Public Disclosure Authorized. Public Disclosure Authorized. Public Disclosure Authorized. Public Disclosure Authorized. Report No.

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1 Project Name Region Sector Project ID Implementing Agency Environment Category Report No. PID9361 Kenya-Public Sector Management Technical Assistance Credit Africa Regional Office Other Public Sector Management KEPE66490 Date PID Prepared November 20, 2000 Projected Appraisal Date November 2000 Projected Board Date February 2001 Address Directorate of Personnel Management Nairobi, Kenya Contact Person: Mr. James E.O. Ongwae Tel: Fax: C 1. Country and Sector Background Government recently completed a draft Interim Poverty Reduction Strategy Paper for The IPRSP has five basic components and policy objectives:n To facilitate sustained economic growthn To improve governance and securityn To increase the ability of the poor to raise their incomesn To improve the quality of life of the poorn To improve equity and participationthe IPRSP notes that the country's macroeconomic strategy aims at progressively increasing real per capita GDP growth, while keeping inflation below 5 percent, gradually increasing foreign exchange reserves, and maintaining the current account deficits at sustainable levelsgovernment makes good governance a cornerstone of the IPRSP, with particular focus on the overall public sector reform program and strengthening the operational capacity of the Kenya Anti-Corruption Authority (KACA). Government is committed to taking the steps necessary to combat corruption, increase the transparency of procurement procedures, and increase the effectiveness of accounting and auditing procedures through the introduction of an Integrated Financial Management System. Two bills aimed at enhancing integrity and honesty in the public service have been presented to Parliament for debate and enactment: Public Service Code of Conduct and Ethics Bill, 2000 and Anti-corruption and Economic Crimes Bill, The reform program also seeks to strengthen the Office of Controller and Auditor General through rationalization of its functions and increased capacity.the government has undertaken a functional rationalization of ministries, departments and other public agencies against national and sectoral objectives. The expected staff reduction as a result of Ministerial rationalization is 48,826 civil servants over the next two years. (This number includes both retrenchment and natural attrition). While the government intends to restore merit-based recruitment and promotion of public servants and to set service delivery targets against which good or poor performance will be linked for rewards and sanctions respectively, Government also intends to

2 establish a comprehensive, viable and motivating pay and benefits policy for its staff. Capacity building and training of public servants will be undertaken through a medium to long-term programme to re-equip the public service with knowledge and skills to fulfill its new mandates.in a bid to improve law and order and public safety, the government will undertake a number of reform actions that should lead to increased transparency in and accessibility to dispensing justice. This will include finalization of the on going comprehensive review of legal sector, covering the Office of the Attorney General, the Judiciary, Ministries of Lands and Settlement, Agriculture and Health, and legal education institutions. A process will be established to examine the desirability of creating a Ministry of Justice The scope of court divisions will be expanded to include well functioning civil, commercial, and family divisions in key cities throughout the country. 2. Objectives The development objective of this Technical Assistance Credit is to assist Government in improving the capacity of public service institutions for better service delivery. The project will seek to enhance the capacity of the public service to effectively and efficiently play its part in the economic and social development of the country. The reform programme will create a leaner, more focused and better equipped public service that embraces transparency and accountability, openness and dialogue, and is committed to professional excellence and discipline. The project will also support the improvement of the performance of the judiciary and other legal sector institutions to ensure a more rapid, fair and honest justice system. The International Development Association will provide approximately X% of the estimated project funding, or US$25 million. The project is designed for a four-year implementation time frame. 3. Rationale for Bank's Involvement IDA staff have played a catalytic role in the preparation of this program through their involvement with the Institutional Development and Civil Service Reform Credit that closed in June The Bank has, in addition to financial support, drawn attention to good African and international practices and lessons learned, and provided technical expertise. The Bank also plays a facilitating role with donors in support of the public sector reform process. Likewise, Bank experience with public sector reform projects in other countries will add substantial value to the reform process in Kenya. This particularly applies to the conceptual design of different components of the program. The proposed design herewith reflects lessons learnt from other projects, in particular the need to:take a strategic, integrated approach which is based on a clear vision of the role, mandate and operational objectives of the reformed public sectorappropriately time and sequence different components of the reform agendabuild strong stakeholder commitment during the project preparation; and toeffectively integrate ongoing PSM activities of other donors. 4. Description Public Service Reforms Public Financial Management Legal Sector Reforms Procurement Reform PSR Coordinating Unit -2-

3 Global Distance Learning Center 5. Financing Total ( US$m) GOVERNMENT IBRD IDA 25.0 Total Project Cost Implementation The implementation arrangements for this project will be led by the Director of the Department of Personnel Management (DPM) in close consultation with other permanent secretaries. Each component of the reform program will have a reform secretariat. Government has established a Public Sector Reform Coordinating Unit (PSRCU) that would be responsible for overall coordination, monitoring and evaluation. The PSRCU will also be responsible for reporting to the DPM on implementation progress, and financial accounting. Furthermore, the Coordinating Unit will provide on-demand technical assistance to the reform secretariats. (See Diagram below). The DPM Director will serve as accounting officer for the overall reform program, reporting directly to the Head of the Public Service and to Parliament, as required. The details of the implementation arrangements will stress that each project component secretariat would be fully responsible for ensuring effective implementation of reform measures in its sector or project component/sub-component. Each component of the project would be implemented according to terms and conditions acceptable to the Bank. These would generally provide the basis for time-bound action plans. Training and capacity building activities will be carried out according to agreed timetables either with government training institutions or through contracts awarded from open bids. A detailed implementation plan will be agreed upon between the Government and the Bank before project effectiveness. The implementation plan will be regularly updated and submitted to the Bank for discussion during project implementation.as shown in the diagram on implementation arrangements, effective and efficient implementation of project activities would be directed and guided at both the political (Cabinet/Minister) and technocratic (Head of Public Service, PSs and other Accounting Officers) levels. Keeping the institutional arrangements simple while ensuring participation and providing for clear lines of accountability is the challenge that the Appraisal Mission team would have to address, in consultation with GOK counterparts. In particular, it would be necessary to spell out clearly the respective roles of the different key players in the implementation process. Project records and accounts will be maintained by qualified financial officers to reflect the operations, resources and expenditures for each project activity in accordance with sound accounting practices. The accounts will be consolidated annually into financial statements for the whole project. Supporting documentation will be made available to the Bank's Task Team Leader. For expenditures incurred on the basis of Statements of Expenses, all records providing evidence for such expenditures will be retained by the implementing organization for at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Special Account was made. The control environment of implementing agencies will be assessed and appropriate accounting and reporting systems will be developed according to Operational Policy requirements through separate -3 -

4 technical assistance. (See Annex 6a on Project Financial Management, Accounting and Auditing for more details).the implementation arrangements will be revisited on a regular basis to take into account technical and political changes as well as progress within the overall public sector reform effort. Each World Bank supervision mission will review the implementation arrangements with the Government and other contributing donors to suggest improvements or changes as necessary. 7. Sustainability The Institutional Development and Civil Service Reform Project (Credit 2671-KE) that closed on June 30, 2000 was extended for a final nine months in September 1999 because of the strong evidence of Government commitment to tackle the problems of inefficiency and corruption in its public sector institutions. Some of the actions already implemented include the reduction in the number of ministries from 27 to 15 and making Accounting Officers in ministries and departments fully responsible for managing the finance and personnel functions; removal of corrupt and/or inefficient managers from leadership positions in several ministries and parastatatals. A Medium Term Expenditure Framework has been introduced to ensure that government budgets are effectively related to policy priorities over a three-year time frame. Government has also prepared a retrenchment plan to be implemented during FY2000/2001 and 2001/2002. Sustainability of the reform program will depend upon continued commitment of the political and technocratic leadership teams and the cascading of support to middle management officers and throughout the entire public service. Likewise, sustainability over the longer term will be predicated on ownership of long term reforms at all levels of the machinery of government and building adequate local capacities for improved service delivery. 8. Lessons learned from past operations in the country/sector Important lessons have been learned from the past seven years of Bank-financed public sector reform in Kenya. These lessons highlight the need to:continue to identify and further refine the core functions of governmentimplement recommendations on rationalization of ministerial structuresimprove the capacity of managers and professionals in the public service ensure political support for reforms at the highest levels. Other lessons point to the need to establish linkages and phasing of reforms. One of the most important lessons has been the importance of having an effective senior management structure and clearly defined roles of Permanent Secretaries in guiding the implementation of reforms.equally important are some global lessons for public sector reform.shift focus from the content of public policy to the way policy is implemented. Address a broad range of mechanisms to promote public sector reform. (To include improved financial management, retrenchment, strengthening the legal framework and the rule of law)emphasize a participatory approach and broad-gauged ownership of the reform process. (Attention to this lesson in the preparation of this project is reflected in Government's active role in project preparation).lessons learned from other projects, particularly public sector reform projects, and captured within documentation from previous project preparation include:a long term, strategic approach to technical assistance which is not donor driven is needed to achieve sustainable results. Previous projects were predominantly focused on achieving macroeconomic targets. In most cases, these efforts failed to provide enough room or sufficient time for a - 4 -

5 complex reform agenda which is based on institutional development and capacity building. A strong discipline for the implementation process needs to be established to ensure progress towards long term objectives and a constant re-assessment of all significant project elements. Previous public sector reform projects have failed because of insufficient control mechanisms and a weak project implementation,more attention needs to be paid to assuring frequent monitoring of the quality of technical assistance outputs to measure the overall performance of a project. Performance indicators which focus more on quality, process and behaviour are needed.local champions who know what they want and know how to operate in the given environment are important success factors.explicit attention needs to be given to the institutional environment which plays a crucial role during the implementation of the reform agenda. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues not applicable 11. Contact Point: Task Manager Harry C. Garnett The World Bank 1818 H Street, NW Washington D.C Telephone: (202) Fax: (202) For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fax: (202) Web: Note: This is information on an evolving project. Certain components may not be necessarily included in the final project