Annex IDENTIFICATION Total: EUR RATIONALE 2.1. Sector context

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1 Annex 1. IDENTIFICATION Title/Number Support ECOWAS Public Finance Management Reforms CRIS number: ROC/FED/ Beneficiary region: West Africa Total cost Total: EUR th EDF contribution: EUR A-envelope ECOWAS contribution: EUR (parallel co-financing) Aid method / Method of implementation Stand-alone project approach Partially decentralised management Direct Centralised Management DAC-code Sector Public sector policy and administrative management 2. RATIONALE 2.1. Sector context ECOWAS (Economic Community of West African States) and WAEMU (West African Economic and Monetary Union) are the two main regional organisations in West Africa, with different levels of integration but similar objectives: fighting poverty and achieving sustainable development in a peaceful and secure environment, conducive to deeper regional integration. EU support to regional integration in West Africa is mainly channelled through the Regional Indicative Programme (RIP). The 9 th EDF RIP allocation was EUR , which almost doubled to EUR under the 10 th EDF. In this regional framework, the 10 th EDF programme of support to Regional Authorising Officer (RAO) institutional and management reforms aims to strengthen the capacities of the ECOWAS Commission in implementing its regional strategy and pursuing its mandate in a more efficient and effective way, through better management of its resources. Reinforced coordination and coherence with WAEMU is also targeted. The project was designed as a response to the acknowledged need for institutional reforms and capacity strengthening at the ECOWAS Commission. Several institutional assessments, evaluations and audits conducted over the last five years (either independently or undertaken in the frame of EU-funded projects) have pointed to the lack of compliance by ECOWAS with international standards on financial and administrative management. This has proven an obstacle to ECOWAS accessing contribution agreements, which is the preferred implementation modality for channelling EU funds. Disbursement of funds from other development partners has recently also been suspended. Furthermore, implementation of EDF projects in accordance with EDF rules and procedures (under the 9 th EDF) has been painfully slow, marred by long delays and financial and contractual errors. Additionally, poor 1

2 coordination between ECOWAS and WAEMU has been singled out by the European Court of Auditors as a particular problem, which prompted it to recommend that support to the regional organisations be made conditional on them agreeing on an institutionalised convergence mechanism. The ECOWAS Commission has several strategic documents in place to guide its operations. The Strategic Plan, aimed at providing the Commission with a strategic focus, includes a specific goal on reinforcing institutional capacity. The capacity needs of all the Commission's directorates were identified and documented as part of the strategic plan's development. The strategic plan is further elaborated in the Commission s Medium Term Action Plan (MTAP, ) and the ECOWAS Commission Capacity Development Plan (ECCDP ), developed to support the MTAP. Under result 1, the project will support specific activities targeting institutional reforms and capacity strengthening, which are already included in the ECCDP, and also coincide with several recommendations of the 2011 Joint Management Assessment on the four pillars reforms. Under results 2 and 3, support to ensure an improved ability by the ECOWAS Commission to act as RAO for EDF projects and enhanced coherence and coordination with WAEMU will be provided. More recently, following the appointment of a new team of Commissioners in early 2012, and acknowledging the need to review and streamline the ECOWAS organisational set-up, a comprehensive study on the structure, policies, procedures and practices within the ECOWAS institutions was launched in July It is expected to be finalised in The project will take into account the institutional assessment and its findings and recommendations Lessons learnt The main lessons learnt are drawn from the implementation of several 9 th EDF projects (mostly under partially decentralised management, but also in joint management with ECOWAS via a contribution agreement), including the Mécanisme de coordination et de suivi du Programme Indicatif Régional 9 e FED, and from several institutional assessments and audits conducted over the last five years. To quote only one source, the 2011 report of the mid-term evaluation of the "Economic Integration and Trade" Programme recommends that "activities related to institutional reforms and capacity building notably those related to "four pillars" in the areas of accounting, procurement, auditing and internal control should be the absolute priority if ECOWAS wants to improve cooperation with different partners, knowing that the Pool-Fund (Joint Financing Agreement) is considered only as a temporary arrangement 1. A key lesson learnt is to focus on limited specific activities, by providing high-level, permanent technical assistance, which will be able to ensure visible progress during the implementation phase of the project. ECOWAS must ensure that the technical assistance team(s) interacts properly with the Directors/Heads of Units to whom they are assigned. If a contribution agreement is to become the appropriate funding contribution to support the regional integration agenda of the two West African regional organisations, ECOWAS must ensure compliance with international standards, i.e. the four pillars. This will also result in benefits for overall internal operations and donor support. 1 Mid-term Evaluation of 9 EDF ROC 16, Final report (English), July 2011, page 61 2

3 2.3. Complementary actions Various interventions of development partners are worth mentioning. Most notably, the Capacity Building Programme financed by the Pool Fund, currently governed by a Joint Financing Agreement between the ECOWAS Commission and a group of donors comprising Canada, the UK and Spain, has included support to the ECOWAS Commission Capacity Development Plan (ECCDP), on procurement (tender code, procedures manual, etc.) and to the External Funds Unit. Disbursements were suspended in 2011 due to non-compliance by ECOWAS with the Pool Fund's reporting requirements. GIZ (German Society for International Cooperation) has been supporting the ECOWAS Commission, since 2008, to develop a Management Information System (MIS), including an intranet website. Under the current ( ) phase of the programme, EUR will be dedicated to Strategic Management and Organisational Development and Monitoring and Evaluation. The directorates concerned are the Strategic Planning Directorate, the Computer Community Centre, the Communication Directorate and the Monitoring and Evaluation Directorate. The activities designed under Result 1 will seek complementarity with the GIZ intervention. Furthermore, a similar programme is being developed in support of institutional reforms at the WAEMU Commission. This will be particularly relevant for the activities planned under result 3. Due account will be taken, during the inception phase, to coordinate and ensure coherence with the interventions planned for the WAEMU Commission. Under the 10 th EDF RIP, the ECOWAS Commission receives other contributions (through grant agreements or indirectly through contribution agreements with IOs and delegation agreements with bodies from EU Member States) which aim at reinforcing its institutional capacities in various sectors for a total amount of EUR Donor coordination Donor coordination on institutional reforms and capacity building at ECOWAS takes place in the frame of the Capacity Building Thematic Group, so far led by the Canada International Development Agency (CIDA). In view of the latter's retrenchment planned for end 2012, another development partner will have to take the lead. Synergies will be ensured between the annual Steering Committee of the project and the Thematic Group (if still active). 3. OBJECTIVES 3.1. Objectives The overall objective of the project is to support the ECOWAS Commission in implementing its regional strategy and pursuing its mandate in a more efficient and effective way, through better management of its resources. The project purpose is to strengthen the capacities of the ECOWAS Commission to allow compliance of its procedures with international standards on accounting, audit, internal control and procurement, a more efficient management of EU/EDF resources and reinforced coordination with donors and with the WAEMU Commission. 3

4 3.2. Expected results and main activities Result 1. Capacities of the identified horizontal directorates of the ECOWAS Commission are strengthened and institutional reforms are supported to ensure compliance of ECOWAS procedures with international standards related to the four pillars (accounting, internal control, audit and procurement). Result 2. The ECOWAS Commission has an enhanced capacity to fulfil its role of Regional Authorising Officer (RAO) in the implementation of 10 th EDF projects in compliance with the applicable financial and contractual procedures. For the following 10 th EDF projects, also in the decision-making process, the ECOWAS Commission will act as contracting authority: EU Support to ECOWAS Regional Peace, Security and Stability mandate (EU-ECOWAS PSS); Support to ECOWAS Regional Action Plan on illicit drug trafficking, related organised crime and drug abuse in West Africa. Result 3. The ECOWAS Commission ensures efficient monitoring of the 10 th EDF projects, in coordination with the WAEMU Commission and in the context of improved coherence with other donors interventions. The main activities will include: Inception phase The focus will be on: the review of the ECOWAS institutional assessment (if finalised and endorsed by ECOWAS Member States) and of the progress achieved in the implementation of International Public Sector Accounting Standard (IPSAS) requirements, the ECOWAS Accounting System (SAP) and other on-going financial management reforms (for result 1); the review of activities (especially under Result 1), and fine-tuning of the logframe, timetable and budget; the review of the coherence between the support to the Joint Technical Secretariat (JTS) and the assistance provided to the WAEMU Commission (result 3); the job descriptions and supervision of the recruitment of the six staff under the grant contract with ECOWAS; an assessment of previous training courses on EDF procedures (results 2 and 3); establishment of a fully-fledged recruitment plan for the key directorates concerned (mainly under result 1), etc. Result Finance Directorate Review and update the IPSAS and SAP implementation work plan, establishing a clear timetable and milestones, and progress monitoring and reporting requirements Support the production of financial statements, financial and narrative reporting in conformity with IPSAS Supervise the set up of an Integrated Accounting Software SAP Support the review and updating of the manual of accounting procedures Produce instructions for and train finance officers on the new accounting system Establish an action plan for the financial consolidation of development partner-funded activities Support the development of a result-based budgeting manual Develop an effective and accountable asset management policy; develop a Fixed Asset Register tracking software 4

5 1.1.9 Assist in reinforcing the internal control framework to establish procedures for the management of staff travel expenditures and outstanding advances Assist in enhancing internal control procedures to ensure that all the bank accounts are duly reconciled and reviewed each month Develop an automated archiving and filing system 1.2 Human Resources Directorate Support the development of a Human Resources Management System in line with the SAP/IMIS framework Provide technical advice to review and update HR internal structures and policies Provide training and awareness raising on the new HR policies and structures Provide technical advice to set up efficient recruitment procedures Support the development of the Performance Management System Support the development of the Training Management System 1.3 Procurement Unit Support the review of the tender code (if still needed) and of the manual of procurement procedures Support the preparation of a procurement plan for the ECOWAS Commission, including provisions for its publication on the ECOWAS website and regular review Support the dissemination of procurement public information through the ECOWAS website Support the development of procurement process integrated with SAP and IMIS Support to develop a supplier/vendor database Support to implement automated archiving system with dedicated space, and connected to Integrated Management Information System (IMIS) Assist in developing procurement templates 1.4 Office of the Chief Internal Auditor Support the development of a Commission-wide risk management process Support the review and finalisation of the risk register Support sensitisation of all Directorates on risk management Support to finalise the internal audit manual (on-going) Assist in reinforcing communication between the Office and relevant directorates/units on specific internal audit matters 1.5 Office of the Financial Controller Assist in clarifying the roles and responsibilities as well as the interaction between internal audit office and financial controller office Reinforce knowledge on procurement, project management and other needs Reinforce knowledge on ECOWAS institutions: Court of justice, Parliament, etc. 1.6 Directorate Strategic Planning Support the review of the Directorate's mandate 2 (i) staff regulations; (ii) staff handbook, (iii) code of conduct, (iv) anti fraud policy, (v) competency framework, (vi) HR development plan and capacity development plan 5

6 1.6.2 Assist in clarifying the responsibilities of the Directorate in the risk management process and ensure its full involvement in the process Support the development of an internal process for the review and approval of the operational work plans of the ECOWAS Commission's departments Assist in the development of a strategic planning cycle, involving planning, monitoring and evaluation Result Finance Directorate, External Funds Unit Provide induction training, as necessary, on EDF financial and contractual procedures, mainly management of grants and service contracts Provide on-the-job training for the preparation of financial reporting in compliance with EDF procedures and requirements Set-up an internal quality control system that includes the filling in of the EU check list for each submission of payment Support to reinforce accounting and payment flow systems Assist in the establishment and implementation of an appropriate archiving and filing system Set up an internal manual of EDF procedures, establishing the relationship with the Procurement Unit 2.2 Procurement Unit Provide induction training on EDF procedures, especially with regard to grants and service contracts management Support the development and implementation of an effective and efficient operational internal organisation for EDF-funded projects Support the development of tender dossiers and the launch of tender procedures, including on-the-job training (for interventions under 10 th EDF projects) Result Joint Technical Secretariat (JTS) Develop a strategy to improve the work and effectiveness of the JTS (establishing objectives, roles, responsibilities, work-plan, actors involved, resources) Support the development of studies on regional convergence in West Africa Support the mapping, needs assessment and establishment of a progress monitoring system of the regional integration process in ECOWAS member states 3.2 Office of the Vice President Supervise and coordinate the ECOWAS's contributions to the 11 th EDF programming exercise, ensuring coordination between PIR and PIN Support the monitoring of the 10 th EDF projects under implementation in West Africa (retrieving and consolidating reports, proposing steering management decisions, etc.) Support the ECOWAS Commission on accessing EU funding opportunities (other than through the RIP) 6

7 3.2.4 Contribute to the development partners' working group on capacity building, ensuring coherence between EU and other donors' interventions Inform the ECOWAS Vice President (VP), as supervisor of the project, on the status of activities supported by the project Risks and assumptions The key assumptions are: the ECOWAS Commission assumes leadership and is pro-active and committed to driving institutional reforms forward; the ECOWAS and WAEMU Commissions are willing to coordinate for enhanced coherence and monitoring of regional integration in West Africa. The key risks and associated mitigation measures are set out in the table below: Risk Risk level Mitigation measures High 1 ECOWAS institutional assessment is delayed or its recommendations are not of appropriate quality. 2 ECOWAS absorption capacity to proceed with reforms is not satisfactory, and suitably qualified technical staff are not available at ECOWAS 3 ECOWAS does not assume its role with regard to donor coordination 4 ECOWAS contributions (appropriate and adequate office accommodation, utilities, ECOWAS staff) are available on time 5 All stakeholders overcome resistance to change in communication and information exchange 6 Adequate quality of permanent key TA experts and of back-stopping 7 Lack of coherence and coordination between support to the ECOWAS (JTS) and the assistance provided to the WAEMU Commission Medium Low Low Medium Low Medium Some horizontal reforms are on-going (no need to wait for the conclusions of the ECOWAS institutional study). The close involvement of ECOWAS Commission's leadership in the formulation of this project shows acknowledgement of the need for reforms and willingness to pursue them. A grant will initially cover six new positions in the Finance Directorate (first two years). Regular staff appraisal will be provided by the Human Resources Performance Management System. The project will support enhanced donor coordination and encourage synergies between the steering committee and the capacity building thematic group. Addressed through enhanced ownership and strengthened coordination and priority given by the Vice President Development and implementation of an effective strategy of communication. Implementation of Intranet; ECOWAS website enhanced. Rigorous selection of consultancy firm and key experts, based on clear and targeted ToRs. Regular monitoring by ECOWAS and EU Delegation, through the monthly reports summarising weekly activities. The inception phase will make sure that synergies and coordination is achieved, under result 3, between activities targeting the JTS and the assistance provided to the WAEMU. 7

8 3.4. Cross-cutting Issues Cross-cutting issues such as climate change, environmental sustainability, human rights and HIV/AIDS are not directly relevant to the project, and they have not been integrated into its design. Good governance: the project supports 4 Pillars` reforms, which in themselves are conducive to better governance and greater accountability. The recommended approach is to look at the "basics first", notably ensuring reliable accounting and financial reporting. A high level of leadership, commitment and management buy-in is needed for successful institutional reforms. Gender equality: the "Toolkit on Mainstreaming Gender Equality" should be utilised. Focus will be placed on equal participation of women in the implementation of the project and equal access to training opportunities Stakeholders The main stakeholders for this project, as well as key beneficiaries, are the ECOWAS Commission with its selected Directorates/Units concerned, mainly in the Administration and Finance Department, but also the Office of the Vice-President, the Strategic Planning Directorate, the External Relations Directorate, the Office of the Financial Controller and the Chief Internal Auditor. Furthermore, ECOWAS departments responsible for the implementation of 10 th EDF-funded projects and programmes (see detailed list above) will indirectly benefit from the activities envisaged. The wider stakeholder group includes all actors from ECOWAS Member States in the public service and in civil society who are directly or indirectly concerned and/or affected by the implementation of EDF-funded projects/programmes and a better implementation by ECOWAS of its regional strategy and more efficient management of its resources in general. It also includes the other development partners, through the improvement of the regional organisation's capacity to mobilise, manage, and coordinate all international development assistance. 4. IMPLEMENTATION ISSUES 4.1. Method of implementation A Financing Agreement will be signed with the Economic Community of West African States (ECOWAS) referred to in Article 17 of Annex IV to the Cotonou Agreement. The method of implementation is as follows: 1. Partially decentralised management - for activities implemented through two technical assistance service contracts, under Result 1 and Results 2 and 3, respectively, in accordance with Articles 21 to 23 of Regulation (EC) No 215/2008 on the financial regulation applicable to the 10 th European Development Fund. The Commission controls ex ante all the procurement and grant procedures. Payments are executed by the Commission. 2. Direct centralised management - for implementation of activities under Result 1 through a grant contract (direct award) with an international organisation (ECOWAS), and for evaluation, audit and visibility activities (service contracts), in accordance with Article 26 of 8

9 Regulation (EC) No 215/2008 on the financial regulation applicable to the 10 th European Development Fund. The grant contract is awarded to the ECOWAS Commission as the organisation whose institutional reforms and capacity building are targeted through the project. The grant will support the employment, for two years, of six staff in the Finance Directorate, which is a key beneficiary of assistance under Result 1. The change of management mode constitutes a substantial change except where the Commission "re-centralises" or reduces the level of tasks previously delegated to the beneficiary country, international organisation or delegatee body under, respectively, decentralised, joint or indirect centralised management. Project governance and implementation arrangements will be as follows: 1. A Project Steering Committee to oversee the overall direction of the project in relation to the ECOWAS institutional reforms that will meet once a year. 2. A Project Management Steering Committee to oversee and validate the operational management of the project. The Project Management Steering Committee (PMSC) shall meet three times a year. 3. Two Project Implementation Committees (one for result 1 and one for results 2 & 3) will coordinate and supervise the daily implementation of activities. They will meet on an ad-hoc basis, based on monthly activity reports Procurement and grant award procedures 1) Contracts All contracts implementing the action must be awarded and implemented in accordance with the procedures and standard documents laid down and published by the Commission for the implementation of external operations, in force at the time of the launch of the procedure in question. Participation in the award of contracts for the present action shall be open to all natural and legal persons covered by the 10 th EDF. Further extensions of this participation to other natural or legal persons by the concerned authorising officer shall be subject to the conditions provided for in Article 20 of Annex IV of the Cotonou Agreement. The tender procedures of the first technical assistance service contract (for results 2 and 3) will be published with a "suspensive clause" before the financing agreement between the European Commission and the beneficiary is signed. The use of this suspensive clause before the adoption of the financing decision is expressly authorised under EDF in order to ensure early project start-up (Article 19b of Annex IV of the Cotonou Agreement). 2) Specific rules for grants The essential selection criteria are financial and operational capacity of the applicant. The essential award criteria are relevance of the proposed action to the objectives of the call, design, effectiveness, feasibility, sustainability and cost-effectiveness of the action. They are established in accordance with the principles set out in Title VII Grants of the Financial Regulation applicable to the 10 th EDF. When derogations to these principles are applied, they shall be justified. 9

10 The recourse to an award of a grant without a call for proposals is justified because ECOWAS Commission is a de facto monopoly situation to implement the actions that are targeted in the project. Financing in full (derogation to the principle of co-financing): the maximum possible rate of co-financing for grants should not exceed 80%. Full financing may only be applied in the cases provided for in Article 109 of the Council Regulation on the Financial Regulation applicable to the 10th European Development Fund. Financing in full is necessary for carrying out the programme. The grant will bring support to ECOWAS mandate. The regional organisation has limited resources. It has, however, committed itself to fund as from the third year the operating costs, i.e. the remuneration of the six ECOWAS staff members Budget and calendar The total project cost is estimated at EUR , of which EUR shall be financed from the EU-West Africa Regional Indicative Programme ( ) in the framework of the Cotonou Agreement, and EUR by the Commission of the Economic Community of West African States (ECOWAS). The ECOWAS Commission undertakes to finance, for the remaining implementation period of the project, the operating costs, i.e. remuneration of the six ECOWAS staff to be hired in the Administration and Finance Department and supported by the project in the first two years. ECOWAS financial contribution will be done through a parallel co-financing. The foreseen operational duration of the project is 54 months from the signature of the Financing Agreement. The closure phase is 24 months from the end of the operational phase Performance monitoring Performance monitoring in the context of the proposed project will be undertaken at two different levels and by different actors: - At the overall objective level and the project purpose level monitoring will be undertaken by the Office of the Vice President (the RAO) according to Objectively Verifiable Indicators and Sources of Verification in the logical framework. - At the results level and the activities level monitoring will be undertaken by the implementing line Directorates/Units according to OVI and Sources of Verification in the logical framework. The objectively verifiable indicators specified in the logical framework will be used for monitoring and measuring the performance of the project and should be reported in the progress reports. They will be further refined and detailed by the Project Support Unit during the inception phase. Indicators will also be improved and adjusted throughout project duration, if needed. They form part of the review of technical and financial implementation progress by the Project Steering Committees. The Commission may carry out Results Oriented Monitoring via independent consultants. 10

11 4.5. Evaluation and audit Provisions have been made for a Mid-Term Review and a Final Evaluation of the project. An amount of EUR has been earmarked for evaluations and audits Communication and visibility Communication/visibility activities will be developed during the inception phase of the project in close coordination with the ECOWAS Commission and the EU Delegation, which will be subject to their approval. The communication strategy should enhance the quality of communication/information within the ECOWAS Commission and especially within the Directorates/Units concerned. The visibility actions dedicated to the promotion of the joint cooperation between EU and the ECOWAS Commission should improve the public knowledge of the EU-ECOWAS partnership. 11

12 S/N Description Appendix Indicative Budget: EU Contribution EUR ECOWAS Contribution EUR 1. PARTIALLY DECENTRALIZED MANAGEMENT TOTAL EUR A TA Service Contract Result B TA Service Contract Result 2 & Sub total DIRECT CENTRALIZED MANAGEMENT C Grant Contract to ECOWAS D Monitoring & evaluation (Service Contract) E Audit (Service Contract) F Visibility (Service Contract) Sub total Operating Costs G Operating Costs CONTINGENCIES H Contingencies* GRAND TOTAL *The EU contribution to the "Contingencies" heading may be used only with prior agreement of the Commission. 12