The World Bank Improving Quality and Efficiency of Public Sector Audit (P161359)

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF IMPROVING QUALITY AND EFFICIENCY OF PUBLIC SECTOR AUDIT APPROVED ON APRIL 18, 2017 TO REPUBLIC OF NICARAGUA REPORT NO.: RES32871 Public Disclosure Authorized GOVERNANCE LATIN AMERICA AND CARIBBEAN Public Disclosure Authorized Regional Vice President: Country Director: Senior Global Practice Director: Practice Manager/Manager: Task Team Leader: Jorge Familiar Calderon Yaye Seynabou Sakho Deborah L. Wetzel Xiomara A. Morel Lourdes Consuelo Linares Loza

2 ABBREVIATIONS AND ACRONYMS CGR ISSAIs NAGUN PDO SAI SICA Office of the Comptroller General (Contraloría General de la República) International Standards of Supreme Audit Institutions Recipient s Government Audit Standards (Normas de Auditoría Gubernamental) Project Development Objective Supreme Audit Institution Sistema de Control de Auditorías

3 Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID P Original EA Category Not Required (C) Approval Date 18-Apr-2017 Financing Instrument Investment Project Financing Current EA Category Not Required (C) Current Closing Date 30-Jun-2018 Organizations Borrower Republic of Nicaragua Responsible Agency Nicaragua Comptrollers' General Office Project Development Objective (PDO) Original PDO The project development objective is to improve the quality and efficiency of public sector audit, thereby strengthening external oversight over the management of public resources in Nicaragua. Summary Status of Financing TF Approval Signing Effectiveness Closing Net Commitment Disbursed Undisbursed TF-A Apr Jun Jun Jun Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No

4 Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. BACKGROUND 1. This restructuring paper seeks the approval of the Central America Country Management Unit (LCC2C) for: i) an extension of the closing date of the Nicaragua Improving Quality and Efficiency of Public Sector Audit (P161359), financed through the Supreme Audit Institution Capacity Development Fund (SAIF), for twelve months from June 30, 2018 to June 28, 2019, and ii) inclusion of additional activities under existing components which would further enhance achievement of the development objective. There have not been any previous extensions. The Recipient requested the extension of the closing date through a letter from the Ministry of Finance, dated June 12, The Project Development Objective (PDO) is to improve the quality and efficiency of public sector audit, thereby strengthening external oversight over the management of public resources in Nicaragua. The Project has four components: (1) Training of Comptroller General s Office (Contraloría General de la Republica, CGR) Auditors and Staff from Internal Audit units on the deployment of updated auditing standards based on international standards; (2) Implementation of an integrated government audit system (Sistema de Control de Auditorías, SICA); (3) Implementation of a quality control system; and (4) Project management, monitoring and audit. B. PROJECT STATUS 3. To date, both progress towards achievement of the PDO and implementation progress (IP) are rated Moderately Satisfactory. The current disbursement rate stands at about 47 percent of the total RETF amount of USD 497,000, but 70 percent is committed. Presently, there is no outstanding Interim Financial Report or Audit. 4. Project was designed to be implemented in 18 months, but delays in the approval and signing reduced the implementation period to almost 11 months. In spite of those delays, the implementing agency made an extra effort to advance on project activities and there are some early results so far achieved and firm actions are being taken for the completion of remaining activities: (a) 1,000 auditors were trained through a combination of on-line and face-to-face training on the updated audit standards (NAGUN) based on the International Standards for Supreme Audit Institutions (ISSAIs).

5 (b) Code of Ethics and related documents were approved by the CGR s Council in March, 2018 as part of the CGR s Integrity System, and it became into force. 256 CGR staff participated in a sensitization workshops on the application of the new integrity tools, and it is expected that nearly 1,300 ethic commitment acts are signed by individual staff. (c) The implementation of the Quality Control System in compliance with ISSAIs is in process and scheduled to be completed by the end of June/2018. (d) Cooperation Agreement with the Chile SAI for the implementation of the SICA system and technical adaptation was signed and a detailed implementation plan agreed. Upon overcoming some coordination challenges at the beginning, implementation so far is progressing well. Software and hardware required for the adaptation, installation, implementation and operation of the system has been procured, identification of needs and adjustments was completed, the system was installed in Nicaragua and second phase (development of functional adjustments, and testing of the changes) is underway. 5. In spite of the foregoing, project implementation has also suffered delays that prevented to complete certain activities by the expected target date. The Project builds and relies significantly on collaboration and knowledge exchange with other SAIs in the Region, mainly Chile for the audit system and Mexico for the specialized training. This approach brings many benefits, but it also involves challenge and requires flexibility to accommodate availability of staff from the partner SAIs to provide the technical assistance. The specialized training for performance audit (20 auditors) and financial/ compliance audit (30 auditors) to be facilitated by the Mexico SAI (Auditoría Superior de la Federación) is delayed because of management changes in the Mexico ASF. While the coordination with Chile worked a lot better and activities are under implementation, the last phase related to carrying out the two pilot audits using SICA, which is required to formally put the system into production will require additional time. 6. Savings of about USD 83,000 were generated mainly due to more technical assistance from the Chile SAI and simpler methodology for the adaptation of the SICA system, reduction in publication and travel costs, and CGR s decision to finance 100 percent of the administrative costs. The CGR has proposed to use the savings in the financing of some specific activities that would allow to fully consolidate the use of the new standards and tools to carry out their audit work, including (a) development of guidelines and provision of training to CGR auditors and internal auditors working in public sector entities on the application of audit sampling standards, under Component 1. (b) development of additional functionalities in the SICA system for the carrying out of the audit of general-purpose financial statements in compliance with ISSAIs under Component 2; and

6 (c) Carrying out of a sensitization and change management workshop for CGR staff to support the transition towards a new operational framework of the CGR, under the updated auditing standards and automated tool (SICA), under Component 4 of the Project C. RATIONALE FOR THE CHANGE/EXTENSION 7. Implementation time was already reduced due to delays in the approval and signing. In addition, coordination with partner SAIs took longer than expected, and factors outside the control of the CGR, in the case of Mexico, caused additional delays. As a result, completion of two important activities -implementation of SICA and specialized training, has been impacted, and it would hinder the achievement of the PDO. 8. The Government of Nicaragua requested a seven-month extension, which from the technical perspective would be considered adequate. However, the current country situation may affect operation of the public sector, including the CGR and Project implementation. In view of the circumstances, an extension of twelve months until June 28, 2019 is being proposed. 9. Therefore, this extension will provide the needed time to: i) complete planned activities with the quality and support required, and ii) implement the additional activities to be financed with the savings, further contributing to the achievement of the desired results. 10. The proposed restructuring fully complies with the Bank Directive for Investment Project Financing. The Project s Development Objectives remain achievable, and the performance of the Recipient is considered moderately satisfactory. The Bank and the Recipient agreed on actions that will be undertaken by the Recipient to complete the Project. The project is not subject to suspension of disbursements; and the Recipient does not have any outstanding audit reports nor there are audit reports which are not satisfactory to the Bank. D. Summary of key Agreed Action # Component Action Due Date Responsibility 1 1 Submit detailed training scheduled June 29, 2018 CGR agreed with Mexico SAI for the specialized training. 2 2 Complete the pilot audits using SICA November 30, CGR system II. DESCRIPTION OF PROPOSED CHANGES 11. There are no changes to the PDO, safeguard ratings, or institutional and implementation arrangements. The only changes proposed relates to: i) the extension of the closing date from June 30, 2018 to June 28, 2019,

7 ii) inclusion of three new activities under existing components, and aligned to the current PDO, and iii) the associated revisions to the end target dates in the results framework. (a) Changes to project activities. The following new activities will be added: Part 1 (a). Development of guidelines and provision of training to CGR auditors and internal auditors working in public sector entities on the application of audit sampling standards. Part 2. (a) (iii) Development of additional functionalities in the SICA system for the carrying out of the audit of generalpurpose financial statements in compliance with ISSAIs; and Part 4 Carrying out of a sensitization and change management workshop for CGR staff to support the transition towards a new operational framework of the CGR, under the updated auditing standards and automated tool (SICA). (b) Changes to the Results Framework S/N Description of Indicator Action Description of Changes PDO Indicators 1 Integrated Government Audit System (SIAG) implemented and formally adopted for use in CGR's audits Revised Aligned the end target date with the 2 20% Reduction in the time (number of days) used to carry out financial audit commitments in public sector entities Revised Aligned the end target date with the Intermediate Indicators IR1 Core team of CGR auditors specialized in Performance audit Revised Aligned the end target date with the IR2 SIAG adapted, installed and in operation for being used by CGR staff in pilot audits Revised Aligned the end target date with the IR3 CGR s auditors and internal auditors of 249 entities trained in overall use of updated NAGUN based on ISAISs Revised Final target adjusted to 1,000 (typo error in Project Paper). IR4 Quality control system implemented in accordance with ISSAI No. 40 Revised Aligned the end target date with the IR5 Core team of CGR auditors specialized in ISSAIs Revised Aligned the end target date with the IR6 CGR s auditors and internal auditors trained in application of audit sample standard. New

8 PDO_IND_TABLE Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. III. SUMMARY OF CHANGES Changed Change in Results Framework Not Changed Change in Components and Cost Change in Loan Closing Date(s) Change in Disbursement Estimates Change in Implementation Schedule Change in Implementing Agency Change in Project's Development Objectives Cancellations Proposed Additional Financing Proposed Reallocation between Disbursement Categories Change in Disbursements Arrangements Change in Overall Risk Rating Change in Safeguard Policies Triggered Change of EA category Change in Legal Covenants Change in Institutional Arrangements Change in Financial Management Change in Procurement Other Change(s) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators Integrated Government Audit System (SIAG) implemented and formally adopted for use in CGR's audits Unit of Measure: Yes/No

9 Value No No Yes Revised Date 07-Nov Jun Apr % Reduction in the time (number of days) used to carry out financial audit commitments in public sector entities Unit of Measure: Days Value Revised Date 07-Nov Jun May-2019 Intermediate Indicators IO_IND_TABLE Core team of CGR auditors specialized in Performance audit Unit of Measure: Number Value Revised Date 07-Nov Jun Feb-2019 SIAG adapted, installed and in operation for being used by CGR staff in pilot audits Unit of Measure: Yes/No Value No No Yes Revised Date 07-Nov Jun Feb-2019 Quality control system implemented in accordance with ISSAI No. 40 Unit of Measure: Yes/No Value No No Yes Revised Date 07-Nov Jun Sep-2018 Core team of CGR auditors specialized in ISSAIs

10 OPS_DETAILEDCHANGES_COMPONENTS_TABLE OPS_DETAILEDCHANGES_LOANCLOSING_TABLE Unit of Measure: Number Value Revised Date 07-Nov Jun Feb-2019 CGRâs auditors and internal auditors of 249 entities trained in overall use of updated NAGUN based on ISAISs Unit of Measure: Number Value Revised Date 07-Nov Jun Jan-2018 COMPONENTS Current Component Name Development and implementation of a training strategy for CGRâs auditors and staff from the internal audit units on the deployment of the updated auditing standards and audit manual. Adaptation and implementation of the Integrated Governmental Audit System (SIAG) Design and implementation of a quality control system in compliance with ISSAI No. 40. Project management, M&E and audit Current Cost (US$M) Action 0.17 Revised 0.25 Revised Revised Proposed Component Name Development and implementation of a training strategy for CGRâs auditors and staff from the internal audit units on the deployment of the updated auditing standards and audit manual. Adaptation and implementation of the Integrated Governmental Audit System (SIAG) Design and implementation of a quality control system in compliance with ISSAI No. 40. Project management, M&E and audit Proposed Cost (US$M) TOTAL

11 LOAN CLOSING DATE(S) TF Status Original Closing Revised Closing(s) Proposed Closing Proposed Deadline for Withdrawal Applications TF-A4518 Effective 30-Jun Jun Oct-2019 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed , , , Note to Task Teams: End of system generated content, document is editable from here.