' FM issues in Country Assistance Strategy (CAS) and Governance and Anti corruption (GAC )

1. ' FM issues in Country Assistance Strategy (CAS) and Governance and Anti corruption (GAC) Country Case Study Bangladesh

2. Governance at the heart of the CAS FM actively involved in- • CAS preparation & consultation as a ‘sector’ unlike in previous CAS as support provider • Country Office and HQ staff worked jointly with participating partners’ FM Counterparts With principal focus on • Reduced governance impediments & opportunities for corruption thru improvingPFM and public proc. • Alignment of sector FM issues with sector governance focus • Strengthened Risk management in the Bank’s projects thru early identification of risks and mitigating measures jointly with sector

3. Improving PFM to enhance Governance • Identifying weaknesses- joint review by GOB,DFID& Bank’s integrated team FM,PR,PREM; • Jointly identified priority reforms-ongoing program • Government driven DSC/TSC supported time bound PFM Actions; • Government owned Bank led second generation reforms- strengthened budget management, enhanced audit impact & effective parliamentary oversight • GAP Study – Auditing and Accounting Practices • An Audit Act- greater independence of CAG, mandatory disclosure of Audit Reports-enhance public awareness • Policy guidance: Adhoc Public Accounts Committee • iBAS across key government system- assurance on accountable budget implementation

4. Governance centered CAS drivesPFM Reforms at sector level • CAS governance tests applied on sectoral DPLs leading to improved FM practices in Education, Railways, Power entities • Strengthening FM environment of Road Sector entities► FMAP under framework of Institutional Development Action Plan in Roads & Highways Department (RHD) and Local Government Engg. Department (LGED) • Strengthened FM Risk Management aligned with Operational Risks Assessment (ORA) and resultant Operational Risks Mitigating Plan in RHD. ORA replicated in LGED • Health Sector SWAp with FM framework – Fiduciary and Institutional • Expenditure tracking surveys in selected ministries • Partnerships with DPs-DFID,ADB on FM capacity building & entity Auditing in Govt departments

5. Strengthened risk management:Reduce corruption in Bank funded projects CAS aligned FM and Procurement work – Improved Governance and fiduciary at the centre Joint annual procurement and FM /technical review in high risk projects- 7 projects Joint FM and Procurement Risk Mitigation Action Plan FM Risks’ review by Operational Risk Mitigation Team Increasing direct payments and Special Commitments to limit direct handling of project funds Payments through bank advice to limit direct contract between borrower’s FM staff and the vendors Reduce risks from handling funds by eliminating steps in flowing funds to the beneficiaries .

6. Strengthened Fiduciary Controlin Bank funded Projects • Strengthened supervision and a risk-based approach to FM supervision looking into contracts administration as required • Modernize and Simplify large contract payments • Undertake systematic follow up on audit issues • Transparent basis of audit settlement- Entry and Exit meeting- FMS verifies settlement process • Pursue remedies more vigorously- upfront action on mis-procurement, ineligible expenditure and enhancing internal control within a short time • Ensure communities’ and civil societies’ oversight on audit issues aimed at reducing corruption- • Establish Audit Committees in projects requiring at least two outside members • Performance Audit for large operation led by sector along with SAI capacity building support from projects

7. Strengthened Fiduciary Controlin Bank funded Projects • Transparency -Receipt and use of funds : Cost of assets built/ procured and Asset Tracking-beneficiaries involved. • Agree with Government: • Preventing unauthorized use of project assets • Withhold disbursement for serious audit objection • Use Country system , FM capacity building • Action on corrupt officials in addition to refund, • Outsource Internal Audit if in-house capacity is inadequate • Involve Beneficiaries in financial management of project schemes implemented by LGIs • Pursue Public disclosure of FM issues – Project Launch workshops, Information Note

8. Implementation Experience • Clients questioned - Governance overpowering Development focus • Extended Focus on Governance not communicated at all levels of Government • Dissemination to implementation level :FM issues’ alignment with Governance • Consultation with Ministries & Implementing entities made them ready for assessment of entity Governance Framework • FM assessment collaborated and aligned with Governance assessment • Enabling environment for greater fiduciary work: Consensus with client –Governance enhances dev. Effectiveness, Sector Govern. Focus in DPLs & SWAPs, Entity Governance Assessment, Operational Risk Assessment, Operational Risk Mitigation Team’s review of risks, Joint FM,PR & Sector Post review

9. Summary or key messages • Business no longer as usual-Governance is every body’s business • Focus on GAC is based on Bank’s mandate to reduce poverty • Improving governance and tightening corruption loopholes are not option, but an integral part of FM work • Risk and Result focused FM agenda- both at Project and Country level • Improving institution, sector environment and country systems have to go hand in hand with project fiduciary work • Enforcement of remedies more systematically, signaling Bank’s zero tolerance on corruption. • Corruption erodes trust, which is the essence of relationship between the Bank and the borrowers