Draft: Memorandum of Understanding for RWSS CF Version 5.1
October 2008
Draft RWSS CF MoU
October 2008
Memorandum of Understanding
Between
REPUBLIC OF
MOZAMBIQUE
Represented by the Ministry of Public Works and Housing,
Ministry of Planning and Development,
Ministry of Finance,
And
Contributing Partners:
Austrian Development Cooperation
Canadian International Development Agency
The Dutch Ministry for Development Cooperation
Swiss Development Cooperation
United Kingdom’s Department of International Development
United Nations Children’s Fund
………..
………..
………..
Regarding the
Common Fund for “Programa de Agua e Saneamento Rural”
PASR
Maputo, Month, year
1 Contents
Acronyms and Abbreviations
Preamble
Article 1Fundamental Commitments
Article 2Goals and Objectives of PASR
Article 3 Purpose and Scope of MoU
Article 4Mutual Responsibilities
Article 5Planning, Budgeting and Accountability
Article 6Commitments and Disbursements
Article 7Flow of Funds
Article 8Financial Management and Procurement Procedures
Article 9 Audit
Article 10 Reporting
Article 11 Coordination, Monitoring and Review
Article 12 Non-Compliance, Force Majeure
Article 13 Anti-Corruption
Article 14 Amendments, Additions and Withdrawals
Article 15 Dispute Settlement
Article 16 Entry into Effect
2 Annexes
Annex 1Contributing Partners’ Specifications and Exceptions
Annex 2Financial Flow Mechanisms
Annex 3 Performance Assessment Framework indicators for PASR
Annex 4 Calendar for the Coordination of PASR
Annex 5Scope and Evolution of RWSS SWAP
3 Acronyms and Abbreviations
ACAAvaliação Annual Conjunta: Annual Joint Sector Review
AfDBAfrican Development Bank
AIPAnnual Implementation Plan
BM Bank of Mozambique
CFCommon Fund
CIDACanadian International Development Agency
CoCCode of Conduct
CPsContributing Partners
CUTConta Única do Tesouro: Single Treasury Account
DAGDepartment of Administration and Finance
DARDepartment for Rural Water (in DNA)
DASDepartment for Water and Sanitation (in DPOPH)
DESDepartment of Sanitation (in DNA)
DFID British Department for International Development
DNANational Directorate of Water
DPOPHProvincial Directorate of Public Works and Housing
DPPF Provincial Directorate of Planning and Finance
E-SISTAFEElectronic component of the State Financial Management System
FOREXConvertible Foreign Exchange Currency
GoMGovernment of Mozambique
INENational Institute of Statistics
JICAJapan International Cooperation Agency
MCCMillennium Challenge Corporation
MDGMillennium Development Goals
MoFMinistry of Finance
MOPHMinistry of Public Works and Housing
MoUMemorandum of Understanding
MPDMinistry of Planning and Development
MTEFMedium Term Expenditure Framework
MZM Meticais
NRWSSPNation Rural Water Supply and Sanitation Programme
ODAOfficial Development Assistance
ODAMozODA database for Mozambique
OE State Budget
PAFPerformance Assessment Framework
PAPProgramme Aid Partners
PARPA Action Plan for the Reduction of Absolute Poverty
PASRPrograma de Agua e Saneamento Rural
PESEconomic and Social Plan
PESA-ASRRural Water Supply and Sanitation Strategic Plan
RWSSRural Water Supply and Sanitation
SCCSector Coordinating Committee
SWAPSector Wide Approach to Programming
TATribunal Administrativo: Administrative Court
ToRTerms of Reference
UNICEFUnited Nations Children’s Fund
Memorandum of Understanding between: the Ministry of Public Works & Housing, the Ministry of Planning & Development, and the Ministry of Finance of the Mozambique; and Official Development Assistance partners committed to supporting rural water supply and sanitation through a Common Fund.
This Memorandum of Understanding (hereinafter referred to as MoU) regarding the Rural Water Supply and Sanitation Common Fund (hereinafter referred to as the Common Fund) is signed on …………………2009 between the Ministry of Public Works and Housing (hereinafter referred to as MOPH); the Ministry of Planning and Development (hereinafter referred to as MPD); the Ministry of Finance (hereinafter referred to as MoF); and Contributing Partners (hereinafter referred to as CPs). The MOPH, MPD, MoF and CPs are hereinafter referred to as the Signatories to this MoU.
Preamble
- This Memorandum of Understanding (MoU) establishes a dedicated Common Fund to support the implementation of the “Programa de Agua Rural e Saneamento”: PASR (the National Rural Water Supply and Sanitation Programme). It sets out principles, terms, conditions and institutional mechanisms for the partnership between the Government of Mozambique (GoM) and international Official Development Assistance (ODA) partners relating to the Common Fund (CF).
This MoU is consistent with the MoU between Government and Programme Aid Partners (PAPs) for the provision of General Budget and Balance of Payments support.
- PASR will be implemented within the context of two broader frameworks:
(i) The Code of Conduct for the Water Sector, which commits ODA agencies and Government to the principles of Ownership, Harmonisation, Alignment, Results and Mutual Accountability.
(ii) A Sector Wide Approach to Programming (SWAP) in the RWSS sub-sector. The RWSS SWAP brings together GoM and ODA partners in a voluntary arrangement aimed at ensuring that aid for this sector is harmonised effectively and equitably to serve the water and sanitation needs of the rural poor.
- The terms, principles and structural mechanisms referred to in this MoU are further detailed in the Annexes. The Annexes 1 to 5 are reference documents and integral to the MoU. They may only be revised following due consultation and approval by Signatories.
- The financial contributions of each Contributing Partner to PASR Common Fund will be agreed in the bilateral agreements between MOPH and the respective partner. This MoU will be attached as an annex to each Contributing Partner’s bilateral agreements with the Government.
Bilateral agreements will have precedence over this MoU. In the event of discrepancies between the provisions of these bilateral agreements and this MoU, the CP concerned will inform the Signatories regarding those discrepancies. All individual CP specifications and exceptions to the MoU will be reflected in Annex 1. CPs commit to limit the number of exceptions to this MoU, and to reduce and eliminate exceptions over time, if possible within the duration of this MoU.
- This MoU is not a legally binding document, and is not an international treaty.
Article 1Fundamental Commitments
1The fundamental commitments which form the basis of the partnership between Government of Mozambique and contributors to the PASR Common Fund are:
- Meeting the Millennium Development Goals (MDGs) for Water and Sanitation for the rural poor.
- The promotion of regional and gender equity in the provision of Water and Sanitation services in Mozambique.
- Strengthening the capacity and commitment of MOPH and decentralised structures, to sound financial management and procurement practices, transparency and good stewardship in the use of funds.
Article 2Goals and Objectives of PASR
2.1 PASR, the National Rural Water Supply & Sanitation Programme, is based on two policy frameworks, the PESA-ASR and PARPA, respectively: the Strategic Plan for the Rural Water and Sanitation, and the Action Plan for the Reduction of Absolute Poverty.
The overall goal of PASR is to contribute to the satisfaction of basic human needs, improve well-being and fight against rural poverty through increased use and access to water supply and sanitation services. PASR’s specific programmatic objective is the achievement of MDG targets of 70% coverage in rural water supply and 50% in rural sanitation by 2015 through these implementation strategies:
- Improving the quality and increase the coverage and sustainability of rural water supply services.
- Promoting rural sanitation in the national agenda at all levels, and particularly at the district level.
- Expanding technological options and institutional management models for RWSS.
- Decentralising resources, functions and competencies to enhance demand-responsive, service provision.
- Linking planning and funding with the decentralisation process
Article 3Purpose and Scope of the MoU
3.1This MoU establishes a Common Fund to support PASR.
This MoU sets out the financial procedures and institutional arrangements for the channelling of external funds through common mechanisms aligned as far as possible, with the GoM’s public financial management system, to support the implementation of PASR and strengthen institutional and financial management capacity in terms of:
- Common procedures for commitment and disbursement on the part of Contributing Partners (CPs).
- Common procedures for accounting, reporting and auditing
- Annual joint monitoring and evaluation of performance of MOPH and CPs against agreed targets for the implementation of PASR and the annual PES
3.2With this MoU, the Signatories commit themselves to honour their mutual obligations as agreed in the Paris Declaration on Aid Effectiveness to which GoM and all CPs are parties
Signatories strive to achieve the highest degree of alignment with GoM’s budgetary and accounting system, and legislation. The aim for such alignment is make planning and implementation more efficient; reduce the administrative burden and minimize transaction costs; and the need to strengthen MOPH’s internal capacity and procedures, and those of decentralised structures integral to the implementation of PASR.
3.3Signatories commit themselves to encouraging other ODA partners working in RWSS to enter and comply with this MoU.
Article 4 Mutual Responsibilities
4.1 The Signatories commit themselves to a development partnership based on mutual commitment, trust, respect and confidence, recognizing that there is no legal sanction in the implementation of such a partnership, and recognizing that the sanction of withdrawal of support should only be considered after less disruptive remedies and due processes of consultation have been exhausted.
Responsibilities of the Government of Mozambique
4.2. MOPH is responsible for implementing PASR. Following GoM’s annual planning and budgeting cycle, and the submissions of ODA partners to the RWSS SWAP, MOPH will produce an Annual Implementation Plan (AIP) based on the annual RWSS Economic and Social Plan (PES). The AIP will reflect all the interventions, priorities and targets, and internal and external resources for RWSS, and provide the basis for annual discussions between MOPH and CPs.
4.3. MOPH will be responsible and accountable for the performance, policies and appropriate strategies for the effective and equitable delivery of PASR.
Responsibilities of Contributing Partners
4.4. CPs commit to aligning their planning, budgeting, accounting and auditing systems relating to their contribution to the PASR Common Fund, and their wider support of PESA-ASR to those of the GoM, so as to reduce the administrative burden and transaction costs on MOPH.
4.5. CPs will provide MOPH with indicative commitments of their projected contributions to the PASR Common Fund by mid November each year, for years n+2, n+3 and n+4. These commitments will be based on the budgetary needs of the PASR and take into account the Government’s contribution to PASR expressed in the annual budgetary allocation to MOPH, and projections in the Medium Term Expenditure Framework (MTEF).
The commitments will be confirmed on an annual basis in time to be inscribed in the consolidated State Budget for MOPH, and disbursements will be made according to the procedures set out in Articles 5, 6 and 7 below.
Responsibilities of All Signatories
4.6 MOPH will immediately inform all CPs of any circumstance which may interfere or threaten to interfere with the appropriate use of PASR funds, and will call a meeting to consult with the CPs on remedial action to be taken.
4.7 CPs will have the option to suspend, reduce and cancel disbursements if any of the following articles are violated: Article 1 Fundamental Commitments; Article 2, Goals and Objectives; Article 8 Financial Management and Procurement Procedures; and Article 9 Audit.
Article 5Planning, Budgeting and Accountability
5.1. Following the GoM’s annual budgeting and planning cycle, MOPH produces an annual Economic and Social Plan (PES) for the Water and Sanitation Sector. The PES sets out the activities and investment required to achieve annual PARPA targets specified in the Performance Assessment Framework (PAF) for the sector: for RWSS; urban water and sanitation, and water resources management.
5.2. The PES sub-sectoral component dealing with rural water supply and sanitation will form the basis of a PASR AIP, with PAF indicators and targets relevant to rural water and sanitation. (Annex 3: PAF Indicators for PASR).
5.3. The AIP will reflect State Budget, PASR Common Fund resources and off-CUT commitments to the rural water supply and sanitation sub-sector, and will be discussed by MOPH and CPs before it is finalised. The PASR AIP will take into account the recommendations of the Annual Joint Review and audit of year n-1.
5.5. MOPH will ensure that the resources from Common Fund directed into this AIP will only be used to cover expenditures that are consistent with the PES.
5.6. MOPH will be ultimately responsible for the resources from the Common Fund used to support the AIP, notwithstanding GoM’s policies on decentralisation which require implementation to be undertaken increasingly by DPOPHs and District Administrations (Annex 2: Financial Flow Mechanisms for the decentralised implementation process)
Article 6Commitments and Disbursements
6.1CPs will communicate their annual financial commitments for the year n+1 to MOPH for PASR Common Fund within four weeks of the Annual Joint Review.
Once commitment figures are agreed they will be disbursed unvaryingly, except in the event of a major breach of this MoU. A major breach is defined as
(i) Evidence of serious and continuing fraud and mismanagement of funds (Article 8 Financial Management and Procurement Procedures; Article 9 Audit).
(ii) A significant divergence from the policy foundations and operational purpose of PASR as encapsulated in this MoU. (Article 1 Fundament Commitments; Article 2 Goals and Objectives of PASR).
6.2CPs will determine their annual financial commitments for the following year (n+1), on the basis of:
i) Government performance in RWSS as measured against the RWSS PAF indicators and balance of PES of year n-1;
ii) The Water Sector Joint Review of year n-1;
iii) The audit report of PASR Common Fund year n-1
Once determined, commitments will be entered into ODAMoz database.
Further, CPs will endeavour to provide by mid November of year n the indicative commitments for the years n+2, n+3 and n+4 as required for the MTEF preparation process.
6.3 CPs will specify in their bilateral agreements with GoM, the amount of ODA commitment to the PASR Common Fund, and subsequent treatment of this ODA.
i) Amount of ODA: Commitments to PASR Common Fund will be multi-annual, but subject to approval by the respective governance frameworks of the CP, and dependent on performance of the RWSS sub-sector as stated in Article 6.2 above.
ii) Treatment of ODA: Commitments to PASR will be designated either as ‘internal’ or ‘external’ by the CP prior to payment into the PASR Common Fund Forex Account. This will enable the proper treatment of CUT Meticais balances in line with Article 7.4
6.4In exceptional circumstances, in line with bona fide commitments and conditions in their prevailing bilateral agreements with GoM, CPs may earmark their contributions to PASR Common Fund to be used for a specific operational or geographical aspect of PASR. CPs will be encouraged to discontinue such exceptions beyond the validity of their current bilateral agreements.
6.5 A disbursement plan for the transfer of external funds into the PASR Common Fund FOREX account will be agreed by CPs and MOPH before the end of financial year n, for the financial year n+1, taking into account expected expenditure in the PES for the year n+1
During a fiscal year, disbursements will be made in a timely fashion as agreed in the Calendar (Annex 4), notwithstanding the sub-sector’s in-year performance or delays in the submission of progress reports during the year in question.
6.6 MOPH will send a formal written request to individual CPs at least one month before the agreed date of disbursement. Upon payment CPs will inform MOPH in writing, to enable subsequent cross-validation. MOPH will in turn confirm receipt of funds in writing, based on information received from MoF.
6.7 Expenditures include actual expenditures, and committed but not paid expenditure. Committed but not paid expenditures include:
i) The non-executed portion of the value of signed contracts under execution in the procurement of goods, delivery of services and construction works, inscribed and budgeted for in the State Budget of year n;
ii) Expenditure to be paid and, exceptionally, not yet paid until the closure of the exercise.
Committed but not paid expenditures will be inscribed in the budget and paid in year n+1 to complete the relevant activities commenced in year n.
Article 7Flow of Funds
7.1 Disbursements from CPs for the PASR Common Fund will be paid into a specific Forex account in US Dollars and/or Euro, indicated by the GoM, in favour of the ‘Ministry of Finance - the National Directorate of Treasury’, at the Bank of Mozambique (BM). From this Forex account funds will be transferred via a transitory account in Meticais to the CUT, from where it will follow national financial procedures. (Annex 2 Financial Flow Mechanism).
Deposits for the PASR Common Fund made into the CUT will be coded as either internal or external funds, depending on the specification of the CP (Annex1 Donor Specifications and Exceptions). The transitory account will remain in place only for so long as it is required.
A change in the coding of funds has to be communicated by a CP to MOPH, after the Annual Joint Evaluation (ACA) and before 31 May of year n.
7.2Funds from the PASR Common Fund Forex account will be transferred to the CUT on instruction from MOPH.
7.3. The balance i.e. non-executed funds in the PASR Common Fund Forex account at the end of financial year n will be carried forward and re-inscribed in PASR Common Fund budget for year n+1.
7.4.The balances in Meticais in the CUT may be treated in two ways as specified by CPs in their bilateral agreements:
i) The balances in Meticais, which are already inscribed in the CUT and coded as internal funds will be treated the same as for the State Budget (OE)
ii) The balances in Meticais, which are already inscribed in the CUT and coded as external funds, will be re-inscribed into the budget for RWSS for the year n+1 as external resources for RWSS.
Article 8Financial Management and Procurement Procedures
8.1 MOPH will perform all financial management in accordance with relevant national legislation specifically regarding financial management, as set out in Sistafe Law 9/2002, of 12 of February, and Decree 23/2004 of 20 of August, or any other legislation that will replace these instruments referred, and any other regulations and instructions issued for the same purpose as stipulated in SISTAFE.