Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 74891-MA

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT FROM THE MENA TRANSITION FUND

IN THE AMOUNT OF US$4 MILLION

TO THE

KINGDOM OF MOROCCO

FOR THE

NEW GOVERNANCE FRAMEWORK IMPLEMENTATION SUPPORT PROJECT

September 30, 2013

This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information.

KINGDOM OF MOROCCO - GOVERNMENT FISCAL YEARJanuary 1st - December 31st

CURRENCY EQUIVALENTS US$1 = 8.4077 Moroccan Dirham (MAD)

(Exchange rate effective as of August 30, 2013)

LIST OF ABBREVIATIONS AND ACRONYMS

AAA Analytical and Advisory ActivitiesAfDB African Development BankCMD Modulated expenditure controlCPS-PR Country Partnership Strategy-

Progress ReportCSO Civil Society OrganizationDPL Development Policy LoanEU European UnionFMS Financial Management SpecialistGDP Gross domestic productGFS Government Financial StatisticsGID Integrated Financial

Management Information System (Gestion Intégrée de la Dépense)

IBRD International Bank for Reconstruction and Development

ICPC Anti-Corruption Agency (Instance Centrale de Prévention de la Corruption)

IGF Inspectorate General of Finance (Inspection Générale des Finances)

ISA Implementation Support Agency LIBOR London Inter-Bank Offered RateLG Local GovernmentsM&E Monitoring and evaluationMAD Moroccan DirhamMAGG Ministry of General Affairs and

Governance (Ministère des

Affaires Générales et de la Gouvernance)

MCRPCS Ministry in Charge of Relations with Parlement & Civil Society

MEF Ministry of Economy and FinanceMENA Middle East and North AfricaMICNT Ministry of Industry, Trade and

New Technologies (Ministère de l'Industrie, du Commerce et des Nouvelles Technologies)

MTEF Medium-Term Expenditure FrameworkOBL Organic Budget LawOECD Organization for Economic Co-

operation and DevelopmentPC Project CoordinatorPD Project DocumentPEFA Public Expenditure and Financial

AccountabilityPFM Public Financial ManagementPPD Public Procurement DecreePS Procurement SpecialistPSIA Project Social Impact AssessmentSGG Secretary General of the Government TA Technical assistanceTGR General Treasurer of the

Kingdom (Trésorerie Générale du Royaume)

Regional Vice President: Inger AndersenCountry Director: Neil Simon M. Gray

Sector Director:Sector Manager:

Bernard Funck a.i.Guenter Heidenhof

Task Team Leader: Fabian Seiderer

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PAD DATA SHEET.

Kingdom of MoroccoNew Governance Framework Implementation Support Project (P143979)

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PROJECT APPRAISAL DOCUMENT

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Basic InformationDate: September 30, 2013 Sectors: General Public Administration Sector (50%); Central

government administration (30%); Sub-national government administration (20%)

Country Director: Neil Simon M. Gray Themes: Administrative and civil service reform (40%), Public expenditure, financial management and procurement (40%); Decentralization (20%)Sector Manager/Director: Guenter Heidenhof/Manuela V.

Ferro

Project ID: P143979 EA Category: C - Not Required

Lending Instrument: Grant from the MENA Transition Fund

Team Leader(s): Fabian Seiderer

Joint IFC: No.

Beneficiary : Government of Morocco.

Client : Ministry of Governance and General AffairsBeneficiaries: Ministry of Economy and Finance, Ministry in charge of Relations with Parliament and Civil Society, Ministry of Interior

Implementing Agency: Ministry of Governance and General Affairs

Contact: Mr Jamal Echiguer Title: Project Director

Telephone No.: 0537 68 73 29 Email: echiguer@affaires-generales.gov.ma

Agencies responsible for Component I : Ministry in charge of d with Relations with Parliament and Civil Society and Ministry of Governance and General Affairs

Contact: Ms. Fatima Zahra Ben Hussein

Title: Director of Relations with Civil Society

Telephone No.: 212610845306 Email:

Agency responsible for component II: Ministry of Economy and Finance

Contact: Mr. Fouzi Lekjaa Title: Director of Budget

Telephone No.: 212537677267 Email: lekjaa@db.finances.gov.ma

Agency responsible for component III: Ministry of Interior

Contact: Mr. Abdelrhani Guezzar Title: Director of Local Finance

Telephone No.: 212537215865 Email: aguezzar@interior.gov.ma

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Project Implementation Period: Start Date: 01-Sep-2013 End Date: 31-March-2018

Expected Effectiveness Date: 120 days after the signing of the grant agreement

Expected Closing Date: 31-March-2018.

Project Financing Data(US$M)[ ] Loan [ X ] Grant [ ] Other

[ ] Credit [ ] Guarantee

For Loans/Credits/OthersTotal Project Cost (US$M): 4

Total Bank Financing (MENA Transition Fund) (US$M): 4.

Financing Source Amount(US$M)Borrower 0

International Bank for Reconstruction and Development (MENA Transition Fund) 4

Total 4.

Expected Disbursements (in USD Million)Fiscal Year 2013 2014 2015 2016 2017 2018

Annual 0.2 0.5 1 1 1.0 0.3

Cumulative 0.7 1.7 2.7 3.7 4

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Project Development Objective(s)The Project Development Objective is to contribute to the strengthening of government transparency, accountability and public participation by supporting (i) the development and implementation of a public consultation policy and a law on petitions; (ii) the improvement of access to fiscal information and enhancement of performance orientation in budget management; and, (iii) the strengthening of fiscal decentralization.

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Components

The project was prepared by an IBRD team consisting of: Fabian Seiderer (Team Leader, MNSPS), Lida Bteddini (MNSPS), Khalid El Massnaoui (MNSED), Salim Benouniche, Abdoulaye Keita, and Laurence Folliot (MNAPC), Lamyae Hanafi Benzakour (MNAFM), Ibtissam Alaoui (MNAEX), David Bontempo (MNSPS), Sanaa Bouchikhi (MNCMA) and Mavo Ranaivoarivelo (MNSPR); Tracy Hart (MNSEN) provided key input for the preparation of this operation. Guenter Heidenhof (Sector Manager, MNSPS), and Joelle Businger (Country Program Coordinator, MNCA1) provided feedback and comments on a first draft of the Program Document. The legal advisers for this operation are Jean Charles De Daruvar and Alexandra Sperling (LEGAM). Peer reviewers are Ivor Beazley (Lead public sector specialist, ECSP4), and Adrian Fozzard (Lead public sector specialist, PRMPS).

Jean Pierre Chauffour (Lead country economist, MNSED), Yolanda Tayler (Manager, MNAPC) and the Transition Fund Coordination Unit provided key input and guidance at various stages of the project preparation. The team worked under the supervision and guidance of Simon Gray (Maghreb Country Director), Manuela Ferro (Sector Director, MNSPR), and Guenter Heidenhof (Sector Manager, MNSPS). Special thanks are due to the Ministry of General Affairs and Governance, the Ministry of Economy and Finance, The Ministry in charge of relations with Parliament and Civil Society and the Ministry of Interior, for their cooperation.

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THE KINGDOM OF MOROCCO

NEW GOVERNANCE FRAMEWORK IMPLEMENTATION SUPPORT PROJECT

Table of contents

I. Strategic Context.....................................................................................................................1A. Country Context............................................................................................................1B. Sectoral and Institutional Context.................................................................................2C. Higher Level Objectives to which the Project Contributes...........................................5

II. Project Development Objectives.............................................................................................6PDO..........................................................................................................................................6i. Project Beneficiaries........................................................................................................6ii. PDO level results indicators.............................................................................................7

III. Project Description...............................................................................................................8A. Project components.......................................................................................................8B. Project Financing.........................................................................................................13i. Financing Instrument......................................................................................................13ii. Project Cost and Financing.............................................................................................13

IV. Implementation...................................................................................................................15A. Institutional and Implementation Arrangements.........................................................15B. Results Monitoring and Evaluation.............................................................................16C. Sustainability...............................................................................................................16

V. Key Risks and Mitigation Measures......................................................................................17A. Risk Ratings Summary................................................................................................17B. Description..................................................................................................................17

VI. Appraisal Summary............................................................................................................19A. Economic and Financial Analysis...............................................................................19B. Technical.....................................................................................................................20C. Financial Management................................................................................................20D. Procurement.................................................................................................................21E. Social (including safeguards)......................................................................................22F. Environment (including safeguards)...........................................................................23

Annex 1: Results Framework and Monitoring.............................................................................24Annex 2: Detailed Project Description.........................................................................................27

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Annex 3: Implementation Arrangements......................................................................................35Annex 4: Operational Risk Assessment Framework (ORAF).......................................................53Annex 5: Implementation Support Plan........................................................................................56

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I. Strategic Context

A. Country Context

1. Morocco is a middle-income country with a population of 32 million and a per capita income of US$ 2,951 (2012). Over the past decade, Morocco has made progress towards achieving its millennium development goals (MDG) and has sustained a growth rate of 4.6 percent and a stable macroeconomic framework despite adverse external shocks. Extreme poverty has been reduced but the country still faces a wide-range of socioeconomic challenges. Poverty and vulnerability remain high, with around 17 percent of the population living just above the poverty line. Likewise, and despite substantial social spending, inequality and deprivation remain high, as evidenced by the high and steady Gini coefficient (0.41) and the very high rate of adult illiteracy (30 percent for men and 66 percent for women). In 2012, more than 22% of public expenditures (except public debt service) have been allocated to social sectors to finance public services and investments. A further 15% has been allocated to direct food and fuel subsidies. Nevertheless, socioeconomic disparities and challenges of access to basic public services persist, as evidenced by the fact that less than half of the first graders complete primary schooling in rural areas. In January 2012, the Government responded to these challenges by announcing an ambitious plan to boost the growth rate to 5.5 percent, lower unemployment to 8 percent, and improve the reach and quality of government services. These development challenges highlight weaknesses in the effectiveness of public policies and strengthen the motivation to push forward reforms promoting citizen’s voice, the performance of public expenditures and government accountability both at the central and local level.

2. Development challenges have fueled a sense of inequality and disenfranchisement among large segments of the population, as expressed in recurrent demonstrations. These challenges also raise questions on the effectiveness of past development policies and the issue of equal access to public services, now a new constitutional right. Although the protests in Morocco were more peaceful than in other countries in the region, the demands for reform were very similar, focusing largely on political change, a curbing of corruption, and a more inclusive development process. Limited voice and participation in the design and implementation of public policies is considered an important constraint. More specifically, limited transparency in the use of public resources, both at the central and local level, has been identified as a key impediment for effective governance by making it difficult for citizens to hold government accountable. In turn, limited accountability provides room for discretion in the management of public resources, reduces the incentives to improve performance, thus limiting the effectiveness of public policies.

3. Popular demands have been acknowledged in the transition process and have translated into the main components of the new Constitution, in which governance reforms feature prominently. In March 2011, the King announced the launch of a comprehensive process of political, institutional, and social reform that led to the revision of the constitution and to new elections. On July 1, 2011, the new constitution was

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adopted which introduced reforms improving Morocco’s governance framework through greater checks and balances between the legislative, executive, and judicial branches. More specifically, the Constitution introduced reforms to: (i) strengthen the role of Parliament through greater legislative powers and increased oversight over the government; (ii) elevate the role of the Prime Minister to that of Head of Government, to be proposed by the political party winning a parliamentary election; (iii) enhance the independence of the Judiciary as a power that is autonomous from both the Executive and the Legislative; (iv) strengthen citizen’s rights, including public participation and the right to access public sector information; (v) strengthen consultative bodies and accountability of institutions, including the National Council for Human Rights, the Ombudsman, and the Anti-corruption Agency, and (vi) establish far-reaching regionalization as a democratic and decentralized system of governance. A section of the constitution (articles 12 to 15) empowering civil society and strengthening its involvement in the management of public affairs is a direct response to recent protests and popular demands for better governance and inclusion. Furthermore, the constitution includes new provisions empowering regions by upgrading them to directly elected local governments (article 135), reinforcing public participation to improve local governance (articles 136 and 139) and strengthening fiscal decentralization (articles 141 and 142). These provisions further support the new strategy for Advanced Regionalization aiming to improve social and economic development at the local level and reduce geographical and social disparities.

4. These recent constitutional changes represent the roadmap for Morocco’s transition process and lay out the comprehensive medium-term reforms required to accomplish it. The important changes introduced in the mandates and functions of Parliament required the renewal of representatives through early elections, which were held on November 25, 2011, in which the Justice and Development Party (PJD) won 107 out of 395 seats in the nationwide vote. The PJD then formed a coalition government in early January 2012, with its leader becoming the Head of Government, as foreseen by the new constitution. Following the withdrawal of the second political party in the coalition, negotiations are underway to rebuild a new majority While the current political situation is unlikely to lead to a reversal of the high level governance reforms supported by this project, it may delay their implementation.

B. Sectoral and Institutional Context

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5. In line with the new constitution and in response to popular demands, the government prepared a program that aims to establish a more open and inclusive governance framework to help strengthen the development process and improve the delivery of public services. While many areas under this program are not new, the Government program includes a set of progressive measures which are reinforced by renewed political support and an improved enabling environment. The 2012-2016 Government program, which was presented to Parliament on January 26, 2012, is structured around five key pillars, including: (i) deepening national identity and social cohesion; (ii) the rule of law and advancement of regionalization and governance; (iii) job creation and economic development; (iv) national sovereignty and social development; and (v) improving access to social services for all Moroccans. The Government program focuses on a number of governance reforms relating to the delivery of public services, access to information and public engagement, reform of public financial management, decentralization, and a strong emphasis on the justice sector.

6. A key transformational change is derived from the new constitutional right to public consultation, which recognizes inclusive participation in government decision making as a fundamental principle (Articles 12-15). Enabling citizens to petition and make legislative proposals as well as to extend the scope of public consultation through a standardized government-wide mechanism aims to directly respond to these new rights and help establish a mechanism for more informed policy-making throughout government. This reform builds on the current practice of online consultation on draft law and regulations and complements the institutional consultation process, notably through the Economic, Social and Environmental Council (CESE) established in 2011.

7. The Government program places emphasis on access to information, a parallel area of reform and prerequisite to effective public consultation. The World Bank is currently providing technical assistance to the Government for the development and the implementation of the new legal, regulatory and institutional framework for access to information (ATI). Through a dedicated law on ATI (article 27) currently under preparation, proactive disclosure of key financial and budgetary information will be required at the central and local level. Weak access to information has been highlighted as a major challenge in previous years, and Morocco’s performance on Global Integrity indicators illustrates this challenge in recent rankings, with measures of the strength of access to information and the media cited as “weak” (64/100). Furthermore, the 2012 Open Budget index ranks Morocco at 38 out of 100 due to insufficient reporting and disclosure on financial information and budget documentation.

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8. The budget reform has gained a new momentum and is considered a key lever to improve the performance of public service delivery and the accountability of Government over the use of public resources. Growing fiscal constraints in Morocco (with a budget deficit above 7.6 percent of GDP in 2012) and the international public debt crisis highlight the importance of fiscal transparency and increased allocative and operational efficiency in public expenditures. The budget reform is considered instrumental to achieving these multiple and complementary objectives and to addressing the above-mentioned weaknesses. The programmatic budget classification and the introduction of multi-annual budget perspectives are seen as ways to enhance the strategic nature of the Government’s budget policy and to improve allocative efficiency. By strengthening the link between public policies, performance objectives, and budget appropriations, it would improve transparency and facilitate parliamentary oversight. The introduction of a performance management approach through which the Government, ministries, and program managers commit to performance objectives and report on their achievements aims at strengthening the Administration’s external and internal accountability.

9. Advancing regionalization is a key pillar of Morocco’s governance transition, as confirmed by the constitutional revisions and the new strategy adopted in March 2011. The emphasis on advancing regionalization is warranted by numerous weaknesses in the accountability and transparency of local governments, as well as the limited scope for citizen engagement in local affairs, which detrimentally impact the effectiveness of local government services. These shortcomings are notably reflected in the low score (c) in the last Public Expenditure and Financial Accountability (PEFA) assessment of the transparency of inter-governmental fiscal relations. Transparency of financial transfers and allocations made by the central government can be improved. For instance, the report on local finances accompanying the budget law does not disclose transfers to individual local governments. Information on the VAT account are published with the budget settlement law. Likewise, local government budgets are rarely disclosed on their Websites. Different sets of rules exist depending on the fiscal sources—VAT, business tax, and income tax—of transfers to local governments, each passing through special Treasury accounts.

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10. In order to address challenges on the local government level and to implement the new constitutional principles of self-determination, the Government has initiated a major reform to the current fiscal transfer and equalization system, in addition to reforms strengthening the managerial responsibility and accountability of local governments. Local governments will benefit from increased competences and corresponding resources according to the principle of subsidiarity (Article 140-141). These important changes will be implemented through the revision of the organic law on local governments, the law on local finances and the revision of the regulatory framework on inter-governmental fiscal transfers. Such revisions are also warranted by the new organic budget law, as central and local governments share the same budget classification and public accounting rules. Likewise, the new transparency and public consultation policies are also applicable to local governments. Regional councils will be entrusted with greater responsibility for public service delivery and will require the corresponding financial visibility, autonomy, and tools. This will involve central planning and coordination with the Government and its local representatives, line ministries and their devolved regional bodies, and local governments. The constitution also calls for the setup of two new funds (article 142) to strengthen vertical and horizontal equalization and reduce development disparities.

11. The proposed project aims to support the Government with the implementation of critical reforms. The Bank is supporting governance reforms through various instruments, most notably in the framework of the Accountability and Transparency Development Policy Loan (DPL) (P130903) which supports the adoption of new laws and policies. Parallel technical assistance provides financing for the design of these new policies and the implementation of new right to access public sector information.

C. Higher Level Objectives to which the Project Contributes

12. The project is fully aligned with Transition Fund objectives by supporting the Government in the implementation of transformational reforms that will strengthen economic governance. The reforms supported by this project will help strengthen the country’s overall governance framework and make tangible the new Constitutional principles. The Bank is supporting this governance reform agenda through a comprehensive support program, including (i) policy advice for the design of these new policies and laws, (ii) a multi-donor Accountability and Transparency Development Policy Operation (DPO) to support the adoption of this new legal and institutional framework and (iii) through the proposed technical assistance project to support the implementation of this new governance framework. The proposed project is fully integrated with the DPO and builds on the current policy dialogue by supporting the implementation of its three strategic reforms strengthening, respectively: (i) open governance through greater public consultation, (ii) accountability in public financial

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management through the budget reform and; (iii) fiscal decentralization through the revision of the fiscal transfer and equalization system to local governments.

13. The project directly contributes to the achievement of the common objectives of the Morocco Country Partnership Strategy (CPS) FY10-13 (Report 67694-MA) and its progress report, namely to strengthen governance and territoriality. The CPS progress report, discussed by the Board of Executive Directors in May 2012, confirms the relevance of these objectives while recognizing the need to adapt the strategy to the new socio-political priorities by strengthening governance and accountability, ensuring greater social and economic inclusion, and increasing the scope for voice and public engagement. The proposed project is designed to support the achievement of the two cross-cutting objectives of the CPS by supporting the implementation of horizontal reforms including: (i) public consultation; (ii) performance-based budgeting and fiscal transparency; and (ii) decentralization.

Donor coordination and complementarity

14. The technical assistance proposed under this project complements the current support to governance reforms provided by the World Bank together with other development partners. Support to these reforms benefit from close coordination with other donors, notably through the coordinated Morocco First Transparency and Accountability Development Policy Operation (Hakama), prepared with the European Union (EU) and the African Development Bank (AfDB). The components included in this project aim to support strategic reforms on civic engagement, performance budgeting and fiscal decentralization, which are central to the joint DPO and for which the authorities requested implementation support from the World Bank. The project will complement and strengthen the current engagement. It will also build on a large pool of analytical underpinnings as well as on up-stream technical assistance provided by the Bank, the EU, the AfDB and the MENA multi-donor trust fund, through the “Morocco and Tunisia economic governance support project”. Finally, the governance and decentralization reforms, supported by this project could eventually be complemented by dedicated capacity building projects, such as a local government support program discussed with the Bank and a public administration reform project discussed with the OECD and the Bank.

15. The synergies between this project and current interventions from the Bank and other donors are presented below:

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Table 1: scoping of current donor support to governance reforms.

Reform areas/ Donors

World Bank (own resources and MENA multi-donor TF project)

European Union African Development Bank

OECD

Open government

Hakama and policy advice on the access to information law, the public consultation policy and the fiscal transparency policy.

Hakama (joint budget support)

Hakama (joint budget support)

Open Government Partnership assessment

Public financial management

Hakama and policy advice on the budget reform and on public procurement.

Hakama and TA on the budget reform (training plan and action plan). Twinning on financial controls: with the CoA and with the General inspectorate of Finance. TA on the tax reform.

Hakama. OECD senior budget officer meetings

Decentralization Hakama and diagnostic of the transfer and equalization system. Sector specific support to local government service delivery.

Public administration reform

Support to administrative simplification (CNEA)

Work on deconcentration, on human resource management and on the quality of public services.

Advice on HRM

Justice sector reform

Justice sector enhancement technical assistance project + Justice sector public expenditure review.

Past MEDA justice support project (closed).

II. Project Development Objectives (PDO)

16. The objective of the Project is to contribute to the strengthening of government transparency, accountability and public participation by supporting (i) the development and implementation of a public consultation policy and a law on petitions; (ii) the improvement of access to fiscal information and enhancement of performance orientation in budget management; and, (iii) the strengthening of fiscal decentralization.

i. Project Beneficiaries.

17. The project will support the implementation of a range of new constitutional rights and structural reforms that are expected to benefit the Moroccan population as a whole. More specifically the project’s primary beneficiaries will be citizens, civil society organizations, businesses, parliament, taxpayers, users of public services and local governments. The project will also support efforts to reduce gender disparities notably by strengthening women’s participation in public consultations as well as by introducing gender sensitive performance indicators in the budget reform.

Reforms supported under this project will benefit the project beneficiaries through the following expected outcomes:

(i) The development of a government wide public consultation policy and a law on the right to petition in line with international standards, will strengthen citizens’ voice in public affairs;

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(ii) Civil society organizations will be associated in the development of new public engagement policies through an inclusive and structured National Dialogue and will benefit from capacity building and training to effectively exercise these new rights;

(iii) Businesses and investors will benefit from increased transparency and consultation, which reduce information asymmetry and create a more predictable regulatory environment and level playing field conducive to growth and employment;

(iv) Parliament and taxpayers will benefit from the new organic budget law introducing performance budgeting and increasing government accountability in the allocation and management of public resources and results achieved. The implementation of performance budgeting is expected to enhance parliamentary oversight, and strengthen the allocative and operational efficiency of public expenditures.

(v) Users of public services will benefit from the increased responsibility and accountability of managers and public service providers, through the introduction of performance budgeting;

(vi) Local governments will benefit from capacity building and from the revision of the fiscal transfer and equalization system, which will increase transparency of intergovernmental fiscal relations and contribute to more effective equalization policies. This reform would also create incentives for local revenue collection and greater self-determination, sought by the constitution.

18. The secondary beneficiaries of the project are the public administrations and notably: (i) the Ministry in charge of relations with parliament and civil society that will benefit from capacity building and support for its role as permanent secretariat for the National Dialogue, (ii) the Ministry of Economy and Finance that is in charge of the budget reform, (iii) the Ministry of Interior that is tasked to implement the new constitutional provisions for advanced regionalization.

ii. PDO level results indicators.

1. At the level of the project development objective:

Strengthened legal framework and formalized practices for participation in public affairs

Increased accountability of government over the use of public resources.

The transparency of local finances and of intergovernmental fiscal relations has increased.

2. At the component level:

Component I: Strengthening Public Participation

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Increased participation rate of CSOs in public consultation activities since and as a result of the National Dialogue

Strong satisfaction rate among CSOs participating in public consultation Strong engagement of CSOs in the development of legal framework on public

engagement

Component II: Enhancing Efficiency and Accountability in the use of Public Funds

Strengthened budget transparency, policy based budgeting and external scrutiny Improved budget execution rate Strengthened budget transparency and access to information

Component III: Advancing regionalization

Increased public accessibility of formal rules and regulations for fiscal transparency and equalization

Training on the new procurement rules and on financial management Strengthened competition and value for money in procurement Improved fiscal reporting by local governments

III.Project Description

A. Project components

19. The project supports the implementation of the governance framework foreseen in Morocco’s new Constitution through technical assistance and capacity building for three strategic intertwined governance reforms aiming to increase civic engagement in government affairs, enhance the government’s accountability towards parliament and tax payers, as well as to strengthen fiscal decentralization and local governance. The project follows an integrated and holistic approach by supporting three horizontal and mutually reinforcing governance reforms in order to improve the inclusiveness and effectiveness of Morocco’s public policies across the entire government.

20. The duration of this project is envisaged for a period of 4 years, in line with the time frame of the Government’s development program (2012-2016). Supporting the implementation of reforms covered under the Morocco Transparency and Accountability DPL, this project will also support an information and communication strategy that will help provide the necessary visibility to improve awareness within the administration and the public on the benefits of the Government’s reform strategy and ongoing initiatives. The project is composed of three components supporting three strategic and intertwining governance reforms:

Component I – Strengthening Public Participation: (US$730,000)

21. Fostering greater public engagement is one of the core commitments enshrined in

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the new Constitution. Improving public consultation and participation in the design and implementation of public policies contributes to improving their quality as well as their implementation by helping build consensus and, in turn, compliance. Consultation practices are widely accepted as effective tools for building public trust around key reforms, generating efficiency savings and accelerating public service reform.

22. The Constitution has introduced the right to petition, by which citizen can directly propose legislation or present motions on public initiatives. These are important levers to foster a more open mode of governance. They need to be concretized through dedicated laws, which the Government intends to develop in a participatory manner. The Ministry charged with relations with Parliament and Civil Society (MCRP) has established a structured national dialogue around the development of rules, policies and a legal framework defining public engagement mechanisms. This Dialogue is notably expected to propose to parliament a draft law on petitions and motions as well as a draft policy on public consultation.

23. The objective of Component I is to support the development of a legal framework for public engagement, particularly in the form of a government wide policy on public consultations and a law on petitions. It will then support the implementation in pilot ministries and local governments. To ensure that this process is inclusive and transparent, the project will also support the development of an online consultation platform provided by the Inter-ministerial Committee for e-government (C-Gov), as well as a monitoring and evaluation mechanism for the implementation of these policies. The project’s support will include advice, exchange of experience with relevant countries and practitioners as well as capacity building to the public sector and Civil Society Organizations. The latter will complement existing projects supporting the demand side, such as ANSA-Arab World Initiative.

24. More specifically this component will support:

(a) providing advice and technical assistance to the Ministry in Charge of Relations with Parliament and Civil Society as well as to the structures of the national dialogue and civil society organizations;

(b) facilitating national and international exchanges of experiences regarding citizen participation through the provision of advice and study tours;

(c) carrying out activities aimed at raising awareness on the national dialogue and related public consultation initiatives;

(d) supporting the development of an e-consultation platform launched by the Inter-Ministerial Committee for e-government;

(e) developing a training-of-trainers program through the provision of training sessions to selected public officials and civil society actors on, inter alia, public consultation, change management and advocacy;

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(f) testing the new consultation policy developed, in two selected pilot public institutions; and

(g) developing: (i) a monitoring and evaluation system on public consultations; and (ii) rolling out a user survey aimed at addressing user satisfaction ratings and feedback on the consultation process.

Component II: Enhancing Efficiency and Accountability in the use of Public Funds

25. The budget reform is a building block of Morocco’s governance and public sector reform agenda as it enhances transparency and accountability throughout the budget process, strengthens parliamentary oversight, and represents a strong lever for the modernization of the management of public expenditures and services.

26. The second project component supports the implementation of performance budgeting. The objective of this component is to provide the Government and parliament with the tools to strengthen internal and external accountability on the implementation of public policies and the use of corresponding resources. The new organic budget law will require the Government and the different ministries to commit to performance objectives along with the budget proposal. At the end of each budget year the Government will have to report to Parliament and to the public on the achievement of the performance targets. This new budget management approach will also increase accountability and managerial flexibility within the public administration. Finally, the new programmatic budget presentation will foster fiscal transparency and the link between policy priorities and budget allocations. This project component is subdivided in four subcomponents focusing respectively on the implementation of the budget reform, the new public procurement rules, a diagnostic of public investment management and supporting an external public financial management assessment.

27. Sub-component II-1: will support the implementation of the new organic budget law by introducing programmatic and performance budgeting. A draft organic budget law has been prepared and is currently discussed with Parliament and with the Court of Audit. The adoption of the law is foreseen in 2013 with an early implementation in key line ministries with the 2014 budget. The Ministry of Finance, the Ministry of Agriculture, the Ministry of Education and the High Commission for Forestry and Water will constitute the first implementation wave and start to prepare the new programmatic budget in 2013, with the corresponding performance objectives and indicators. The reform will be rolled out to all ministries by 2017.

28. The public sector expertise needed for the implementation of this reform will be provided through a twinning project between the Ministry of Economy and Finance in Morocco and one or more Ministries of Finance from Deauville Partnership countries having a unique expertise in the implementation of such a budget reform and the necessary regional experience and language skills, such as the French Ministry of Finance, Canada, the UK or Chile. This twinning project will take the form of a direct service contract with the lead partner public administration. This contract will enable to

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pair high public officials from Morocco with their counterparts in these countries to foster exchange of expertise and experience in the design and implementation of the various dimensions of the budget reform. The proposed twinning project will be providing advice and technical assistance to the MEF and selected ministries, through a twinning program, for: (i) implementing the new organic budget law, (ii) preparing its implementing regulations and the new budget management procedures; (iii) modernizing budget classification; (iv) developing a performance monitoring and evaluation framework; and (v) developing performance commitments for selected ministries.

29. Sub-component II-2: supports the implementation of the new procurement rules and regulations across the public sector, through the development of training modules and of a training-of-trainers program in the area of public procurement.. The new rules and regulations aim to enhance transparency, efficiency and value for money of public procurement, including through e-procurement. They extend the scope of public procurement rules to agencies and local governments, thus requiring large training efforts. This subcomponent will focus on the design of training modules and the training of trainers for the central administration and local governments, leveraging existing public sector training structures/programs in the country. It will be integrated into the training program being developed by the working group at the SGG

30. Sub-component II-3: will finance a public investment management diagnostic and technical assistance to improve the efficiency of public investments in Morocco. It will use the World Bank’s newly developed public investment management assessment tool covering the entire project cycle, from identification, selection, management through to evaluation. Based on the diagnostic of the current practice of the Ministry of Economy and Finance and one or two pilot ministries, the project will prepare an action plan to strengthen public investment management.

31. Sub-component II-4: supports an external public financial management diagnostic to assess the progress made in, inter alia, the performance budgeting reform. It will use the Public Expenditure and Financial Accountability (PEFA) methodology and, in turn, update the previous 2009 assessment. This diagnostic will help identify the progress made and document the results achieved.

Component III: Advancing Regionalization

32. Regionalization is a key component of Morocco’s governance transition, as confirmed by the constitutional revisions and the new Advanced Regionalization strategy adopted in March 2011. Major changes were introduced to strengthen the regions and their socio-economic development, increase accountability and transparency of local governments as well as of intergovernmental fiscal relations. Local governments are at the frontline of public service provision to citizens and the regions in particular will have a key role in planning and coordination for public services and infrastructure. The empowerment of directly elected regional governments and strengthening transparency and public engagement in the management of local affairs represent a key pillar of the

12

Country’s new governance framework. Reforms supported under the two first project components represent an opportunity to bring about more inclusive local governance and strengthen their financial management. The implementation of the advanced regionalization strategy and the planned empowerment of regions will necessitate the transfer of new competences and financial resources. This will in turn require the revision of the current system of fiscal transfers and equalization, taking into account the new distribution of competences in a constrained fiscal environment and strengthening local government’s financial management.

33. Component III will support fiscal decentralization by supporting the revision of the fiscal transfer and equalization system for local governments through: (i) international and local expertise; and (ii) the carrying out of study tours and workshops. It will further provide training-of-trainers for local officials on, inter alia: (i) the budget preparation; (ii) the new procurement rules; and (iii) internal audit; as well as provide training to regional and other local authorities on planning and performance contracting guidelines and tools.

More specifically this component will include:

Technical assistance (TA) and advice to the reform of the fiscal transfers and equalization system, in line with the new constitution and strategy for advanced regionalization, including: (i) international and local experts; (ii) a consultation workshop; (iii) information seminars and change management; (iv) international benchmarking; and, (v) south-south exchange through two study tours.

Support to the implementation of the new law on local finance and capacity building for local government (LG) public financial management, which includes international and local technical assistance to the Ministry of Interior (MoI)/Direction Générale des Collectivités Locales (DGCL) for the development of training and capacity building on: (i) budget preparation; (ii) strategic budgeting based on the Communal and regional development plans; (iii) public procurement, based on the new procurement decree and regulation; and, (iv) training on the new financial management information system for local governments (GID-CL)

TA for the development of planning guidelines and tools; including: LG training and capacity building on planning for regions and LG to improve the multi-annual costing, link with the budget, and economic and financial (ecofin) analysis of projects, performance contracting; TA for the revision and simplification of performance contracting policies and procedures for regions and LGs, based on the new organic law for LGs.

B. Project Financing

i. Financing Instrument

34. The technical assistance project will be financed through a grant from the MENA

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Transition Fund in the amount of US$4,000,000. The grant will be recipient executed in line with the Bank and the Transition Fund’s policies and procedures.

ii. Project Cost and Financing

Indicative project budget for 4 years (in USD)

Indicative Cost by Component Transition Fund

Country Financing

Bank Financing

Total (USD)

I. Strengthening public participation

I-1: Support to Ministry, to Civil society and to the National Dialogue on the new constitutional principles of citizen participation and to the participatory development of related consultation and petitions policies.

I-2: Piloting of the new consultation policy in one ministry and one local government and capacity building of officials and CSOs

I-3: Development of a monitoring and evaluation system, including on-line consultations and user surveys.

322,000

266,000

142,000

50,000372,000

Total component I 730,000 50,000 780,000

II. Enhancing Efficiency and Accountability in the Use of Public Funds

II-1 Support to the implementation of the performance budgeting reform through public sector expertise from OECD countries having implemented the same reform. It comprises support to (i) the design and steering of the budget reform and for the development of the new procedures and tools, (ii) the implementation of the performance-based approach in line ministries, and (iii) the development of a government wide performance monitoring and evaluating system and the revision of the financial management information systems.

II-2 training and capacity building for the implementation of the new public procurement rules.

II-3 Public investment management diagnostic and technical assistance

II-4 public financial management assessment through an update of the 2009 PEFA.

1,500,000

124,000

100,000

100,000

70,000 1,570,000

Total component II 1,824,000 70,000 1,894,000III. Advancing Regionalization

III-1 Adapting the fiscal transfer and equalization system for local governments (LG), in accordance with the new constitution and the advanced regionalization strategy.

III-2 Capacity building for Local Government (LG) financial management, including on the new public procurement rules.

III-3 Strengthening the planning and performance contracting process in line with the enhanced role of regions.

277,800

296,000

195,000

50,000 327,800

Total component III 768,800 50,000 818,800Information and communication 50,000Unallocated expenditures 137,200Project Implementation Unit 490,000 200,000 1 690,000

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Total project cost 4,000,000 200,000 170,000 4,370,000

Nature of expenditures

Category Amount of the Grant Allocated

(expressed in USD)

Percentage of Expenditures to be Financed

(inclusive of Taxes)

Goods, non-consulting services, and consultants’ services, Training and Operating Costs under the Project

4,000,000 100%

TOTAL AMOUNT 4,000,000

35. The project will finance primarily services (99.5%) and limited goods (0.5%), mainly for the operation of the project implementation unit. The project will not finance works. Services financed by the project notably include local and international consultancy services, public sector administrative services, transportation services, information and communication services as well as events, training seminars and visits abroad.

36. The financing of this project is complemented by financing from the Government and from the Bank. The Government is providing a counterpart contribution, both in kind (staff) through its own budget. The Bank is supporting these reforms and project activities through technical assistance in the amount of US$170,000 as well as through a proposed development policy loan series under preparation, estimated at US$ 300 million.

IV. Implementation

A. Institutional and Implementation Arrangements

37. The project is recipient executed and will be implemented by the Ministry of General Affairs and Governance (MAGG). The project will be managed by a project management unit (PMU) headed by a public official from MAGG and supported by a project coordinator as well as procurement and financial expertise. Each ministry will be responsible for the preparation and implementation of the activities foreseen under their respective component. The development of a government-wide consultation policy and a draft petitions law, foreseen under component I is entrusted to the Ministry in charge of relations with Parliament and Civil Society. The budget reform and public financial management diagnostics, covered by component II, are led by the Ministry of Economy and Finance. The implementation of the decentralization strategy, supported by

1 In kind contribution related to project management (staff, offices, utilities)

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component III, is led by the Ministry of Interior. A project Steering Committee will oversee the project implementation and coordinate its activities.

38. The project steering committee (SC) will oversee the project implementation and the project management unit and coordinate the different activities and project stakeholders. The SC, will be headed by the MAGG and include all project stakeholders, notably the project director and coordinator, representatives from the Ministries in charge of relations with Parliament and Civil Society, of Economy and Finance and of Interior as well as other relevant project stakeholders. It will meet as many times as necessary and at least four times per year.

39. A project management unit (PMU) will be established and supervised by MAGG, which will be responsible for the implementation of project activities, procurement of services and financial management. The Unit will also be tasked with monitoring the activities and coordination between the different actors associated in the respective reforms covered under this project. The Project Director presides over the PMU and will be assisted by a Project Coordinator, as well as an expert in procurement and financial management. The Project Director is appointed by the Minister and the three other positions are financed by the project.

Specific implementation mechanisms:

40. Subcomponent II-1, supporting the implementation of the performance budgeting reform will be implemented through an administrative services contract with one or more OECD countries having experience in the implementation of such a budget reform as well as the necessary regional experience and language skills. This administrative services contract will enable to pair public officials from Morocco with their counterparts in these countries to foster knowledge exchange in the design, steering and implementation of the various dimensions of the budget reform.

B. Results Monitoring and Evaluation

41. M&E organizational arrangements. The M&E system will be based on the agreed results framework and monitoring arrangements (See Annex 1). The PMU will be responsible for supervising the M&E activities at component and PDO level. For each component the lead ministry will be in charge of the M&E of its own project activities and report on a quarterly basis to the PMU at the MAGG. The PMU will produce overall quarterly progress reports and send them to the Bank no later than two months after the reporting period. At the end of each year an annual report will synthetize the progress achieved over the last 4 quarters.

42. M&E actions. The project M&E system will be complemented by specific M&E actions funded under the project or by respected independent external surveys publicly available. This includes on-line user surveys and an evaluation to be conducted under component I on the implementation of the public consultation policy as well as an external Public

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Expenditure and Financial Accountability (PEFA) assessment funded under component II. The results from external independent assessments, such as World value survey, on citizen’s engagement as well as from the Open Budget Index on fiscal transparency will further feed the project’s M&E system. Beyond the project level M&E system, it will also support the development of government-led M&E systems. For instance the national dialogue on public consultation will have its own M&E system, including a feedback mechanism for participants, a monitoring system for the implementation of the new public consultation policy and external evaluations. Component II will support the development of a government-wide performance M&E system in the context of the budget reform, comprising performance monitoring integrated in the budget cycle, ex-post performance audits and evaluations, associating external experts.

C. Sustainability

43. The nature of the policy changes supported by the project increases the likelihood in sustainability of its results. The project is supporting the implementation of the new constitutional rights and governance principles, adopted by a referendum in July 2011. The new policies derived from the constitution represent a priority for the Government and are difficult to revert to as they have created high expectations. The project design and its integration with the parallel development policy loan (Hakama) supporting the same reforms are meant to enhance the sustainability of its results. At the macro level the project supports the revision of the policy framework and more specifically the development of a new policy on public consultations, a new law on the right to petition, the organic finance law and a new regulatory framework on fiscal transfers to local governments. At the meso level the project is supporting the necessary institutional development for the implementation of these new policies and laws, including by supporting the institutionalization of the national dialogue, by supporting the institutional setup necessary for the management of the budget reform at the ministry of Economy and Finance as well as in line ministries. At the micro level the project is providing training and capacity building to the public officials and Non State Actors involved in the actual implementation of these reforms and new policies.

44. To increase the sustainability of the capacity building activities, the project support will focus on institutional strengthening and on the development of training modules in close cooperation with existing public training institutions. It will train trainers, both from the public sector and from the civil society and complement other civil society organization capacity building initiatives from the European Union or the Bank funded ANSA-Arab World initiative.

45. Component II will promote peer-to-peer knowledge exchange, by building working relations across countries, thus contributing to the sustainability of this reform. Experience has shown that such administrative cooperation between peers has often led to knowledge-exchange well beyond the project duration.

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V. Key Risks and Mitigation Measures

A. Risk Ratings Summary

B. Description

46.

Stakeholder Risks are considered high in view of strong expectations to produce visible and concrete results relating to transparency, accountability and citizen participation. This will be dependent on government capacity to adequately sequence and phase reforms, prioritizing ‘quick-wins’ while maintaining a long-term reform perspective. While the current socio-political context is more conducive to change, it also bears important risks of frustration and tension in the absence of visible results in the short term. Managing people’s expectations and the sequencing of reforms and changes across the public sector are thus critical factors for the success of the Government’s program particularly given the transformational and transversal nature of reforms relating to public consultation, performance-based budgeting and decentralization. The authorities and the project aim to mitigate the risk of frustration by building-in intermediate visible results throughout the reform process, such as the setup of the national dialogue on citizen engagement as well as visible fiscal transparency measures.

47. The risk of insufficient ownership by Government, project stakeholders and the donor community is low. The proposed project responds to the high level directions outlined by Morocco’s 2011 Constitution that calls for the “inclusive participation in government decision making (Articles 12-15); balanced public finances (Article 77); and advancement of the regionalization agenda through principles of good governance, greater accountability, and improved representation.” The project components and accompanying reforms are strongly anchored in these new Constitutional provisions as well as the new Government program.

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Risk Category Rating

Stakeholder Risk High

Implementing Agency Risk

-Capacity Substantial

-Governance Moderate

Project Risk

-Design Moderate

-Social and Environmental Low

-Program and Donor Low

-Delivery Monitoring and Sustainability Moderate

Overall Implementation Risk High

48. The implementation of the Government’s large governance reform program faces major coordination challenges, considering the numerous reforms and their cross-cutting nature. The project design aims to mitigate this coordination risk by focusing on three strategic and intertwined reforms and by entrusting the project management to the Ministry of General Affairs and Governance, which has the overall coordination mandate.

49. Risks to the successful execution of the overall project stem largely from limited implementation capacity of the implementing agency and counterparts. The Ministry of General Affairs and Governance, deals primarily with public policies and has limited experience in managing projects. The mandate to coordinate governance reforms is new for the Ministry and it is in the process of strengthening its own capacity. Likewise, the Ministry charged with relations with Parliament and Civil Society, has a new and extended mandate (Civil Society) and limited experience in managing projects. The project seeks to mitigate this high risk by supporting the project management unit, providing implementation support from the Bank and hand holding advice on the different reforms. Although the reforms support by this project benefit from a large political consensus, the negotiation of a new Government coalition may delay the reform process and the implementation of this project.

50. In addition to these horizontal risks, each component/ reform may face its own specific challenges, which the project design aims to address as follows:

In regards to public consultation, there is a risk of insufficient engagement from the public administration in the absence of a formalized and established policy. Although authorities have scaled up public consultation on strategic and high level reforms, such as the Constitution, the decentralization strategy and the justice reform, other consultation processes remained generally ad-hoc, primarily focused on strategies rather than on actual policies and often seen as a mere validation process. The authorities aim to address this potential risk by launching a high level and inclusive national dialogue for the design of the country’s new civic engagement policies. The design of Component I aims to further mitigate this risk by incorporating a strong information and communication strategy linked to the launch and implementation of the National Dialogue, in order to raise awareness of on-going initiatives and build consensus for reform. In addition, the e-consultation platform will be a useful tool to help expand the scope of consultation to a wider user base as well as act as a medium for Government to disseminate information and updates on overall progress.

Regarding the budget reform, there is a risk of slippage and lack of engagement from line ministries in the absence of new formal rules and regulations for budget preparation and management. Previous reform efforts suffered from delays in the absence of a clear timetable. Past pilot testing of the performance approach yielded limited results as the legal and regulatory framework remained unchanged, which created frustration among ministries which were confronted with parallel procedures. The authorities recognize this limitation and focus their efforts on the revision of the organic budget law, which is in its final stage. A sequenced implementation plan is also being developed. The project will help mitigate this risk

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by assisting the Ministry of Economy and Finance in developing the necessary guidelines for line ministries and by supporting them in their implementation.

The regionalization reform is complex and highly political, and may be faced with a risk of implementation delay. The constitutional revisions and the new Advanced Regionalization strategy, adopted in March 2011, introduced major changes empowering regions, reducing their numbers and redistributing competences and resources. These changes will be implemented through the revision of the organic law on local governments and will also require the revision and consolidation of the regulatory framework on inter-governmental fiscal transfers as well as the amendment of the law on local finances. These important and sensitive changes may face a risk of delays and resistance. This risk is partly mitigated by the high level political support this reform has across the political spectrum as well as by the participatory approach followed by the high commission for regionalization for the development of the strategy.

VI. Appraisal Summary

A. Economic and Financial Analysis

51. Strengthening the country’s governance framework will have significant benefits for the society at large. Although it is difficult to quantify the economic and financial impact of such transformational and cross cutting reforms, and the causal link with the project’s support, economic research2 suggests a positive correlation between fiscal transparency, foreign investments and government borrowing costs and interest spreads. Anecdotal evidence confirms that a more open mode of governance with genuine public participation contributes to improve the design, acceptance and implementation of public policies and regulations. Enabling citizens to voice their priorities ensures better targeting of public programs and expenditures. Businesses and investors benefit from reduced information asymmetry and greater regulatory predictability, thus promoting a level playing field conducive to growth and employment.

52. Regarding public financial management, increased accountability over the budget allocations and performance creates incentives for greater allocative efficiency. Likewise, increased managerial responsibility and accountability within the public administration of budget management fosters greater operational efficiency of public expenditures. The same is true for increased transparency of intergovernmental fiscal relations, which will contribute to improve the predictability of resource flows to local governments. The introduction of resource allocation criteria based not only on size and population but taking also into account the services provided and the local revenues generated, will create incentives for local revenue collection and foster greater self-determination of local governments, sought by the constitution.

B. Technical

2 Gelos & Wei 2005 et Glennerster & Shin 2008

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53. The project design follows a comprehensive and collaborative approach to support the implementation of the new governance framework. It uses an integrated approach by supporting mutually reinforcing reforms that foster open governance, improve public financial management and strengthen intergovernmental fiscal relations. It follows also a holistic approach by supporting horizontal structural reforms across the public sector (central and local governance) to enhance impact. The project is integrated to the Bank’s comprehensive support to Morocco’s governance reforms, comprising policy advice for the design of the new laws and policies, a development policy operation (DPO) supporting their adoption and this technical assistance to support their implementation. The project follows a collaborative approach with bilateral and multilateral donors, both through involving OECD member countries in the provision of expertise (component II) and through the joint Hakama program and related policy dialogue.

54. The proposed project components are technically sound and in line with international standards and good practices. The policy advice on the public consultation and transparency policies is based on prior policy notes and international benchmarking. The advice on the budget reform builds on the Bank’s global expertise and experiences, including from Europe, North America and Latin America and associates high level practitioners from OECD countries having experienced similar budget reforms. Finally, the support to the revision of the fiscal transfer and equalization system will build on a comprehensive diagnostic of the current system and its evolutions and integrate an international benchmarking.

C. Financial Management

55. The financial management system within the Ministry of General Affairs was appraised to determine if it complies with the requirements of the Bank in respect to OP/BP10.02. The financial management assessment of the Ministry of General Affairs and Governance cover the areas of accounting and financial management, as well as the reporting and auditing processes of the project. The financial management system, including necessary arrangements to respond to the needs of the financial monitoring of the project, satisfies the minimum requirements of the Bank.

56. The assessment concluded that the Ministry of General Affairs and Governance, strengthened by the suggested arrangement of the PMU, will have sufficient capacity to manage project financial matters and administer grant funds. The main responsibilities will include Project budgeting, treasury, general accounting and reporting. The FM inherent risk for the country, the entity, and the project is considered moderate.

57. Disbursement files will be prepared by the project management unit at the Ministry of General Affairs and Governance following established procedures.

58. The PMU within the Ministry of General Affairs and Governance ensure that interim unaudited financial reports for the Project are prepared and furnished to the World Bank

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not later than forty five (45) days after the end of each calendar semester, covering the semester, in form and substance satisfactory to the World Bank.

59. The Ministry of General Affairs and Governance shall have its Financial Statements for the Project audited in accordance with the provisions of Section 2.07 (b) of the Standard Conditions. Each such audit of the Financial Statements shall cover the period of one fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the World Bank not later than six months after the end of such period.

60. Financial flow of funds will come from the grant funds of the Bank. Flow of funds between the World Bank the Ministry of General Affairs and Governance will be organized according to the Disbursement procedures of the Bank.

D. Procurement

61. Procurement under the Project is mostly for the selection of international and local consultants for technical assistance, training and capacity building, the design, development and implementation of policies, operational tools and various guidelines for the 3 different components. To support the implementation of the performance budgeting reform under the component 2, an administrative services contract will be concluded between the Moroccan Ministry of Finance and a consortium/association of Ministries or public administration agencies of Finance from OECD countries selected for their best expertise will be formalized on single source basis as an administrative services (non -commercial) agreement on cost recovery basis. Procurement would include also some goods and services related to project management, logistics for the organization of training, workshops, consultations and other capacity building events for the 3 components. Procurement will concern also goods and services related to project management, logistics for the organization of training, workshops, consultations and other capacity building events for the 3 components.

62. The Ministry of General Affairs and Governance (MAGG) will have the overall responsibility to manage the project. It will act as the project implementing agency and its Division in charge of Administration and finance (DAF) which is in charge of procurement for the Ministry will be handling all procurement under the project. The units directly in charge of procurement within the DAF (“service des marchés” and “service Bon de commande”), will have the responsibility in relation with the other concerned departments, for planning and carrying out procurement activities. A capacity assessment of the MAGG (“Division administration et finances”) was conducted on January 7 and 10, 2013. Overall, it shows that the MAGG has limited experience in implementing Bank funded project.

63. The overall risk for procurement is considered substantial. This is because of: (i) the weak experience in Bank procedures of the MAGG and its staff working directly on project implementation and (ii) the absence of training in Bank procurement procedures for those staff. To help better mitigate the risk and facilitate project implementation the following measures are recommended: (i) hiring of a procurement specialist, (ii)

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organization of training in procurement for all staff involved in the project implementation (MAGG, MoF, MCRP and all other concerned public entities), before project effectiveness, (iii) preparation of Standard bidding documents (SBD) for National Competitive Bidding (NCB) complying with procedures for NCB acceptable to the Bank; and (iv) preparation of an implementation manual for the project. More details are provided in Annex 3.

E. Social (including safeguards)

64. This technical assistance project has no direct distributional impact as it focuses on horizontal structural governance reforms. The project has a positive social impact by contributing to the Government’s effort to strengthen citizen engagement and voice, through the support to the development and implementation of a government-wide public consultation policy and law on petitions. These policies will be developed in a participatory and inclusive manner associating civil society organizations to the National Dialogue and through an online consultation platform.

65. The project supports both supply and demand side governance actions. The project will provide technical assistance to the design and implementation of the new consultation policy and train public officials (supply side) as well as capacity building for Civil Society Organizations to strengthen the demand side and facilitate effective participation. Support to the demand side will leverage and complement existing programs supporting Non state Actors, such as the ANSA Arab World program financed by the World Bank and Implemented by Care Egypt, including in Morocco.

66. No involuntary resettlement and/ or involuntary land acquisition can be envisaged in relation to project activities and therefore OP 4.12 does not apply.

F. Environment (including safeguards)

67. The proposed Project is rated Category C for environmental safeguards purposes. This small technical assistance project is not expected to have any direct environmental safeguards implications. The technical assistance provided and the policies supported by the proposed project are oriented toward improving transparency and effectiveness of public governance and do not include a lending sub-component or physical investments. The project provides technical assistance to the Government. The project activities do not support direct investments, involve civil works, or imply policy actions that would have any direct environmental or social safeguards impacts. In particular, it should be noted that the proposed actions to enhance citizen engagement, improve the performance orientation of the budget or the transparency of intergovernmental fiscal relations do not target environmental procedures and thus will neither directly improve nor degrade existing standards for public health and safety or the environment. Indirectly, however, as these institutional capacities for ministries are strengthened, so will public expectations for all other ministries, including those relating to the management of natural resources and the environment.

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Annex 1: Results Framework and MonitoringProject Development Objective (PDO): The Project Development Objective is to contribute to the strengthening of government transparency, accountability and public participation by supporting (i) the development and implementation of a public consultation policy and a law on petitions; (ii) the improvement of access to fiscal information and enhancement of performance orientation in budget management; and, (iii) the strengthening of fiscal decentralization.

PDO Level Results Indicators* Unit of Measure Baseline

Cumulative Target Values**Frequency Data Source/

Methodology

Responsibility for Data Collection

Description (indicator definition etc.)

YR 1 YR 2 YR3 YR 4

Indicator One:Strengthened legal framework and formalized practices for participation in public affairs

Number of dedicated policies of formalized practices for public engagement established

1 policy related to US-Morocco Free Trade Agreement

0 laws1 policy

1 law2 policies

1 law3 policies

1 law3 policies

Every legislative cycle, as relevant

Official government bulletin; MCRP

MCRP Stocktaking assessment of newly established laws or policies in the domain of public engagement

Indicator Two:Increased accountability of government over the use of public resources

Ranking on PEFA3 performance indicators related to budget transparency (nº6), policy based budgeting (nº12) and external scrutiny (nº 26 and 27)

2009 assessment: Indicator nº6 scored B, nº 12 : C, nº26: D, and nº27: B

nº6 scored B, nº 12 : C, nº26: D, and nº27: B

nº6 scored B+, nº 12 : B, nº26: C, and nº27: B+

nº6 scored B+, nº 12 : B, nº26: C, and nº27: B+

nº6 scored B+, nº 12 : B, nº26: C, and nº27: B+

Once, by end of the project cycle

Morocco PEFA assessments

World Bank and client

Data on PEFA framework generated by World Bank PEFA assessments

Indicator Three:Increased transparency of intergovernmental fiscal relations and local finances

Ranking on PEFA indicator measuring competition and value for money in procurement (PI-19)

PI-19 (2009): B B B B B+ Once, by end of the project cycle

Morocco PEFA assessments

World Bank and client

Data on PEFA framework generated by World Bank PEFA assessments

INTERMEDIATE RESULTS

Intermediate Result (Component One): Strengthening public participationIntermediate Result indicator One: Increased participation rate of CSOs in public consultation activities since and as a result of the National Dialogue

Number of CSOs participating in consultation activities since and as a result of the National Dialogue

250 CSO representatives (regional consultation in Kenitra on constitutional roles of CSOs)

500 700 850 950 Annual Diagnostic survey conducted by MCRP

MCRP Participation data compiled through MCRP diagnostic surveys

Share of participation by gender using e-consultation processes in X sectors

NONE 75% male; 25% female

68% male;32% female

55% male; 45 % female

55% male; 45% female

Annual Participation measured through a survey

MCRP/MCINT

Data compiled through MCRP e-consultation platform

3 Public Expenditure and Financial Accountability (PEFA) is a multi-donor diagnostic instrument, with 28 high level performance indicators measuring a country’s public financial management. Morocco was assessed in 2009 and the current budget reform should translate into better scores on budget transparency, link between policies and budget and external budget oversight (respectively indicators nº6, 12, 26 and 27. Indicators are ranked from A to D, D being the lowest score.

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Intermediate Result indicator Two: Strong satisfaction rate among CSOs participating in public consultation

Percentage of CSOs that feel public consultation processes met their expectations

NONE 0 50 60 70 Annual Satisfaction survey conducted by MCRP

MCRP

Intermediate Result indicator Three: Strong engagement of CSOs in development of legal framework on public engagement

Number of proposals submitted by CSOs to MCRP for the development of public engagement framework

NONE 0 50 150 200 Annual MCRP data MCRP An annual report on the number of proposals submitted by CSOs in the context of public consultation activities

Intermediate Result (Component Two): Enhancing Efficiency and Accountability in the use of Public Funds

Intermediate Result indicator One: Strengthened budget transparency, policy based budgeting and external scrutiny

Ranking on PEFA

performance indicators related to budget transparency (nº6), policy based budgeting (nº12) and external scrutiny (nº 26 and 27)

Indicator nº6 scored B, nº 12 : C, nº26: D, and nº27: B

nº6 scored B, nº 12 : C, nº26: D, and nº27: B

nº6 scored B+, nº 12 : B, nº26: C, and nº27: B+

nº6 scored B+, nº 12 : B, nº26: C, and nº27: B+

nº6 scored B+, nº 12 : B, nº26: C, and nº27: B+

Once, by end of the project cycle

Morocco’s PEFA assessments

World Bank and client

Data on PEFA framework generated by World Bank PEFA assessments

Intermediate Result indicator Two: Improved budget execution rate

Budget execution within budget programs

2010: 67.3% 70% 72% 73% 75% Annual MoF - budget directorate database

MoF budget directorate

Data on budget execution rates as reported by the MOF budget directorate

Intermediate Result indicator Three: Strengthened budget transparency and access to information

Ranking of budget transparency on OBI index

2012 ranking: 38 38 38 42 42 Bi-annually Open Budget Index (OBI)

World Bank and client

A sub-set of indicators measuring budget transparency from the Open Budget Index, conducted by the International Budget Partnership, which covers 95 countries in total

Ranking of access to information framework on RTI measure from OGP

2010 baseline : 1 3 4 4 4 Annual Right to Information Index (RTI) as presented by the Open Government Partnership (OGP)

World Bank and client

RTI assessment on existence of ATI law (4 points), a constitutional provision guaranteeing ATI (3), or a draft ATI law under consideration (1)

Intermediate Result (Component Three): Advancing Regionalization

Intermediate Result indicator One: Increased

Number of formal rules and regulations for fiscal

Transfer rules are scattered and

Partial Full Full full Annual MoI, local finance

MoI local finance

Annual assessment conducted on number of

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public accessibility of formal rules and regulations for fiscal transparency and equalization

transfers and equalization made available online

allocation criteria are only partly public

directorate directorate formal rules and regulations for fiscal transfers and equalization made accessible online via government websites

Intermediate Result indicator Two: Training on the new procurement rules and on financial management

Cumulative number of trainers and officials trained (disaggregated by gender).

None 15 (10% women)

30 (12% women)

50 (15% women)

80 (20%) Annual MoI, local governments

MoI, local governments

Attendance sheets of trainings

Intermediate Result indicator Three: Strengthened competition and value for money in procurement

Ranking in PEFA index on competition and value for money in procurement (PI-19)

PI-19: B B B B A Once, by end of project cycle

Morocco PEFA assessments

World bank and client

Public procurement of local governments has improved as evidenced by a higher PEFA ranking

Intermediate Result indicator Four: Improved fiscal reporting by local governments

Budget information from local governments are available in real time through GID

0% 50% 70% 80% 90% Annual MoI local budget directorate assessment

MoI local budget directorate

A greater number of local governments are using the integrated information system GID and reporting their fiscal data in real time.

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Annex 2: Detailed Project Description

Component I: Strengthening public participation:

1. Fostering greater public engagement is one of the core commitments enshrined in the new Constitution. Improving public consultation and participation in the design and implementation of public policies contributes to improving their quality as well as their implementation by helping build consensus and, in turn, compliance. Consultation practices are widely accepted as effective tools for building public trust around key reforms, generating efficiency savings and accelerating public service reform. Better informed and engaged users benefit decision-makers by leading to better quality participation and greater efforts to support and improve reform implementation. Citizen’s right to petition and to propose draft laws is another effective tool for greater citizen engagement and a building block for participatory democracy. The new constitution strengthened citizen engagement and introduced specific rights to petition and to be consulted (articles 12 to 15).

2. In efforts to concretize these new Constitutional rights, the Ministry charged with relations with Parliament and Civil Society (MCRP) is organizing a national dialogue around the development of rules, policies and a legal framework defining public engagement mechanisms. The outcome of the national dialogue will be a range of laws and policies, derived from discussions with civil society organizations and stakeholders, which will comprise the main legal framework for public engagement. Expected results from the yearlong national dialogue include draft proposals for a government-wide policy on public consultation and a law on petitions. These legal texts will be presented to Parliament and Government for review and adoption.

3. The National Dialogue is led by an independent entity, who chairs a large advisory commission comprised of representatives from relevant ministries, universities and research centers, specialized experts, civil society representatives, and representatives from the media industry. The committee is tasked with defining the National Dialogue action plan as regards consultations concerning the new Constitutional rights afforded to civil society. The overall dialogue process should adhere to generally accepted international standards. The Ministry’s role should be limited to facilitation as well as logistical and organizational support. On issues of monitoring and evaluation, the Ministry intends to issue reports on the progress of the national dialogue on a regular basis. These reports will be made public through a website dedicated to the National Dialogue process and will be disseminated to the media. This process will lead into the preparation of the final document on the outcomes and recommendations of the national dialogue.

4. The objective of Component I is to support the implementation of this national dialogue and a participatory process for the design of a government wide policy on public consultations and a law on petitions. This project component is subdivided into three sub-components focusing on (i) support to the Ministry, to the national dialogue on the new constitutional principles of citizen participation and to the participatory

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development of related policies; (ii) capacity building and piloting of the new consultation policy and petitions law, and; (iii) monitoring and evaluation.

5. Sub-component I-1 - Support to the Ministry charged with relations with parliament and civil society, to civil society and to the National Dialogue on the New Constitutional Principles of Citizen Participation and the participatory development of related policies:

5.1 Advice and technical assistance: This sub-component will provide advice and technical assistance on the above mentioned policy changes to the Ministry charged with relations with parliament and civil society, to civil society as well as to the different components of the National Dialogue. This activity will also provide the relevant advice and technical assistance on the development of a public consultation policy and the development of the law on petitions. International and local hand-holding technical expertise will help to strengthen capacity building in this new and innovative reform area. The technical assistance will be provided in the form of a standard consultancy contract with the identified international and local expert in the relevant technical field. The project will also support peer learning with international practitioners having implemented similar consultation processes and reforms.

5.2 Exchange of international experience : Support provided through this sub-component will make available good practice international experience from countries such as the UK, a leading pioneer in the area of public engagement. The expertise will be in the form of one-on-one exchanges in Morocco and abroad, in the form of working sessions dedicated to developing draft documents notably related to the National Dialogue process and laws and policies developed throughout. This activity envisages a total of four (4) persons throughout this exchange and access to two international country examples. This activity will build on the international experience and knowledge-exchange organized by the Bank through a series of multi-country, multi-stakeholder videoconference on public consultations. The ANSA-Arab World Initiative will also provide an important network of regional expertise in the area of social accountability and public engagement. This activity has been designed in close collaboration with World Bank Institute and the ANSA-Arab World to help ensure the maximum complementarity across these parallel initiatives.

5.3 Information and Communication : Linked to Component 1 of this project is a dedicated information and community strategy aimed to strengthen awareness on the reform initiative and the value of public consultation. This activity will provide support to activities designed to raise awareness on the national dialogue and accompanying public consultation initiatives. In addition, this activity will provide support to the development of a dedicated e-consultation platform to help expand the scope of users and geographical coverage of consultation activities, in line with international good practice. The e-consultation platform is a priority of Morocco’s e-government strategy and will build on the expertise of the Ministry of Industry, Trade and ICT. This platform will aim to act as a ‘one-stop-shop’ for public consultation initiatives across government on both a central and sector level, thus building on past initiatives in the area of consultation.

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6. Sub-component I-2 – Support to capacity building and piloting of the new consultation policy and petitions law: This sub-component aims to build capacity for successful implementation of this new reform area by providing support for the development of training modules and the training-of-trainers for government officials and civil society organizations. While this sub-component does not provide direct support to the training of CSOs, the training-of-trainers activity will help to build capacity for officials who will be responsible in the transfer and knowledge exchange for CSO capacity building. Training sessions will be provided on (i) the different modalities of public consultation; (ii) change management; (iii) advocacy and awareness raising; (iv) public policies and development projects; (v) civic engagement; and, (vi) administrative and financial management of CSO. This sub-component will also provide support to the piloting of the petitions law or the new consultation policy in two government agencies at the central and local level respectively. Support under this sub-component will cover international and local expertise, in addition to the establishment of training seminars and material related to these activities.

7. Sub-component I-3 – Support to monitoring and evaluation: This sub-component will provide the necessary technical assistance for the development of a monitoring and evaluation system on public consultations. This sub-component includes support for the provision of international and local expertise in designing an M&E system in line with public consultation mechanisms, in addition to the development and roll-out of a user survey aimed to address user satisfaction ratings and feedback on the overall consultation process. The user survey will be directly embedded in the online public consultation platform to be established under sub-component I-1 and will be developed in close coordination with the Ministry of Industry, Trade and ICT. In addition, the Ministry will develop and issue progress reports on the National Dialogue which are to be published on the dedicated ministerial website and accessible to citizens and the media. These progress reports will lead into the preparation of a final document on the results of the national dialogue, expected to be presented to Parliament beginning of 2014.

Component II: Enhancing Efficiency and Accountability in the use of Public Funds

8. The budget reform is a building block of Morocco’s governance and public sector reform agenda as it enhances transparency and accountability throughout the budget process, strengthens parliamentary oversight, and represents a strong lever for the modernization of the management of public expenditures and services. This project component is subdivided in three subcomponents focusing respectively on the implementation of the budget reform, the new public procurement rules and supporting an external public financial management assessment.

9. Sub-component II-1: Support the implementation of the performance budgeting reform by pairing the Ministry of Finance in Morocco with countries from the Deauville Partnership with relevant experience in the implementation of this type of budget reform. This sub-component will support the Government in the implementation of the new organic budget law by introducing programmatic and performance budgeting. A draft organic budget law has been prepared and is currently being discussed with

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Parliament and with the Court of Audit. The adoption of the law is foreseen in 2013 with an early implementation in key line ministries with the 2014 budget. The Ministry of Finance, the Ministry of Agriculture, the Ministry of Education and the High Commission for Forestry and Water will constitute the first implementation wave and start to prepare the new programmatic budget in 2013, with the corresponding performance objectives and indicators. The reform will be rolled out to all ministries by 2016. In each ministry, program heads and managers will be designated and tasked with setting the performance objectives, managing the corresponding resources and reporting on their achievements. The corollary of this increased accountability is more managerial flexibility for the reallocation and management of budget resources. For that purpose, the Ministry of Finance has started to differentiate and alleviate ex-ante financial controls based on managers’ capacity and risks.

10. The project will support the implementation of performance budgeting through the provision of public sector expertise and technical assistance for the modernization of budget classification, the preparation of bylaws and new budget management procedures. It will empower program managers in addition to making them more accountable for their performance. Activities under this component will also support the development of a government wide performance monitoring and evaluation framework and will build on the Bank’s past support to the conceptualization and pilot testing of this reform. The Bank had supported the initial development of guidelines for medium term budget frameworks and for the design of performance objectives and indicators. These guidelines now need to be revised in accordance with the new organic budget law and the results of previous pilot testing. The project will also support the four first ministries for the restructuring of their budgets in a programmatic and multiannual format as well as the development of their performance plans along their 2014 budget.

11. The public sector expertise needed for the implementation of this reform will be provided through a twinning project between the Moroccan Ministry of Finance and one or more Ministries of Finance from Deauville partnership countries having a unique expertise in the implementation of such a budget reform and the necessary regional experience and language skills, such as the French Ministry of Finance, Canada, the UK or Chile. This twinning project will take the form of a direct service contract with the lead partner public administration. This contract will enable the pairing of high public officials from Morocco with their counterparts in these countries to foster exchange of expertise and experience in the design and implementation of the various dimensions of the budget reform. As this reform necessitates an overhaul of the current budget preparation and management procedures with wide ranging implications, both the Ministry of Finance and the line ministries will need guidance on the steering of this broad and complex reform. The required guidance includes expertise in the design of new rules and regulation, coaching for the new performance management approach and support for the setup of a government wide performance monitoring and evaluation system, integrated with the Government’s current information systems. The required expertise is mostly available in the public sector, in countries having implemented similar budget reforms. The proposed twinning project will be structured along three components, specified below: (i) support of the design and piloting of the budget reform,

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(ii) support to the implementation of the performance-based approach in line ministries, (iii) development of a government wide performance monitoring and evaluating system.

12. The twinning project for the performance budgeting reform would comprise the following specific activities:

(i) Support to the design of new rules and regulations and pilot-testing:

Advice, training and exchange of international experiences for the budget reform steering committee and involved administrative structures;

Technical assistance for the drafting of the new organic budget law’s bylaws;

Technical assistance for the development of standards and operational guidelines for the line ministries;

Advice for the revision of the new budget classification and the development of budget programs.

Advice and technical assistance for the development of multiyear budget programming tools and budget rules

Technical assistance to adapt the financial information systems to the new budget classification and management.

Development of a website and Intranet for reform in order to communicate and create a community of practice within the administration.

Development of e-learning modules for the new budget management procedures

(ii) Support to the implementation of the performance-based approach in line ministries.

Technical assistance for the development of ministerial budget programs and the corresponding performance commitment and reports

Advice and technical assistance for the development of performance management tools in line ministries, including: (i) an operational breakdown of ministerial performance objectives and indicators, (ii) the development of performance management dashboards, and (iii ) performance management controls,

Technical assistance for the horizontal and vertical performance contracting for the implementation of ministerial programs.

(iii) Development of a government wide performance monitoring and evaluating system

Technical assistance to develop a government wide system performance monitoring and evaluation system, integrated with existing information systems.

Advice for the Development of an inter-ministerial mechanism for quality control and validation of the ministerial budget programs, performance commitments and reports.

Support the carrying out of two ex-post program evaluations, involving external experts.

Advice for the development of a methodology to review and amend budget programs based on their performance

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13. Sub-component II-2 : supports the implementation of the new procurement rules and regulations across the public sector, through the development of training modules and the training of public sector trainers. The implementation of the new procurement rules and regulations, which will enter into force in 2013, will be primarily supported through training and capacity building. The new rules and regulations aim to enhance transparency, efficiency and value for money of public procurement, including through e-procurement. The new procurement decree extends the scope of public procurement rules to agencies and local governments, thus requiring large training efforts. This subcomponent will focus on the design of training modules and the training of trainers for the central administration, using the existing training institutions and programs in the country. This includes the MEF training institute for the central level, and the training facilities of the Directorate General for local governments (MoI). This subcomponent could also tap into the pool/network of procurement training experts developed by the TGR (Trésorerie Générale du Royaume) to teach within those existing sectoral institutions, and for the development of the e-procurement aspects. Support to local governments will be provided under component 3, along with the other new local public financial management rules. It will be complemented by an Institutional Development Fund (IDF) grant supporting the national tender commission at the Secretary General of the Government. A multi-stakeholder working group has been set up to coordinate these training and capacity building efforts across the public sector.

14. Sub-component II-3: will finance a public investment management diagnostic and technical assistance to improve the efficiency of public investments in Morocco. Authorities and international organizations have expressed concerns regarding the uneven effectiveness and impact of public investments. The scaling up of public investments in social sectors and for basic services has not always yielded the expected development outcomes. Development challenges and social and regional disparities remain high and addressing them is the Government’s utmost priority. However given the financial constraints, this effort requires also enhancing the effectiveness of programmed public investments and thus the strengthening the public investment management (PIM) process. The Ministry of Economy and Finance has thus expressed interest in the new and comprehensive PIM assessment toolkit developed by the World Bank and covering the entire project cycle, from identification, selection, management through to evaluation. The current component would support an initial diagnostic with this tool kit for the Ministry of Economy and Finance itself as well as for one or two pilot ministries. This will enable customizing further the toolkit, training public officials who could then carry out the assessment on a larger scale, while already providing some recommendations on how to strengthen public investment management in the ministries covered.

15. Sub-component II-4: supports an external public financial management (PFM) diagnostic (PEFA) to assess the progress made in the recent reforms, including the performance budgeting reform. A joint external diagnostic of Morocco’s public financial management system, using the Public Expenditure and Financial Accountability (PEFA) methodology has been conducted in 2009 with the European Union and the African Development Bank and has made recommendations for improvement. Since then, the Government has initiated important reforms across the budget cycle, from

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preparation, execution, with a new integrated financial management system GID, but also on procurement, public accounting and on financial controls. Regarding the latter, the commitment control body and the accountant’s financial controls have been merged in a single entity and the process has been simplified and modernized introducing a risk based approach (contrôle modulé de la dépense). Likewise, the budget reform, supported by the DPL and subcomponent II-1 will move to actual implementation, thus addressing some of the weaknesses highlighted in the 2009 PEFA regarding notably the link between public policies and budget allocations. The PEFA update will enable to capture these changes and to incorporate its findings and recommendations in the ongoing reform process. Similarly to the initial PEFA, the update could be conducted jointly with the European Union and with the African Development Bank.

Component III: Advancing Regionalization

16. Regionalization is a key component of Morocco’s governance transition, as confirmed by the constitutional revisions and the new Advanced Regionalization strategy adopted in March 2011. Major changes were introduced in order to strengthen the regions and their socio-economic development, increase accountability and transparency of local governments as well as of intergovernmental fiscal relations. Local governments are at the frontline of public service provision to citizens and the newly elected and empowered regions will have a key role in planning and coordination for public services and infrastructure. Reforms under Component III have important linkages to other dimensions in this project, particularly to the budget and public financial management reforms that will impact local financial management. Likewise the open governance reforms supported by the project aim at fostering public participation across the public sector. Expectations are particularly high at the local level, considering their direct interface with citizens for numerous basic public services.

17. Component III supports fiscal decentralization reforms in an effort to strengthen the performance of local governments and improve relations across levels of government, in line with the new constitutional provisions empowering local governments. The project supports the transfer of certain competences to the regional level to stimulate economic growth across the country and reduce spatial inequalities. It contributes to re-assessing functions of the central government based on the principle of subsidiarity, and following an inclusive sectoral approach, in view of improving public service delivery through decentralization. It would provide regional stakeholders with instruments to set development strategies and coordinate with the central government. The Constitution also foresees the setup of two funds to foster equalization in order to reduce regional disparities. These changes require the overhaul of the current fiscal transfer and equalization system, currently assessed by the Bank. Activities supported under Component III are divided into three sub-components, including: (i) support to adaptation of the fiscal transfer and equalization system for local governments; (ii) capacity building support; and, (iii) support to the system of planning and performance contracting.

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18. Sub-component III-1 – Adapting the fiscal transfer and equalization system for local governments, in accordance with the new Constitution and the advanced regionalization strategy. Support will be provided through technical assistance and advice to the revision of the fiscal transfer and equalization system, including both international and local expertise. This activity also envisages support through international benchmarking and knowledge-exchange among two partner countries (TBD) for a total of four persons. This exchange will be primarily through the form of two south-south study tours. Information and change management seminars on the new transfer and equalization system will be designed and supported through this sub-component.

19. Sub-component III-2 – Capacity building for local government financial management, including on the new public procurement rules. Support will be provided for technical assistance, the design of training modules and training-of-trainers for local government officials on: (i) preparation of the budget based on an multi-annual budget framework and on the priorities of communal and regional development plans (ii) procurement rules, based on the new decree, (iii) implementation of the new integrated financial management and revenue information systems called GID CL and GIR; and, (iv) internal audit.

20. Sub-component III-3 – Strengthening the system of planning and performance contracting in line with the new organic law on local governments and the enhanced role of regions: This sub-component will provide technical assistance through international and local expertise, to the development of planning guidelines and tools in order to enhance local government development planning processes. Support will also be dedicated to the development of training and capacity building activities including dedicated seminars and training modules for regions and other local authorities, with the aim of improving multi-annual budget-programming in addition to linkages with the budget. Similar activities will be developed to support economic and financial analyses of projects.

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Annex 3: Implementation Arrangements

1. The project is recipient executed and the implementation agency will be the ministry of General Affairs and Governance (MAGG). The project will be managed by a project management unit (PMU) headed by a public official from MAGG and supported by a project coordinator as well as procurement and financial expertise. The responsibility of specific activity implementation under each component will be left at the responsibility of each respective lead ministry. The development of a government wide consultation policy foreseen under component I is entrusted to the Ministry in charge of relations with Parliament and Civil Society, the budget reform, covered by component II, is led by the Ministry of Economy and Finance and the implementation of the decentralization strategy, supported by component III, is led by the Ministry of Interior. A project Steering Committee will oversee the project implementation and coordinate its activities. To facilitate project implementation and supervision, a procurement plan, dated September 5 2013 has been prepared to identify a limited number of key experts to be recruited and to package most activities into single contracts to be awarded to international and/or local firms that have proven capacity to deliver results under “turn-key” contracts or similar results-based approaches.

Project institutional and implementation arrangements

2. A visualization of this implementation arrangement is presented in the following illustration :

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3. A strategic oversight committee at the level of Secretary Generals will be established. This committee, presided by the Secretary General of MAGG, will provide strategic guidance to the SC and oversee the overall implementation of the project. It will convene as needed and at least once a year.

4. The project steering committee (SC) will oversee the project implementation and the project management unit and coordinate the different activities and project stakeholders. The SC, will be headed by MAGG and include all project stakeholders, notably the project director and coordinator, representatives from the Ministries in charge of relations with Parliament and Civil Society, of Economy and Finance and of Interior as well as other relevant project stakeholders. It will meet as many times as necessary and at least four times per year. The task of the Steering Committee is to provide overall guidance, facilitation, coordination and supervision of project activities throughout the project cycle. The SC membership, mandate and internal regulation will be specified in terms of references. This latter committee will provide strategic

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Ministries: Education, Finances Interior, Agriculture, Water and Forestry, Relations with Parliament, etc. – Ministerial Departments, Royal Treasury of Morocco (TGR) – Local Governments (LG)

Project Beneficiaries of Activities

Ministry in charge of relations with Parliament and Civil Society

(MCRP)

Steering Committee

Ministry of Interior (MI)

Ministry of Finance (MoF)

Ministry of General Affaires and Governance (MAGG)

Project Management Unit – (PMU)

Financial Specialist (FS)Procurement Specialist (PS)

Project Coordinator (PC)

Project Management (PM - MAGG)

guidance to the SC and oversee the overall implementation of the project. It will convene as needed and at least once a year.

More specifically, the SC will be responsible for:

Defining the objectives, priorities and expectations of the project; Reviewing the activities and related budgets that are presented by the Project

Management Unit (PMU); Reviewing the progress of planned activities; Managing differences that may arise in the course of activities and decide on

corrective measures as necessary to ensure implementation; Facilitating the management of implementation hurdles that may arise; Ensuring the participation of all stakeholders and that project objectives are met; Approving any changes in the Project Manual.

5. A project management unit (PMU) will be established and supervised by MAGG, which will be responsible for the implementation of project activities, procurement of services and financial management. The Unit will also be tasked with monitoring the activities and coordination between the different actors associated in the respective reforms covered under this project. The Project Director presides over the PMU and will be assisted by a Project Coordinator, as well as by a procurement specialist and a financial management specialist. The Project Director is appointed by the Minister and the three other positions are financed by the project. Detailed descriptions of each position as follows:

The Project Director (PD) is a public official from MAGG. He will be assisted by a coordinator, and will oversee the implementation of the project; sign contracts, and validates report implementation reports and financial reports.

The Project Coordinator (PC) is a local expert with project management experience, hired by the project. He will manage the daily activities of the project, under the responsibility of the Project Director, manage procurement, accounting and reporting and oversees financial management. The PC sets up a system for monitoring and evaluation of activities and results of the project in close coordination with the Ministries, relevant Departments and beneficiaries involved in respective reforms. The PC also controls the activities related to information and communication of ongoing reforms covered under the project.

The Procurement Specialist (PS) is a local consultant, hired by the project. He prepares a procurement plan for the project and updates this plan as needed. The PS prepares the bidding documents and assists in recruitment processes with the coordinator, under the supervision of the PD, and in consultation with the World Bank on the basis of terms and references provided by the service recipient. The PS

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works closely with its counterpart office of the Bank. His/ her terms of reference are annexed to the project implementation manual.

The Financial Management Specialist (FMS), is a local consultant hired by the project, manages the project accounts and produces quarterly financial reports, in close coordination with the Finance Office of the Bank. His/her terms of reference are annexed to the project implementation manual.

6. The MAGG will prepare agreements with respective beneficiary ministries to coordinate the activities and budget allocations under their respective component. The beneficiary Ministry of the respective task will, in conjunction with the PMU: (i) define the needs (preparation of terms of reference, technical specifications, training, etc.), (ii) provide information on monitoring activities and (iii) validate the services provided by the resources at their disposal. The MAGG, based on expressed needs, will provide: (i) procurement, (ii) the provision of resources, (iii) financial monitoring of suppliers and their payments result in "good pay" issued by the beneficiary. Each year, meetings between beneficiaries and the PMU will establish the activities and annual budgets to be submitted to the SC. To facilitate interaction between departments and PMU, each beneficiary ministry will appoint a focal point that will be in permanent contact with the PMU and provide an interface between his Ministry and the MAGG.

7. Cross-cutting activities, such as training, will be implemented by the MAGG for beneficiaries. They will establish the number of trainees, the themes, and venue. The MAGG will monitor and evaluate the training provided to beneficiaries.

8. Activities will be described, estimated and planned in year n-1. On the basis of this plan, a procurement and disbursement plan will be established or updated. These documents will form the basis for the financial monitoring system. Tracking tables will be presented to the SC during quarterly meetings. An annual monitoring will be established at the year end. The quarterly assessment will be sent to all participants by the PMU 15 days before the date of the meeting. On the basis of the monitoring tables, the SC will take appropriate decisions to achieve the objectives of the project. These tables will also be forwarded to the World Bank in accordance with the grant agreement.

9. The table below lists the required steps to be achieved and respective responsible unit:

N° Stage Responsible entity

1. . Nomination of focal point Beneficiaries

2. Preparation of activities and ToRs Beneficiares + MAGG

3. Procurement MAGG

4. Contract signatures MAGG

5. Resources are made available MAGG

6. Activity implementation Beneficiaries + Service

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providers

7. Follow up of activities (monitoring and evaluation) Beneficiaries / MAGG

8. Validation of services or supplies provided Beneficiaries

9. Payment of service providers MAGG

10. Development of monitoring tables and annual summary table

Beneficiaries + MAGG

11. Presentation of results to SC MAGG

12. Corrective measures for year n+1 SC

Specific implementation mechanisms for the twinning project:

10. Subcomponent II-1, supporting the implementation of the performance budgeting reform will be implemented through an administrative services contract with one or more OECD countries having a unique public sector expertise and experience in the implementation of such a budget reform as well as the necessary regional experience and language skills. This administrative services contract will enable to pair high public officials from Morocco with their counterparts in these countries to foster knowledge exchange in the design, steering and implementation of the various dimensions of the budget reform. Under the administrative services contract, the contracting public institution from the OECD partner country will appoint a high official with relevant experience in performance budgeting as head of the twinning project. He will act as adviser and coordinator for the implementation of the twinning. He will be seconded and supported by a competent official, appointed as twinning coordinator for the management of the activities and reporting requirements under the contract. Both will work in close cooperation with the designated Moroccan counterparts, the overall project management unit and with the Bank. The twinning coordinator could be visiting or resident in Morocco, in which case he would have an office in the premises of the Ministry. He will report quarterly to his counterpart at the Ministry of Economy and Finance as well as to the project director from MAGG on the implementation of the administrative services contract. Under each specific component of this contract, a lead expert, who is a high public official with proven expertise and experience in the subject matter, will take responsibility for the delivery of the advice and technical assistance agreed upon. He will be supported by a pool of experienced public officials who will provide specific short term expertise as required for the deliverables of the contract. Four to five lead experts are foreseen in addition to the twinning head and coordinator. Public sector expertise can be mobilized from other OECD countries as needed for the project delivery, under the supervision and responsibility of the contracting public institution. Such cooperation can take the form of sub-contracting or co-contracting for the purpose of this administrative services contract. This component and contract includes two visits of Moroccan public officials to two OECD countries having implemented such budget reform to learn from their experience. A dedicated steering committee will be established to oversee the smooth implementation of this

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administrative services contract. It shall be co-chaired by the two twinning heads, who are two high officials appointed respectively by the contracting parties. The dedicated steering committee signatories will meet at least twice a year in Morocco. A launching and closing seminar are foreseen and included in the budget. Financial management of the administrative services contract will be ensured by the contracting public institution, which will send the payment requests in line with the contract schedule to the project director at MAGG.

Financial Management, Disbursements and Procurement

11. Public Financial Management: The Bank’s experience in Morocco and the main conclusions of the 2009 PEFA indicate that the Moroccan public finance system is governed by an elaborate legal and regulatory framework. The financial management risk of the Moroccan public finance system is considered low.

12. Assessment of the Financial Management System: An assessment of the financial management system in place at Ministry of General Affairs and Governance was carried out to determine if it complies with the Bank minimum requirements for the project management in respect to the OP/BP10.02.

13. The Financial Management System (FMS) in place in the executing agency is based on principals and procedures defined by the legal framework applicable to the public sector and more specifically to governmental institutions.

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Risk Analysis: Inherent risk

Risk Rating Mitigation of risk Risk rating after

mitigationCountry levelThe Moroccan public finance system is governed by a complex legal and regulatory framework that offers guarantees of high reliability and transparency.Morocco’s compliance with rules and regulations and existing accountability arrangements provide an adequate framework for the use of public funds and public financial management (PFM) is considered broadly transparent.

Low

Project levelThough the Ministry of General Affairs has a previous experience on Bank’s financed IDF grant for the reinforcement of the reform process of the National Commission of Business Environment (CNEA), important delays in the implementation of the grant’s activities and low disbursement of grant proceeds were mainly due to lack of capacity and monitoring.

Substantial

A Project Management Unit will have a dedicated consultant for FM (financial management), that will work closely with the Director of the PMU.

The PMU will be overseen by a Steering Committee representing the central departments and the decentralized units involved.

Capacity building of financial management staff of the project.

Close monitoring by the World Bank financial management team

A Project implementation manual acceptable to the World Bank to ensure that project activities are covered in their entirety and that the risk level is mitigated.

Moderate

Inherent risk before mitigation Substantial

Inherent risk after mitigation

Moderate

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Control Risks

Risks Rating Mitigation of risk

Rating after

mitigation of risk

BudgetThe administrative and financial management unit is responsible at the Ministry of General Affairs and Governance for the preparation of and implementation of the annual budget for operating and investment programs of the Ministry. The budget is submitted to the Secretary General/the Minister and afterwards to the Directorate of Budget at the Ministry of Finance for primary approval. The draft budget is submitted for adoption by first and second chamber of Parliament.

Low

AccountingThe accounting system is based on accounting regulations applicable to public institutions (Royal Decree n° 330-66, April 21, 1967) BO. n° 2840, April 26, 1967, p. 452) ; relating to the maintenance of public accounting in accordance with General Code of accounting Standards.

Low

Financial ReportingThe Implementing agency is using GID to administer its accounting. The financial reporting for the project can be extracted from GID.While presenting the funds to the MoF to be budgeted, the split of the grant into components will be clearly presented to allow the bank funds to be reported in GID by components.The Financial report will require the presentation of the funds by category as well. Hence, an excel spreadsheet will be prepared where it will provide the information needed.Reconciliation with the system will be performed to ensure accuracy.

Moderate

The FM consultant will extract the report from GID and will ensure that complementary information requested in the financial report, if not able to extract it from GID, are completed in an excel spreadsheet, reviewed and submited to the Director for approval and submission to the Bank

Low

Funds FlowFinancial flows come from the World Bank and in kind contribution from the counterpart. The flow of funds from the World Bank are organized according to the Bank's disbursement procedures

Low

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Risks Rating Mitigation of risk

Rating after

mitigation of risk

Internal controlNo formalization of the internal control functions within the Ministry.

Substantial

An implementation Manual details the control environment to be applied for this project.The external auditor of the project will submit a report on internal control

Moderate

AuditingDelay in the submission of the audit report of the project to the Bank

Moderate

The Bank team will ensure the auditor, its term of reference are acceptable to the Bank and that the audit work is started in a timely manner to deliver the required report within the deadlines.

Low

Inherent risk before mitigation Substantial

Inherent risk after mitigation

Moderate

14. Given all the measures to be taken to reduce the level of exposure, to manage and to reduce the risks and weaknesses identified, the risk of residual financial management at this stage is considered moderate.

15. Implementing Agency: A Project Management Unit will be established within the Ministry of General Affairs and Governance. The PMU will ensure the coordination and execution of the project. The PMU will be overseen by a Steering Committee. The Steering Committee will meet at the request of the president at least four times per year and upon request. The task of the Steering Committee is to provide overall facilitation and supervision of project activities throughout the project cycle. The chair of the Steering Committee will be the Secretary General, or the Project Director. The Project Director, a public official from the MAGG, presides over the PMU and will be assisted by a Project Coordinator, a specialist in procurement and financial management. The Project Director is appointed by the Minister and the two other positions are financed by the project.

16. The Administrative and Financial Management unit (Direction Administrative et Financière - DA) within the Ministry of General Affairs and Governance will ensure support to projects. The FM consultant will strengthen the DA capacity, and will assist in ensuring good management of funds, and timely production of the required financial reporting.

17. Procedures and policies: The Ministry of General Affairs and Governance has a manual of procedures for the Administrative and Financial unit but does not have a manual of accounting and organizational procedures. Hence, to allow a good implementation of the project, a Manual of execution will be required to explain the procedures to be applied for the funds and the level of controls to be applied.

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18. Budgeting: In Morocco, each Ministry prepares its own budget and submits it to the Ministry of Economy and Finance for approval through the “loi de finance”. In the case of grants, they can use “le fond de concours” when additional resources become available during the fiscal year. In this case, the Ministry of General Affairs and Governance will include the amount of the grant in its budget and submit it to the MEF through “les fonds de concours” for budgeting. The MAGG will ensure that the Budget is well presented and that the separation of the funds in the different budget lines will allow to identify the grant component. This will allow the funds budget presentation for this grant to be presented in GID accordingly, and hence, extract the financial reporting directly from the system.

19. Accounting: An acceptable cash based accounting system with the outline of budget components is operational according to the regulations described in the public accounting law. The transactions in terms of commitments and disbursements are reflected in the well-functioning Integrated Financial Management Information System (IFMIS) named GID (Gestion Intégrée des dépenses). The overall principles for project accounting are outlined below: (a) Books of accounts for the project will be maintained on cash basis principles. Maintaining the reporting financial to reflect all the transaction flow of funds and issuing of the interim unaudited financial report (IUFR) each semester; and (b) Project accounting will cover all sources and utilization of project funds. This will include payments made and expenditures incurred.

20. Financial Management Reporting of the Project: Interim Unaudited financial report (IUFR) will be extracted from GID and complementary information requested will be maintained on an excel spreadsheet. From GID we will be able to extract the commitments and disbursements. However, we will not be able to present the commitment by categories. GIS will allow the extraction of the commitment and disbursements by component only. Hence, this complementary information will be prepared by the FM consultant who will compare the information prepared with the total of the component extracted from GID to ensure accuracy. The head of the Administrative and Financial Management Unit will review, approve and submit it to the PMU director for approval and submission to the Bank. The PMU will produce the IUFRs every semester and send them to the World Bank within 45 days from the end of each semester.

The FMR’s include, in addition to a summary of project progress the following:

- Summary of funding sources and uses of funds- Uses of funds by project component and by project category- Cash withdrawal- Cash forecast

Bank guidelines on financial monitoring will be communicated to the project. A sample of FMR to use for the project has been agreed upon and is annexed to the project implementation manual.

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21. Controls: In Morocco, the rules governing funds commitment and payment authorization are clear, well known, and enforced. The control framework is based on the segregation of duties between the Commitment (ordonnateur) and payment (comptable). The Ministry of General Affairs and Governance does not have the internal control procedures formalized. Hence, a Project Implementation Manual has been prepared, acceptable to the Bank in order to document the control environment. The Project Implementation Manual describes, among others: controls mechanisms, transfer and accountability mechanisms for beneficiaries.

Fiduciary responsibility for control of budget execution and monitoring is assigned to the General Inspectorate of Finance (IGF). The Budget Directorate within the MEF plays an important role in controlling transactions financed by external donors.

22. External Audit: Audit Arrangements. Annual Project financial statements audited by auditors acceptable to the Bank will be submitted to the Bank within 6 months after the end of each Fiscal Year. The audit will be comprehensive and cover all aspects of the Project (i.e., all sources and utilization of funds, and expenditures incurred). The audit will be carried out in accordance with International Standards on Auditing. The Project team will provide the auditor with access to project related documents and records, and information required for the purposes of the audit. The implementing agency will retain an auditor acceptable to the Bank to perform an annual audit in accordance with International Standards on Auditing (ISA), as issued by the international Federation of Accountants.

The audit terms of reference should be acceptable to the Bank.

23. Annually: Audited Project Financial Statements (PFS) will be submitted to the Bank. PFS will include: (i) a statement of sources and utilization of funds or Balance sheet, indicating funds received from various sources, project expenditures, and assets and liabilities of the project; (ii) schedules classifying project expenditures by components, expenditure categories; and (iii) a statement of reimbursement made on the basis of statements of Expenditure (SOEs). Such audits can be performed by the IGF.

24. Internal audit: The Ministry does not have an internal audit unit. Following The 2007-2008 IGF audit report’s recommendations, three main actions are undertaken: 1) an internal audit mission will be launched in the beginning of 2014 to review the Ministry financial procedures. This mission will issue a report with an action plan, 2) the recruitment of a public official ensuring the function of internal auditor and control management is programmed for early 2014, and 3) the Organization readjustment of the Ministry is undergoing.

25. Staffing: The PMU will manage the day to day implementation of the project. The PMU will be housed at the Ministry of General Affairs and Governance and composed of a Project Director, assisted by a Project Coordinator, a Procurement consultant, an FM consultant who will reinforce the DA unit and who will be under the supervision of

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the Head of the Administrative and financial management unit.

Accounting staff in the Administrative and Financial unit is composed of six public officials with administrative, engineering and technician profiles holding positions in the commitment, procurement, mandating payments and logistics units.

The Head of the administrative and financial unit is qualified. However, he handles many responsibilities and will not be able to fully dedicate his time to this project. Hence, the recruitment of an FM consultant is important to strengthen the team and to provide support to the project. The Head of the administrative and financial unit will have to control and supervise the work of the consultant to ensure ownership of the project by the Ministry.

Funds flow and disbursement

26. The funds after their budgeting in the “Loi de Finance” will be made available to Ministry of General Affairs and Governance. The payment justifications supporting documents will be sent to the Directorate of Budget (MEF) for verification, approval and then submission to the Bank according to the guidelines for the disbursement of the Bank and the method agreed in the Disbursement Letter.

The MAGG has the below options:

1- Pre-finance the expenses, and grant disbursement will be made based on documentary evidence or on presentation of statement of expenditures (SOEs) prepared in compliance with the World Bank disbursement procedures. The MAGG will provide documentary evidence and SOE, which will be submitted to the MoF, Budget Directorate, External financing department, which will review eligibility and submit them to the World Bank for reimbursement.

2- Direct payment: The MAGG will prepare documentary evidence in compliance with the World Bank disbursement procedures and will submit them to the MoF. The MoF, Budget Directorate, which will review eligibility and submit the Direct payment request to the World Bank for payment.

3- Advance: The beneficiary may also open a designated account, dedicated to the project, to receive advances. Thus, the supporting documents and / or statements of expenditure will be determined by the MAGG who shall transmit them to the MEF to justify the funds used. A request for replenishment must be submitted once the advance justified.

The counterpart in kind contribution will be well detailed and will be honored by the MAGG.

The disbursement procedures will be well detailed in the execution manual.

27. In summary, the proceeds of the grant would be disbursed in accordance with the

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traditional disbursement procedures of the Bank and will be used to finance project activities through the disbursement procedures currently used, that is Direct Payment, Reimbursement accompanied by appropriate supporting documentation (Summary Sheets with records and/or SOEs) in accordance with the procedures described in the Disbursement Letter and the Bank's “Disbursement Guidelines”. The minimum application size for direct payment and reimbursement will be the equivalent of US$10,000.

28. In order to allow a continuation of related activities, retroactive financing is allowed to finance eligible expenditures made prior to the Grant signing date but on or after January 15, 2013. The aggregated amount should not exceed US$500,000 equivalent. The Bank will honor eligible expenditures for services rendered and goods delivered by the Project closing date. A four months' grace period will be granted to allow for the payment of any eligible expenditure incurred before the grant closing dates.

29. Necessary supporting documents will be sent to the Bank in connection with contracts that are above the prior review threshold, except for expenditures under contracts with an estimated value of (a) US$100,000 or less for goods; (c) US$100,000 or less for consulting firms; (d) US$50,000, or less for individual consultants, as well as training which will be claimed on the basis of SOEs and operational costs. The documentation supporting expenditures will be retained at the MAGG and will be readily accessible for review by the external auditors and periods.

30. All disbursements will be subject to the conditions of the Grant Agreements and

disbursement procedures as defined in the Disbursement Letter.

31. E-Disbursement. The Bank has made available e-Disbursement for all projects. Under e-Disbursement, all transactions will be conducted and associated supporting documents and SOEs scanned and transmitted online through the World Bank’s Client connection system. The use of e-Disbursement functionality will streamline online payment processing to (i) avoid common mistakes in filling out WAs; (ii) reduce the time and cost of sending WAs to the Bank; and (iii) expedite the Bank processing of disbursement requests.

32. Planning of Supervision: A supervision mission will be conducted every six months based on the risk assessment of the project. The mission’s objectives will include: (i) ensuring that strong financial management systems are maintained for the project throughout its life; and (ii) semi-annual review of IUFRs, review of annual audited financial statements and management letters.

33. Action Plan:

Actions to be undertaken When

Selection of a Financial management specialist Effectiveness

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Procurement Arrangements

General

34. Procurement for the proposed project would be carried out in accordance with (i) the World Bank’s Guidelines On Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, known as the ‘Anti-Corruption Guidelines’ dated on October 15, 2006 and revised in January, 2011; (ii) the ‘Guidelines: Procurement of Goods, Works, and non-consulting services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers’ (known as Procurement Guidelines) published by the Bank in January 2011; (iii) the ‘Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers,’ (known as Consultant Guidelines) dated January 2011; and (iv) all the accompanying standard bidding documents for any new procurement and the provisions stipulated in the Grant Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the grant, the different procurement methods or consultant selection methods, the estimated costs, prior review requirements, and agreed time frame are set out in the Procurement Plan. The procurement procedures and Standard Bidding Documents (SBD) that will be used by the recipient is defined in the Project Implementation Manual, which includes specific and detailed sections regarding Procurement.

35. Procurement under the Project is mostly for the selection of international and local consultants for technical assistance, training and capacity building, the design, development and implementation of policies, operational tools and various guidelines for the 3 different components. To support the implementation of the performance budgeting reform under the component 2, a direct administrative services contract between the Moroccan Ministry of Finance and a consortium of Ministries of Finance from the OECD countries is envisaged. Procurement will also concern goods and services related to project management, logistics for the organization of training, workshops, consultations and other capacity building events for the 3 components.

36. National Competitive Bidding (NCB) procedures adjusted as indicated below will be used for all Goods and Non-Consulting Services contracts estimated to cost less than the equivalent of US$3,000,000. To ensure broad consistency with the Procurement Guidelines, the following provisions will apply when using NCB under this project. Said procedures shall ensure that, inter alia:

a) The bidding documents include explicitly the bid evaluation method, award criteria and bidder qualification criteria;

b) Technical, administrative and financial envelopes are opened immediately after the bid opening session has started and prices are read aloud;

c) The bids are evaluated on the basis of the price and any other criteria expressed either in pass/fail terms or in monetary terms;

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d) Contracts are awarded to the qualified bidder who has submitted the least-cost evaluated and substantially responsive bid as stipulated in the bidding document; and

e) Standard bidding documents and bid evaluation reports found acceptable by the Bank are used.

37. Moreover, it has been agreed with the borrower that each contract financed from the proceeds of this grant shall provide that suppliers, contractors and subcontractors shall permit the Bank, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract and to have said accounts and records audited by auditors appointed by the Bank. The deliberate and material violation by the supplier, contractor or subcontractor of such provision may amount to “obstructive practice”.

38. The procedures and standard bidding documents (SBD) of the borrower adjusted to be acceptable by the Bank will be used under National Competitive Bidding (NCB). Thus prior to issuing the first call for bids, a draft SBD to be used under NCB procurement must be submitted to the Bank for approval;

39. Procurement Plan: A Project Procurement Plan for the first 18 months, dated September 5, 2013 acceptable to the Bank has been prepared and will be updated at least once a year. The procurement plan shall indicate which contracts shall be subject to the Bank’s prior review. All other contracts shall be subject to Post Review.

Specific Procurement Arrangements

No Works contracts are contemplated under the project.

40. Procurement of Goods and non-consulting Services: Procurement of goods and services related to project management, logistics for the organization of training, workshops, consultations and other capacity building events among others, will be carried out using the following methods:

a) National Competitive Bidding (NCB): Each package estimated to cost less than the equivalent of US$ 3,000,000 may be procured on the basis of NCB procedures as found acceptable by the Bank. Bidding documents acceptable to the Bank will be used.

b) Shopping: Goods and non-consulting services estimated to cost US$ 200,000 or less may be procured using Shopping procedures.

c) Direct Contracting: Under circumstances which meet the requirements of paragraph 3.7 of the Procurement Guidelines, goods, non-consulting Services and works may be procured in accordance with the paragraph 3.7 of the Procurement Guidelines using the Direct Contracting procurement method.

41. Selection of Consultants: International and local consultants services required for the

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project are mostly for technical assistance, training and capacity building, the design, development and implementation of policies, operational tools and various guidelines for the 3 different components. NOTA BENE : the single source selection method will be used also for the administrative services contract between the Moroccan Ministry of Finance and a one or a consortium/association of Ministries or public administration agencies from OECD countries, selected on basis of best expertise to provide an administrative services (non-commercial) agreement on cost recovery basis to provide assistance, expertise and support to the implementation of the performance budgeting reform under the component 2, (despite the fact that this is not a commercial consultancy services contract).

42. The following Bank methods and corresponding standard documents will be used:

a) Quality & Cost Based Selection (QCBS) for all types of consultant services.

b) Least-cost Selection. Services for assignments which meet the requirements of paragraph 3.6 of the Consultant Guidelines may be procured using the Least-cost Selection method in accordance with the provision of paragraphs 3.1 and 3.6 of the Consultant Guidelines.

c) Selection Based on Consultant’s Qualifications (CQS). Services estimated to cost less than US$100,000 equivalent per contract may be procured in accordance with the provisions of paragraphs 3.1 and 3.7 of the Consultant Guidelines.

d) Single Source Selection. Under circumstances which meet the requirements of paragraph 3.8 of the Consultant Guidelines for Single Source Selection, consultant services may be procured in accordance with the provisions of paragraph 3.8 through 3.11 of the Consultant Guidelines, with the Bank’s prior agreement.

e) Individual Consultants (IC). Services for assignments that meet the requirements set forth in the paragraph 5.1 of the Consultant Guidelines may be procured under contracts awarded to individual consultants in accordance with the provision of paragraph 5.2 and 5.3 of the Consultant Guidelines. Under the circumstances described in paragraph 5.6 of the Consultant Guidelines, such contracts may be awarded to individual consultants on a sole-source basis.

Short lists may be composed entirely of national consultants for contracts of less than US$200,000 equivalent per contract, complying with the remarks mentioned above.

Publication of Results and Debriefing

43. Online (UN Development Business, and /or Client Connection) publication of contract awards would be required for all Direct Contracting, and the Selection of Consultants for contracts exceeding a value of US$200,000. All consultants competing for an assignment involving the submission of separate technical and financial proposals, irrespective of its estimated contract value, should be informed of the result of the technical evaluation (number of points that each firm received) before the opening of

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the financial proposals. The borrower would be required to offer debriefings to unsuccessful bidders and consultants should the individual firms request such a debriefing.

Fraud, Coercion, and Corruption

44. All procuring entities, as well as bidders, suppliers, and contractors shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraphs 1.16 & 1.17 of the Procurement Guidelines and paragraphs 1.23 & 1.24 of the Consultants Guidelines.

Frequency of Procurement Supervision

45. Supervision of Procurement by the World Bank is an integral part of Project supervision and implementation monitoring. In addition to the prior review supervision to be carried out from Bank offices, it is recommended that two (2) supervision missions take place during a year to visit the project and to carry out post review of procurement actions.

46. Based on the risk associated with procurement (substantial), as mitigation measures, the following actions need to be implemented:

a) Hiring of an external consultant to help carry out procurement and build capacities within the Ministry of General Affairs and Governance (MAGG);

b) Organization of training in procurement for all staff involved in the project implementation (MAGG, MoF, MCRP and all other concerned public entities);

c) Preparation of Standard Bidding Documents for NCB in accordance with the Procurement Guidelines and found acceptable by the World Bank for Goods and Non-consulting Services; these documents, taking into consideration required adjustment in order to be acceptable to the Bank, will be submitted for review and approval to the World Bank;

Monitoring & Evaluation (M&E)

47. M&E organizational arrangements. The M&E system will be based on the agreed results framework and monitoring arrangements (See Annex 1). The PMU will be responsible for supervising the M&E activities at component and PDO level. For each component the lead ministry will be in charge of the M&E of its own project activities and report on a quarterly basis to the PMU at the MAGG. The PMU will provide

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quarterly progress report to the Bank. Every semester a report will synthetize the progress achieved over the last 2 quarters, the main challenges, risks and risk mitigating measures. It will provide an assessment of the project indicator foreseen in the results framework.

48. M&E actions. The project M&E system will be complemented by specific M&E actions funded under the project or by respected independent external surveys publicly available. The former include on-line user surveys and an evaluation to be conducted under component I on the implementation of the public consultation policy as well as an external Public Expenditure and Financial Accountability (PEFA) assessment funded under component II. The results from external independent assessments, such as World value survey, on citizen’s engagement as well as from the Open Budget Index on fiscal transparency will further feed the project’s M&E system. Further, the project will also support the development of reform specific M&E systems. For instance the national dialogue on public consultation will have its own M&E system, including a feedback mechanism for participants, a monitoring system for the implementation of the new public consultation policy and external evaluations. Likewise, component II will support the development of a government wide performance M&E system in the context of the budget reform, comprising performance monitoring integrated in the budget cycle, ex-post performance audits and evaluations, associating external experts. These different M&E systems, once operational, will further strengthen the project M&E system and facilitate its alignment with the government’s priorities and information systems. This will also improve the sustainability of results beyond the project duration.

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Annex 4: Operational Risk Assessment Framework (ORAF)Morocco: New Governance Framework Implementation Support Project

Project Stakeholder Risks Rating:

High

Description:A. The risk of challenges in program ownership by Government,

project stakeholders and donor community is low. The proposed project responds to the high level directions outlined by Morocco’s 2011 Constitution that calls for the “inclusive participation in government decision making (Articles 12-15); balanced public finances (Article 77); and advancement of the regionalization agenda through principles of good governance, greater accountability, and improved representation.”

B. The various project components are led by different counterparts across the respective reform areas. Potential risks include limited capacity or mandate constraints in clients that are relatively new to the Bank such as the Ministry charged with relations with Parliament and Civil Society (MCRP), compared to the solid relationship of trust which has been established with the Ministry of Economy and Finance (MEF) through past engagements in the area of public financial management reform.

C. The third component of the project includes regions and local governments as counterparts. Capacity challenges vary across the project components, stakeholders both at central and local levels as well as among NGOs.

Risk Management:A. Beyond capacity building and institutional strengthening measures, no further mitigation measures are foreseen.B. Beneficiary perceptions will be assessed throughout the project, through reform specific M&E systems and external surveys. The project and the Bank will carry out /continuous monitoring and supervision.C. The project will dedicate resources to systems and capacity development at various levels.

Resp: Client and Bank

Stage: Through implementation

Due Date : During implementation Status: in progress

Implementing Agency Risks (including fiduciary)Capacity Rating: Substantial

Description: Component I: The new Constitution has expanded the scope and mandate of the former Ministry charged with relations with Parliament to include affairs relating to government-civil society engagement. This new mandate will pose challenges in regards to capacity and competences, thus potentially affecting oversight, preparation, management and implementation of planned activities.Component II: The Bank has a long-standing relationship with the main counterpart, the Ministry of Economy and Finance which helps to minimize uncertainties in regards to capacity constraints and

Risk Management: Risk will be mitigated through hand-holding technical assistance as well as the carrying out of training seminars for public administration staff with regards to public consultation, petitions and motions, e-participation methods, and monitoring and evaluation. The seminars will be designed with a flexibility component to allow trainings to adjust according to specific capacity needs. In regards to the regionalization agenda, there is strong ownership on the part of the Ministry of Interior to push these new reforms forward and strong expectations at the local level for results, thus stimulating momentum for rapid progress. The program as designed will aim to strengthen local government capacity as well as capacity of the MoI through international and local expertise, training seminars, and a strong information and communication campaign to raise understanding and awareness of these reforms both within government and externally.

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reform ownership.Component III: The regionalization agenda has been a priority in the country’s development plan for the past decade. Nonetheless, little progress has been made in materlizing these objectives. Risks may potentially arise in regards to political ownership, as well as capacity constraints on the level of the regional or local governments to successfully implement these new reforms. Expectations are particularly high at the local level, considering their direct interface with citizens for numerous basic public services.

Resp: Client and Bank Stage: Implementation Due Date: continuous

during implementation

Status: To be put in place once the project is approved

Governance Rating: ModerateDescription: Given the strong emphasis on governance reforms in the constitution and the new government’s development program, there seems to be broad consensus about the importance of strengthening government accountability, transparency, and participation in order to improve the acceptance and effectiveness of its development policies. It is also recognized that past public sector and governance reforms failed to yield visible and tangible results for the population, as evidenced by the government’s agreement with the findings and recommendations of the PARL series’ implementation completion and results report (World Bank: June 30, 2011).

Risk Management: Proper sequencing and phasing of reforms aim to address potential difficulties in maintaining reform momentum across the different reform components under this project. The Government aims to address this by combining visible short-term measures with more medium-term structural reforms in order to build momentum and consensus around visible and successful reform initiatives in each area.

Resp: Client and Bank

Stage: through implementation Due Date : ongoing Status: in progress

Project RisksDesign Rating: Moderate

Description: Given the innovative and cross-cutting nature of the reforms covered under this project as well as involvement of various counterparts each with varying capacity constraints, there might be a risk regarding varying implementation success across the different components. Due to the medium term nature of the reforms, there is a risk for limited short term results.

Risk Management: The project design incorporates the principles of flexibility to accommodate for the long-term nature of these reforms as well as potential factors that might affect overall progress. Based on progress on the ground, respective reform components will be reviewed and revised, as needed, during the mid-term review. The project design aims at minimizing the risks by focusing on an integrated and holistic approach, supporting three strategic and intertwined reforms both at the central and local government level.Resp: Client and Bank

Stage: Through implementation. Due Date : ongoing Status: in progress

Social & Environmental Rating: LowDescription: The grant funds only TA activities and there are no direct social or environmental safeguards risks envisaged with respect to this operation which is rated as a Category C.

Risk Management: No specific mitigation measures are foreseen.

Resp: N/A Stage: N/A Due Date : N/A Status: N/AProgram & Donor Rating: Low

Description: No risk is envisaged with respect to the Transition Fund which will be providing the grant financing for this project.

Risk Management: No specific mitigation measures are foreseen.

Resp: N/A Stage: N/A Due Date : N/A Status: N/ADelivery Monitoring & Sustainability Rating: Moderate

Description: Overall responsibility for oversight and monitoring of Risk Management: Bank staff both in HQ and in the field will continue to maintain dialogue with the

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the project rests with Ministry of General Affairs and Governance (MAGG). Building on the positive experience accumulated over the course of several World Bank budget support operations, MAGG will continue to take the lead in monitoring progress in implementation of this program.

key counterparts and the relevant sector ministries and will conduct periodic reviews of the Government’s reform program and activities supported under this project. Specific attention will be devoted to monitoring the indicators and goals of the program.

Resp: Client and Bank

Stage: through implementation Due Date :ongoing Status: in progress

Overall Implementation Risk Rating High

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Annex 5: Implementation Support Plan

Strategy and Approach for Implementation Support

1. Implementation Support Plan

The Bank will closely monitor and support this strategic technical assistance project, which is part of an integrated support program to Morocco’s governance reforms, including inter alia the Transparency and Accountability Development Policy Loan (Hakama), policy advice and technical assistance financed by the Bank, the MDTF and dedicated IDF grants on the procurement reform. The Bank has a regular policy dialogue on the reforms supported by this project and established close working relations with its main stakeholders. The Governance mandate of the Ministry of General Affaires and Governance, which is the implementing agency, is new (February 2012) and its focus is traditionally more on policy coordination and reforms. The Ministry has limited experience in the implementation of projects and has thus established a project management unit to help implement it. Considering the cross cutting nature of the activities supported and the number stakeholders, a steering committee has been set up to ensure the guidance and coordination of project activities. This project implementation support plan outlines the main steps the Bank intends to take to assist the implementing agency (MAGG), the Steering committee and the ministries involved in the implementation of the activities foreseen

2. What would be the main focus in terms of support to implementation during:

Time Focus Skills needed Resource Estimate

Partner Role

First twelve months

Advice on project implementation; monthly local supervision; build the capacity of project stakeholders and assist in the design of ToRs. Assist in the design and set up of the twinning arrangement for the budget reform

Project management experience, technical knowledge in the thematic areas of support + FM + Procurement.

USD 100 000 Active participation in the project steering committee and activities; collaborative approach to maximize synergies among the project activities.

12-48 months Policy dialogue and bi-monthly local supervision; capacity building; policy advice and in-house technical assistance on the supported reforms

Project management experience, technical knowledge in the areas of support.

USD 100 000 per annum

Continued active cooperation from all project stakeholders and coordination among them, including through the steering committee.

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Skills Mix required

Skills Needed Number of Staff Weeks

Number of Trips

Comments : Input

G&PS specialist, TTL

Public sector and engagement specialist

Procurement specialist

FM specialist

Team assistant

24

8

4

2

4

Field based

2 combined with other mission

Field based

Field based

Field based

Policy dialogue, project management and supervision; communication; technical assistance on the budget reform and fiscal transfers

Project supervision/ ISR + communication+ Policy dialogue and TA on the civic engagement component

Implementation support; Supervision, PR

Implementation support; FM supervision and audit review.

Correspondence, Filing, mission planning

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