Fiduciary Assessment of Social Cash Transfers in Zambia Final Report June 2008 By Coffey International Development

This report has been prepared for the Department for International Development by Robert Hawkins Clement Mugala, Consultants supplied by Coffey International Development and Triple Line Consulting Limited through the Governance and Social Development Resource Centre Framework. The views expressed herein are those of the authors and do not necessarily represent the view of Coffey International Development, the consortium members of GSDRC or DFID.

CONTENTS ACRONYMS ...........................................................................................................................................1 EXECUTIVE SUMMARY. .......................................................................................................................2 1. INTRODUCTION........................................................................................................................4 2. APPROACH UNDERTAKEN ....................................................................................................5 2.1 SCOPE OF WORK ....................................................................................................................5 2.2 GENERAL APPROACH............................................................................................................5 2.3 SPECIFIC APPROACH.............................................................................................................5

2.3.1 Research ......................................................................................................................5 2.3.2 Analytical review .........................................................................................................5 2.3.3 Fiduciary Risk Assessment .......................................................................................6

3. FIDUCIARY/FINANCIAL MANAGEMENT REVIEW ................................................................7 3.1 FIDUCIARY RISK ASSESSMENT ............................................................................................7

3.1.1 Historical, governance and institutional context.....................................................7 3.1.2 Impact of PEMFA on SCT financial management..................................................10 3.1.3 Performance of PFMA systems (Fiduciary Risk Matrix) .......................................11 3.1.4 Identification of key fiduciary and corruption risks ..............................................15 3.1.5 Credible programme to improve .............................................................................16 3.1.6 Residual risks............................................................................................................17 3.1.7 Monitoring fiduciary risk ..........................................................................................18

3.2 ADDITIONAL ASSESSMENT .................................................................................................18 3.2.1 Strategic Issues.........................................................................................................18 3.2.2 Targeting Issues........................................................................................................19 3.2.3 Delivery Issues..........................................................................................................19 3.2.4 Process Issues..........................................................................................................20 3.2.5 Capacity Issues.........................................................................................................20 3.2.6 Audit and Monitoring Issues....................................................................................21 3.2.7 Scaling Up Issues .....................................................................................................22

3.3 ASSESSMENT SUMMARY.....................................................................................................23 4. RECOMMENDATIONS............................................................................................................24 4.1 CROSSCUTTING ISSUES ......................................................................................................24 4.2 DESIGN OF SCT PILOTS AND NATIONAL PROGRAMME. ................................................24 4.3 CAPACITY BUILDING NEEDS...............................................................................................25 4.4 MONITORING FIDUCIARY RISK. ..........................................................................................26 APPENDICES 1. TERMS OF REFERENCE .......................................................................................................28 2. LIST OF PERSONS CONSULTED .........................................................................................34 3. BIBLIOGRAPHY......................................................................................................................37

ACRONYMS ACC Area Co-ordinating Committee CARE CARE International – international aid agency CO Controlling Officer CSO Central Statistics Office CWAC Community Welfare Assistance Committee DFID UK Department For International Development DSW Director of Social Welfare MCDSS DSWO District Social Welfare Officer DWAC District Welfare Assistance Committee FAO World Food and Agriculture Organisation FRA Fiduciary Risk Assessment GPP Good Practice Principle GRZ Government of the Republic of Zambia GTZ Deutsche Gesellschaft Fűr Technische Zusammenarbeit GmbH

(German Organisation For Technical Co-operation) HQ Head Quarters IFMIS Integrated Financial Management Information System MCDSS Ministry of Community Development and Social Services MFNP Ministry of Finance and National Planning MoU SCT scheme Memorandum of Understanding MTEF Medium Term Expenditure Framework NGO Non-Government Organisation PEFA Public Expenditure and Financial Accountability PEMFA Public Expenditure Management and Financial Accounting PFMA Public Financial Management and Accounting PPM Pay Point Manager PRBS Poverty Reduction Budget Support PSCAP Public Sector Capacity Building Project PSWO Provincial Social Welfare Officer PWAS Public Welfare Assistance Scheme SAG Sector Advisory Group SCT Social Cash Transfers SIDA Swedish International Development Agency TWG Technical Working Group UNICEF United Nations Children’s Fund ZICA Zambia Institute of Chartered Accountants

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EXECUTIVE SUMMARY Zambia’s Fifth National Development Plan identifies social protection as important to support economic growth, contribute directly to poverty reduction, promote equity and fulfil human rights. Programmes identified to reduce extreme poverty in incapacitated households include the Public Welfare Assistance Scheme (PWAS) and Social Cash Transfers. Currently there are pilot Social Cash Transfer programmes in 5 districts that will reach 11,700 beneficiaries in 2008. This consultancy focussed on financial aspects of Social Cash Transfers (SCT), taking into account other work on: targeting methods; delivery mechanisms; institutional, facilities and human resource capacities; and MIS development. In the course of the assignment we: consulted various stakeholders in the SCT scheme; reviewed 5 pilots and 1 non-pilot district and considered the proposed framework for a possible future national programme; assessed fiduciary risk and financial management capacity; and made recommendations of specific and general improvements with a particular focus on support in scaling up the programme. Our overall assessment is that the fiduciary risk for SCT in Zambia is substantial. In the report we provide recommendations for improvement that if promptly implemented would lead quickly to a moderate risk rating. This compares favourably with accepted international experience where social cash transactions are generally considered as high risk. The following table summarises the detailed assessment made in the report.

Good Practice Principle Risk Rating Trajectory of Change

GPP 1 - A clear set of rules governs the budget process Low

GPP 2 – The budget is comprehensive Moderate

GPP 3 – The budget supports pro-poor strategies Low

GPP 4 – The budget is a reliable guide to actual expenditure Low

GPP 5 – Expenditure within the year is controlled (controls for disbursement and spending) Low

GPP 6 – Government carries out procurement in line with principles of value for money and transparency Low

GPP 7 – Reporting of expenditure is timely and accurate Substantial

GPP 8 – There is effective independent scrutiny of government expenditure Substantial

These risk ratings need to be considered in the context of corruption risk. For SCT in the current overall corruption environment we consider the risk of petty corruption to be substantial. Taking into account the low risks in respect of grand and administrative corruption we rate the overall corruption risk for SCT to be moderate. Our assessment of the current programme is that it is a credible programme of improvement requiring some attention to secure all the features that one would expect to find. The longer-term programme for scaling up SCT nationally is not a credible programme. It requires considerable further planning and development. Whilst noting these issues the report does conclude that the current process is suitable for scaling up to become nation-wide.

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When considering the residual risks not addressed by the current reform we found that a major part of risk is due to delays in reporting that depreciate the value of internal controls. In our review we found no reasons why existing timetables cannot be met. More active management with closer supervision and proactive support is required. In addressing the need for predictable external scrutiny the SCT scheme has yet to experience an external audit undertaken under the direction of the Auditor General. The change in the SCT operations, whilst understood, results in the loss of the CARE Internal Auditor activity, which is unfortunate. The current reporting arrangements, which are in urgent need of increased levels of management activity to make them timelier, are largely sufficient to monitor fiduciary risk. Some attention could be given to improving the supervision and co-ordination of monitoring efforts. The other major recommendations made in the report are: • Many aspects of the SCT process would improve through the adoption of performance

management in the MCDSS (and hence the wider civil service). • There are opportunities to rationalise resources at the district level, in particular technology

and human resources with financial management capability, maximising the return on development partner investment at the district level.

• More attention must be given to the committed, attentive yet flexible management of the process at all levels. The priority for all must be the regular and prompt payment to beneficiaries.

• Attention should be given to improvements in the effectiveness of communication in the process, particularly through the use of mobile phone technology.

• The recommendations in the Kimetrica report appear reasonable in that they retain maximum levels of simplicity taking into account other factors.

• Scaling up activity should continue to utilise existing MCDSS PWAS delivery system as it contains basic control activities including segregation of duties, checks and balances, monitoring and oversight of transactions through community structures.

• The Accountant General should formally approve the accounting arrangements for SCT. • Consideration should be given to CARE Internal Auditor’s mandate being renewed under the

current revised arrangements. • Requests for funds release should be made promptly and regularly for reimbursement for

whatever documentation is available. • Monitoring efforts need to be adequately supported and more actively co-ordinated. • An appropriately thought through and detailed strategic plan for the national roll-out needs to

be prepared. • Our recommendation for the CARE Internal Auditor should be considered as short-term with a

longer-term solution developed for building capacity in the MFNP internal audit function for the nation-wide SCT scheme implementation.

• On-the-job training in financial management needs to be given to the DSWOs and their assistants.

• Additional resource planning should be undertaken to ensure that corresponding facilities are provided to match the capacity developed and ensure that sufficient additional human resources are deployed to cope with increasing work-loads as they are encountered.

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1. INTRODUCTION Zambia’s Fifth National Development Plan identifies Social Protection as important to support economic growth, contribute directly to poverty reduction, promote equity and fulfil human rights. The latest ‘Living conditions Monitoring survey’ (CSO 2008) estimates that 51% of the Zambian population live below the food poverty line. This means that approximately 5-6million are food poor. 70% of this number is poor due to either unemployment or underemployment. The rest are structurally poor in that they have few or no able bodied adult members. Social Cash Transfers is aimed at the structurally poor. Programmes identified to reduce extreme poverty in incapacitated households include the Public Welfare Assistance Scheme (PWAS) and Social Cash Transfers. The Technical Working Group on Incapacitated Households (TWG-IH) is coordinating work around this objective. Currently there are pilot Social Cash Transfer programmes in 5 districts which will reach 11,700 beneficiaries in 2008. Lessons from the pilots and supporting studies will inform the design of a possible national Social Cash Transfer programme, as outlined in the Implementation Framework drafted by the TWG-IH. The SCT scheme is administered by the Ministry of Community Development and Social Services (MCDSS) through the Public Welfare Assistance Scheme (PWAS). It was officially launched in Kalomo in 2004 covering two agricultural blocks. The scheme was later extended to Kazungula, Chipata, Katete and Monze districts. Depending on the choice of targeting methodology, transfer level, and delivery mechanism, estimated costs for a national SCT Scheme range from $11-$42 million, representing 0.5-1.5% of GRZ expenditure (UNICEF Policy Brief Aug 07). Despite the apparent affordability, these amounts far exceed current allocations to social transfers for incapacitated households. A national scheme would require strong political support to finance Social Cash Transfers in the long term. Additional donor support is likely to be necessary in the medium term pending reallocation of resources in the Government of the Republic of Zambia (GRZ) budget. Social Cash Transfer programmes have inherent fiduciary risk, being made up of high volumes of low value payments. Perceptions of corruption can seriously damage political commitment to schemes, while capacity constraints, poor infrastructure and banking systems, lack of efficient means of reaching out to intended beneficiaries and poor information management systems are some of the concerns that can hinder the attainment of scheme objectives. Notwithstanding these concerns, the management of fiduciary risks must be balanced with costs of the delivery system and the achievement of scheme objectives. Current pilots have established a framework for managing of fiduciary risks, which to a greater extent has contributed to the satisfactory performance of SCT in Zambia. The scheme is managed through a bottom up participatory institutional structure that includes the GRZ, Donors and other Cooperating partners and the community at district, area and community levels. A detailed manual of operations facilitates capacity building and helps to implement accounting and internal control procedures at all levels of the delivery system. Checks and balances include approval and verification of beneficiaries by the community and the monitoring, auditing, evaluations by the community and external agencies. Direct transfer of funds from MCDSS HQ to districts, employment of government employees as Pay Point Managers, monitoring of payments by CWACS and collection of cash by beneficiaries or their deputies are other mitigating factors that help to add credibility to the Scheme.

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2.

2.1

2.2

2.3

APPROACH UNDERTAKEN

SCOPE OF WORK The detailed terms of reference for the work are contained in Appendix 1. In the following paragraphs we describe our approach within them.

GENERAL APPROACH The consultancy focussed on financial aspects of Social Cash Transfers (SCT), taking into account other work on: • targeting methods • delivery mechanisms • institutional, facilities and human resource capacities • MIS development. In the course of the assignment we undertook the following: • Consulted various stakeholders in the SCT scheme. • Documentation review • Reviewed 5 pilots and 1 non-pilot district and considered the proposed framework for a

possible future national programme. • Assessed fiduciary risk and financial management capacity. • Made recommendations of specific and general improvements with a particular focus on

support in scaling up the programme.

SPECIFIC APPROACH 2.3.1 Research Research was carried out at both primary and secondary levels. The primary level involved structured and unstructured interviews, briefing meetings and questionnaires involving key stakeholders as follows (a full list of stakeholders met is given in Appendix 2): • CARE Zambia Program manager of SCT, CARE Zambia Internal auditor • DFID advisers Morgan Mumbwatasai and Kelley Toole • Accountant General and Deputy Accountant General - MFNP • Director of Budgets - Desk officer - MFNP • Director of Social Welfare - MCDSS • Director of Planning - MCDSS • Principal Accountant - MCDSS • Internal Auditor - MCDSS • Provincial District Welfare Officers - MCDSS for Southern and Eastern Provinces • District Social Welfare Officers for Kazungula, Kalomo, Monze, Katete, Mazabuka and

Chipata • CWAC and DWAC members • Pay Point Managers • Beneficiaries. Secondary research activities included review of relevant national and international documents, reports, studies and literature pertaining to Social Protection in general, and Social Cash Transfers in particular. We also reviewed in-country (Zambia) public finance statutes, rules, practices and procedures, as well as study reports and approaches being undertaken by Cooperating Partners supporting the Social Protection Sector in Zambia. A bibliography is given as Appendix 3. 2.3.2 Analytical review We made an overview assessment of the following: • Institutional arrangements • Public financial management systems • Human resource and institutional capacities • Examination of the economy, efficiency and effectiveness of the delivery system • Management information systems

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• Alignment of the financial management system at MCDSS to the public financial management system.

We also reviewed the key social protection policies and sector strategies as well as the overall political commitment to a national Social Cash Transfer Scheme. 2.3.3 Fiduciary Risk Assessment This risk assessment was made in accordance with DFID guidelines. Within them either the PEFA Public Financial Management Performance Measurement Framework or the DFID Good Practice Principles (GPPs) could have been used in the evaluation. The GPPs were chosen because the associated guidance interfaces well with assessment of corruption risk.

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3.

3.1

FIDUCIARY/FINANCIAL MANAGEMENT REVIEW

FIDUCIARY RISK ASSESSMENT 3.1.1 Historical, governance and institutional context The Zambian political and economic sectors are undergoing noticeable structural changes that will impact significantly on governance and development. On the political front, Zambia is currently reviewing its constitution through the National Constitution Conference, which among other things, seeks to review the powers of the President and whether cabinet ministers can be appointed from outside parliament. Economically, Zambia’s gross domestic product has grown for the last five consecutive years at an estimated real growth rate of 4% per annum. Much of this growth has been stimulated by the agricultural and mining sectors. Inflation, which for many years hampered development and contributed to chronic poverty in the country, has for the first time in more than 10 years registered a single digit rate in 2008. Despite these positive changes, the quality of economic governance is low and poverty remains a problem. The fight against poverty requires sound public financial management to ensure effective and efficient resource management. This fiduciary risk assessment is part of the overall review process of government reform process to determine how well public resources are spent, and in particular, whether resources for poverty reduction programs (such as Social Cash Transfers) are reaching the people for whom they are intended for. Public Financial Management Legal Framework in Zambia The Zambian Constitution Article 118 of the Constitution of Zambia describes in detail the accounting procedures and guidelines for a sound public financial management system in government. It lists all the required systems, procedures, internal controls, documentation, financial and non-financial reports that should be maintained, as well as the reporting timelines and reporting channels. The provisions of the constitution aim at ensuring that public finances are not only well accounted for and well spent, but that the Zambian parliament is able to provide oversight on the use of public resources. The Finance Act-Chapter 347 of the Laws of Zambia The Finance (Control and Management) Act defines the roles and responsibilities for public financial management. It gives the Minister of Finance the responsibilities for the management, supervision, control and direction of all matters relating to the financial affairs of the country and allows him/her to designate a Controlling Officer (CO) in each Ministry. The CO is responsible for each expenditure head of his/her ministry provided for in the annual budget. The Act makes the CO the Chief Accounting Officer and charges him/her with the duty of accounting, reporting and controlling the resources under relevant budget heads. He/she is required to keep such books and accounts as may be prescribed, and must produce annual financial reports and present them to Parliament within nine months after the end of each financial year. The Permanent Secretary is normally the designated CO for his/her ministry. Each ministry has a Principal Accountant responsible for the day to day financial operations and reporting requirements. The Public Expenditure Management and Financial Accountability Framework (PEMFA) Over the past few years, the Zambian government has undertaken a number of fiscal reforms aimed at improving financial management. These reforms have been supported by the international community including the World Bank, the European Union and the UK’s Department for International Development, DFID. The first major initiative was the Public Sector Capacity Building Project (PSCAP) whose objective was to improve financial management accountability and to help the Zambian government implement its Medium Term Expenditure Framework, (MTEF). PSCAP has ended and has been replaced by PEMFA. This is a five year programme covering 2005-2009 fiscal years. Its overall objective is to improve efficiency, effectiveness and accountability in the

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management and utilization of public financial resources to support the implementation of Zambia’s poverty reduction strategy and the Fifth National Development Plan. The programme consists of the following components: • Commitment Control and Financial Management System • Improved Fiscal Policy and Economic Planning • Reformed Budget Preparation and Budget Execution • Improved Debt Management • Better External Finance Coordination • Consistent Legal Framework • Strengthened External Audit • Enhancing Parliamentary Oversight • Accountability Training and Regulation • Public Procurement Reform • Management Information System through the Integrated Financial Management Information

System (IFMIS), a centralized database in which all the government’s financial transactions will be recorded.

World Bank Diagnostic Study of the PFM in Zambia – 2005 According to the MFNP/donor joint evaluation of the PEMFA for 2005, there are a number of institutional and capacity constraints that undermine the efficient achievement of the objectives of the programme. Weaknesses exist in the extent of compliance with internal controls because of inadequate information flows and capacity constraints. The report highlights the risks associated with Public Finance Management weaknesses as: • Under-targeting of revenues which prevents greater resources from being available for public

services • Inefficient ways of allocating resources • Poor budget execution • Non-comprehensive budgetary reporting to Government and Parliament • Low compliance levels • Inadequate oversight by the Auditor General, Parliament and Civil Society Organizations These weaknesses and their impact on public finance management have a direct bearing on the capacity of the Social Cash Transfer Scheme’s ability to transfer resources to the people for whom it is intended for. In order for the SCT scheme to meet its objectives, it is important for the government to ensure that appropriate financial management system is in place, particularly with the executing line ministry, MCDSS. Other Reforms The other reforms undertaken to improve management of public funds include: • The introduction of Activity Based Budgeting system for the national budget, starting with the

2004 budget • Publication of the Medium Term Expenditure Framework (MTEF) for 2005-2007 as a policy

document for fiscal and monetary policy management

Social Cash Transfers Scheme and the institutional framework The scheme is administered by the MCDSS through the PWAS. The GTZ Social Safety Net Project and DFID working with CARE International Zambia Office have provided funding and technical assistance. The lead partners and donors and their respective contributions are as follows: • CARE International provides technical assistance • DFID provides financial aid and technical assistance • GRZ provides overall management, staff resources and funds for administrative expenses • GTZ provides technical assistance • UNICEF provides technical assistance • World Bank provides technical assistance

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Institutional Arrangements The overall institutional arrangements for the scheme are summarized below:

MCDSS HQ SAG-SP

TWG-SA

PSWO

DSWO

ACCs

CWACs

Beneficiary

DWAC

PPM

Roles and Responsibilities Community Welfare Assistance Committee (CWAC) The CWACs are elected by the community for tenure of 3 years and are composed of community members, representatives from associations in the community and Church representatives. CWACS are responsible for targeting, helping beneficiary households, managing changes in the household structure, monitoring the payment process at pay points as well as monitoring the impact of the SCT scheme. Area Coordinating Committee (ACC) ACCs are composed of representatives from different CWACs and is mainly responsible for: Monitoring the targeting process, reacting to changes in the household structure, monitoring the performance of CWACs and dealing with complaints at community level. Pay Point Manager (PPM) PPMs are chosen jointly by the Department of Social Welfare and other departments represented in the communities such as Education and Health. PPMs are mainly responsible for providing guidance to beneficiaries at the pay point, being responsible for regular and timely pay outs of transfers, dealing with problems arising in the payment process, accounting for the transfers and communicating with the DSWO on a regular basis. District Social Welfare Officer (DSWO) The District Social Welfare Office includes the DSWO, at least one Assistant Social Welfare Officer and a Scheme Assistant. The DSWO is mainly responsible for being in charge of the functioning of the grassroots structures of PWAS, organizing ACC and CWAC trainings, verifying application forms, serving as a secretariat to the DWAC, dealing with the bank and PPMs, reacting to changes in the household structure, monitoring all processes related to the scheme, handling financial management, documenting and updating information on the cash transfer scheme and collaborating with the PSWO and DSW HQ. District Welfare Assistance Committee (DWAC) The DWAC membership is made up of the DSWO, representatives of government institutions, Church representatives and representatives of the NGOs in the district. DWAC is responsible for coordinating social welfare interventions in the district, handling the complaint management process at district

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level, supporting and controlling the DSWO in its management functions and providing the last level of control in the approval process. Provincial Social Welfare Officer (PSWO) The Provincial Social Welfare Office includes the PSWO and two senior Social Welfare Officers. The main tasks of the office include responsibilities for financial management, coordinating of fund transfers to DSWO, monitoring the performance of DSWO, collaborating with Director of Social Welfare HQ in capacity development, organizing advocacy activities at provincial level and dealing with human resource requirements. Ministry of Community Development and Social Services (MCDSS-HQ) In respect of SCT administration MCDSS-HQ is composed of the Director of Social Welfare (DSW), the Chief Social Welfare Officer, a Senior Social Welfare Officer and two Social Welfare Officers. The DSW is responsible for social cash transfers at HQ. The MCDSS-HQ is responsible for overall financial management, coordinating and providing guidance on the implementation of the SCT, monitoring and evaluation of the impact of the scheme, coordinating advocacy activities at national and international levels and guaranteeing coherence of the concept of SCT with national policies. Technical Working Group on Social Assistance (TWG-SA) The TWG-SA is part of the Sector Advisory Group on Social Protection. It is chaired by the DSW and includes members from the Planning Unit of the MCDSS, and Cooperating Partners. The TWG-SA provides strategic direction and leadership for SCT. Sector Advisory Group on Social Protection (SAG-SP) The SAG-SP is chaired by the PS MCDSS and consists of local and international NGOs, donors and technical assistance providers. It is mandated with developing and monitoring implementation of policy and programmes in social protection broadly. It is supported by a number of technical working groups. 3.1.2 Impact of PEMFA on SCT financial management The overall objective of PEMFA is to improve financial management and oversight of government’s public financial management system. The 2005 World Bank diagnostic review of PFMA in Zambia identified weaknesses relating to lack of compliance with internal controls and capacity constraints. Another study entitled “Zambia Poverty Reduction Budget Support Joint Appraisal Memorandum: Norway, Royal Netherlands Embassy, SIDA, DFID Fiduciary Risk Assessment, 14 December 2004, concluded that overall levels of fiduciary risk in Zambia are considered to be high but with a positive direction of change in the majority of dimensions. Viewed against these assessments and observations, we reviewed the relevant features of the PEMFA programme relevant to SCT, as follows: Regulatory Framework The SCT financial management operations are based upon GRZ procedures which must comply with the Financial Control and Management Act of Zambia, as supplemented by Financial regulations (1969-1991), and amended from time to time. The main weaknesses in this area relate to non compliance of legislative provisions resulting in excessive supplementary budgets, poor oversight by Parliament and inadequate capacity by the office of the Auditor General. The on-going reforms have resulted into better regulatory compliance Financial Accounting and Reporting The SCT scheme follows existing MFNP Accounting and Reporting procedures, under the auspices of the Accountant General. The PFM Performance Report of 2005 has scored key accounting procedures an average of “B”. The scoring indicates acceptable levels of the quality of government procedures.

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Operations of Bank accounts and Bank Selections GRZ public financial management systems provide clear guidelines on modalities and procedures of operating bank accounts and selection of bankers. These provisions comply with GRZ Financial Regulations and GRZ Bank Arrangement Circular number 13 of 2004, and are in accordance with internationally acceptable accounting standards. System Procedures and Budgetary Control The systems used for financial management in Zambia tend to be largely manual or relying on outdated technology with limited applications. This makes it difficult to track, monitor and account for the flow of funds, and leads to delays and failure to report on time. To overcome this weakness, GRZ has started to implement the Integrated Financial Management Information System (IFMIS), as part of the government’s reform process of the public financial management system. It includes budgetary accounting and control, grant accounting, cost accounting and control, cash management and General Ledger modules. According to the IFMIS report of December 2007 to April 2008, the programme has reached an advanced stage and is expected to go live soon. This development will definitely help SCT processes, procedures and systems. Internal Control, Auditing and Oversight The PFM provides for internal and external audit of government transactions, operations and systems, in accordance with the Public Finance Act number 15 of 2004 and related Financial Regulations. Internal audit activities include prepayment audits as well as independent appraisals of the financial, operational and control activities. External audit is undertaken by the Auditor General or his/her appointee. Effective implementation of both internal and external audit programs mitigates against fiduciary risk and provides necessary checks and balances, accountability and performance audit checks 3.1.3 Performance of PFMA systems (Fiduciary Risk Matrix) In this section we take each of the DFID Good Practice Principles for financial management (GPPs) and assess the associated fiduciary risk when considering the situation in respect of each of the underlying indicators. In each of these assessments we have related our evaluation to the core public expenditure management and financial accounting (PEMFA) assessment undertaken in December 2005 and the associated Public Expenditure and Financial Accountability (PEFA) rating1 together with any updating information. In addition to making a formal fiduciary risk assessment (FRA) for social cash transfers (SCT) in Zambia our intention is to demonstrate where the financial management arrangements for SCT either mitigates or at least does not exacerbate any core risks. As will be seen below some of the DFID GPPs are worded with the core public financial management and accounting processes in mind. We have attempted to make appropriate interpretations to apply those principles at the SCT level. Our overall assessment is that the fiduciary risk for SCT in Zambia is substantial. From the summary table below it can be seen that this substantial rating reflects a significant weighting of the report and independent scrutiny GPPs in the overall assessment. Later in the report we provide recommendations for improvement which if promptly implemented would lead quickly to a moderate risk rating. We have also included in the table our assessment of the trajectories of change for each of the GPPs. It should be remembered that in accordance with guidance each trajectory of change is based on demonstrated achievement not on potential future improvement notwithstanding how certain that might be. 1 PEFA ratings approximate to DFID GPP assessments as: A Low B Low to moderate C Moderate to substantial D High

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Good Practice Principle Risk Rating Trajectory of Change

GPP 1 - A clear set of rules governs the budget process Low

GPP 2 – The budget is comprehensive Moderate

GPP 3 – The budget supports pro-poor strategies Low

GPP 4 – The budget is a reliable guide to actual expenditure Low

GPP 5 – Expenditure within the year is controlled (controls for disbursement and spending) Low

GPP 6 – Government carries out procurement in line with principles of value for money and transparency Low

GPP 7 – Reporting of expenditure is timely and accurate Substantial

GPP 8 – There is effective independent scrutiny of government expenditure Substantial

The following paragraphs set out our detailed assessment for each of the GPPs. GPP 1 - A clear set of rules governs the budget process. This GPP has two indicators. These are: • A budget law specifying fiscal management responsibilities is in operation. • Accounting policies and account code classifications are published and applied. The 2005 assessment described a satisfactory legislative framework, with ‘B’ ratings for budget documentation and the budget process and a ‘C’ rating for budget classification. This equates with a moderate fiduciary risk. The budget process for SCT is subject to a mutually agreed memorandum of understanding, project memorandum and associated budget. As such it is well defined. This GPP is therefore assessed as of low fiduciary risk. With no significant changes in this situation the trajectory of change is considered to be neutral. GPP 2 – The budget is comprehensive. This GPP also has two indicators. They are: • All general government activities are included in the budget. • Extra budgetary expenditure is not material. The PEFA assessment in 2005 rated the comprehensiveness of information included in the budget documentation as a ‘B’ and the extent of unreported government operations as a ‘D+’. In our review we found that the DFID funding for the SCT was not included in the GRZ 2008 Budget with only the 1.5 billion Kwacha counterpart funding appearing in the ‘Yellow Book’. We understand however that this omission was due to delays on the GRZ’s part in signing the formal agreement and hence securing the funds. Technically at this point the level of SCT payments are not sufficiently provided for and are hence extra budgetary. The Principal Accountant in the Ministry of Community Development and Social Services (MCDSS) is well aware of the need to make a supplementary budget application to regularise the position. In addition the SCT related staff costs paid for by UNICEF should be captured in both the GRZ revenue and expenditure budgets to provide more complete SCT related figures. Currently we understand that there is one activity entry in the 2008 Budget covering all the expenditure concerning the SCT i.e. both payments to beneficiaries and

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administrative costs. We would prefer the transfers to beneficiaries and the administrative expenditure to be separately quoted in the budget and the accounts to improve public scrutiny of both aspects. We assess that there is moderate fiduciary risk for this GPP. 2008 is the first year that SCT expenditure has appeared in the annual budget. In view of this achievement the trajectory of change is considered to be positive. GPP 3 – The budget supports pro-poor strategies. The one indicator for this GPP is: • Budget allocations are broadly consistent with any medium term expenditure plans for the

sector or for the overall budget. The 2005 PEFA Assessment gave a ‘C+’ rating for the multi-year perspective in fiscal planning, expenditure policy and budget. We understand the current medium-term expenditure framework is consistent with the 2006-2010 Fifth National Development Plan and its pro-poor strategies. The extent to which SCT is pro-poor is dependent on its application, in particular on the identification of the beneficiaries in need and the proportion of total expenditure that actually reaches those beneficiaries. Currently four of the five pilot SCT districts have community based targeting. One, Katete District in Eastern Province, has universal targeting with the associated risk that less needy over sixty year olds may be receiving benefits. Nevertheless this whole district is poor in Zambian terms and elderly households with children are some of the poorest households in Zambia (ILO SPER 2008). The proportion of administrative expenses is planned to be 11.3% of total costs for 2008. Given the current processes this is accepted as reasonable. We understand that alternative methods of delivery are being investigated which may provide opportunities to reduce these costs. In the existing costs structure we understand the vast majority of expenditure is at the district/community level with associated economic benefits. Overall we see that the SCT programme is designed to be positively pro-poor and assess the associated fiduciary risk as low. GPP 4 – The budget is a reliable guide to actual expenditure. This GPP has one indicator: • Budget outturn shows a high level of consistency with the budget. For the GRZ overall the rating given by the 2005 assessment was a ‘D’ for composition and a ‘C’ for the aggregate figures of the outturn results compared with the original budget. Based on the Care Internal Auditor’s reports for Chipata and Kazangula overall under expenditure of 4.5% and 2.3% respectively were recorded. If sustained at this level or better this would result in an ‘A’ PEFA rating. This indicator is therefore rated as low risk. This is particularly the case when taking into account that the unspent balances should be available in the district social welfare officer (DSWO) bank accounts for future expenditure. We found no evidence of any particular change in this situation or related achievement. We therefore assess the trajectory of change as neutral. GPP 5 – Expenditure within the year is controlled (controls for disbursement and spending). This GPP has two indicators. They are: • In-year reporting of actual expenditure. • Systems operating to control virement, commitments and arrears. The PEFA assessments in respect of predictability and control of budget execution cover a range of nine indictors which were assessed from ‘B’ to ‘D+’, with the majority at ‘D+’ i.e. a substantial to high risk in DFID terms. The weaknesses in payroll controls and the indictors related to tax collection are not significantly relevant to SCT. The systems operating to control virement, commitments and arrears are the same throughout government and apply to the administration expenses of the SCT processes.

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The principal method of control for SCT is that monies are only released to fund further expenditure on proof of previous expenditure having been undertaken. As previously mentioned the internal audit reports for Chipata and Kazangula show overall under expenditure of 4.5% and 2.3% respectively. In fact the majority of the content of these differences related to under expenditure of SCT administration suggesting that the risks of over commitment are much lower for this particular type than general government expenditure. This warrants a low risk rating. Since we did not find any evidence of any particular change in this situation nor related achievement, we assess the trajectory of change as neutral. It should be noted that the major deficiency in financial reporting is in the lack of timely execution. The fiduciary risk associated with these delays is considered and assessed in GPP 7 – Reporting of expenditure is timely and accurate. GPP 6 – Government carries out procurement in line with principles of value for money and transparency. The two indicators for this GPP are: • Appropriate use of competitive tendering rules and decision making is recorded and

auditable. • Effective action taken to identify and eliminate corruption. The Poverty Reduction Budget Support (PRBS) FRA in 2004 rated both indicators as high risk. Corruption is not separately assessed in a PEFA assessment. The rating in the 2005 PEFA assessment was a ‘D+’ however, for competitive and transparent procurement. Whilst these assessments reflect a high risk level for the whole of government, for SCT the individual transactions are of relatively small value with very limited need for procurement. We assess the risk level as low. We did not find any evidence of any particular change in this situation nor related achievement. We therefore assess the trajectory of change as neutral. GPP 7 – Reporting of expenditure is timely and accurate. There are two indictors for this particular GPP. They are: • Reconciliation of fiscal and bank records is carried out on a routine basis. • Audited annual accounts are submitted to parliament within statutory period. The PEFA assessment rates the four associated indicators for accounting, recording and reporting as ‘C’ or ‘C+’. This equates approximately to a moderate rating in DFID terms. Against this background our examination of the operations of the SCT discloses the following points of concern: • The bank reconciliation process was only being carried out in one of the five districts. • In one district (Kalomo) only one of the two required cashbooks was being maintained. • Internal audit reports disclosed undocumented differences in cash balances. • There were instances of considerable delays in the financial and other reporting processes. Whilst the fiduciary risk is limited by the practice of funds release being in response to proven and documented expenditure, we still rate the fiduciary risk in this area as substantial. We noted that cash books recommended in internal audit reports had been introduced in Chipata and Kazungula, and that within days of the Principal Accountant introducing a bank reconciliation document it was being used in at least one district. In view of this we assess that there is a positive trajectory of change. GPP 8 – There is effective independent scrutiny of government expenditure. There are three indicators to be considered in respect of this GPP. They are: • Government accounts are independently audited. • Government agencies are held to account for mismanagement.

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• Criticisms and recommendations made by auditors are followed up. The PEFA assessment for the scope, nature and follow-up of external audit was ‘B+’, with ‘C+’ ratings for the legislative scrutiny of the annual budget law and external audit reports. The inclusion of the SCT in the budget and hence in the government accounts increases the level of external audit scrutiny by the Auditor General. The probability of a detailed external review is nevertheless low, particularly considering the value of the funds concerned and the overall demands on the Auditor General’s time. The SCT scheme Memorandum of Understanding (MoU), consistent with the finance legislation provides for the possibility of a Zambia Institute of Chartered Accountants recognised external auditor being sub-contracted. There has been a level of review in the past provided by the CARE Internal Auditor, however the mandate to do so has lapsed with the change in the SCT operations as from November 2007. The activity of the Internal Auditor in the MCDSS we consider to be weak. In our field visits we were advised of a corrupt pay point manager (PPM) being replaced and forced to repay monies, and of DSWOs being required to make good cash deficiencies. We understand the actions taken against these DSWOs were as a result of the CARE Internal Auditor’s reports. We have not seen otherwise any formal response by management to the other content of these reports. In view of these observations we assess the fiduciary risk in this area to be substantial. The specific requirement for the Auditor General’s scrutiny is positive but the responsibility for the external audit has always legally rested with the Auditor General. The loss of the CARE Internal Auditor’s activity when this has provided the most useful scrutiny is a more significant negative. Therefore we assess the trajectory of change overall for this GPP to be negative. 3.1.4 Identification of key fiduciary and corruption risks Statement on Corruption Risk The Fiduciary Risk Assessment for Poverty Reduction Budget Support of December 2004 discussed the public service corruption situation at length but did not give a formal rating to the associated risk. The PEFA based assessment of December 2005 makes no assessment of corruption risk. The placement of Zambia as 102 out of 146 with a score of 2.6 in the 2004 Corruption Perceptions Index of Transparency International indicates that at that time the risk was high. Since then the risk does not appeared to have changed. In 2005, 2006 and 2007 the score remained static at 2.6 with Zambia’s ranking continuously falling to 123 by 2007. This infers that the situation in Zambia remained unchanged in a global environment of improvement. In 2004 the Government of Zambia published a ‘National Governance Baseline Survey’ that reviewed the incidence of corruption. In that survey the MCDSS was placed in the middle of the rated public institutions for integrity and cited as one of the leading organisations in meeting performance standards. In the detailed assessment of corruption we are concerned with three levels i.e. grand corruption – the large-scale looting or plunder of state resources; administrative corruption – the manipulation of administrative processes to divert and obtain state resources; and petty corruption – the corruption of service delivery to obtain bribes, monies or benefits to which there is no entitlement. In social cash transfers there is no opportunity for grand corruption. The opportunities for administrative corruption are somewhat limited. There are no major procurements or contracts. The bulk of transfers are made through controlled disbursements to Pay Point Managers with the majority of administrative expenditure relating to a large number of small allowances, transport refunds and office costs. The corruption risk, however, is certainly present at the petty level where corrupt practices could occur through the potential collusion between District Social Welfare Officers, Pay Point Managers, Community Welfare Assistance Committee (CWAC) members and beneficiaries or combinations thereof. There is anecdotal evidence to suggest that this type of corruption takes place with intimated instances of:

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• Pay point managers and CWAC members colluding to divert funds from beneficiaries • CWAC members and other persons colluding to misrepresent their status and fraudulently

obtain benefits • Undue influence exerted by headmen on CWACs in the targeting and selection process. Whilst we have been unable to substantiate these claims we consider that they and similar corrupt practices are possible. In the current overall corruption environment we consider the risk of petty corruption to be substantial. Taking into account the low risks in respect of grand and administrative corruption we rate the overall corruption risk for SCT to be moderate. Key Fiduciary Risks From the fiduciary risk assessment matrix it can be seen that key fiduciary risks relate to: • Prompt and accurate financial reporting, and • Independent scrutiny of financial reports. The failures in financial management relating to deficiencies in: bank reconciliation; maintenance of cash books; accounting for cash transactions; and prompt financial reporting result in a substantial risk. During our field visits and review of reports we were able to identify instances of breakdown in procedures but were advised that in each case any losses identified were recovered. There is always a risk of theft and/or fraud whenever a person has access to cash. Currently DSWOs and PPMs have access to cash. PPMs must handle cash in order to pay beneficiaries. It would be preferable for the DSWOs to have no reason to handle cash. Fiduciary risk would reduce if all payments made by DSWOs were in the form of cheques rather than cash. Unfortunately typical payments are of the order of K100,000 whilst each cheque has a bank charge of K30,000, which is prohibitive and not cost effective under the current cost structure. It may be possible to negotiate a lower transaction cost with a preferred service provider when the programme is implemented at a national level. At lower levels of the delivery system, fiduciary risks relate to losses occurring as a result of fraud or collusion by the operatives at the district and community levels i.e. the DSWOs, PPMs and CWAC members. The process relies on the work of the DSWOs to reduce the potential risk of fraud or collusion by the PPMs and CWAC members. In turn the process relies upon the continuing supervision by the Provincial Social Welfare Officer (PSWO) and MCDSS HQ to mitigate the risk of fraud by the DSWO. All of these risks are further mitigated in the process through the independent scrutiny of the SCT records and accounts by the internal and external auditor. In the review we noted that the most effective activity in that regard had been undertaken by the CARE Internal Auditor. It is therefore of concern that under the latest arrangements the CARE Internal Auditor no longer has a mandate for that role. 3.1.5 Credible programme to improve Fiduciary risk is concerned with money being spent for the purposes intended and achieving value for money. To that end we need to establish whether the programme being supporting is a credible programme of reform and hence will not fail becoming a wasted investment. There are two potential SCT programmes to consider. One is the programme to scale up the SCT process as a nation-wide initiative. This proposal is not very well articulated at present. The document produced in 2006 is out of date, contains insufficient information to be considered as a viable proposition, does not contain the expected features and as such is not a credible programme. Since the current programme for SCT delivery is less than six months old and replaces previous SCT arrangements it is arguably appropriate to consider and evaluate whether the current programme is in itself a credible improvement programme. A number of appropriate and useful observations surface when the general features of a credible programme are evaluated against the current one. The requisite features and our comments on them are given as follows:

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• Government lead. There are doubts concerning the extent of the political ownership of the SCT programme. Whilst the Minister for Community Development and Social Services may well support the scheme the Minister for Finance and National Planning has expressed doubts as to the need for it. At the operational level within the MCDSS there is a degree of ambivalence. One does not get a sense of firm commitment to the scheme at the higher levels but there is a more positive level of ownership at the provincial and district levels.

• Realistic and achievable. The current programme is certainly realistic and achievable. There are certain areas where availability of resources is a challenge but these are being dealt with. There is considerable analysis and planning to be undertaken before an assessment could be made as to the achievability of proposals for scaling up the scheme nationally.

• Comprehensive framework effectively sequenced. The SCT programme is well integrated with the other social welfare activities of the MCDSS. It effectively utilises, supports and strengthens existing Poverty Welfare Assistance Scheme (PWAS) structures.

• Relevant and sustainable. The SCT scheme is certainly consistent with the Republic of Zambia Fifth National Development Plan, which talks about the priority for “carefully identified and well-targeted poverty reducing and poverty alleviation interventions”. The sustainability aspects are interesting to consider. In some quarters of government the apparent perception is that economic growth will eliminate poverty without the need to provide support directly to the poor. Whilst in other quarters it is accepted that irrespective of economic development there is a continuing need to alleviate poverty by direct benefit provision to the economically incapacitated poor. For sustainable resources to be allocated this difference needs to be resolved. In terms of process and institutional structure design the SCT is sustainable since it is closely allied to existing processes and structures.

• Developing local capacity. This follows on from the closing observation for sustainability. The SCT programme definitely builds local capacity by utilising, supporting and strengthening existing PWAS structures. The area of capacity building that requires some attention is in the capacity of the MCDSS to be able to articulate and advocate the need for and benefits from the SCT programme.

• Building demand for change. The current programme builds on the successes and lessons from the previous GTZ and CARE projects. When consulting with stakeholders and undertaking field visits during this assessment however, some doubts as to the strength of demand for change emerge. There is certainly a demand for the change amongst the practitioners, the community organisations and the beneficiaries. Unfortunately demand for change is less evident in the higher levels of administration and government. We have already mentioned the need to engage the whole of government and the need to build capacity in advocating the programme.

• Performance indicators. There are two areas of performance indicators to consider. There needs to be performance indicators that demonstrate the timely and efficient execution of the scheme. Secondly, there needs to be performance indicators related to the assessment of the effectiveness of the delivery and the associated anticipated benefits. The scheme features base-line studies, subsequent monitoring and evaluation, and further studies to undertake the latter. However performance indicators for timely and efficient executions are less well established. There are periodic reports and timetables in the process but little actual evaluation and communication of performance in the scheme.

Our overall assessment is that the current programme is a credible programme of improvement requiring some attention to secure some essential features. The longer-term programme for scaling up SCT nationally is not a credible programme. It requires considerable further planning and development. 3.1.6 Residual risks In considering residual risks we are mainly concerned with those risks which are significant and are not effectively addressed by the current reforms. From the fiduciary risk assessment matrix it can be seen that substantial fiduciary risks relate to: • Prompt and accurate financial reporting, and • Independent scrutiny of financial reports.

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For financial reporting we noted that there is currently a positive trajectory of change and that further steps are being taken to give financial management training and improve the capacity of DSWOs in this regard. A major part of the fiduciary risk is due to the delays in reporting which depreciates the value of all the internal controls. In our review we found no reasons why existing timetables cannot be met. More active management with closer supervision and proactive support is required. The situation is somewhat different for the independent scrutiny of financial reports. As one would expect there is a requirement for the Auditor General or an approved sub-contractor to carry out an annual audit as per the MoU. Good practice requires that the frequency and content of additional internal audit activity should not be prescribed. Internal audit activity should retain an element of unpredictability. Nevertheless it could be said that at some time during a year each SCT district should receive some level of scrutiny. We noted the weakness of MCDSS internal audit and a negative trajectory of change since the CARE Zambia Internal Auditor is no longer required to review SCT under the latest arrangements. Consideration should be given to providing CARE Zambia with the appropriate mandate to continue in an internal audit role. This would quickly address the situation. 3.1.7 Monitoring fiduciary risk The purpose of identifying fiduciary risk is to facilitate the management of that risk. The management of risk is preferably achieved by its mitigation/elimination through a change in process design. This change has to be an economic one where the benefits outweigh the costs. There are many examples of risk elimination being uneconomic in the SCT process. Here are three encountered: • The elimination of pay point managers and the need for cash could be achieved by payments

direct to beneficiaries’ bank accounts. In pilots this has been found to be incompatible with beneficiaries needs.

• The internal auditor has recommended that separate accounting staff be employed at district level to undertake finance duties. The low workload resulting from the number of transactions and the associated employment cost make this an uneconomic proposition.

• The elimination of the need for the DSWO to handle cash could be achieved by the payment of allowances etc. by cheque. Unfortunately the transactional cost in bank charges is too high to economically justify the change.

Recognition and active management is achieved through the continuing monitoring of fiduciary risk. In the next section we talk at some length about the need for increased ownership of the SCT scheme and more active management of the processes. The current reporting arrangements, which are in urgent need of increased levels of management activity to make them more timely, are largely sufficient to monitor fiduciary risk. Some attention could be given to improving the supervision and co-ordination of monitoring efforts. In particular we have in mind the more active support to beneficiary monitoring by CWACs at one end of the spectrum, in addition to securing increased scrutiny of the process though internal audit at the other. 3.2 ADDITIONAL ASSESSMENT This section deals with the assessment of anything in our terms of reference which either have not been dealt with in 3.1 Fiduciary Risk Assessment or require further explanation. 3.2.1 Strategic Issues The overall strategic direction of the SCT process is important to consider in securing value for money and the best use of financial resources. If this is not done there are major risks to the efficiency and sustainability of the programme. In considering this aspect of SCT in Zambia we make the following observations: • Ownership of the SCT programme – We have already touched on this issue when looking

at the government leadership of the programme in the ‘Credible Programme to Improve’ section on page 16. There is a need to secure firmer commitment to the scheme both at the political levels and within the MCDSS. All practitioners need to be certain that this is a very important scheme, fiercely owned and actively led.

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• Understanding of purpose/mission – We found a lack of appreciation by practitioner’s of their role in the process. Often they thought their responsibility was to administer the scheme rather than to deliver the benefits. This led to poor prioritisation and decision making.

• Communication problems – There are considerable breakdowns in communication within the process. We found instances of information from the lower levels not being effectively and promptly communicated up thorough the MCDSS organisation and vice versa. We also found deficiencies in the communication between the MCDSS and the external stakeholders. When making our field visits we found the extensive use of personal mobile phones as a convenient and effective means of communication. Perhaps consideration should be given to the utilisation of this medium in the overall process design. We also noted the requirement for official communication from HQ to districts (and vice versa) through provincial offices. Whilst we have no desire to isolate or undermine the management responsibility of provincial offices modern systems require modern matrix management styles to be adopted. It is possible to inform and advise at the HQ, provincial and district levels simultaneously.

• Performance management – The lack of any form of performance management associated with the SCT programme is a major deficiency in its operation. MCDSS employees do not work to agreed work related outcomes and targets. Their work related achievement is not directly linked to any recognition or reward. We recognise that this is a major deficiency in the overall operations of government and as such cannot easily be addressed separately for SCT processes alone. This lack of performance management in the civil service means that there are considerable difficulties in providing incentives to perform and in building the appropriate work ethic.

• There are prospects for incentives to be given at the delivery level for CWAC members. The obvious opportunity is for transport, in the form of bicycles, to be made available to them. This would be both a personal benefit and improve their efficiency. Recognition of their service could be achieved through providing tee-shirts that identify their status and valuable voluntary work. We understand that previous incentives provide through bicycles, tee-shirts, business plan related financing has met with mixed success.

• Rationalisation of services at the district level – It is quite astounding to be in a district social welfare office talking about communication problems when less than fifty metres away there is a v-sat link installation for nation-wide communication of vehicle registrations. There must be opportunities for the rationalisation of scarce resources at the district level.

3.2.2 Targeting Issues The targeting of beneficiaries has been the topic of a separate professional study by Kimetrica International Limited, which makes recommendations for a way forward in the future development and roll-out of SCT. These recommendations take into account the need to make the targeting methods as simple as possible in order to reduce administrative costs whilst maintaining the scheme’s objectives. In Katete the targeting method is one of universal support to all persons of 60 years of age or over. This meets the need for simplicity but we were advised of some confusion amongst staff as to its application. We understand that the Minister advised them that the better off people should not be given the benefit. The Minister apparently said that ownership of cattle should exclude a person from the scheme. We were advised that the district staff were having problems deciding how to implement the Minister’s directive. From a fiduciary risk view point our concern is that changes in the targeting halfway through the pilot scheme will invalidate comparisons with baseline data. This in turn risks the validity of the whole investment in this part of the SCT programme. 3.2.3 Delivery Issues We were advised that TWH-IH is undertaking a scoping study on delivery options . We will not pre-empt the outcome of that study. From a management of fiduciary risk viewpoint we find it difficult to envisage a safer, cost effective way to pay beneficiaries than the current arrangement. At the moment the PPM, CWAC member and beneficiary all need to be present and certify that the correct sum has been paid and received. As we mentioned in the section on corruption in page 15 there is a risk of collusion between these parties to corrupt the system.

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We recognise that the major fiduciary risk relates to the lack of the capacity of the beneficiary. Whilst it is definitely easier to judge that one has received ones full entitlement in monetary terms rather than when paid in kind, a number of beneficiaries that we met admitted that they had difficulty understanding the different values of the bank notes they receive. In our view the risk of payment failure is mitigated by the following factors: • The presence of the three parties as previously mentioned. • The public nature of the entitlement and payment. The community is involved in the

identification of beneficiaries and the beneficiaries usually come together to collect their benefits. Knowledge is therefore shared and comparisons of each other’s treatment can be made.

• The process provides for deputies to be appointed that the beneficiary trusts to understand and collect the full benefit.

3.2.4 Process Issues There are many aspects of the current SCT process design that limit fiduciary risk and support its management. We note the following aspects as particularly important in this regard: • The process utilises existing PWAS structures and hence SCT financing complements

existing public sector investment. • Simplicity of process is important to ensure that the maximum amount allocated to social cash

transfers is delivered to beneficiaries rather than spent on administration. Existing procedures are not complex.

• The revenue and expenditure related to SCT is now included in the government accounts with associated potential for scrutiny.

• The level of administrative expenditure compared with the level of benefits is reasonable, particularly taking into account the piloting aspects and the value of the individual benefits.

There are however a number of weaknesses in the current process and how it is conducted. We have noted the following in our review: • The use of a database in checking beneficiary duplication, the production of beneficiary

schedules of payment, and future accounting is a welcome development but at present its use is delaying payments rather than facilitating them. All new developments in processes should be carried out in parallel i.e. both the old and new methodology should be maintained until it is certain that a revised or new process works.

• All government accounting arrangements are the responsibility of the Accountant General. In the past permission only to open bank accounts and carry forward amounts form one year of account to another have been sought by the MCDSS from the Accountant General. It would be more appropriate for the Accountant General to approve all the accounting arrangements for SCT as required by the Finance (Control and Management) Act.

• In the previous fiduciary risk assessment on page 21 we mentioned the need for the complete funding and expenditure to be included in the government budget and accounts.

• Also in the fiduciary risk assessment on page 23 we have described several failures in financial management including deficiencies in bank reconciliations, lack of cash books, cash shortages and delays in reporting.

These deficiencies are obviously of concern since there are risks that they can lead to delivery failure, over/under payment of benefit, fraud, theft, weak oversight and a lack of external scrutiny. 3.2.5 Capacity Issues From a fiduciary risk perspective these issues are significant since a lack of capacity can lead to delivery failure and a breakdown in management oversight and monitoring. There are issues to consider in two capacity areas i.e. facilities and human resources.

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We have already mentioned under strategic issues on page 18 our belief that there are opportunities to rationalise resource utilisation at district level across ministries. Otherwise specifically in respect of facilities we make the following observations: • Office space – We observed that in all districts the available office space was very limited,

so limited in fact as to make it difficult to accommodate the necessary files if all areas within the district were covered. It is certain that when scaling-up takes place there will be a need to provide additional accommodation with associated capital or rental costs.

• Technology – There are certainly opportunities to improve the application of technology to the current processes. The revision and proper application of the database is a high priority. We previously mentioned that mobile phones are routinely used by the social workers. The expansion of their use with associated technology could be utilised to both enhance general communication and more specifically improve the speed of accounting for transactions.

• Transport – One is always sceptical of requests for transport, particularly vehicles, because of the risks associated with inappropriate use. Nevertheless there is a case to consider in those districts where vehicles are not available. There will certainly be a critical need as and when scaling-up takes place. The supply of bicycles to the CWACs would not only assist greatly in their voluntary work but would also provide them with an appropriate reward.

The deployment of appropriate levels of capable human resources is the other area where significant capacity issues arise. In the course of our work we noted the following: • Staffing levels – In more than one district we noted that supernumerary scheme assistants

were employed to support the administration of the scheme. Whilst we do not question the need for them we have a level of discomfort in their employment outside of the proper civil service. One of the overall strengths of SCT is that it builds on and strengthens existing MCDSS structures. The use of supernumerary scheme assistants works against this. We mention later, when talking about scaling up on page 22, the need for strategic planning taking into account future human resource needs.

• Capability/training – During the assignment we were able to attend several sessions of the workshop held in Lusaka for the SCT practitioners at provincial and district levels. The latest revised version of the SCT manual of operations was introduced and explained and training in financial management and database use carried out. This evidenced a positive approach to building capacity. However when we undertook our field visits we observed several breakdowns in financial management and a certain lack of appreciation by practitioners of their role in the process. This suggests that there is a need for further training to achieve greater capability. It is quite likely that the improvement in financial management capability would be best achieved by some on-the-job training.

• Volunteers and incentives – The CWAC has a pivotal role in the operation of SCT at the community level yet the CWAC members are unpaid volunteers. In our field visits we encountered two frequent requests from the CWAC members. First was the request for bicycles to enable them more easily to visit and monitor beneficiaries. This has already been mentioned under facilities issues above. Secondly CWAC members requested to be given tee-shirts with SCT related logos. They suggested that this would identify their role and facilitate their work in the community. We understood that this would also provide an appropriate incentive, recognition and reward for their work.

3.2.6 Audit and Monitoring Issues Through external scrutiny and monitoring we seek to reduce the risk of delivery breakdown and failures in accountability. Our observations concerning audit and independent review have been given previously in our assessment of GPP 8 on page 24. The independence of the Auditor General is important and hence it is not desirable for anyone to influence the programming of her/his activities or her/his priorities. In view of this and in order to ensure that degree of external review is definitely undertaken we are suggesting that an external auditor? be appointed to conduct a periodic review. In the assessment of GPP 8 we have also mentioned that we consider the MCDSS internal auditor activity for SCT to be weak. We have also previously mentioned the desirability of supporting existing structures and institutions. In view of this it has been suggested by various stakeholders that it would

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be more appropriate to strengthen the MCDSS internal auditor rather than utilising CARE. The difficulty is that the MCDSS internal audit function is part of a government wide common service based in the Ministry of Finance and National Planning. Improving the capability of internal audit therefore requires a government-wide initiative. Whilst we accept that this would be the optimal solution it is beyond the capacity of the SCT programme. Our next best solution is to suggest the utilisation of an external auditor. There are also issues to consider in the monitoring within SCT. In particular the CWACs have a significant role in monitoring existing and potential beneficiaries. CWAC members need to provide continuing information on the status of the beneficiaries and advise the PPM and DSWO on changes in household status. For example CWAC members will advise when a household changes due to a beneficiary dying or moving away. This monitoring work whilst critical apparently goes unrecognised and unrewarded. 3.2.7 Scaling Up Issues As part of our work we have been asked to consider the current SCT process with regard to scaling up the current pilot projects to a nation-wide programme of support. To that end we were given a May 2006 report on a possible implementation framework to consider. When assessing the possibility of scaling up operations we make the following observations: • The current process is suitable for scaling up to become nation-wide. In particular this is

because of both its simplicity of design and the use of existing MCDSS structures. The use of known and currently utilised structures facilitates value for money and sustainability.

• The May 2006 report is totally inadequate. It makes no attempt to asses even at the highest levels the resources required, plans to address capacity deficiencies and the like. The report does not even appear to recognise that the existing SCT pilots are not rolled out completely within the current districts.

• The May 2006 report proposes that the nation-wide SCT programme can be rolled out through incremental increases over a five year period. Whilst we recognise the desirability of this approach from a process implementation view point we question the political acceptability. At present the national awareness of pilot schemes covering parts of 5 out of 72 districts is probably low. When half of the country is receiving and the other half is not, and the half that not receiving is going to have to wait another year or two will this be politically acceptable? We think probably not.

• In the May 2006 report the assumption appears to be that capacity issues relate solely to human resources. These are certainly very important. From our field visits, however, it appears that many districts will have office accommodation constraints that may well require planning for the long lead times associated with building and infrastructure development. These are typical of the step changes that will be encountered in the scaling up process and which need to be recognised and carefully planned for.

• Of the current five pilot districts Chipata is the most urban but certainly not as urban as areas in Lusaka or the Copperbelt. The Kimetrica report recognises the need for different targeting approaches in urban settings. We are not social welfare experts but from a delivery assurance perspective would like to be certain that the current SCT design is appropriate for roll out in an urban environment.

• From a financing view point there are sustainability issues to consider. We have already mentioned that the Minister for Finance appears to not wholly support the SCT initiative. Notwithstanding this apparent lack of support we have not seen details of the projected cost of a nation-wide scheme and proposals as to how that scheme will be recurrently financed and hence sustained.

It is acknowledged that these issues are addressed by activities in the Action Plan for Strengthening National Level Programming for Social Assistance for Incapacitated Households, September 2007 – December 2008. These activities however are not articulated as part of a strategic plan for implementation.

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3.3 ASSESSMENT SUMMARY In the following section we discuss our findings against each of the items listed in the fiduciary risk assessment of our terms of reference. For the purposes of brevity, clarity and elimination of potential repetition we present the topics and our comments in tabular format.

Topic Comments Risk rating Overall institutional arrangements SCT institutional arrangements largely build

on existing structures. Low

Funds flow from MFNP/ donors to beneficiaries

Funds flow process contains no unexpected risks. It would be useful to eliminate the DSWO from holding cash. PPM and CWAC dual presence at payment time essential.

Moderate

Planning and budgeting procedures and capacity

Planning of current pilots adequate. Need for improved long-term planning and budgeting. Moderate

Financial management capacity including staffing at all levels

Inadequate maintenance of cash books. Failures in bank reconciliations. Evidence of improvements in capacity found. Further on-the-job-training required.

Substantial

Accounting policies, financial controls and procedures

Accounting procedures require Accountant General’s approval. Procedures generally good. Failures in bank reconciliations.

Moderate

Records management Evidence found of improvements in records management. Some inadequacies encountered.

Moderate

Financial reporting and monitoring Format of financial reporting satisfactory. Delays in financial reporting found with lack of follow-up.

Substantial

Information management systems Modifications of database significantly delaying payments. No procedures for parallel running system changes.

Substantial

Incentives for misallocation of funds Misallocation of funds requires breakdown in internal control facilitated by delays in reporting. Simple misappropriation more prevalent. Detection enhanced by active internal audit, which is reducing.

Substantial

Independent oversight External audit responsibility of Auditor General. Actual performance only evidenced after end of current fiscal year. Internal audit review capacity is reducing.

Substantial

Anti corruption and complaints handling

Grand and administrative corruption opportunities are very low. However substantial potential for corruption at petty level. Beneficiaries found to be aware of alternative routes for complaints.

Moderate

Public information and social accountability

External audit reporting and possible parliamentary follow-up not yet experienced. Published budget entry from 2008 but no separation between benefit and admin costs to facilitate public scrutiny.

Substantial

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4.

4.1

4.2

RECOMMENDATIONS From the observations we have made in the conduct of this assignment and based on the conclusions we have drawn, in this section of our report we make a number of recommendations for consideration by the relevant stakeholders.

CROSSCUTTING ISSUES We identified the following crosscutting recommendations: • Performance management – Many aspects of the SCT process would improve through the

adoption of performance management in the MCDSS (and hence the wider civil service). In particular this would: improve ownership of the process; increase awareness of the purpose of the process; reduce delays in process implementation including reporting; and facilitate the introduction of performance incentives.

• Rationalisation of resources – There are opportunities to rationalise resources at the district level, in particular technology and human resources with financial management capability. This would maximise the return on development partner investment at the district level.

DESIGN OF SCT PILOTS AND NATIONAL PROGRAMME.

We make the following recommendations concerning the design of the SCT programme and the potential national programme: • Improved ownership/management – We could find no substantial reasons for the delays in

the process and the resultant hold-ups in beneficiary payments. We recommend that more attention be given to the committed, attentive yet flexible management of the process at all levels. The priority for all must be the regular and prompt payment to beneficiaries.

• Communication – We recommend that specific attention be given to improvements in the effectiveness of communication in the process. The informal use of personal mobile phones already assists in communication. The use of mobile technology provides many more opportunities to communicate transmitting not only voice but text, images of documents/reports, etc. Even more opportunities are presented by the use of WAP enabled mobiles.

• Targeting – The recommendations in the Kimetrica report appear reasonable from a fiduciary risk management perspective in that they retain maximum levels of simplicity taking into account other political and social factors.

• Delivery structures – We recommend that any scaling up activity continue to build on and strengthen the current practice of utilising existing MCDSS PWAS delivery structures.

• Database – The current improvements in the database need to be completed and implemented throughout the SCT pilots. It is usual practice when making changes in IT applications to fully test them before implementation. Indeed for livelihood critical applications such as payrolls, pension and social benefit delivery it is good practice when making changes to parallel run old and new processes to ensure that failures are avoided.

• Accounting procedures – We applaud the demonstrated trend to include all aspects of the financial management of SCT within the government accounting system. To that end we recommend that the Accountant General should discharge her/his duty under the Finance (Control and Management) Act by formally approving the accounting arrangements for SCT.

• Independent scrutiny – To facilitate a high level degree of scrutiny by parliament and the public we recommend that the sums voted in the annual budget should be separated between benefits and administrative costs. The detailed external scrutiny of the operations of SCT is certainly the responsibility of the Auditor General. Since the SCT has only been included in the government expenditure budget for this financial year there has been no experience of an external audit undertaken under the direction of the Audiitor General. The level of scrutiny that he/she may achieve is uncertain since there are many demands on scarce auditing resources. The review efforts of the CARE Internal Auditor have been very useful in the past and we recommend that consideration be given to the Auditor’s mandate being renewed under the current revised arrangements.

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• Funds release – It is the MCDSS’s current practice to only apply for the release of further SCT funds from DFID once it has put together all of the expenditure documentation for a period from all of the pilot districts. It has been suggested to us that this approach creates peer pressure on those districts that are slow to perform. We believe that this is inappropriate logic. Each district has no power, responsibility or opportunity to influence the performance of another. That responsibility squarely rests with senior management. The current practice means that funds are released only at the pace of the slowest district making returns. This disadvantages all beneficiaries and is contrary to the purpose of SCT. It is also a disincentive for the better districts. We strongly recommend that this practice is changed and requests for funds should be made promptly and regularly for reimbursement for whatever documentation is available. Our recommendations for increased levels of management activity should be particularly focussed on improving the capability of those districts that fall behind.

• Co-ordination of monitoring effort – We have noted the level of effort that is put into the various monitoring activities ranging from the base-line and the subsequent surveys, through CWAC monitoring, to external scrutiny. From a Fiduciary Risk Assessment point of view, monitoring and evaluation enhance tracking, and assessment of the efficiency, effectiveness, impact of social cash transfers to beneficiaries and their communities. These activities are important in providing information and data about the flow through of funds, efficiency of the delivery mechanism and how well the funds are put to their intended purpose. In managing fiduciary risk, this tool can provide possible sources of financial leakages, weaknesses in the structure of the procedures and systems, as well as in the capacity of institutions to manage the scheme.

• Our observation was that there was no coordinated framework for evaluating, analyzing and feedback mechanism of the various monitoring and evaluation efforts being conducted by various groups. For example, the monitoring work of CWACS and that of NGOs is not coordinated. CWAC members and DSWOs reported that they were not getting feedback from monitoring results of the NGOs. It is important that these activities be adequately supported and more actively coordinated for improvement of information sharing, planning and control.

• Strategic plan development – From the evidence presented to us we conclude that there is insufficient planning at the strategic level for the scaling up of the pilot projects to a national programme. Whilst we conclude that the current process design is scalable we note step change requirements in resourcing that need to be carefully programmed as part of a sufficiently detailed strategic plan. We recommend that an appropriately thought through and detailed strategic plan for the national roll-out be prepared.

4.3 CAPACITY BUILDING NEEDS. We make the following recommendations concerning meeting capacity building needs: • Internal audit – We recognise the difficulty in building capacity for internal audit in the

MCDSS alone when internal auditors are part of a government-wide shared service within the MFNP. Nevertheless this should be considered in the context of wider public financial management reform. Our recommendation to extend the mandate of the CARE Internal Auditor should be considered as short-term with a longer-term solution developed for building capacity in the MFNP internal audit function for the nation-wide SCT scheme implementation.

• Financial management – There are currently failures in financial management, particularly in respect of bank reconciliation and maintenance of cashbooks that are due to lack of relevant skills. We recommend that, in addition to the classroom training and revised documentation already delivered, on-the-job training in financial management is given to the DSWOs and their assistants.

• CWACs – Community Welfare Assistance Committees are central to the operation of SCT at the community level. Every CWAC member that we spoke to had received training but we believe that their capability could be increased by taking one or more of the following steps: • Engage CWAC members in scheduled periodic training to maintain and upgrade

skills. • Provide resources, particularly bicycles, that will enable members to fully exploit their

capability.

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• Give recognition to CWAC members for the services they provide. This recognition in the form of such items as tee-shirts can also act as incentives and rewards for their participation.

• Resource planning – Any capacity building initiatives are void unless they are supported by adequate resource planning. This planning, which is not sufficiently evident, will ensure that corresponding facilities are provided to match the capacity developed and ensure that sufficient additional human resources are deployed to cope with increasing work-loads as they are encountered.

4.4 MONITORING FIDUCIARY RISK. The current design of the SCT process already has in place sufficient reporting for stakeholders to be able to monitor fiduciary risk. In the fiduciary risk assessment section of this report starting on page 7 we have identified the following residual risks, taking into account the content of the current reform. They are: • Prompt and accurate financial reporting, and • Independent scrutiny of financial reports. Our main recommendation is for the various stakeholders to press the management of the SCT process to provide the required reports in a timely manner. The residual risks can be effectively monitored by reviewing the production of financial reports in terms of content and timeliness, and through the periodic receipt of reports produced as a result of independent reviews.

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APPENDIX 1

TERMS OF REFERENCE

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1. TERMS OF REFERENCE

TERMS OF REFERENCE

FIDUCIARY ASSESSMENT OF SOCIAL CASH TRANSFERS IN ZAMBIA

1. Objectives 1.1 The objective of this piece of work is to inform the design of Social Cash Transfer pilots and a

possible future national programme to ensure timely and full delivery of resources to beneficiaries, while mitigating fiduciary risk to acceptable levels.

1.2 This will be achieved through undertaking a financial management capacity and fiduciary risk

assessment of Social Cash Transfer pilots and a possible future national programme, and making recommendations to strengthen systems and capacity.

2. Background 2.1 Zambia’s Fifth National Development Plan identifies Social Protection as important to support

economic growth, contribute directly to poverty reduction, promote equity and fulfil human rights. Programmes identified to reduce extreme poverty in incapacitated households include the Public Welfare Assistance Scheme (PWAS) and Social Cash Transfers. The Technical Working Group on Incapacitated Households (TWG-IH) is coordinating work around this objective.

2.2 Social Cash Transfers are an innovative approach to Social Protection in Zambia. Currently

there are pilot Social Cash Transfer programmes in 5 districts which will reach 11,700 beneficiaries in 2008. Lessons from the pilots and supporting studies will inform the design of a possible national Social Cash Transfer programme, as outlined in the Implementation Framework drafted by the TWG-IH.

2.3 Depending on the choice of targeting methodology, transfer level, and delivery mechanism,

estimated costs for a national SCT Scheme range from $11-$42 million, representing 0.5-1.5% of GRZ expenditure (UNICEF Policy Brief Aug 07). Despite the apparent affordability, these amounts far exceed current allocations to social transfers for incapacitated households. A national scheme would require strong political support to finance Social Cash Transfers in the long term. Additional donor support is likely to be necessary in the medium term pending reallocation of resources in the Government of the Republic of Zambia (GRZ) budget.

2.4 Social Cash Transfer programmes have inherent fiduciary risk, being made up of high

volumes of low value payments. Perceptions of corruption can seriously damage political commitment to schemes, but management of fiduciary risks must be balanced with costs of doing so and achievement of scheme objectives.

2.5 Current pilots have established financial management procedures and evaluations have

shown that beneficiaries are receiving their transfers and administrative costs are within acceptable levels (currently averaging 13%). Problems with capacity to account for expenditure have however delayed payments, reducing the impact of the programmes. A national programme would further depend on regular disbursements from Ministry of Finance and National Plannning (MFNP) to Ministry of Community Development and Social Services (MCDSS) to ensure regularity of transfers. Streamlining financial management arrangements and/or increasing capacity to manage transfers is needed to ensure smooth running of the pilots. A future national programme would also require establishment of reliable funding sources from donors and GRZ.

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3. Scope of Work 3.1 This consultancy will focus on financial aspects of Social Cash Transfers, taking into account

other work on: • targeting methods • making payments (delivery options) • MIS development

3.2 The consultant will consider both existing pilots and a possible future national programme. 3.3 The consultant will carry out the following:

A. Assessment of fiduciary risk and financial management capacity B. Recommendations to support smooth implementation with acceptable levels of

fiduciary risk A. Fiduciary assessment A1. The fiduciary assessment will cover the following areas:

• Overall institutional arrangements • Funds flow from MFNP/donors to beneficiaries • Planning and budgeting procedures and capacity • Financial management capacity including staffing at all levels • Accounting policies, financial controls and procedures • Audit (internal and external) • Records management • Financial reporting and monitoring • Information management systems • Incentives for misallocation of funds • Independent oversight • Anti corruption and complaints handling • Public information and social accountability

A2. For each area a risk assessment should be indicated in the categories high, medium

and low. A3. An overview assessment of other ongoing social transfer programmes should be

made to draw lessons and asses relative fiduciary risks. Relevant programmes include Public Welfare Assistance Scheme (PWAS), Targeted Food Security Pack (TFSP), Fertiliser Support Programme (FSP, implemented by Ministry of Agriculture and Cooperatives (MACO)), and national pension schemes.

A4. Consideration of the ongoing Public Expenditure Management and Financial

Accountability (PEMFA) programme should be made to asses the degree to which PEMFA reform processes will impact on financial management performance at MCDSS and whether and in what time frame they will mitigate any identified risks.

A5. Consideration of the proposed decentralisation process and how this would impact on

financial management and fiduciary risk in future. B. Recommendations B1. The consultant will make recommendations on how the fiduciary systems can be

strengthened to ensure complete, timely and documented delivery of resources to beneficiaries, while mitigating fiduciary risk to acceptable levels. These should take into account the objectives of the programme and efficiency of delivery in terms of administrative costs.

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B2. Recommendations will cover: • Design of pilots and proposed national programme • Capacity development in GRZ (specifically MCDSS at national, provincial and

district level, but also considering MFNP, auditor general and any other relevant parts of )

• Monitoring fiduciary risk

B3. A system for monitoring progress against recommendations arising from the assessment should be presented.

4. Proposed methodology 4.1 Briefing on work with TWG-IH and DFID Adviser. Finalisation of methodology, timeframe and

outputs. 4.2 Review of relevant documents (see annex A) on :

• Pilot projects • Proposed national programme • Public expenditure management and financial accountability in Zambia • Fiduciary risk, especially related to social cash transfers

4.3 Meet with key stakeholders including MFNP, MCDSS, CARE and donors interested in

supporting SCT’s in the future to: • Asses acceptable levels of financial management and fiduciary risk • Collect information on SCT’s and other GRZ social transfer programmes

including PWAS, TFSP, FSP and national pension schemes for comparison. 4.4 Carry out field visits to asses financial management performance and capacity at all levels.

These will include: • Provincial (2 with pilots) • Districts (selection of those with and without pilots) • Pay points (both community and banks) • SCT pilot beneficiaries

4.5 Preparation of draft report for comment by TWG-IH. 4.6 Finalisation of report taking into account comments by key stakeholders. 5. Specific outputs 5.1 A detailed report covering:

• Assessment of fiduciary risk and financial management capacity • Recommendations for

• design of SCT pilots and national programme • capacity building needs • monitoring fiduciary risk

5.2 A Policy Briefing Note of key findings and recommendations (max 4 pages) 6. Competencies 6.1 The team will consist of one national and one international consultant. Between them, the

consultancy team will have competencies in public financial management and accounting, experience with social cash transfers and knowledge of Social protection and PEMFA systems in Zambia.

6.2 The international consultants will be responsible for:

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• The overall management of the consultancy and all outputs • Providing technical input on fiduciary risk and financial management capacity

6.3 The local consultant will be responsible for: • Organising meetings with key stakeholders including logistics for field visits • Providing technical input on PEMFA systems and social protection in Zambia

including the political economy around fiduciary risk.

7. Timing 7.1 The consultant should start on 31st March 2008. 7.2 The draft report should be submitted within 4 weeks from the starting date of the contract. 7.3 The TWG-IH will provide comments within 2 weeks of submission of the draft report. 7.4 The final report incorporating comments should be submitted 1 week after receiving

comments from the TWG-IH. 8. Reporting 8.1 The consultant will report to the TWG-IH. 8.2 The consultancy will be managed by DFID Zambia’s Growth Senior Programme Officer

(Morgan Mumbwatasai) in close collaboration with the Vulnerability and Food Security Adviser (Kelley Toole).

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Annex A: Key references Pilot projects • Manual of Operations – Pilot Social Cash Transfer Scheme • Financial and audit reports • DFID Zambia Programme Memorandum on Support to SCT’s and associated MoU’s • Evaluations of pilot programmes (www.socialcashtransfers-zambia.org) • Draft Independent Impact evaluation of SCT pilots (MASDAR 2008) • Internal audit of SCT pilots (CARE 2007) Proposed national programme • Fifth National Development Plan, Social Protection Chapter (GRZ, 2006) • Draft Implementation Framework for SCT’s and associated action plan for 2008 • Targeting study (Kimetrica 2008) • Draft Cooperationg Partners Options Paper on support to Social Protection (2008) Public expenditure management and financial accountability in Zambia • PEMFA Programme Document and Financial guidelines • DFID Zambia PRBS Fiduciary Risk Assessment • 2005 PEFA Evaluation Report • Social Protection Expenditure and Performance Review (ILO 2008) • Note on Auditor General Reports, Norwegian Embassy 2007 Fiduciary risk, especially related to social cash transfers • How to note: Managing Fiduciary Risk when providing PRBS (DFID January 2008) • How to note: Managing the Fiduciary risk associated with social cash transfer programmes

(DFID, June 2006)

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APPENDIX 2

LIST OF PERSONS CONSULTED

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2. LIST OF PERSONS CONSULTED Kelley Toole Vulnerability and Food Security Adviser: DFID Zambia Morgan Mumbwatasai Senior Program Officer: Economic and Enterprise Development

DFID Zambia Phyllis Chuma-Chilembe Principal Accountant-MCDSS Robby Mwinga Program Manager for Social Cash Transfers - CARE Zambia Sanga Mataka Senior Internal Auditor - CARE Zambia Ackson Mbewe Auditor - MCDSS Reuben Zulu Director of Planning - MCDSS Gregory Mwanza Chief Planner - MCDSS Mike B. Goma Accountant General-MFNP Joel M. Ukwimi Deputy Accountant General - MFNP Nosiku Lifumbela DSWO Kazungula Howard Siachalwa Ng’andu CWAC Chairman Grace Sibuka Ng’andu CWAC Member Phelem Chalinga Ng’andu CWAC Vice Secretary Angela Mabunda Ng’andu CWAC Member Cornwell Habbole Ng’andu Secretary Nzala Michelo Kazungula Pay Point Manager M.P. Siamasamo ADSWO: Kalomo Benson Hachombe Pay Point Manager: Kalomo Siyunda-Siyunda Kalomo CWAC Member Never Velemu Kalomo CWAC Member Ruth Akapelwa Kalomo CWAC Member Manzunzo Zulu DSWO Monze Kelvin Butts Sigubbu CWAC Chairman Maambo Mweemba Manungu B DWAC Member, Shilda Nzala Manungu B CWAC member Agnes Ngulube DSWO-Mazabuka Thomas Banda Mselera CWAC Chairperson Joyce Mtonga Mselera CWAC Committee member Charles Mwale Mselera CWAC Secretary Potte Ngoma Mselera CWAC Vice Secretary Aaron Mwale Chipata PPM Fastone Soko ChImasuko PPM Reuben Zulu ChImasuko CWAC Vice Secretary Mwanita Banda ChImasuko CWAC Committee Member Getrude Sakala ChImasuko CWAC Secretary Regina Zulu ChImasuko CWAC Chairperson Lyson Phiri ChImasuko CWAC Committee Member Peter Tembo ChImasuko CWAC Committee Member Kamizimbi Zulu ChImasuko CWAC Treasurer Joyce Mukuka DSWO Katete Chris Zulu ADSWO Katete Mercy Lungu SCT Scheme Assistant Katete Charlotte Harland UNICEF Rose N. Mutupo DSW, MCDSS J. Musamba DFID M.Adams CARE Zambia Bestone Mbozi MCDSS Most Mwamba MCDSS S.Michelo MCDSS Y.Kakusa MCDSS Sheila Nkunika MCDSS Brian Mulenga Regional Hunger and Vulnerability Programme Bijoy Sarker Concern Worldwide

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Julie Lawson McDowall Social Protection Advisor, Irish Aid Tienengi Banda Beneficiary Everess Zulu Beneficiary Tideleko Makuzo Beneficiary Mosi Chilumbu Beneficiary Tikale Banda Beneficiary Zevenano Phiri Beneficiary Whyson Phiri Beneficiary Saini Phiri Beneficiary Cecelia Gwai Beneficiary Chokoma Phiri Beneficiary Joyce Tembo Beneficiary Judy Mwelwa Beneficiary Saliya Mudenda Beneficiary Maria Milambo Beneficiary Brad Magrath General Manager, CAD International

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APPENDIX 3

BIBLIOGRAPHY

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3. BIBLIOGRAPHY Fifth National Development Plan (FNDP), Ministry of Finance and National Planning GTZ report on Social Cash Transfers in Zambia, 2005 Manual of Operations for Social Cash Transfer Scheme, 8th Edition, Ministry of Community

Development and Social Services, May 2008 Public Expenditure Management and Financial Accountability Reform Programme, Financial

Management Guidelines, Ministry of Finance and National Planning Public Financial Management Performance Report and Performance Indicators-2005, Ministry of

Finance and National Planning Zambia Poverty Reduction Budget Support (PRBS) Joint Appraisal Memorandum 2004 Poverty reduction Budget Support Proposal, Fiduciary Risk Assessment, Annex 1 to the Joint

Appraisal Memorandum, December 2004 Alternative Methods for Targeting Social Assistance to Highly Vulnerable Groups, Ben Watkins,

Kimetrica, February 2008 Implementation Framework For Scaling Up To A National System Of Social Transfers In Zambia,

Ministry of Community Development and Social Services, May 2006 Social Assistance for Incapacitated Households – Strengthening National Level Programming, Action

Plan, September 2007 – December 2008, GRZ & Cooperating Partners in Social Protection Zambia National Governance Baseline Survey Report, August 2004 Transparency International, Country Study report, Zambia 2006/7 Care International in Zambia, Draft Internal Audit Report On Social Cash Transfer Project, Kazungula,

Period of Audit: August 2006 – September 2007 Care International in Zambia, Draft Internal Audit Report On Social Cash Transfer Project, Chipata

Urban, Period of Audit: July – October 2007 DFID Project Memorandum, Zambia Reforms in Public Expenditure Management and Financial

Accountability (PEMFA), December 2004 DFID Project Memorandum, Support to the Development of the Implementation Plan for a National

Social assistance Scheme, Zambia, May 2008 DFID How to note, Managing Fiduciary Risk when providing PRBS, Additional Guidance, managing

the Risk of Corruption, June 2005 DFID How to note, Managing the fiduciary risk associated with social cash transfer programmes, June

2006 DFID How to note, Managing Fiduciary Risk in DFID bilateral aid programmes, January 2008

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