Terms of Reference
In-depth Fiduciary Review of IDA and ARTF Financing in the General Education Sector
Afghanistan Country Office
TERMS OF REFERENCE (TOR)
Hiring of Consulting Firm for
In-depth Fiduciary Review of IDA and ARTF Financing in the General Education Sector
I. Introduction
1. The World Bank has been supporting the education sector in Afghanistan since 2003 through a series of Education Quality Improvement Projects (EQUIP) towards achieving the equitable access to quality basic education. The Second Education Quality Improvement Project (EQUIP II) was approved in 2009 and is scheduled to close on December 31, 2017. EQUIP II is financed by Afghanistan Reconstruction Trust Fund (ARTF) and International Development Association (IDA); project core financial data is provided below. While EQUIP II funds are used for school construction, improving learning environment and teacher training, the salaries of school teachers are financed through the Recurrent Cost Window (RCW) of ARTF. Education Quality Reform in Afghanistan (EQRA) Project is currently under preparation and is expected to be effective in 2018.
2. The RCW was set up in 2002 to support Afghanistan’s Reconstruction Program by financing/reimbursing eligible expenditure of the Government of Islamic Republic of Afghanistan (GoIRA). The eligible expenditures include salaries, wages, benefits, and other payments for government employees as well as operations and maintenance and interest payments, in accordance with the grant agreement and procedures agreed upon between GoIRA and the World Bank. The Ministry of Finance (MOF) submits detailed records of expenditures to the World Bank for which it seeks reimbursement from the RCW. An internationally accredited accounting firm recruited by the World Bank, referred to as the RCW Monitoring Agent (MA), determines the eligibility rate for reimbursement from the RCW. The amount that is reimbursed to GoIRA from the RCW is the minimum of either the agreed upon cap for RCW financing for the year or the volume of expenditures that was deemed to be eligible. The RCW MA reports directly to the World Bank on a monthly and quarterly basis, the outcome of its assignment including the review and verification of eligible expenditures and the performance of related GoIRA’s accounting, payroll, procurement, and payments systems.
3. As the ARTF trustee, the World Bank has a fiduciary responsibility to ensure that the funds are used for the purposes intended with proper attention being given to economy, efficiency, and mitigating chances of misuse. The government also has a responsibility to put in place appropriate arrangements to use the fund as intended and with due care to economy, efficiency, effectiveness, and value for money.
4. There have been several concerns over the use of funds of some IDA and ARTF financed projects in the education sector. EQUIP II is widely viewed within Afghanistan as having been vulnerable to corruption, with frequent allegations of non-existent school buildings, non-completion of school buildings and sub-standard school buildings. This perception appears to be shared across the public, government officials and the international community. The annual report of the supervisory agent responsible for reviewing ARTF projects for the year October 2015 and November 2016 indicated some technical concerns including lack of operations and maintenance (O&M) plans across all subprojects, use of substandard materials and non-maximal use of procured materials under the Quality Enhancement Grants amongst others. Financial Management (FM) implementation support in September 2016 and Post Procurement Reviews (PPR) also came up with some concerns. External Audit Report of 2016 identified issues of school construction on disputed land, payments to consultants before submission of deliverables, advances in millions of Afghanis unadjusted for several months, books of accounts and relevant records not properly maintained, and weak asset and cash management. Most recently, the Independent Joint Anti-Corruption Monitoring and Evaluation Committee (MEC) has published a Ministry Corruption Vulnerability Assessment (MCVA) which reported on a wide range of observations on corruption vulnerabilities in the Ministry of Education (MOE).
5. Considering the above, the Bank has decided to work with MOE to conduct an in-depth review of the fiduciary arrangements of EQUIP II and the recurrent expenditure subject to RCW reimbursement (e.g., payroll of school teachers). The objective is to review MOE’s fiduciary arrangements using the engagements on EQUIP II and the arrangements for recurrent expenditure payments supported under the RCW as the empirical focus for the review. The review is intended, among other potential benefits, to contribute to a robust design of the EQRA project and its implementation arrangement.
6. Disbursements in the last two fiscal years ended December 31, 2016 and 2015 total approximately US$ 89 million. Project core financial data as of September 25, 2017, is as follows:
Project Name / OverallRisk / Effectiveness Date / Closing Date / Grant No. / Total Grant Amount (USD’M) / Disbursed Amount (USD’M) [1]
P106259 - Second Education Quality Improvement Program / Substantial / 14-04-09 / 12-31-17 / TF93962
IDA H3540 / 408.0
28.9 / 380.0 (93%)
28.9 (100%)
7. EQUIP II has three components: School grants; teacher and principal training and education; and project management, monitoring and evaluation.[2]
Component 1: School Grants (Disbursements to December 31, 2016: $136.4M)
There are two complementary objectives of the school grants component: a) to support the improvement of teaching and learning by facilitating the creation of enabling school environments; and b) to support the improvement of basic school facilities at existing government registered primary, middle and secondary schools with teachers on payroll.
Component 2: Teacher and Principal Training and Education (Disbursements to December 31, 2016: $137.5M)
The objective of this component is to create sustainable systems which will increase the level of professional knowledge and skills of educators throughout Afghanistan. This component will provide much needed training to teachers and principals. As time passes, the training efforts will focus more on the creation and development of local professional networks which will allow educators to share ideas, problems, and solutions with their peers. This component will be delivered in partnership with USAID-funded Building Education Support for Teacher Training (BESST) and have national coverage. USAID funding will cover eleven provinces and EQUIP II covers the remaining twenty-three.
Component 3: Monitoring and Evaluation (Disbursements to December 31, 2016: $107.8M)
The objective of this component is to (a) build on and support the existing structure for EQUIP in MOE and (b) establish and implement a practical monitoring and evaluation system for the program so that lessons can be drawn in a timely fashion to facilitate program improvement as well as policy making.
II. Project Implementation Arrangements
8. The overall responsibility of the project is vested in the leadership committee made up of the Minister and his two deputy-ministers and senior advisors. MOE, through its central, provincial and district departments, is responsible for the overall execution of the project.
9. NGO contracting and monitoring is the sole responsibility of MOE and is done using previously agreed upon guidelines and criteria. The Grants Management Unit (GMU) at the MOE handles fiduciary aspects related to financial management, disbursement, and audit functions for the life time of the project. The EQUIP Coordinator and his team with the GMU coordinate all project activities in individual components. The monitoring unit liaises with all relevant project departments in gathering data on progress made against agreed indicators.
10. Procurement activities are carried out by MOE through its GMU and Procurement Directorate. Procurement is in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” (dated May 2004; revised October 2006); “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” (dated May 2004; revised October 2006); and the provisions stipulated in the Development Grant Agreement. The Bank’s Standard Bidding Documents, Requests for Proposals, and Forms of Consultant Contract are used.
III. Project Status and Implementation Progress
Key Project RatingsImplementation Progress / Moderately Unsatisfactory
Component 1: School grants / Moderately Unsatisfactory
Component 2: Teaching, principal training & education / Satisfactory
Component 3: Project management, monitoring and evaluation / Moderately Satisfactory
Financial Management / Unsatisfactory
Procurement / Moderately Unsatisfactory
11. EQUIP II has been rated Moderately Unsatisfactory since June 2015. There is a lack of coordination between the line departments and significant delays in the completion of civil works.As of November 1, 2016, 1,118 out of 1,820 schools planned under EQUIP I, II and Additional Financing (AF) had been fully completed with all the necessary components, whereas 415 schools had incomplete items (e.g., water point, latrines, furniture, and boundary wall), construction of 110 schools had stopped, and 177 were under construction. With respect to functionality of the school buildings, there were 1,586 functional school buildings which were being used across all the grades. There was a significant number of consulting firms and contracted staff working on the project. The number of contracted staff was about 734, a reduction from the former number of 1,500.
12. There are substantial risks associated with the effective use of funds for the school grants under component one. Additionally, there are likely substantial risks in the effective application of funds for component three – project management, monitoring and evaluation; and concerns that a substantial number of the contracted staff might not have been covered in the procurement plan.
13. The FM rating of the EQUIPII project is Unsatisfactory. There were ineligible expenditures of US$40,000 which were refunded after over a year while advances to provinces for approximately US$750,000 remained outstanding for the last three years. In addition, the audit reports for the last three fiscal years had several audit observations including likely inappropriateness in some bidding processes, retroactive issue of purchase orders, purchases prior to approval, substantial unliquidated advances, excess payments, and acceptance of substandard items for payments. Additionally, observations in prior years have not been rectified nor have responses to the observations received by the Bank. The internal audit report for 2014 and 2015 have also not been shared with the Bank.
14. The procurement rating of the EQUIP II Moderately Unsatisfactory. A recent procurement review indicated the observation in the table below.
Review No. / Description / Amount (USD equiv.) / Proc Type / Proc Method / Date of Award / No. of Deviations (Major/ Minor) / Compliance1 / Procurement of 145 laptop Computers / $133,400 / Goods / NCB / 10/20/2012 / 1/2 / Yes
2 / Printing and Supply of 60000 Text Books for TED / $93,806 / Goods / Shopping / 12/8/2012 / 0/1 / No
3 / procurement of Photocopiers and scanners / $42,586 / Goods / Shopping / 6/8/2013 / 1/2 / No
IV. Objectives
15. For the In-depth Review, the Bank envisions a holistic exercise that goes beyond a transaction-based document review to comprise an evidence-based examination of the programs with emphasis on its fiduciary controls and accountability arrangements to minimize inappropriate use of projects funds and optimize their potential impact. The Bank expects that the findings of the Review will educate future projects to be implemented in its Afghanistan portfolio.
16. As such, the Bank’s primary objectives for the Review are to verify whether:
a. expenditures funded over the project implementation period are eligible as outlined in the Project Appraisal Document (PAD) and grant agreement;
b. funds have been used for the purpose intended with due regard for economy and efficiency, including the identification of indicators of potential fraud, corruption and other misuse of funds;
c. payroll of school teachers is processed as per approved pay scale and government regulations, there are no arithmetical errors in payroll, controls are in place to detect ghost workers, and salaries are paid to employees in time; and
d. control and oversight processes used by the Government, third party monitor, and the World Bank were adequate and functioned appropriately to identify and prevent problems; in cases where gaps or non-compliance are identified, the Review will also seek to identify the reason for the control breakdown.
17. The Review is expected to complement prior reviews done by Bank’s Procurement (Solutions and Innovations in Procurement) team to avoid any duplication. Reference to the findings of the Post Procurement Reviews (PPR)[3]/Independent Procurement Reviews (IPR)[4] will be required to plan further deep dive exercises such as physical verification and beneficiary feedback on the quality of deliverables, etc.
V. In-depth Review Approach and Methodology
18. The Review will follow a risk-based approach, including the selection of a risk-based sample of transactions. See annex for some guidance on risk.
19. It is expected that the transaction review will employ a forensic methodology that will include identifying indicators of fraud and corruption and, where warranted, additional procedures such as physical verification, third-party verification of transactions and documents and stakeholder interviews. Where suspected cases of fraud, corruption and other sanctionable practices[5] are identified, these should be reported to INT for deciding the proper course of action.
20. Working papers and supporting documentation should be collected and retained to properly document and evidence the audit procedures performed and the findings. Complementary work should document the control and oversight procedures and protocols used by the Government, third party monitor, and the World Bank, and the results of interviews with key informants on the operation of these controls.
21. A Consulting firm will be engaged to carry out the Review (“the Consultant”). The team will work under the overall guidance of the FM and Procurement Coordinators supported by the Afghanistan-based FM and Procurement Specialists as well as the Program Leader for Human Development and Governance and INT (collectively, “the Bank Team”). The minimum requirements for the consulting firm are provided in the section below. The proposed approach and methodology is outlined in phases as follows:
Phase 1: Background Information, Risk Assessment & Sampling, and Analytical Desk Review
22. The initial risk assessment, sampling and analytical desk review will be conducted by the Bank Team, who will communicate the results of the work to the Consultant, and collaborate with the Consultant in the development of a detailed work plan for the rest of the Review.