIMA is a web-based application that
interfaces directly with core Bank systems, including SAP and the Project Portal. It comprises a risk
management module and a portfolio management module and allows FM staff to document their field work and
professional judgment in an organized central database.
As of October 31, 2007, project risk information for 76 percent of all Bank projects under implementation had
been recorded in RAPMAN-PRIMA. It is expected that appropriate project risk information for all projects will
be entered by December 31, 2007. Information on interim financial reports and use of country systems is
expected to be available by March 31, 2008.
11
activities; and supports the implementation of a risk-based approach to the allocation of FM
resources by helping focus management attention on high-risk areas. It also offers a rich data
source for analyzing the investment lending portfolio by capturing all key FM information about
a project, from FM assessment through FM supervision.
24.
Audit Compliance. The FM Sector monitors compliance with legal covenants pertaining
to the submission of audited financial statements and audit reports. As Table 3 shows, the
proportion of audits of loans, credits, and recipient-executed trust funds received on time
improved in comparison with the previous year. However, the proportion of audit reports with
clean opinions—which had risen slightly last year—returned to the FY05 level. Of the audits
with qualifications, the highest proportion was for “exceptions”—22 percent for FY07, 18
percent for FY06, and 22 percent for FY05. Fewer than 2 percent were adverse or disclaimer
opinions.20 This means, however, that nearly 25 percent of the audits were not fully satisfactory.
Even in the challenging environments in which the Bank operates, the FM Sector will seek to
improve the timeliness and nature of the opinions received. To this end, under the guidance of
Regional FM managers, FM staff will intensify country-level efforts to strengthen controls and
implementation, including invoking remedies as appropriate (Box 9 presents an example).
Region
AFR
EAP
ECA
LCR
MNA
SAR
Bankwide
Table 3. Timeliness of audit reports due in FY07
(percentages)
Received on time
Received during FY
FY06
FY07
FY06
FY07
IBRD/
IBRD/
IBRD/
IBRD/
Trust
Trust
Trust
Trust
IDA
funds
IDA
funds
IDA
funds
IDA
funds
67
53
78
55
86
81
93
77
59
64
66
73
77
81
83
95
52
62
62
68
70
77
76
83
44
40
49
51
66
58
77
69
60
26
53
68
80
54
80
84
9
9
25
21
83
71
94
79
51
50
61
60
77
74
86
82
Source: Business Warehouse—ARCS.
Box 9. Efforts to improve audit compliance in MNA
In June 2007 the MNA FM team collaborated with the Governments of Iraq and Jordan to host an external auditors’
capacity-strengthening workshop that featured an “audit toolkit” that is designed to provide technical guidance to
auditors of Bank-supported operations. The toolkit includes detailed terms of reference for auditors, a summary of
applicable international standards, and sample audit methodologies and reporting formats. The workshop was
attended by 25 auditors representing 11 audit firms based in Baghdad, Erbil, Amman, and Cairo, as well as the Iraqi
Fiduciary Monitoring Agent. Further details are posted at www.irffi.org.
20
The fact that more than one-quarter of the audit reports were provided by supreme audit institutions reflects
increasing reliance on country systems; however, it also means that 72 percent of audit reports are still provided
by private sector auditors, indicating the need to help supreme audit institutions build capacity to perform
financial audits.
12
25.
Audit Exemptions. In FY07, the FM Operations Review Committee approved two audit
exemptions (see Box 10), and eight were awarded for operations under US$500,000 and for
projects qualifying under the United Nations Development Programme exemption.21
Box 10. Audit exemptions granted during FY07
The 2007 Global Development Marketplace Grant Facility and the additional financing for the Pakistan Polio
Eradication Project were exempted from annual financial statements audits under provisions of Operations
Policy/Bank Procedures (OP/BP) 10.02, Financial Management. The exemptions were granted as in both cases
alternative fiduciary arrangements were in place to ensure that funds are used efficiently and effectively for the
intended purposes. Both programs have shown satisfactory fiduciary performance over the past few years; in effect,
they are using an extension of the existing satisfactory financial management arrangements.
C. Global Partnerships
26.
As an extension of its mandate to help developing countries improve their public
financial management, the FM Sector engages—and takes leadership—in two kinds of global
partnerships. Through partnerships with bilateral and multilateral donors, it helps ensure that
policy and operational issues affecting financial management are coordinated and that
agreements related to financial management under the global harmonization initiative move
forward. And through partnerships with global accounting and auditing institutions and relevant
standard-setting bodies, it promotes inclusion of PFM development issues in their activities and
facilitates partner countries’ adoption of internationally recognized standards, codes, and
practices.
1. Bilateral and Multilateral Development Partners
27.
OECD-DAC Joint Venture on Public Financial Management. One of the goals of the
Paris Declaration on Aid Effectiveness is to achieve greater reliance on countries’ PFM systems
where there is assurance that aid will be used for intended purposes. This goal will require
concerted action from partner countries and donors on various fronts: strengthening country PFM
systems, adopting agreed frameworks for measuring performance, conducting joint analytic
work, and coordinating the provision of technical cooperation. The Joint Venture on Public
Financial Management supports the development community in achieving this goal and, more
generally, facilitates the implementation of the Paris Declaration as it relates to public financial
management. (Box 11 summarizes the key achievements of the Joint Venture.) In preparation
for the Third High-Level Forum on Aid Effectiveness, to be held in Accra, Ghana, in September
2008, the Joint Venture is preparing a report on the use of country PFM systems. The report,
which will form part of the Forum outputs, will take stock of implementation; draw lessons from
experience; identify opportunities for and obstacles to greater use of country systems; and set out
issues, messages, and actionable commitments that will help donors and partner countries
accelerate progress on the use of country systems. The Bank and the European Community, as
co-chairs of the Joint Venture, are responsible for the overall coordination, management, and
timely delivery of the report (with support from the OECD-DAC Secretariat and internal and
external constituents).
21
See Financial Management Framework Agreement between the World Bank and the United Nations, March 10,
2006, accessible at http://go.worldbank.org/3PEMNUJDZ0.
13
Box 11. Summary achievements of Joint Venture on Public Financial Management
Promoting good practice in implementing PFM by analyzing country case studies and working closely with
regional and international PFM professional networks. The Joint Venture has published good practice papers on
Budget Support (OECD 2005), Capacity Development in Public Financial Management (OECD 2005), and
Financial Reporting and Auditing (OECD 2003).
Harmonizing the measurement of performance in PFM by monitoring the adoption of harmonized measurement
frameworks and by working closely with the PEFA Secretariat. The Joint venture has published Supporting Better
Country Public Financial Management Systems (OECD 2005) and Measuring Performance in Public Financial
Management (OECD 2003).
Improving transparency of information on aid flows by supporting the establishment of accounting standards for
disclosure of external assistance and by working with other organizations to set out good practice in recording aid
flows in national budgets. The Joint Venture has worked with the International Public Sector Accounting Standard
Board to elaborate a standard on Disclosure Requirements for Recipients of External Assistance (Financial Reporting
Under the Cash Basis of Accounting). (The exposure draft of this standard—Exposure Draft 32—was approved in
November 2007.)
28.
Multilateral Development Banks Financial Management Harmonization Working
Group. Meeting in June 2007, the Multilateral Development Banks (MDB) Working Group
endorsed the principle that the use of country systems should be the default option for MDBfunded operations when circumstances permit, but recognized that in some MDBs, inadequate
FM staff capacity represents a significant operating constraint. Participants agreed to prepare a
paper for senior-level MDB management highlighting the achievements of FM harmonization so
far22 and flagging constraints, challenges, and opportunities for further progress. The African
Development Bank is taking the lead in this effort.
29.
Public Expenditure and Financial Accountability. In recent years, the Bank has been
participating in the PEFA initiative, a partnership of multilateral and bilateral development
agencies that is working to harmonize donors’ PFM approaches. Following intense work,
international consultations, and piloting, in June 2005 PEFA issued the PFM Performance
Measurement Framework, an integrated and harmonized approach for measuring and monitoring
PFM performance progress and focusing support on country-led PFM reform programs. The
Framework incorporates a set of high-level indicators covering the entire budget cycle, which
draw on international standards, and a PFM Performance Report that enables the indicators to be
read and understood in context. Since June 2005, the Bank has been working with PEFA
partners and the PEFA Secretariat to operationalize the framework. By the end of FY07, the
Bank, the European Community, and others had used the framework to conduct 65 assessments23
in countries covering all six Regions, with almost 40 percent of them in Africa. A PEFA review
of early implementation experience24 found that adoption of the framework is progressing well,
with extensive donor participation and indications that the framework has facilitated donor
22
23
24
“Framework for Collaboration among Participating Multilateral Development Banks on Financial Management
Diagnostic Work” and “Framework for Collaboration Among Participating Multilateral Development Banks on
Financial Reporting and Auditing” are accessible at http://go.worldbank.org/8WNPOBQSJ0
According to an unpublished PEFA update report Overview on the Status on Applications of PEFA
Performance Measurement Framework, August 29, 2007, 45 country assessments were complete, 20 were
substantially complete, and 37 were in progress.
The report, “PFM Performance Measurement Framework: Final Report on Early Experience from Application
of the Framework,” November 3, 2006, and further information on the PFM Performance Measurement Framework,
are available on the PEFA website: www.pefa.org.
14
harmonization and collaboration around PFM analytic work; however, in June 2007 the PEFA
Steering Committee noted the continuing challenges of further quality improvement and timely
completion and public availability of reports. In early FY08, an independent PEFA Impact
Assessment is examining the impact of using the PEFA framework at the country level; the
consultant’s draft report will be submitted to the PEFA Steering Committee meeting in
December 2007.
2. Professional Institutions and Standard-Setting Bodies
30.
Timely, transparent, and reliable financial reporting and audit contribute to improved
governance and better financial management in government; promote the growth of a competitive
and responsible private sector; facilitate monitoring of companies and governments, thus influencing
their behavior; strengthen the financial discipline of government business enterprises; and improve
the assessment and collection of taxes on corporate profits. Moreover, openness and transparency in
financial reporting play an important role in creating an environment that makes it difficult for
corruption to flourish. For these reasons, the Bank funds the Global Financial Management
Partnerships Program, which supports developing and disseminating global accounting and auditing
standards covering both the public and private sectors. Under this program, in FY07 the FM Sector
continued its strategic partnerships with key international accounting and auditing organizations to
promote (a) the development of high-quality accounting and auditing standards, taking due account
of developing country concerns and issues; (b) wide dissemination and adoption of these standards
by more partner country governments; and (c) support for training and capacity-building initiatives to
foster the skills and aptitudes required for successful implementation of the standards. (Box 12
highlights some FY07 progress and achievements.)
III. THE FM SECTOR: FY07 INSTITUTIONAL AGENDA
31.
The preceding section described the range of activities through which the Bank’s FM
Sector carries out its dual mandate to improve FM performance in partner countries and to
provide reasonable assurance on the use of Bank funds. The Sector also has a broad internal
responsibility to maintain a structure and activities that support carrying out that mandate. This
section summarizes the Sector’s internal activity in FY07.
32.
Financial Management Sector Board. The Financial Management Sector Board (FMSB)
has overall responsibility for financial management in Bank operations, including the FM Sector
Strategy and related operational policies, procedures, and guidance to staff; the quality of
operational work; human resources management; knowledge, learning, and outreach; and internal
and external partnerships. The FMSB, which is chaired by the Chief Financial Management
Officer, is made up of the six Regional FM Managers and representatives from the Loan
Department, Procurement Group, Public Sector Group, and Legal Operations Policy. The FMSB is
supported by two Standing Committees: the Human Resources Committee, which is responsible
for human resources management, and the FM Operations Review Committee, which responds to
requests for advice and policy interpretations on FM aspects of Bank-supported operations, and
also provides clearances for specific decisions. In FY07 the FMSB established a new committee
and working group structure to help it carry out its responsibilities (see Annex D).
15
Box 12. Achievements through partnerships with standard-setting bodies
International Public Sector Accounting Standards Board (IPSASB)
The IPSASB issued a standard on the presentation of budget information in financial statements and Exposure Draft
32 on disclosure requirements for recipients of external assistance. Both address issues of consistency,
completeness, and transparency in government financial reporting and are highly relevant to improved
accountability in partner countries. Exposure Draft 32 was approved in November 2007. In addition, the IPSASB
approved IPSAS22 (Disclosure of Financial Information about the General Government Sector) and IPSAS 23
(Revenue from Non-Exchange Transactions—Taxes and Transfers), and issued Exposure Draft 30 (Impairment of
Cash-Generating Assets).
International Accounting Standards Board (IASB)
The IASB has continued its technical work of improving and updating International Financial Reporting Standards
(IFRS). Of particular note has been the development of a new reporting standard, currently an exposure draft, for
small and medium enterprises (the draft is being field-tested, and approval is expected in the second half of FY08),
which will be of particular benefit to the commercial sector in developing countries. Meanwhile, there is growing
international acceptance of IFRS: several developing and emerging market countries, including China, took steps to
implement IFRS-based corporate financial reporting requirements during FY07. More than 100 countries now either
mandate or permit IFRS. Public-interest entities’ application of IFRS for financial reporting is an important step that
improves investors’ perceptions of risk and thus helps countries mobilize greater investment at lower costs. The
accessibility of IFRS also improved during the year: measures were taken to reduce prices for publication in
developing countries and to translate the standards into additional languages (now totaling nearly 40). In addition,
on November 15, 2007, the US Securities and Exchange Commission (SEC) removed the requirement for non-US
companies reporting under IFRS to reconcile their financial statements to the US’s generally accepted accounting
principles—an important step toward providing the world’s integrating capital markets with a common language for
financial reporting.
International Organization of Supreme Audit Institutions (INTOSAI)
The INTOSAI Professional Standards Committee has continued its active participation in developing new
International Standards on Auditing (ISA), working with the main standards-setting body, the International Auditing
and Assurance Standards Board (IAASB). It is also developing Practice Notes to facilitate supreme audit
institutions’ adoption of ISA. Approval of the first Practice Note represented an important achievement during
FY07, and others are under preparation.
____________________
a
The recently concluded Congress of INTOSAI in Mexico City (November 2007), which is the supreme organ of INTOSAI and
is composed of all INTOSAI Members, approved nine ISA-based financial audit guidelines for SAIs Details are available at
http://issai.org/composite-344.htm
33.
The FM Anchor. The FM Anchor, which is based in Operations Policy and Country
Services (OPCFM), serves as Secretariat to the FMSB and its committees and working groups,
and supports implementation of their work program. It also provides operational guidance and
support to FM staff, including targeted cross-support to the Regions.
34.
Staffing. The FM Sector has 151 professional staff. About 83 percent are located in the
Regions, 6 percent in the FM Anchor, and 11 percent in the Loan Department. FM staff are fully
integrated into task teams, and 73 percent of Regional FM staff are based in country offices.
A. Staff Development
35.
FM staff levels increased from 141 at end-FY06 to 151 at end-FY07 (Table 4). During
FY07, 13 FM specialists were recruited (12 for country offices and 1 for the Washington office),
and 3 departed. In addition, there were 20 staff reassignments and 14 changes of duty station.
16
Washington
Country offices
Total
AFR
7
23
30
EAP
3
16
19
Table 4. FM Sector staffing
(as of June 30, 2007)
ECA
LCR
MNA
SAR
5
9
4
5
10
12
7
21
15
21
11
26
OPCFM LOA
9
15
0
3
9
18
Others
2
0
2
Sector
59
92
151
Note: Does not include staff on developmental assignment or secondment.
Source: Peoplesoft
36.
Staff Rotation. In FY07, the FMSB’s Human Resources Committee observed that the
number of emerging senior professional-level vacancies was unlikely to offer sufficient
opportunity for staff to rotate and enjoy new challenges. To enhance skills and re-energize staff
through greater mobility, therefore, it provided opportunities to rotate to other Regions or to a
central department. A sectorwide exercise was successfully launched in which 8 of the 10 staff
who met the criteria (more than five years in assignment) were rotated. This exercise enhanced
the professional development of FM-mapped staff, including those in the Loan Department and
country offices.
37.
Knowledge, Learning, and Outreach. The FM Sector is the Bank’s most decentralized,
with 73 percent of its Regional staff in country offices. While this allows Sector staff to be
maximally responsive to the needs of operations and of borrowers, it also presents a significant
challenge: how best to provide training for such a dispersed group, so that they can maintain and
increase their skills. To help address this challenge, during FY07 the Sector organized a total of
157 learning events, compared with 101 events during FY06 (see Table 5). These events
reached 7,612 participants, up from 6,486 in FY06,25 and some 75-80 percent of them were
offered in country offices.
Region or
department
AFR
Anchor
EAP
ECA
LCR
LOA
MNA
SAR
Total
Total
learning
events
21
35
9
5
19
46
2
20
157
Table 5. FM Sector – formal learning activities for FY07
Area of focus
Target audience
Private
Total
Donor
FM
FM
PFM
sector
audience
Clients
staff
staff
13
7
1
1,754
1,455
60
122
24
9
2
572
29
96
369
7
2
0
938
799
89
3
1
1
267
190
62
13
2
4
1,432
1,207
215
45
1
0
1,457
1,264
64
1
0
1
136
120
16
4
16
0
1,056
870
152
110
38
9
7,612
5,934
156
1089
Other
staff
117
78
50
15
10
129
0
34
433
Other knowledge, learning, and outreach activities during FY07 included the following:

25
An initiative was launched to develop a database of good practices as a reference tool
for staff.
The numbers for FY06 were significantly affected by staff attendance at the Fiduciary Forum and Learning Week.
17

The internal FM website was substantially updated, with more than 150 new entries.

Innovative “across-the-globe” interactive training sessions were introduced for
country office staff.

A number of PEFA framework training events supported by FM Anchor staff
reaching a large number of borrowing country participants, FM staff, and
development partners (for example, an event held in China in June 2007 attracted
over 100 Government staff from the Ministry of Finance and National Audit Office).

A report on the FM curriculum and delivery mechanisms was prepared, and its
recommendations are being implemented.

The “FM Sector News” was successfully reintroduced to promote the exchange of
experiences and lessons learned within and outside the Sector.

The FM Sector participated in OPCS outreach programs, including nine presentations
of FM in Introduction to Bank Operations, two in Bank Supervision, and two for the
Development Policy Lending Academies.

Several Regional knowledge and learning events were carried out (see Box 13).
Box 13. Regional knowledge and learning sessions
Latin America and Caribbean Region. In June 2007 the regional conference on Accounting and Accountability
for Regional Economic Growth, jointly organized by the International Federation of Accountants (IFAC), the World
Bank, and the Inter-American Development Bank, drew over 500 delegates from 44 countries. Participants shared
experiences on strengthening financial transparency and accountability in both the public and private sectors, and
intercountry dialogue and cooperation were cultivated at the regional level. Presentations and videos are available on
the World Bank website at http://go.worldbank.org/2QLARJ5XI0.
South Asia Region. In March 2007 the learning event Achieving Results in Financial Management, held in Lahore,
Pakistan, focused on achieving results in capacity development and fiduciary assurance across the entire spectrum of
FM activities. The training was attended by the South Asia FM team, procurement specialists, and a representative
from OPCFM, thereby fostering communication and collaboration on the Bank’s results agenda across the Region.
In addition, several key officials from the Punjab government’s accounting and finance divisions participated.
Africa Region. The International Federation of Accountants, the African Development Bank, and the World Bank
jointly sponsored a learning workshop for the Africa Region, which attracted more than 200 participants from 37
countries—representatives from the accountancy profession, governments, the donor community, and academia.
Discussions focused on quality financial reporting, the needs of the accountancy profession in the Region, the role of
the government in accountancy and accountancy development, and good governance and ethics. A major outcome
was the establishment of an Africa focus group, which will coordinate dissemination and follow-up activities for the
recommendations. Further information is available at http://www.ifac.org/DevelopingNations/africa_workshop.php.
B. Policies, Procedures, and Guidelines
38.
During FY07, the FM Sector issued a range of updated operational policies, procedures,
and guidelines to staff.
18

OPCS and CSR issued the updated OP/BP 10.02, Financial Management,
and OP/BP 12.00, Disbursement, in March 2007. The statements, which apply to all
IBRD loans, IDA financing, and recipient-executed grants financed from trust funds,
reflect the Board-approved policy changes presented in the papers Audit Policies and
Practices for World Bank-Financed Activities and Eligibility of Expenditures in
World Bank Lending: A New Policy Framework,26 as well as the Bank’s
modernization of its financial management and disbursement practices over the past
several years. Among other things, OP 10.02 requires each project team to include an
appropriately qualified and experienced FM specialist as an integral member; requires
an FM capacity assessment for all operations, and interim financial reporting for all
investment operations; and explicitly states the Bank’s support for the use of country
PFM systems that are assessed to be adequate.

The FM Guidance Note on OP 8.00, Rapid Response to Crises and Emergencies,
issued in March 2007, sets forth guiding principles on oversight arrangements
(including governance and fiduciary oversight) to ensure the appropriate scope,
design, speed, monitoring, and supervision of FM in rapid response operations. The
note requires FM staff to streamline and simplify ex-ante requirements while relying
more heavily on such ex-post requirements as additional fiduciary controls and
reviews. It also recommends ensuring that risk-mitigating measures suitable to
available capacity are in place during implementation and, as appropriate, that they
rely on partner institutions.

The paper “Enhancing Control of Highly Pathogenic Avian Influenza in Developing
Countries through Compensation: Issues and Good Practice” provides practical
guidance to operational teams and governments on the core elements needed to
operate compensation funds in an effective, transparent manner.
39.
Database on Sectorwide Approaches. During FY07, the FM Sector established a
database on FM in operations that use SWAps, highlighting case studies that involve
harmonization and alignment of implementation arrangements and cover a number of different
sectors. The case studies demonstrate that (a) SWAps can be used in connection with subsectors
or across multiple sectors; (b) it is possible to use common arrangements that incorporate use of
country PFM systems even in high-risk environments, if appropriate risk mitigation is in place;
and (c) with appropriate capacity strengthening built into the operation, sound country PFM
systems can be an outcome of, and not necessarily a precondition for, undertaking a SWAp.
26
See Audit Policies and Practices for World Bank-Financed Activities (R2003-0007; IDA/R2003-0013), January
27, 2003; Eligibility of Expenditures in World Bank Lending: A New Policy Framework (R2004-0026/1), March
26, 2004.
19
IV. LOOKING FORWARD: PRIORITIES AND CHALLENGES
40.
As this paper has shown, in the past fiscal year the FM Sector has continued to make
substantial progress in the wide range of activities with which it carries out its mandate.
Nevertheless, the experience of the last year, and the analytical work that has been carried out,
has also revealed areas where significant challenges remain. Accordingly, during FY08 and
beyond, while the Sector continues to emphasize moving from diagnosis to implementation and
building capacity, it will focus on the following priorities and challenges.
41.
Strategic Approach. The Financial Management and Procurement Sector Boards have
agreed that, rather than updating their strategies independently, they will prepare a joint strategy,
consistent with the Bank’s Long-Term Strategy and its renewed emphasis on governance and
anticorruption.27 The intention is to discuss the draft strategy at the joint Fiduciary Forum in
March 2008 and to finalize it by the end of FY08. This innovative approach is expected to
maximize the synergies between the two sectors and foster closer and more effective working
relationships.
42.
Use of Country Systems. While it is widely understood that the use of country FM
systems in Bank-funded operations is the Bank’s default option when circumstances permit, the
challenge for the FM Sector is to deepen and accelerate the use of such systems. To promote and
facilitate this activity, OPCFM is working in consultation with the FMSB and the Regions to
prepare detailed guidance to help FM specialists assess the adequacy of a country’s PFM system
for use in Bank-supported operations. The Sector will also continue collaborating with other
Bank groups in providing follow-up support for public financial management (PFM) reforms
through stand-alone technical assistance, components of investment projects and sectorwide
approaches, and development policy lending linked to PFM reform actions. As a measure of
progress in PFM reforms in partner countries, the FY08 annual report will include a trend
analysis of PFM performance as reflected in ratings of relevant CPIA questions. Also, in future
years, when a sufficient number of repeat PEFA assessments are available, the FM Sector will
present a more detailed analysis of the PFM trajectory in partner countries.
43.
Governance and Anticorruption. Drawing on the paper “Financial Management Sector:
Approach to Governance and Anticorruption,” the FM Sector expects to intensify its GAC work
at the operational level: (a) assisting partner countries to improve their PFM systems, strengthen
their financial reporting and auditing standards and practices, and increase the number of finance
professionals working in the public and private sectors; (b) strengthening fiduciary practices in
Bank financed projects, including “smart” design, use of techniques to enhance corruption risk
monitoring during project supervision, and increased transparency and disclosure of information
about project finances; and (c) working with global partners to support partner countries in this
area, harmonize practices, and support the development of international standards. In these
activities, the Sector will work in close collaboration with internal partners (e.g., PREM, CSR,
Department of Institutional Integrity, Legal, Procurement, Sectors, and country management
units) and external partners (e.g., multilateral development banks, bilateral donors, and global
27
See Report on the Long-Term Strategic Exercise (SecM2007-0372), August 27, 2007 and Long-Term Strategic
Exercise Draft Report Supplemental Note—Synopsis of Feedback Sessions (SecM2007-0372/1), September 11,
2007.
20
accounting and auditing bodies, as well as contributing to global initiatives such as the Stolen
Asset Recovery Program). The newly established FM GAC Working Group will provide
guidance in this area, promoting consistent approaches across Regions, where a number of
innovative initiatives are already underway.
44.
Quality Enhancement. As the Sector completes the process of populating the
RAPMAN-PRIMA system with data, the system is expected to become an increasingly
important tool for the Sector in tracking and monitoring its quality arrangements and enhancing
the consistency of workflow arrangements and compliance with the FM Practices Manual. In
addition, during FY08, the IDA14 Internal Controls Review and a review of the FM Sector’s
quality arrangements are yielding findings that the Sector is using to further improve quality and
will incorporate into the upcoming revision of the FM Practices Manual and its supporting
guidelines. Also, in response to the IEG report, management will give increasing attention to
enhancing the quality of PFM work.
45.
Staffing Issues. In the coming months and years, while the FM Sector will continue
carrying out diagnoses, it will give particular emphasis to implementation. As it works on the
agenda set out here and looks ahead to likely future expectations, it needs to ensure that the Bank
has the necessary skills—particularly PFM skills—to adequately support this work and ensure its
quality. Besides continuing to provide innovative learning opportunities for its highly dispersed
staff, the Sector needs to inventory the skills available, identify skills gaps, and develop practices
and procedures to attract and retain staff with the appropriate skills.
21
ANNEX A: FM ECONOMIC AND SECTOR WORK, FY07
Region
Country
Guinea Bissau
Cameroon
Togo
Botswana
Cameroon
With other sectors Ghana
Lesotho
Kenya
Nigeria
Gabon
Indonesia
EAP
Philippines
Albania
ECA
Azerbaijan
Georgia
Kazakhstan
Kosovo
Serbia & Montenegro
Bosnia
Macedonia
Albania
Kyrgyz
Guatemala
LCR
Panama
Paraguay
Uruguay
With other sectors Mexico
Egypt
MNA
Egypt
Egypt
Jordan
Jordan
Morocco
India
SAR
India – Rajasthan State
Afghanistan
Bangladesh
Bhutan
Maldives
Nepal
Pakistan
Sri Lanka
With other sectors Afghanistan
AFR
Activity
Integrated Fiduciary Assessment
CFAA
CFAA (PEMFAR)
ROSC A&A
ROSC A&A
External Review of PFM
PEMFAR
Country Integrated Fiduciary Assessment
PEMFAR
PEMFAR
ROSC A&A
ROSC A&A
ROSC A&A
ROSC A&A
ROSC A&A
ROSC A&A/JERP
ROSC A&A
Integrated PFM
Fiduciary Update
Fiduciary Update
Fiduciary Update
Fiduciary Update
ROSC A&A
CPAR/CFAA
ROSC A&A
ROSC A&A
Mexico States Fiduciary Performance Indicators
Institutional FM Cap. Assessment – Transport sector
Institutional FM Cap. Assessment – HD sectors
CFAA
Institutional FM Cap. Assessment – Soc Dec
Institutional FM Cap. Assessment – Education
CFAA
FM Literature Survey
State Financial Accountability Assessment
Gap Analysis of Public A&A standards
Gap Analysis of Public A&A standards
Gap Analysis of Public A&A standards
Gap Analysis of Public A&A standards
Gap Analysis of Public A&A standards
Gap Analysis of Public A&A standards
Gap Analysis of Public A&A standards
Public Finance Management Review
Source: Business Warehouse Report of Economic and Sector Work/Analytic and Advisory Assistance
23
ANNEX B: ROSC ACCOUNTING AND AUDITING STATUS REPORT, FY07
As at June 30, 2007
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
Country
AFR
Botswana
Burundi
Cameroon
Ghana
Kenya
Malawi
Mauritius
Nigeria
Senegal
Sierra Leone
South Africa
Tanzania
Uganda
Zambia
EAP
Cambodia
Indonesia
Korea
Philippines (1)
Philippines (2)
ECA
Albania
Azerbaijan
Bosnia & Herzegovina
Bulgaria
Croatia (1)
Croatia (2)
Czech Republic
Estonia
Georgia
Hungary
Kazakhstan
Kosovo
Latvia
Lithuania (1)
Lithuania (2)
Macedonia, FYR
Moldova
Montenegro
Poland (1)
Poland (2)
Romania
Russia
Completed Published
May-06
Jun-07
May-06
Jun-04
Nov-01
Jun-07
Apr-03
Jun-04
Jun-05
Jun-06
Apr-03
Jun-05
Jun-05
Jun-07
May-07
Jan-06
Jun-04
Dec-01
May-06
Jun-06
May-06
Jun-04
Dec-02
Jun-02
Jun-07
Jun-03
May-04
May-06
Jun-04
Jun-06
Jun-06
Jun-05
May-02
Jun-07
Jun-03
Jun-04
Jun-07
Jul-02
Jun-05
Jun-03
Jan-03
Jun-06
Aug-06
Jan-02
Apr-03
Dec-04
Aug-05
May-03
Sep-05
Sep-05
Sep-06
Nov-04
Jan-02
Jun-06
Nov-06
Sep-06
Feb-05
Jun-03
Jul-02
Aug-03
Sep-04
Jan-07
Sep-04
Jun-07
Jan-07
Sep-05
Jul-02
Dec-03
Oct-04
Aug-02
Sep-05
Sep-03
No.
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
Country
Serbia
Slovak Republic
Slovenia
Turkey
Ukraine (1)
Ukraine (2)
LCR
Argentina
Brazil (1)
Brazil (2)
Chile
Colombia
Dominican Republic
Ecuador
El Salvador
Guatemala
Honduras
Jamaica
Mexico
Paraguay
Peru
Uruguay
MNA
Algeria
Egypt
Jordan
Lebanon
Morocco
Tunisia
Yemen
SAR
Bangladesh
India
Pakistan
Sri Lanka
Regional Coverage
AFR
EAP
ECA
LCR
MNA
SAR
Total Regions
Completed Published
Jun-05
Dec-06
Nov-01
Feb-02
Jun-04
Sep-04
Jun-05
Jun-07
Aug-02
Feb-03
Jun-07
Jun-07
Jul-02
Jun-05
Jun-04
Jul-03
Feb-05
Mar-04
Jun-05
Jun-06
Jun-07
Jun-03
Dec-03
Jun-06
Jun-04
Jun-06
Dec-04
Mar-04
Nov-05
Feb-05
Oct-06
Jun-04
Mar-04
Jan-07
Jan-06
Jan-07
Jun-03
Aug-02
Jun-04
May-03
Jul-02
Jun-04
Jun-04
Jun-03
Jun-05
Jun-04
Aug-02
Jan-07
May-03
Dec-04
Jun-05
May-04
Ja-04
Jun-05
Dec-05
Jun-04
Completed
14
5
28
15
7
4
73
Published
9
4
23
10
5
4
55
25
ANNEX C: FM INSTITUTIONAL DEVELOPMENT FUND GRANTS
As at June 30, 2007
Region
Country
Africa
AFR
Africa
West Africa (Regional)
West Africa (Regional)
Burkina Faso
Cape Verde
Congo, Dem. Rep.
Guinea
Malawi
Mali
Mauritania
Nigeria
Nigeria
Senegal
Sierra Leone
Approved in FY07
Africa
Benin
Ghana
Ghana
Mali
Cambodia
EAP
Cambodia
China
Indonesia
Indonesia
Laos PDR
Mongolia
Thailand
Vietnam
Approved in FY07
Indonesia
Lao PDR
Thailand
Vietnam
ECA
Vietnam
Armenia
Azerbaijan
Tajikistan
Uzbekistan
Approved in FY07
SADC Accounting and Auditing
SADC Public Sector Accounting Standards
Association of Accountancy Bodies in West Africa (ABWA)
Forum of Accounts/Auditors General in West Africa (FAAGWA)
Strengthening Public Sector Control Institutions
Supreme Audit Institution
Strengthening of Accounting and Auditing Institutional Framework
Support to the Accountancy Profession
Support to the Accountancy Profession
Improve Public Financial Management
Support to the Accountancy Profession
Common FM platform
Enhancing the Quality of Accounting Practice in Nigeria
Support to the Accountancy Profession
Support to Accountancy Profession
Amount
(US$)
320,000
499,000
676,000
665,000
378,000
333,000
380,000
309,000
200,000
216,000
273,000
475,000
186,000
265,000
239,000
Institutional Strengthening of SAIs in English-Speaking Africa
Support to the Benin Accountancy Profession
Support to Ghana Audit Services (SAI)
Support to Internal Audit Agency
Support to the Audit Institutions
Strengthening National Audit Authority
Improving Financial Accountability in the Private Sector
Strengthening Provincial, Municipal and County Auditors
Public Expenditure Management and Financial Accountability
Strengthening the Indonesian Institute of Accountants
Standard Operating Procedures for Externally financed projects
Strengthening the Capacity of the National Audit Office (MNAO)
Strengthening of the Office of the Auditor General
Introduction of International Public Sector Accounting Standards
927,000
365,000
245,000
498,000
484,000
211,000
256,000
250,000
300,000
257,000
200,000
255,000
280,000
228,000
Strengthening Accountability for and Auditability of Disaster-Related Aid
Strengthening Financial Accountability in Private Sector
Improving Effectiveness of Public Expenditures in the Thai Health Sector
Strengthening the Accounting Capacity of the State-Owned Commercial
Banks (SOCBs)
Capacity Building for Analysis of Wage and Social Insurance Policies
Public Sector Internal Audit
Accounting and Auditing Reform
Public Sector Audit Capacity Building
Strengthening Capacity of Public Sector Audit Institutions
300,000
250,000
395,000
Activity
304,000
300,000
197,000
340,000
300,000
295,000
26
Region
LCR
MNA
SAR
Country
Armenia
Armenia
Croatia
Kosovo
Kyrgyz Republic
Macedonia
Moldova
Serbia
Argentina
Central America
Honduras
Approved in FY07
Latin America
Mexico
Djibouti
Approved in FY07
Djibouti
Egypt, Arab Republic
Lebanon
Bangladesh
Bhutan
India – Andhra
Pradesh
India – Uttar Pradesh
India
India
India
Maldives
Nepal
Pakistan
Bhutan
Bhutan
Pakistan
Activity
Implementation of IPSAS Strategy
Building Government Capacity to Implement Government Financial
Management Information System (GFMIS)
Enhancing Corporate Financial Reporting in Croatia
Capacity Building in Kosovo's Public Sector Accounting
Capacity Building for Public Sector Auditing
Capacity Building in Macedonia's Public Sector Accounting
Capacity Building in Moldova's Public Sector Accounting
Enhancing Corporate Financial Reporting in Serbia
Institutional Capacity Building for the Auditor General Office (AGN)
Strengthening of Institutional Accountability Systems through Supreme
Audit Institutions with the Organization of Central American and
Caribbean Supreme Audit Institutions (OCCEFS)
Enhancing Transparency and Accountability in Public Institutions
OECS: Strengthening Institutional Capacity for Project Implementation
Fiscal Transparency
Capacity Building – Budget Directorate
Building Capacity to prepare Implementation of Integrated Social
Protection System
Enhancing Capital Market Authority Monitoring Capacity
Developing Capacity Building Tools for Sustainable Governance
Strengthening FM capacity of Government and Institutional Capacity of
Controller and Auditor General
Controller and Auditor General’s Office
AP Financial Management Strengthening
Capacity Building – UP Finance Department
Institutional Strengthening Aid Accounts and Audit, Min of Finance
Modernization & Capacity Building in the Office of the Controller and
Auditor General (CAG)
Modernization of Controller General of Accounts, Min of Finance
Capacity Building of Audit Office of Maldives
Public Audit Reform and Capacity Building Office of Auditor General
Support to the Federal Public Accounts Committee
Support the Preparation of Multi-Year Rolling Budget (MYRB)
Improving Public Financial Management
Strengthening of Financial Accountability by Supporting the NWFP
Public Accounts Committee and its Secretariat
Source: Business Warehouse Report 2b1. List of Approved Projects (Lending and IDF)
ANNEX C
Amount
(US$)
320,000
310,000
350,000
160,000
370,000
160,000
160,000
285,000
500,000
400,000
339,000
409,450
500,000
343,000
244,000
309,000
338,000
450,000
370,000
430,000
167,000
385,000
490,000
490,000
384,000
480,000
340,000
330,000
287,000
398,000
27
ANNEX D: FM COMMITTEES AND WORKING GROUPS
1.
During the FM Sector Board Retreat for Principals in September 2006, the following
strategic priorities and key activities for the FM Sector were agreed:

Fiduciary quality: fully implement the FM Practices Manual, related quality
assurance arrangements, and an information system.

Results: measure the impact of fiduciary work, better operationalize analytic work,
and measure results.

Human resources: develop and implement an action plan.

Knowledge and learning: enhance delivery mechanisms for a decentralized network,
establish and maintain a good practice database, and provide appropriate training for
staff.

Communications: provide clear and continuing messages to staff about the role of
FM, and articulate and communicate the corporate role of FM to internal and external
constituents.

Partnerships: establish and maintain key strategic partnerships.
2.
To support the achievement and delivery of these strategic priorities and key activities,
the Financial Management Sector Board (FMSB) established a new structure of five committees
and working groups.

Quality and Results Committee. The Quality and Results Committee advises the
FMSB on consistent application of and uniform adherence to Bank policy and Sector
practices. The Committee provides leadership and services to better equip Bank and
borrower staff to sustain strong operational performance; measure the impact of
interventions; improve FM practices in partner countries; and ensure alignment with
the Bank’s evolving business needs and quality standards. The objectives of the
Committee are to (a) ensure that the FM Sector has adequate management
information systems in place for FM managers and staff; and (b) align FM practices
with the evolving business needs of the Bank and its partners, with particular
emphasis on responsiveness to country needs, innovation, and informed, prudent risktaking.
Two of the Committee’s salient achievements for FY07 include formulating the
methodology to support the Joint Evaluation of Network Quality Arrangements and
the provision of detailed guidance to FM staff in support of the rollout of OP 8.00,
Rapid Response to Crises and Emergencies.

Knowledge, Learning, and Outreach Committee. This Committee advises the FMSB
in supporting Bank FM staff with communication, learning, knowledge-sharing, and
28
ANNEX D
general outreach. The Committee provides leadership and services in partner
countries to ensure consistency with the Bank’s evolving business needs and quality
standards. The Committee’s objectives are to (a) ensure that the FM Sector has access
to the information, knowledge, and learning it needs to respond to the Bank’s
evolving business needs in FM; (b) reach out to internal and external clients, as well
as development partners, through sharing information and good FM practices; and (c)
adapt FM learning, communication, and knowledge-sharing to the changing business
needs of the Bank and its partners.
1

PFM Capacity Development Working Group. The PFM Capacity Development
Working Group focuses on (a) developing a PFM capacity development strategy and
action plan; (ii) developing and updating guidance, tools, and methodologies for PFM
assessment and capacity development approaches; (c) providing training in both the
technical aspects of PFM and the generic skills required to manage capacity-building
projects successfully; (d) identifying, documenting, and disseminating good practices
and success stories in PFM capacity building; (e) tracking results in the area of PFM
capacity development; (f) strengthening partnerships with key internal and external
stakeholders in PFM capacity development;1 (g) supporting the FM, Procurement,
and REM Sector Boards; and (h) providing feedback on the work of others within and
outside the Bank.

Corporate Financial Reporting Working Group. The Corporate Financial Reporting
(Regulatory Policy and Capacity Development) Working Group’s objectives are to
(a) promote high-quality financial reporting in the corporate sectors of World Bank
Group partner countries, incorporating analytic work and capacity development
interventions in the country programs; (b) ensure that the World Bank Group draws
upon current global good practice when designing interventions in corporate financial
reporting; (c) achieve consistency in the approaches taken by World Bank Group
units; (d) influence the global regulatory and standard-setting debate in a manner that
responds to the needs and the unique requirements of partner countries; and (e)
promote consistency of approaches within the development community.

Governance and Anticorruption Working Group. The purpose of this Working
Group is to support the FM network’s effective implementation of the anticorruption
action plan, and to promote consistency in the way anticorruption issues are handled
by FM staff across the Regions. The Working Group will primarily provide a
platform for sharing views and information on anticorruption activities and issues
across the FM network. It will also act as a reference group for OPCFM when
identifying and disseminating good practices, developing guidance and training for
staff on anticorruption, and reviewing operations at the country level.
Internal stakeholders in PFM capacity development include the Procurement and PREM Networks and the
World Bank Institute; external stakeholders include the PEFA Secretariat, World Bank Institute, IFACIPSASB, OECD-DAC Joint Venture on PFM, and INTOSAI.