Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No. 41070-LR

EMERGENCY PROJECT PAPER

FOR A

GRANT FROM THE TRUST FUND FOR LIBERIA (TFLIB)

IN THE AMOUNT OF

US$2.30 MILLION

TO THE

REPUBLIC OF LIBERIA

FOR A

SENIOR EXECUTIVE SERVICE PROJECT

OCTOBER 16,2007

Public Sector Reform and Capacity Building Unit Country Department Africa Regional Office

This document has a restricted distribution and m a y be used by recipients only in the performance of their off icial duties. I t s contents may not otherwise be disclosed without Wor ld Bank authorization

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

i

CISCAP cs CSA CSRP DA EC EGIRP EIP EIPSC GDP GEMAJ? GoL IBRD ICB IDA IFMIS IFRs IMF i-PRSP ISN LCS LICUS M & E MoF N C B NGOs NTGL PEMFAR PFMU PIC PPCC QCBS WTF SBD SES

CURRENCY EQUIVALENTS (Exchange Rate Effective May 15,2007)

Currency Unit = Liberian Dollars (LR$) 1US$ = LR$56.50

FISCAL YEAR July 1 - June30

ABBREVIATIONS AND ACRONYMS

Civi l Service Capacity Building Project Civi l Service Civ i l Service Agency Civ i l Service Reform Program Designated Account European Commission Economic Governance and Institutional Reform Project Emergency Infrastructure Project Emergency Infrastructure Project Supplemental Component Gross Domestic Product Governance and Economic Management Action Plan Government o f Liberia International Bank for Reconstruction and Development International Competitive Bidding International Development Association Integrated Financial Management Information System Interim Financial Reports International Monetary Fund Interim Poverty Reduction Strategy Paper Interim Strategy Note Least Cost Selection Low Income Countries Under Stress Monitoring and Evaluation Ministry o f Finance National Competitive Bidding Non-Governmental Organizations National Transitional Government o f Liberia Public Expenditure Management and Financial Accountability Review Project Financial Management Unit Programme Implementation Committee Public Procurement Concession Commission Quality and Cost Based Selection Results Focused Transitional Framework Standard Bidding Documents Senior Executive Service

FOR OFFICIAL USE ONLY

SOEs SMP TA TF TOR TFLIB TSF I TSF I1 UN UNDP UNMIL USAID

Statement o f Expenditures Staff Monitoring Program Technical Assistance Trust Fund Terms o f Reference Trust Fund for Liberia Transition Support Fund I Project Transition Support Fund I1 Project United Nations United Nations Development Program United Nations Mission in Liberia United States Agency for International Development

Vice President: Obiageli K. Ezekwesili Country Director: Mats Karlsson

Sector Manager: h a n d Rajaram Task Team Leader: Lisa Bhansali

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not be otherwise disclosed without World Bank authorization.

... 111

Table o f Contents

Emergency Project Paper (EPP) Data Sheet 1

A . Introduction ...................................................................................... 2

B . Emergency Challenge: Country Context, Recovery Strategy

and Rationale for Proposed Bank Emergency Project ..................... 4

C . D . E . F . G .

Bank Response and Strategy ......................................................... 10

Appraisal o f Project Activities, Benefits and Risks ....................... 13

Implementation Arrangements and Financing Plan ....................... 16

Project Risks and Mitigating Measures ......................................... 18

Terms and Conditions for Project Financing ................................. 19

Annexes

Annex 1 .Detailed Description o f Project Components ...................... 20

Annex 2.Results Framework and Monitoring ................................... 21

Annex 3 .Summary o f Estimated Project Costs ................................... 23

Annex 4 .Financial Management and Disbursement Arrangements .... 25

Annex 5.Procurement Arrangements .................................................. 32

Annex 6 .Implementation and Monitoring Arrangements .................... 35

Annex 7.Project Preparation and Appraisal Team Members .............. 36

Annex 8 .Economic and Financial Analysis ............................... 37

1

I Date: October 11, 2007 Country Director: Mats Karlsson Sector Manager: Anand Rajaram Project ID: P109195

Team Leader: Lisa Bhansali Sectors: General public administration sector (1 00%) Themes: Administrative and c iv i l service reform (P) Environmental Category: No t required

Total Amount: US$2.3 m

Expected effectiveness date: November 1,2007

1 Short Description: The project will, o n an emergency basis, assist the Government to recruit

Expected implementation period: Three years

Expectedhevised closing date: October 1, 2010

Source Local Foreign I Total

Significant, non-standard conditions, if any: None

Borrower Total IBRD/ IDA Trust Funds Others Total

2.00 0.30 2.30

2.00 0.30 2.30

Total IBRD/ IDA Trust Funds

2008 2009 2010 201 1 2012

1 .oo 1-00 0.30 Does the emergency operation require any exceptions from Bank policies? Have these been approved by Bank management?

A r e there any critical r i sks rated “substantial” or “high”?

What safeguard policies are triggered, if any?

Yes [ ] N o [XI Yes [ ] N o [XI

Yes [XI N o [ ] None

2

A. Introduction

1. This Project Paper seeks the approval o f the Regional Vice President to provide a grant in an amount of US$2.3m to Liberia for the Emergency Senior Executive Service Project. The project i s funded by the Trust Fund for Liberia (TFLIB), a single-purpose t r u s t fund, financed by IBRD net income, approved by the Executive Directors in 2004l. The original purpose o f the TFLIB was to allow Bank engagement in the post confl ict period, particularly, while Liberia remained in arrears to the Bank. The TFLIB covered three main areas o f intervention, namely: community-driven development, infrastructure, and economic management. The proposed SES project i s anchored in the Bank’s overall c iv i l service reform effort including a US$1 mi l l ion C iv i l Service Reform Project currently being funded by the LICUS Trust Fund that i s described in more detail below. These efforts wil l also be complemented by a forthcoming Economic Governance and Institutional Reform Project (funded by IDA) which includes a component that strengthens early reform and capacity building efforts.

2. The proposed grant would help finance the costs associated with rebuilding the public service o f Liberia. The public service has suffered a severe decline in i t s effectiveness and self-esteem leading to a massive loss o f qualified and skil led professional after more than a decade o f the c i v i l war. The proposed support wi l l help respond to the situation in the short- term by the recruitment o f seasoned professionals f rom within the country and from among the many qualified Liberian professionals living in the Diaspora and placing them in the public service on performance contract terms to build capacity and provide strategic leadership and management services in selected ministries and agencies.

3. It i s expected that at the end o f the project, the process o f transforming the c iv i l service into a more professional, effective and accountable institution o f the Government o f Liberia wil l be well underway, with those in SES positions helping to drive forward the reform process. At the same time, the SES will materially improve the Government’s capacity to develop pol icy and begin organizing staff to deliver services.

4. Although the project i s innovative - the Bank has not financed a distinct class o f c iv i l servants before, nor formally l inked payment o f Civil Service (CS) salaries to the development o f a CS reform program - it remains within the ambit o f existing OP/BP guidelines, which al low financing o f c iv i l service salaries provided there i s a clear developmental gain.

5. Various development partners are supporting the implementation o f the Senior Executive Service through technical advice and finding. Notable among them are the United Nations Development Program (UNDP) (US$l .O million), Greece (US$O. 1 million), U S (US$1 .O million), Humanity United (US$1 .O mil l ion) and the Wor ld Bank (US$2.3 million). Other development partners such as the Department for International Development o f the United K ingdom (DffD) provide technical advice through a c i v i l service reform project. U N D P has been the lead agency so far in developing the concept o f the SES, o n behalf o f the Government, and has offered to manage the project o n behalf o f a l l the contributing parties, through the creation o f a special SES trust fund, and being the main interlocutor with the government o n day-to-day project management matters. The grant application has been put together o n the basis o f UNDP continuing to play that role assisting the Civil Service Agency

’ See World Bank Assistance to Liberia: Proposed Establishment o f a Trust Fund for Liberia (IDA/vR2004-0211) Aug. 9, 2004

(CSA) in day-to-day management, though Bank resources will be disbursed through the Project Finance Management Unit (PFMU) in the Ministry o f Finance, which handles other Bank resources, and not through the SES trust fund, for financial control reasons. In addition, the Bank i s supporting c iv i l service reform through a US$900,000 L ICUS Trust Fund grant, which will pay for a number o f diagnostic studies that will feed into the preparation and adoption by the GoL o f a comprehensive c i v i l service reform strategy, o f which the SES scheme will form part. The Bank i s planning to support c iv i l service reform further, through the preparation o f an Economic Governance and Institutional Reform Project (EGIRP) which will have a component for Human Resource (HR) management. And, in a parallel Liberia Trust Fund grant proposal, funds are being requested for the installation o f an Integrated Financial management Information System, which wi l l have a HR records and payrol l module.

4

B. Emergency Challenge: Country Context, Recovery Strategy and Rationale for Proposed Bank Emergency Project.

6. Liberia’s decades o f poor governance and 14 years o f conflict have had appalling social consequences. I t has been estimated that almost a mi l l ion people f led f rom cities, towns and villages to other neighboring countries. In addition, over 300,000 people were internally displaced within the country.

7. The Wor ld Bank and UNDP jo in t ly undertook a needs assessment for Liberia in December 2003. Fol lowing this, a Results Focused Transitional Framework (RFTF) was prepared which defined the most urgent needs. The transitional government at the t ime used the RFTF as a strategic plan under the management o f a RFTF Implementation Management Committee (RIMCO). Despite efforts within the framework o f the RFTF, economic governance remained a major challenge, l i t t le was done to address the problems o f the c i v i l service, further arrears o f pay accumulated and patronage appointments continued. With the encouragement o f i t s development partners, the transitional government adopted the Governance and Economic Management Assistance Program (GEMAP) which was backed by a resolution o f the United Nations Security Council in June 2005. GEMAP’s objective i s to improve economic governance and financial management by putting in place the basic systems o f public financial management, and providing, o n a temporary basis, the specialized financial management staff to oversee them. GEMAP’s key components include revenue improvement, budgeting and expenditure management and adopted measures to strengthen fiscal administration, transparency and accountability. GEMAP thus la id the foundations for the commencement o f government functioning, and, in turn, the normalization o f relations with international financial institutions. However, while it began bringing order to the government’s payroll, tackling the c i v i l service i t s e l f was beyond i t s remit, a challenge that, in turn, required a more unif ied and determined polit ical leadership.

8. Historic presidential democratic elections were held in OctoberAVovember 2005 resulting in the election o f Mrs. El len Johnson-Sirleaf as the Head o f State and her subsequent inauguration on January 6,2006. The new government embarked on an ambitious 150 day reform program. The new government also endorsed the GEMAP as a step in enhancing governance and strengthening economic management. Similarly, the Government has reached understandings o n a new Staff Monitoring Program (SMP) with the International Monetary Fund (IMF) to year end 2007. The program i s consistent with the i-PRSP and aims to further improve economic governance, public financial management, tax and customs administration and the health o f the banking sector.

9. The government constituted the Liberia Reconstruction and Development Committee (LRDC) as the main agency and overarching mechanism to strategize, develop, coordinate and monitor the implementation of national reconstruction program. The LRDC i s chaired by the President, and consists o f key ministers and development partners. I t i s organized around four pillars namely (a) Enhancing National Security (b) Revitalizing Economic Growth; (c) Strengthening Governance and the Rule o f Law; and, (d) Rehabilitating Infrastructure and Delivering Basic Services. Under pi l lar “c”, the G o L has begun tackling c i v i l service reform.

Public sector issues

10. The country has suffered state capture and collapse, and i t s institutions have been eroded through corruption, mismanagement and disregard for the rule o f law by successive

5

regimes. The long-term consequences o f the c iv i l war were enormous. Civil institutions were destroyed; systems o f checks and balances were dismantled. As o f mid-2005, the country had an external debt burden estimated at US$3.7 billion, which i s equivalent to 800 per cent of Gross Domestic Product (GDP). Almost three quarters o f the population l i ve below the poverty line o f 1 USD/day.

11. The effect o f the c iv i l war i s visible in al l sectors. The public service i s not an exception. The public service has suffered a severe decline in i t s morale and effectiveness the consequence o f a massive loss o f qualified and skilled professional, the severe erosion o f pay, and the collapse o f publ ic administration processes, destruction o f government facilities and looting o f equipment, and loss o f records. At the same time, principles o f merit and fairness in recruitment and promotion were replaced by patronage, and many c i v i l servants today are occupying positions they are unqualified to hold. Absenteeism, payrol l fraud and petty corruption are rife. Nonetheless, the c iv i l service has a crit ical role in helping bring about the post conflict recovery, reconstruction and growth o f the economy yet presently i s incapable o f delivering the necessary critical and essential services to the public. The iPRSP notes that the dysfunctional public service i s in need o f both short-term change management as we l l as more comprehensive medium to long-term reform.

12. The Government o f Liberia (GoL) has la id out a vision for a new Liberia which encompasses consolidating peace, enhancing justice, deepening democracy, ensuring food security, promoting human development and setting the nation o n the path for long term growth and development.

Government strategy

13. As a f i rs t step, G o L through a consultative process prepared an interim poverty reduction strategy paper (iPRSP) for the period 2006-2008. A full poverty reduction strategy paper (PRSP) i s under preparation. The iPRSP i s centered on consolidation o f national peace for sustained poverty reducing economic growth and development. Issues to be tackled in the iPRSP are clustered under four main pillars - (i) enhancing national security, (ii) revitalizing the economy, (iii) strengthening governance and the rule o f law, and (iv) rehabilitating infrastructure and delivering basic services.

14. Under the general umbrella o f the iPRSP, the Government, with the help o f development partners, has begun addressing the challenge o f c i v i l service reform. A number o f important steps have been taken. First, as revenues have built, the Government has been able to clear some o f the arrears o f pay inherited from the transitional government. Second, it has been able to make small but symbolically important improvements to c i v i l service pay. When the new Government came to power, monthly pay for most c i v i l servants (apart from allowances) was around US$15 per month. Last year it was raised to US$30, and f rom July 2007 to just over US$50. Whi le this st i l l falls short o f a living wage, and i s clearly insufficient to incentivize staff to turn up regularly for work ( low skil led workers in the NGO sector are paid about US$200 per month), i t has signaled to employees the direction o f the Government’s intentions. Third, the Government has begun the process o f removing “ghosts” from the c i v i l service payroll, managed by the Ministry o f Finance. Fourth, some restructuring has begun in selected ministries. Fifth, efforts have begun rebuilding the capacity o f c iv i l service training institutions l i ke the Liberian Institute o f Public Administration. The experience o f restructuring in a l imited number o f ministries (e.g.: MOD, Office of President, Ministry o f Health - ongoing) has been a positive one.

6

15. However, these efforts, while necessary components o f a c iv i l service reform strategy, do l i t t le in the short run to address the critical lack o f capacity in the c iv i l service, particularly in the ranks o f managers and senior professionals. In most ministries, while there are ministers and assistant ministers, and directors-general actively trying to cope with the challenges of their sectors, there i s a dearth o f expertise at the next level down - effectively, the highest levels o f the c iv i l service, the group that suffered most during the c i v i l war, with many quitting government for jobs in the private sector or in internationally funded NGOs and aid agencies, or leaving the country entirely.

16. The Government’s solution to this critical high level manpower leadership gap i s to create a Senior Executive Service, and to recruit Liberians o n short term performance contracts to fill up to 100 critical positions across ministries. The details o f the scheme are described below. After three years, the SES would be integrated into the rest o f the c iv i l service structure, with the help o f the SES, which in the meantime would have been reformed, with surplus staff and ghosts eliminated, mandates redefined and new ministerial structures put in place.

Donor strategy

17. In broad terms development partners’ strategy hinges o n moving the country f rom a post confl ict situation to consolidating peace and security, economic recovery and reconstruction. A select group o f donors, notably, the EU, DffD, UNDP, U S A I D and the Bank, are giving support to c iv i l service reform and the rebuilding o f legal and judicial capacity, recognizing that until capacity i s restored in these key functions o f government, sustained recovery i s not possible. An immediate goal o f the SES i s filling high level capacity gaps in key ministries, without which l i t t le wil l happen. However, the SES provides an opportunity for the Bank to work with this set o f donors, together with G o L counterparts, to assist the latter develop a robust c i v i l service reform strategy, and help the Government implement i t using SES staff as catalysts for reform in the ministr ies and departments to which they are appointed. In this connection, it i s worth mentioning that the Program Implementation Committee (PIC) (on which the Bank sits) i s in the process o f having i t s oversight mandate enlarged, to embrace the development and implementation o f a broader CS reform strategy. In this way, the goals o f an immediate increase in key ministry capacity and more longer term reform are being brought together.

18. Since a comprehensive c iv i l service reform strategy i s s t i l l being worked out in Liberia, donor interventions in capacity building have been in the context o f sector interventions. A concerted effort at institutional reform and capacity building was undertaken in the Ministry o f Defence and the Ministry o f State, President’s Office. Here, mandates were reviewed with the help o f USAID-funded consultants, new organizational structures and staffing plans were developed, and existing staff were selected back against j ob descriptions on competitive, competency based criteria. Once re-selected, staff benefited from intensive donor supported capacity building. A similar process i s under way in the Ministry o f Health. What these experiences show i s that with a focusing o f mandates, shedding o f surplus staff, training and improved work ing conditions, coupled with responsive donor support, productivity can be greatly improved.

7

Coordination mechanisms

19. Compared with many other situations, there are extraordinarily close and effective coordination arrangements in Liberia between the office o f the Special Representative of the UN Secretary-General and the other major bilateral and multilateral donors active in the country. T h i s makes for immediate exchange o f information on new developments and on the spot coordination o f development partners’ responses with the Government. On the latter’s side, the critical mechanism i s the Liberia Reconstruction and Development Committee, and on the donors’ side the Liberia Partners’ Forum. In the area o f c i v i l service reform, the Bank participates in periodic reviews o f the DfID financed (Civil Service Capacity Building Project (CISCAP), and, with UNDP, i s a member o f the Government run SES Implementation Committee. This enables the Bank to be influential in both the launching o f the SES and the design o f the overall c iv i l service reform program and broader capacity building initiatives.

20. The many years o f neglect and decline caused by the polit ical instability has resulted in severe decline in the effectiveness o f the Liberian c i v i l service. The effect i s a massive loss o f qualified and skilled staff, The estimated 35,000 members o f staff o f the public service are poorly motivated. Wages are very l o w (barely more than US$50 per month for qualified graduate positions, excluding allowances) and incentives for qualified technical staff to j o i n the c iv i l service are non-existent. There i s a missing upper and middle class o f technical staff to carry out the day-to-day functioning o f the government. The very few qualif ied staff that remained in post during the c iv i l war were effectively de-skilled due to the long period o f inactivity and the breakdown o f normal administrative processes. This means that the country faces an enormous task rebuilding a basic capability in the Civil Service to function, to reliably perform the routine tasks o f pol icy making and public administration, and deliver public services. Whilst high priori ty has been given to rehabilitating training institutions and their programs, o f necessity this wil l take time, and there i s the need to fill key leadership positions in ministries and departments immediately below ministers, on an urgent basis, to lead in the review o f departmental mandates, champion the reform process in the c i v i l service, and ensure that some basic routines o f po l icy making and service delivery are undertaken.

21. The Government prepared a vision paper for c iv i l service reform for the Liberia Partners Forum in February 2007. This envisages a thorough review o f mandates, eliminating those that are no longer relevant, reducing the number o f ministries and departments, eliminating payroll “ghosts”, shedding surplus staff, rebuilding ski l ls, and improving over time, pay and working conditions. The vision paper now needs to be turned into a more comprehensive and operational c i v i l service reform strategy. As the G o L sees it, a key part o f the way forward i s the introduction o f a Senior Executive Service (SES). The a im i s to begin a process o f developing a new generation o f public service leaders. The SES scheme i s a result o f the desire o f the Government o f Liberia to achieve i t s strategic goals and development outcomes in a more rapid manner.

22. The scheme will operate through the open recruitment o f 100 senior professionals and managers, in three batches over the next 3 years - recruitment o f the f i rs t batch o f 21 positions i s underway. To ensure arms length selection and professional assessment o f candidates, the selection process wil l be placed in the hands o f a qualified HR management firm, which wil l assess candidates against both a common set o f core leadership and

8

management competencies and carefully prepared individual j ob descriptions. Those eligible will be existing c iv i l servants with suitable qualifications, Liberian professionals and managers in the private sector, and Liberian citizens who are presently part o f the Diaspora outside the country. Salaries wil l be a multiple o f present c iv i l service pay equivalents, broadly equivalent to amounts earned for comparable positions in the Liberian private and c iv i l society sector. Successful candidates will be appointed o n annually reviewed contract terms for up to three years, with performance requirements, based on the j ob description and, as appropriate, any strategic p lan developed for the department in which the SES officer i s placed. SES staff who do not perform will be dismissed. Overall supervision o f the SES scheme i s the responsibility o f the Civil Service Department, which has recently created a special SES coordination unit.

23. The Government views the SES as a scheme that will jump start capacity building in the c iv i l service by deploying a core group o f skilled professionals and managers immediately below ministers that i s capable o f developing pol icy and helping the department to implement it. (Currently, because o f the dearth o f competent high level c i v i l servants, ministers frequently find themselves in executive roles). At the same time, the SES will play a key role in helping the ministries and departments they are placed in under go restructuring and reform, consistent with the C iv i l Service Reform Strategy. In this way, the SES i s designed to address both short term, and longer te rm capacity building objectives.

24. Over time, the SES, as a scheme, wi l l be merged into the broader c i v i l service reform effort, as this i s shaped over time. One possibility i s to use the SES model to pioneer the use o f performance contracts for a l l senior c iv i l service positions. The f i r s t 21 SES positions identified have been chosen with reference to I-PRS program priorities, with a mandate to move forward key poverty reduction programs. At the same time, the selected staff (and those due to fill the remaining 79 SES positions yet to be identified) are expected to have a mandate to lead reforms in their respective departments. Obviously, i t wil l be important that the broader Civil Service Reform Program (CSRP) proceeds apace with the implementation o f the SES, otherwise the integration o f the latter into a reformed CS structure wil l not take place. Indeed, while one objective o f the SES i s to give ministries some capacity to begin delivering services, another objective i s to put experienced senior staff in place who can help ministers implement ministerial reform programs. A key requirement wil l be for the key ministries to be restructured in the coming three years, with revised mandates, new staffing structures with surplus positions eliminated, j ob descriptions, and a new pay and grading system, so that the SES, which wil l start as an enclave system, can be mainstreamed into the rest o f the c iv i l service.

25. K e y issues, in this connection are the init ial case for Bank financing o f recurrent costs, followed by their sustainability after the period o f external financing ends. The Bank has responded to the GoL’s request to support the SES with grant finance because o f the critical role the SES could p lay in providing the leadership and coordination necessary for reform and capacity building in key government ministries, departments and agencies. The SES, in the Bank’s view, could have a powerful developmental pay off, that justifies external financing. There are also strong tactical reasons for donors supporting the SES. Direct financing through the budget o f a scheme entailing competitive pay for on ly a small group o f c iv i l servants would be controversial in the legislature, with unpredictable outcomes and significant fiscal r isks. In addition, while domestic revenues continue to grow, G o L financing o f the SES (less than 5% o f the current wage bill) would mean fewer resources for other priority areas.

9

26. The sustainability o f the SES, once the period o f external support i s over has been carefully examined. While domestic revenues are expected to continue growing strongly over the medium term as both the revenue base expands and tax administration improves, the critical issue i s partly whether SES salaries themselves can be financed through the budget, and partly whether they can be integrated into a new structure o f government o f pay which i s more differentiated that the existing scales, and rewards technical, professional and managerial grades in a more competitive way than presently. This in turn depends on the implementation of a robust c iv i l service reform strategy which looks crit ically at mandates, structures, staffing levels and pay. Through an already approved grant for civil service reform, the Bank i s assisting the G o L develop a new pay and employment strategy, and i s supporting the functional reviews and HR management and control systems that are needed as the G o L goes forward creating a new c iv i l service. In this sense, sustainability o f SES recurrent costs over the medium term i s intimately tied into whether the Government can succeed in bringing into being i t s vision o f a more compact, better paid and higher skilled civil service.

27. Overall, the project entails substantial r i s k s while promising high rewards i f the strategy o f capacity building represented by the project i s successful. These r i sks are elaborated in the section below on Project Risks and Mi t igat ing Measures, which addresses issues l i k e patronage appointments, triggering unsustainable wage bill demands from the rest o f the CS, and bureaucratic resistance to SES outsiders. As noted, the potential gains are large - the prospect o f catalyzing reform in individual ministries, within a broad c iv i l service reform framework, developed under the oversight o f the PIC, in which the Bank i s a participant. Contributing to the project’s finances not on ly allows the Bank to support the high level capacity effort inherent in the SES. It also provides the Bank an opportunity to constructively shape the country’s overall c iv i l service reform program. Furthermore, in discussions with the G o L on the design parameters o f the scheme, the Bank has been able to draw on i t s global experience o f financing high level capacity building interventions in other countries. In preparing the project, account was taken o f the Bank’s experience with paying the salaries o f c i v i l servants and advisers in schemes in other post confl ict countries, such as Afghanistan, Georgia, East Timor, Ecuador and Bolivia, as we l l as the experience next door in Sierra Leone. The team also looked at the experience o f Tanzania with i t s Selected Accelerated Salary Enhancement scheme. None o f these countries i s exactly comparable to Liberia, but each has provided lessons which have been incorporated in to the design o f the present project. The team has also consulted during the past year with the Bank’s foremost specialists in post-conflict c iv i l service rebuilding, and taken their advice into account. (These lessons are summarized in a companion Quality and Global Knowledge Note). Among lessons reflected in the present project are: (i) importance o f any scheme to pay CS salaries to be part o f a more comprehensive c iv i l service reform strategy; (ii) ensuring capacity o f the C S A to manage the scheme i s strengthened; and, (iii) early development o f a medium te rm pay and employment strategy.

Co-financing

28. made from the fo l lowing partners:

G o L in consultation with development partners have secured a total o f US$5.4 mi l l ion

10

Development Partners U N D P Greece us

(US$ in million) 1 .oo 0.10 1 .oo

Humanity United Wor ld Bank

1 Funding Gap (to be provided by other development I 2.25 I

1 .oo 2.30

partners TOTAL

29. The total cost o f the scheme i s US$7.65 mil l ion. There i s therefore a financing gap o f US$2.25 mi l l ion which the G o L has committed i tself to funding. Should the G o L not be able to meet i t s full share o f the anticipated costs, the size o f the SES would be correspondingly reduced.

7.65

C. Bank Response and Strategy: The Project

Brief description of Bank’s strategy of emergency support

30. Before the advent o f the war in Liberia, the country was close to becoming a middle income country. However, the many years o f confl ict resulted in significant decline in living standards. Liberia i s currently supported by major international development partners to rebuild the country and promote peace in the sub-region. Since 2003 when the CPA was signed the Bank has been engaged in active support o n economic governance, institutional reform, infrastructure development, and community empowerment within a strong multi- donor approach.

3 1. The Bank’s Executive Directors discussed an Interim Strategy Note (ISN) for Liberia in June 2007. It supports three pillars o f the government’s i-PRSP, namely infrastructure and basic services, economic revitalization, and governance and the rule o f law. Under the governance pillar, the Bank’s support i s supporting broad public sector and institutional reform including - a Civil Service and Governance Support Program (CSGSP), an Economic Governance and Institutional Reform Project (EGIRP), the Emergency Senior Executive Service Project (ESESP), and a Judicial Reform Project.

32. The Civil Service and Governance Support Program i s chiefly aimed at helping the C iv i l Service Agency move forward with articulating and implementing i t s c iv i l service reform strategy, by providing funds for diagnostic studies, functional reviews o f ministries, the development o f a pay and employment strategy, and staff training. This i s a vital complement to the Bank’s support o f the SES. The EGIRP will mainly provide support to procurement and financial management reform, but i s l ike ly also to have a component financing the installation o f a computerized payrol l and HR management system.

1. Project Development Objectives

33. The development objective o f the Emergency SES Project (ESESP) i s to provide Government with the immediate assistance needed to develop a cadre o f technical and managerial public servants who are we l l motivated to fill an immediate high level capacity gap, whi le at the same t ime assist in transforming the c i v i l service into a more professional,

11

Tier/Level

First Second Third Total

effective and accountable institution o f the Government o f Liberia. This wil l be done through the recruitment o f seasoned professionals from within the country and f rom among the many qualified Liberian professionals living in the Diaspora. This objective i s fully consistent with the current Government’s development agenda and i s aligned with the objectives o f the ongoing support under TFLIB and Interim Strategy Note (Interim Strategy Note).

Number of Staff Salary level/month/person (A) (B) (in US$) 30 3,000 30 2,000 40 1,000 100

2. Summary of Project Components

Component 1. Recruitment o f members for the SES scheme

34. This component involves the recruitment o f members for the SES scheme. Funding will be used to pay for the wages o f members o f the SES for three years. It i s planned to recruit a minimum o f 100 SES members. A total o f 21 positions will be recruited as the f i rst wave o f recruitment. H o w the funding o f positions wil l be shared between the contributing donors will be determined through the PIC. Staff recruited will be in three levels with the fol lowing rates:

Component 2. Management o f the SES scheme

35. This component would be used to procure basic furniture and office equipment to support and strengthen the capacity o f CSA as the oversight c iv i l service institution to eventually manage the SES program at the end o f the project. In addition, the component wil l be used to pay for travel and relocation expenses, workshops and seminars to be organized o n the SES scheme, exit package, and monitoring and evaluation o f the scheme. Again, these costs will be shared between donors, as determined through the PIC. The proposed use o f Bank funds i s set forth in Annex 3. Amongst the items the Bank wil l finance i s an independent impact assessment o f the scheme.

Eligibility for Processing under OP/BP 8.0

36. The project i s part o f the pipeline o f emergency projects included in the I S N discussed by the Board in June 2007. The SES will fill a critical high level gap in the c i v i l service at a much faster rate than if traditional capacity building methods (e.g.: training existing staff f i rst requires re-building o f training institutions, reaching a motivating level o f pay by across the board pay reform takes many years) alone were resorted to. If the scheme works as intended, i t should have a multiplier effect by accelerating the restructuring o f k e y ministries.

37. The best financing option, a consortium o f donors, i s the proposed one. The Government’s revenue position i s too weak to meet the full costs o f the scheme. With arrears s t i l l to be settled, Liberia has not yet reached the point o f regular Bank lending, and a conventional project financing c i v i l service salaries would be controversial. Shared

12

financing, using Bank grant funds, with other development partners participating, and keeping Bank exposure moderate, i s an appropriate financing option for an important but by no means risk free operation o f this nature.

Consistency with Country Strategy (CAS o r I S N )

38. The proposed activities are consistent with the Liberia ISN, which acknowledge the weakness o f the c iv i l service institutions and therefore recognizes the need to strengthen and build human and institutional capacities within the c iv i l service as a priori ty within the governance and rule o f l aw pillar. Getting the machinery o f government to operate at a modicum o f effectiveness underpins the entire country strategy. Whi le helping to fund a SES o f 100 managers and senior professionals wil l not in itself add greatly to service delivery capacity, it provides the government with a lever for change i t i s determined to use.

Expected Outcomes

39. The expected outcomes f rom the project are (i) Discernable improvement in the capacity o f ministries and departments where SES staff are posted to make policy, regulate and deliver services. (ii) Evidence that selected ministries have drawn up strategic plans, reviewed mandates and are implementing restructuring programs with staff l ists, j o b descriptions and re-selection o f staff, consistent with the comprehensive CS reform strategy that the Bank and other partners are assisting the G o L to prepare.

40. The expected outputs are:

(i) The Senior Executive Service scheme i s fully operational, with an established system o f careful screening o f candidates and selection, drawing up o f performance contracts and annual performance monitoring, coordinated by the CSA.

(ii) SES staff are identif ied and recruited to the scheme, and have an immediate impact o n the capacity o f Ministries, Departments and Agencies (MDAs) where they are posted. Participating ministries and agencies have each developed and begun implementing a restructuring plan based o n a redefined mandate, new organizational structure and matching staffing plans.

(iii)

41. project.

The above outputs are l inked to the achievement o f the development objectives o f the

Intermediate indicators are:

1.

2.

Number o f SES positions recruited against clear j o b descriptions and placed in key ministries in three tranches under performance contracts. Number o f ministries which have begun a thorough restructuring and reform process.

42. The expectation i s that design and implementation o f the broader CSRP will have progressed to the point where the SES, after three years, can be mainstreamed into overall c iv i l service management (though perhaps retaining elements o f the performance contract) and the Government i s able to take over the full costs o f annual salaries, either with i t s own

13

revenues, or, possibly, with the assistance o f general budget support, if this becomes available.

43. Source o f Financing. This project i s funded by the Trust Fund for Liberia. In August 2004, the Board approved this single purpose fund, managed by the International Development Association and financed by a US$25 mi l l ion grant f rom IBRD surplus. The key areas o f intervention include: i) infrastructure; ii) economic management and public sector reform; and iii) community-driven development. The SES grant qualifies for funding under the public sector reform category. TFLIB projects are prepared using the Bank’s emergency rapid response procedures (OP/BP 8.00).

D. Appraisal of Project Activities, Benefits and R i s k s

Economic

44. It i s always dif f icult to measure the economic consequences o f c i v i l service reform projects. Whi le costs are quantifiable (SES salaries and scheme overheads), the benefits are indirect, ultimately seen in improved pol icy making capacity, more effective regulation and improved service delivery. Ultimately, the economic justif ication o f the SES i s i t s contribution to a better functioning government achieved through implementation o f a we l l designed and robust c iv i l service reform program. Presently, government i s dysfunctional in mult iple ways, and unless this changes, sustainable recovery (and peace and security) wi l l not be achieved in the long run.

45. The overheads o f the scheme are admittedly high (administrative costs are around 20% o f total costs - though the ratio i s much less for the Bank financed portion). There are several reasons for this. Firstly, there will be re-location costs if SES positions are filled by diaspora candidates. Second, separation packages may need to be paid i f incumbents elect to compete and are not selected. Third, the scheme departs f rom normal CS practice to engage HR consultants to undertake the screening o f candidates - a necessary step if patronage r isks are to be minimized and a truly competency based selection process i s to ensure. Fourthly, provision i s made for an independent evaluation o f the scheme, to extract lessons and apply them to future high level staffing pol icy making.

Technical

46. Technically, the scheme i s appropriately designed. There undoubtedly are Liberians with the sk i l l s the Government needs residing either in Liberia o r in the Diaspora, which the scheme could attract into government. Whi le SES salaries are much better than existing CS scales, they are competitive with the salaries pa id by internationally funded NGOs. The selection process that has been designed outsources the screening o f candidates, and this i s a prudent solution given the background o f patronage appointments. Performance contracts wil l be tr icky to draw up in the Liberian context, but the concept i s an appealing one which could be made to work. Oversight by the contributing donors through the PIC should ensure that the scheme i s run with sufficient rigor. Overhead costs for the project as a whole are admittedly high (over 20%), but this i s justified by the special management arrangements (such as the use o f HR consultants to screen candidates and design and monitor the performance contracts) to ensure that the scheme mns as intended in an environment in which CSA capacity i s weak and risks o f subverting the merit based principles o f the SES are high.

14

Institutional

47. The C iv i l Service Agency i s responsible for managing the SES scheme, and this i s appropriate to i t s mandate (which combines some o f the functions o f a publ ic service commission with a c iv i l service ministry). The C S A presently lacks the capacity to manage the scheme with existing staff, but has wisely recruited a SES coordinator and created a management unit within the CSA. Use o f HR consultants to help with the screening and selection o f candidates i s a sensible measure. Bank resources wil l help build CSA’s capacity to manage the SES scheme.

48. The financial management aspects o f the project wil l be handled by the Project Finance Management Unit in the Ministry o f Finance working closely with the Civil Service Agency, with day-to-day support f rom the United Nations Development Program (UNDP) Office in Liberia. On request o f the Government o f Liberia, the Bank wil l be disbursing funds directly to the PFMU, which, in turn, wil l ensure that SES appointees to the positions the Bank wil l be financing get included in the government wide payrol l system managed out o f the Ministry o f Finance.

Fiduciary

49. Channeling the Bank’s grant funds through the P F M U would ensure that the arrangements that have worked satisfactorily for existing Bank programs, l i k e G E M A P and other Liberia Infrastructure Projects, wi l l be applied to the SES grant. The PFMU i s a central unit that has been established in the Ministry o f Finance for disbursement, accounting and reporting o f donor funded projects. The PFMU has an interim unit manager with international accounting qualifications acceptable to the Bank, a project accountant and an internal auditor. Selection o f a permanent unit manager (international) as we l l as additional accountant, a procurement specialist and an internal auditor with regional experience i s underway. After a competitive selection process a project accountant has been selected, and an offer has been made to him for taking up this position. The selection o f the procurement specialist and the internal auditor i s underway. The PFMU i s responsible for ensuring: (a) satisfactory implementation o f activities included in a l l contracts including adherence to Wor ld Bank standards with regards to environmental and social issues; (b) that financial and accounting records are maintained to a satisfactory standard; and (c) that financial statements and reports are prepared in timely manner for management and audit purposes.

50. Although UNDP has set up a SES trust fund through which i t s own resources for the SES (US$l.O mil l ion) are being channeled, the Bank has decided to channel i t s resources through the P F M U reflecting the need to have Ministry o f Finance to be closely involved in the implementation o f the SES. In Liberia, the P F M U will be working closely with the Civil Service Agency, which i s running the overall SES scheme, and has created a special unit for this purpose. The channeling o f Bank funds through the P F M U in the Ministry o f Finance takes advantage o f an existing mechanism staffed with officers who understand Bank disbursement and reporting requirements, and have already in place adequate financial control mechanisms, which the C S A lacks. In turn, the Ministry o f Finance also operates the government payroll system, through which SES appointees would be paid.

5 1. Due to the 14 years o f c iv i l war in the country, the legal and institutional frameworks for Public procurement were completely destroyed and the Government o f Liberia’s

15

procurement policies and practices lacked the basic principles o f accountability, economy, efficiency and transparency. In the absence o f a CPAR, the United Nations and the Wor ld Bank carried out a Needs Assessment under their Economic Management Assistance Program for Liberia, which determined that Public Procurement Reform was critical to Liberia’s post-conflict transition. Fol lowing this assessment, the G o L embarked o n the Public Procurement Reform, starting with the enactment o f the Public Procurement and Concessions A c t (PPCC) in 2005. The Ac t i s comprehensive and governs a l l government contracts, including those that may be financed out of fiscal resources, e.g. concessions and donor funds, and mandates the formation o f Procurement Committee and Procuring Unit within each Procuring Entity. Currently, the functions o f these two institutions are yet to be articulated and they are mostly nominal. In addition, control mechanisms that provide checks and balances within the Liberian procurement system remain a challenge. In reality, a framework for independent and credible procurement audits and internal quality controls are yet to be developed to accompany the Act. The Ac t also established the Public Procurement and Concessions Commission (PPCC), which i s charged with the implementation o f Government’s Public Procurement and Concessions Reform (PPCR). The reform i s being supported by the Liberia Public Procurement Reform Project (LICUS TF Grant # TF056754).

Env i ronment

52. adverse effect on the environment.

The Environmental category o f the proposed project i s C as it wi l l no t have any

Social

53. The proposed project could lead to some l imited social impacts. Staff currently in positions to be occupied by members o f the SES scheme wil l have the opportunity to compete for SES selection, and if not chosen, they would have to be re-located or separated with compensation. However, for the most part the positions identif ied for filling by the f i rst batch o f SES candidates are presently unfilled, so the adverse social consequences are unlikely to be great. Should staff be made redundant under the scheme and Bank financing sought for severance payments (no call i s envisaged) Bank rules o n severance pay financing would be followed.

54. The Bank hitherto has not financed the creation o f a SES, so this would be a departure from normal practice. However, experience f rom other post confl ict countries shows that skill gaps in the c i v i l service are a critical constraint to sustained recovery, and that conventional capacity building strategies alone are unlikely to y ie ld the desired results within an acceptable time frame. Experience also shows that, notwithstanding extended conflict, sk i l l s do exist in such countries, but due to the collapse o f work ing conditions within government, most o f these ski l ls are to be found outside government, working either for aid agencies, international NGOs, or the private sector. There are also a large number o f Liberians living overseas, who might be induced to return if work ing conditions in government improved.

Safeguards

55. N o safeguard policies would be triggered.

Exception to Bank policy

16

56. The project does entail the Bank paying salaries o f serving c iv i l servants. For a long time this was outside the ambit o f what could be financed. However, operational guidelines were changed two years ago, and the Bank may now finance salaries o f c iv i l servants, provided the developmental benefits are established. The project i s thus fully compliant with OP 6.00 and OP 8.00 on financing o f recurrent costs. As noted above, the argument i s made that without donor financing o f the SES, the almost complete absence o f implementation capacity in ministries and departments will mean that the organizational effort to get c i v i l service reform and capacity building under way wil l not happen.

E. Implementation Arrangements and Financing Plan

57. The overall SES scheme will be supervised by a Project Implementation Committee comprising the CSA, the Office o f the President, the Ministry o f Finance, and the principal financing agencies, notably UNDP, USAID and the Bank. Day-to-day support to the CSA in areas l i ke identification o f positions, preparation o f selection criteria, and assessment o f candidates, wi l l be provided by UNDP, reporting to and under the overall guidance o f the PIC. On request o f the Government o f Liberia, the Bank wil l disburse funds directly to the P F M U in the Ministry o f Finance, which wil l provide financial reports to the Bank. The C S A wil l provide narrative reports on the progress o f implementation o f the overall SES project.

58. As a result o f over a decade o f c iv i l war in Liberia and the neglect o f the c i v i l service, local capacity i s insufficient for efficient and effective execution by the recipient. The Civil Service Agency which i s the natural home for the execution o f the proposed project lack the institutional, technical and fiduciary capacity to execute the project.

Financial Management and Disbursement Arrangements

59. The P F M U in the Ministry o f Finance wil l be responsible for the financial management o f the Bank’s grant to the SES scheme. The P F M U wil l open and maintain a Designated Account (DA), with a Commercial Bank acceptable to IDA, o n behalf o f SES (CSA) for the project.

60. The init ial advance will be disbursed into the DA, operated by the PFMU. Subsequent disbursements wil l be transaction-based for the f i r s t year and transit, upon favourable capacity assessment, t o report-based disbursement in the second year.

61. Government payroll system, operated by the Ministry o f Finance.

The PFMU will arrange for SES officers funded by the Bank to be paid through the

62. year.

The PFMU will arrange for an independent audit to be carried out at the end o f each

Procurement Arrangements

63. The SES Unit in the CSA, with U N D P support, and working closely with the PFMU, will be responsible for the procurement o f services under the grant. In practical terms, this entails the identification o f SES positions, the drawing up o f j ob descriptionsherms o f reference, and the advertisement for qualified candidates. Approval o f the positions and the

17

process o f competitive assessment wi l l be under the overall control o f the PIC, o n which the Bank i s represented. The SES Unit i s under the direct supervision o f the Director General o f the CSA. One staff member o f the SES Unit wi l l be trained on procurement processes.

64. Supervision Arrangements, Monitoring and Evaluation: During the f i rst year o f project implementation, intensive Wor ld Bank supervision will be required in order to ensure that the project development objectives and expected outcomes are met by the end o f the project. A total o f 10 staff weeks are to be devoted to the project each year. The f i r s t FM supervision mission after effectiveness wi l l include a review o f the f low o f funds. There will be two supervision missions per year. Funding i s set aside in the project for an impact assessment o f the SES scheme, once i t has been running sufficiently long for lessons to be extracted. The fol lowing staff wil l be engaged in the supervision o f the project:

Lisa Bhansali, Sr. Public Sector Specialist - 6 weeks

Smile Kwawukume, Sr. Public Sector Specialist - 6 weeks

Michael L. 0. Stevens, Lead consultant on public service reform - 4 weeks

Anthony Mensa-Bonsu, Procurement consultant - 4 weeks

Samuel Bruce-Smith, Financial Management consultant - 4 weeks

Timetable for key Processing events Pre-Appraisal: June 2007 Appraisal: Virtual - August 13-24,2007 Planned RRC date: September 20,2007 Planned Negotiations: October 4,2007 V P approval date: October 9, 2007 Grant signing date: October 12,2007 Planned Effectiveness date: November 1,2007 Planned mid-term review: April 6,2009 Planned Closing date: October 1 , 20 10

The project will be implemented within a three year period from November 1,2007 to October 30,2010.

18

F. Project Risks and Mitigating Measures

Possible opponents of the scheme are those with a vested interest in traditional patronage based management of the CS, and unions who may oppose the bringing in o f better paid outsiders to fill existing CS positions. Drivers o f change are principally key ministers and the President, the emerging private sector, and, to an extent not customary elsewhere, engaged donors. The best way to mitigate the risk o f stakeholder resistance to the scheme i s place SES staff in critical positions where they can make a difference, while at the same t ime to move forward as quickly as possible with a well designed c i v i l service reform strategy that can demonstrate improved working conditions for staff who remain in the c iv i l service, fair compensation for those who are separated, and visible improvements in services from the perspective o f the population at large. K e y will be identifying and implementing the “quick wins” which are undoubtedly there to be exploited.

Potential Risks

(a) If the SES i s not properly and transparently managed, there i s l ikely to be discontent amongst other officials and c iv i l servants not covered under the scheme and SES recruits could loose credibility to the rest o f the c iv i l service.

(b) The selection process under the SES could be abused leading to patronage.

(c) Individuals who are not successful in the competency assessment may seek to disrupt or disparage the program.

(d) Political and financial commitment o f Government to the scheme could wane.

(e) The monthly salary rates for members o f the SES could be

Rating

High

High

Moderate to High

Moderate

High

Risk mitigation measures

The best antidote i s the early r o l l out o f MDAs reforms under the broad CSRP, so that staff who are not part o f the SES see a process getting under way which promises them improved working conditions in the medium term. Close involvement by the Bank in the development o f the overall CSRP, and a good communications strategy. The key to min imiz ing staff resentment and maintain credibil i ty o f the SES scheme i s ensuring that their deployment i s in the context o f departmental reforms that promise improved pay and conditions for those c i v i l servants selected back in to restructured ministries. Placing selection in the hands o f professional HR consultants i s aimed at preventing this Bank involvement in scheme oversight through PIC membership would ensure that selection process i s not abused. This i s most l ike ly to originate f rom incumbent c i v i l servants who apply and are turned down. A mechanism for deployment elsewhere or equitable separation needs to be developed, consistent with the overall CSRP. At present there i s a high level o f interest in the scheme, whose main parameters have been approved by Cabinet and the President. A Project Implementation Committee was formed to advocate for the SES in relevant meetings in order to sustain the commitment o f the Government. Move away f rom annual across-the-board Dav increases (which are unsustainable) to a

19

viewed as a s i g n post by the entire public service.

The SES scheme may not attract enough people in the diaspora.

At the end o f 3 years, Go1 cannot afford to assume responsibility for paying SES salaries.

Moderate

Moderate to high

pol icy that grants pay improvements only for staff in MDAs which undergo serious restructuring, rightsizing, and reform. Separately, the Bank i s supporting development o f a CS pay and employment Dolicv. The advertisement about the SES scheme has been widely published o n Liberian websites targeting Liberians who are eager to return home. Work to ensure macroeconomic stability and a positive investment climate, to promote continued economic growth and strong revenues. Help G o L design a pay and employment strategy which allows progressive real pay improvement within an affordable wage bill.

65. In addition to the mitigation measures enumerated above, there wil l be regular supervision o f the project through the Liberia Country Off ice o f the Bank. Procurement and financial management specialists located in the Ghana Country Office wil l also provide the necessary support. A total o f 13 staff weeks wi l l be used to supervise the project per year. A mid-term review will be carried out 18 months after project effectiveness to assess progress under the project, achievement o f the overall objectives and to eventually reorient the project if needed to ensure that it achieves i t s objectives.

G. Terms and Conditions for Project Financing

66. This project i s to be funded through a grant fi-om the Trust Fund for Liberia.

67. Prior to the disbursement o f funds an operational work plan should be prepared and approved by the Bank. Thereafter an annual update should be prepared no later than December 15 o f each subsequent year.

20

Tieraeve1

First Second Third Total

Annex 1 : Detailed Description o f Project Components

Number of Staff Salary level/month/person (A) (B) 30 US$3,000 30 US$2,000 40 us$ l ,ooo 100

Component I. Recruitment o f members for the SES scheme

Tier/Level November 1,2007 April 1,2008 First 21 9 Second 30 Third 10 Total 21 49

1. This component involves the recruitment o f members for the SES scheme. Funding wil l be used to pay for the wages o f members o f the SES for three years. I t i s planned to recruit a minimum o f 100 SES members. A total o f 21 positions will be recruited as the f i rs t wave o f recruitment. Subsequently, two more recruitment waves are planned for April 1, 2008 and June 1, 2008. Proceeds f rom TFLIB will be used to pay for between 25-40 members o f the SES scheme. The fol lowing rates will apply for the three levels:

June 1,2008 Total - 30 - 30

30 40 30 100

Component 2. Management o f the SES scheme

2. This component would be used to procure basic furniture and office equipment to support and strengthen the capacity o f CSA as the oversight c iv i l service institution to eventually manage the SES program at the end o f the project. In addition, the component wi l l be used to pay for travel and relocation expenses, workshop and seminars to be organized o n the SES scheme, exit package, and monitoring and evaluation o f the scheme. Proceeds from the TFLIB will be used specifically to fund office furniture and equipment, travel and relocation expenses, workshops and monitoring and evaluation o f the scheme and the conduct o f annual external audit.

21

Annex 2: Results Framework and Monitoring

Project Dev. Objective Provide senior managerial and professional staff to key ministries, to increase high level capacity and lead reform and restructuring for better policy making, regulation and improved policymaking and service delivering. Intermediate Results Component One: SES salaries Identification o f critical leadership positions and recruitment of senior professional and managerial staff as members o f a Senior Executive Service, drawn from within and outside the civil service, under three year performance contracts at competitive

Scheme management and administration.

Putting in place a management structure for the scheme to ensure leadership positions are identified by ministries, job descriptions drawn up, qualified candidates are selected, and deployed under performance contracts, reviewed annually.

Outcome Indicators 1. Evidence that leadership capacity in

MDAs where SES staff are placed has discernably improved.

have each developed and begun implementing a restructuring plan based on a redefined mandate, new organizational structure and matching staffing plans.

2. Participating ministries and agencies

Results indicators 1. Number of SES positions recruited

against clear job descriptions and placed in key ministries in three tranches under performance contracts.

2. Number of ministries which have begun a thorough restructuring and reform process.

Establishment or a SES coordination unit in CSA, and regular meeting of the Program Implementation Committee, to provide guidance and oversight.

Use o f Outcome Information 'rovides evidence that SES staff are ,laying a key role in building capacity n l ine ministries for policy making and service delivery.

Demonstrates that MDAs reforms are )art of a coherent overall reform xogram, and that the SES scheme can )e integrated into the CS at the end of ;he period o f donor support. Use o f result Monitoring Demonstrates that qualified staff are being appointed to positions and deployed in key ministries which are undergoing restructuring, consistent with the CSR strategy.

To demonstrate that the scheme i s being implemented as designed, and qualified staff have been deployed according to plan.

4 VI u

h d

v, m m 3

m 3

9 VI m m

s v, 3

N N

v, m v, v,

3 N I I 3 3

23

Component 1 2

Description Estimated Cost (in US$) Salaries o f members for the SES scheme Administration o f the SES scheme

6,018,000 1,630,000

Comport en t 1

T O T A L

Entry points I Tier/ 1 November 1,2007 1 Apr. 1,2008 I June 1,2008 I Total I Salary level per month

7,648,000

Level First

per Person (in US$) 21 9 - 30 3.000

Detailed Cost Breakdown of ComDonent 1

Second Third Total

30 - 30 2,000 - 10 30 40 1,000

21 49 30 100

Tier/ Level

First Second Third

Component 2

November 1,2007 Apr. 1,2008 June 1,2008 Total

2,268,000 8 10,000 3,078,000 - 1,800,000 1,800,000 - 300.000 840.000 1.140.000

Activity 1. Travel and relocation cost 2. WorkshoP and seminars

Amount (in US$) 55,000 25.000

3. Office equipment and furniture at CSA 4. Assessment o f SES candidates bv HR firm

25,000 200.000

5. Impact evaluation o f SES scheme 6. Audit TOTAL

70,000 45,000

420-01)O

Activity 1. Travel and relocation cost 2. Ex i t Package

Amount (in US$) 300,000 180.000

3. Workshop and seminars 4. Vehicle, office eaubment and furniture at CSA

200,000 50.000

24

5. PMU staff salary 6. PMU staff training 7. Travel

165,000 40,000 35.000

8. Internet setup and servicing 9. Communication and Dublication

125,000 70.000

10. Operation and maintenance o f generator

12. Assessment o f SES candidates by HR firm 1 1. Operation and maintenance o f vehicle

120,000 30,000

200,000

I Components I TFLIB I Others I Total I

13. Audit 14. Impact evaluation o f SES scheme

45,000 70,000

One Two TOTAL

Contribution 1,880,000 4,138,000 6,018,000

420,000 1,2 10,000 1,630,000~ 2,300,000 5,348,000 7,648,000

25

Annex 4: Financial Management and Disbursement Arrangements

Introduction

1. A financial management assessment was carried out in accordance with the Financial Management Practices Manual issued by the Financial Management Board o n 3 November 2005. The objective o f the assessment was to determine whether the implementing entities have acceptable financial management arrangements, which will ensure: (i) the funds are used only for the intended purposes in an efficient and economical way; (ii) the preparation o f accurate, reliable, and t imely periodic financial reports; and (iii) safeguard the entity’s assets, in compliance with OPBP 10.02.

2. The financial management assessment was carried out by the Bank financial management team and included interview with key staff o f Public Financial Management Unit (PFMU) in the Min is t ry o f Finance (MoF). Our assessment also draws o n experience with ongoing emergency and rehabilitation projects in Liberia.

Overview of Program and Implementation Arrangements 3. Project implementation will benefit f rom arrangements established under the Emergency Infrastructure Project (EIP) and the Infrastructure Rehabilitation Project (IRP). Oversight will be provided by a project steering committee, chaired by the Ministry o f Finance and with membership including representatives f rom the Bureau o f the Budget (BOB), the C i v i l Service Agency (CSA) and the Central Bank o f Liber ia (CBL). The M o F currently has weak implementation capacity and as a result these activities will be implemented through the C S A in close collaboration with PFMU that will be tasked with the responsibility o f managing the project finances.

4. Due to the existing weak financial management capacity in the l ine ministries and the need to ensure an effective and efficient management o f resources, i t has been agreed that the existing PFMU in the Min is t ry o f Finance takes up the responsibility to manage project funds under the Senior Executive Service Project (SESP). The PFMU is staffed with a team o f competent financial management professionals, i.e. a Project Accountant and an Internal Auditor, with the required experience and qualifications that are satisfactory to the Bank. The PFMU will be further strengthened with selection o f a substantive Unit Manager, whose recruitment i s underway. The PFMU team will be responsible for the day to day management o f project finances, in accordance with the project financial procedures manual already developed for the ongoing projects. The PFMU will also have responsibility for project financial reporting, using already agreed interim un-audited financial statements (IFR) formats in use for the other projects.

Country Accountability Issues

5. Due to the extended conflict situation in the country wh ich l ed to disengagement, the Bank has not carried out a Country Financial Accountability Assessment (CFAA) or similar Financial Management (FM) related Economic and Sector Work (ESW) in Liberia in recent years. A Public Expenditure Management and Financial Accountability Review (PEMFAR) exercise i s currently underway and scheduled to be completed in early 2008. The l imi ted country knowledge that we have i s therefore based solely o n project implementation experience, which i tsel f i s st i l l in i ts infancy. Bo th physical and bureaucratic infrastructure was decimated by the war, including an exodus o f most skilled personnel. Thus the human capital in the area o f FM i s decidedly short, affecting both

26

the private and public sectors. A decision was made early in the re-engagement process to develop a ‘centralized’ project financial management unit, the PFMU in the MoF, to create a reservoir o f skilled personnel that would be available for all projects. I t i s this ‘solution’ that this project wil l also tap into, to avoid the obvious FM capacity constraints.

6. The r i sk analysis and mitigation measures are limited to the r i sk within the project’s control. A summary o f the risks are shown in the table below.

Summary of Risk Analysis

Inherent Risk

Country Level Poor FM performance due to a lack o f adequately qualified FM professionals.

Entity Level Entity Management may politically interfere wi th project financial management controls. Overall Inherent Risks: Control Risk:

Internal Control Procedures:

a) FM policies may not be adequate and may not even be in place.

b) That management may override any existing controls.

Fund Flows a) Project may not submit withdrawal applications on timely basis, thereby causing possible implementation delays.

Internal Audit (IA) The CSA has no functioning IA unit. The C iv i l Service Agency may not establish an IA any time soon, as part o f i t s establishment. External Audit The audited financial statements o f the project wil l be submitted late. Information Systems A computerized accounting system may not be implemented in a satisfactory manner.

Overall Control Risk

Risk Rating

H

S

H

S

S

S

S

S

M

S

Risk Mitigation Measure

Establishment o f the ‘centralized’ FM unit in the MOF to handle al l project finances in the short to medium term, while concurrent P F M TA’s concentrate on targeted P F M training for both public and private sector staff.

Strong and independent project financial management unit (PFMU) wil l be responsible for project financial management.

Project w i l l use FM procedures established at P F M U for the financial management o f EIP and IRP, and documented in a manual which w i l l be cleared by the World Bank.

T h e Financial Management Unit (PFMU) w i th qualified financial staff w i th specific job descriptions w i l l minimize any control override that may occur under the projects.

The oversight responsibility o f the Project Implementation Committee w i l l also play a complementary role in the way project finances are managed.

There wil l also be frequent Bank oversight and periodic external reviews f rom time to time.

Coordination between PFMU, M o F and CSA wil l be streamlined to ensure full cooperation to fosterlengender timeliness o f the submission o f withdrawal applications.

T h e P F M U has an internal auditor who wil l ensure adequate internal checks to address any weaknesses.

Arrangements would be made to make use o f existing P F M U audit arrangements. where Dossible.

T h e P F M U has implemented such a system on the Sun Accounting Platform. P F M U wil l procure adequate services to ensure the system i s maintained in functioning state at a l l times.

27

3.

Strengths and Weaknesses

project enectiveness - - Ratify use o f existing formats o f IFRs or aaee on their modification to suite the needs - . Unit Manager PFMU/ Negotiations

Strengths

4.

7. PFMU in the M o F will have financial management responsibility for the SES project. The staff for the unit i s already managing Bank and other donor financed projects, and their prior experience will be o f enormous benefit to SESP. U s e o f the existing unit will also contribute to speedy and timely implementation o f this project. The PFMU will at a l l times, maintain, the established and acceptable financial management systems and practices that meet the World Bank FM requirements. The PFMU has a training center, which currently hosts FM programs o f the University o f Liberia and has included as part o f the TORS o f professional staff, the provision o f training for l ine ministry staff.

amended to include SESP special needs (if Un i t Manager P F M U January 31,2008 any)

Weaknesses

8. As in other post conflict countries, the overall fiduciary environment in Liberia i s very weak. The accounting staffs o f the MoF and CSA have little or no experience with World Bank financial and disbursement procedures. The PFMU will in the long run be required to build FM capacity wi th in the l ine Ministr ies including M o F and CSA. The PFMU does not have a Unit Manager and has not engaged services o f an external Auditor for the projects under i t s management. However, the position o f the unit manager i s in the process o f being filled and the selection o f an external auditor i s also underway, which will be advantageous to SESP

9. Successful implementation o f this project wil l require ownership and active support from governmental authorities and less interference. This i s the greatest challenge that this project will face.

Actions

10. has to be finalized within 6 months o f achieving project effectiveness.

The sole financial management caveat i s to do with the selection o f a Project Auditor, which

I wltnln m,. .

28

FM Staffing for the Project

11. The PFMU has three accounting staff seconded from the MoF, an international professional accountant and a professional internal auditor, both o f whom assume duty from October 1, 2007. The staff will be provided further training in the Bank’s disbursement and FM procedures, to enable them to manage the resources o f Bank funded projects in Liberia.

Project Financial Management

12. The PFMU wil l be responsible for the day to day financial management o f the SES project in addition to the current EP, EPSC, AIDP and IRP. The PFMU has established an effective accounting system that provides for adequate segregation o f functions, capable o f recording all accounting transactions, and reporting correctly all assets and liabilities o f the project. The system would also be capable o f producing accurate periodic financial reports including interim un-audited financial reports (IFRs) and annual project financial statements.

13. The project will adopt the cash basis in the treatment and recording o f all transactions. In addition, the project will maintain a statement o f liabilities outstanding at all times to correctly reflect the projects indebtedness to suppliers and third parties. The financial management system will follow the financial accounting procedures established for the ongoing projects.

14. The financial management responsibility o f the project will be vested in the PFMU in the Ministry o f Finance. The P F M U has an established FM system that i t has used successfully thus far to support the Infrastructure projects in Liberia. This project will want to take advantage o f the systems.

Budget arrangements

15. The CSA, working with the PFMU, will prepare annual work plans and budget and will be sent for review by the World Bank within three months from effectiveness and there after not later than December 15 each subsequent year. The budgets will be revised as necessary based on comments received.

Funds Flow and Disbursement Arrangements

16. The project arrangements are such that there will be no implementing entities at any decentralized position and the PFMU will therefore operate a centralized funds management system for the project. The PFMU will open a Designated Account (DA), denominated in United States Dollars in a commercial bank, specifically to receive funds disbursed from the Grant. All requests for payment will be sent to the accountant for processing and payments. In the unlikely event that a single payment i s above a defined direct payment threshold that will be reflected in the Disbursement Letter, i t will be processed and sent to the IDA for direct payment to the third party. There will be a requirement for the PFMU to submit replenishment withdrawal applications in respect o f the project to IDA on monthly basis. This will ensure the project has funds for operations at all times.

17. I t has been determined that disbursement under the project will be on transaction basis until such a time that there will be sufficient capacity to transit to report-based disbursement. The initial advance wil l be disbursed into the SESP Designated Account (DA), opened and operated by the

29

PFMU at a commercial bank acceptable to IDA, upon the submission o f a withdrawal application. Subsequent disbursement wi l l be made on submission o f replenishment/withdrawal applications to IDA.

B a n k Accounts

Source o f Funds

1 Current (Draw down) account B a n k Accounts

in Liberian Dollars

Designated Account

18. The Designated Account for SESP will be maintained in U S dollars and will be replenished regularly, at least once a month, to maintain a healthy cash flow for the project.

19. The init ial deposit into the DA will be based on the cash requirements o f the project for the first four months. The authorized amount for the DA will be specified in the Disbursement Letter. The financial resources made available through the Designated Accounts will be used to finance agreed project activities only.

Use of Statement of Expenditures (SOEs)

20. Disbursements for all expenditures would be against full documentation, except for items o f expenditures under contracts below (i) US$50,000 equivalent for Goods; (ii) U S $ 100,000 equivalent for consulting firm; (iii) training; and (v) incremental operating costs for which disbursements would be based on statement o f expenditures (SOEs). Supporting documentation for SOEs would be retained by PFMU for review by Bank missions and external auditors when required.

Direct Payments

2 1. IDA may make payments direct to a third party (Le. consultants, contractors and suppliers) at the request o f the recipient, in a prescribed format, to the IDA for eligible expenditures incurred under the project that are above a set threshold, which will also be reflected in the Disbursement Letter.

30

Category Amount o f the Grant % of Expenditures to be Allocated (in U S Dollars) Financed”

Recurrent Costs for SES Staff 1,880,000 100%

(PartKomponent A) Goods, Consultants’ Services, Training and other Incremental Operating Costs

(PartKomponent B)

Reporting and Monitoring

420,000 100%

22. The CSA will, in collaboration with the PFMU, prepare quarterly project interim reports (PIR) in the area o f financial management beside other areas such as procurement, including complaints from bidders, and project implementation physical progress. The financial management system put in place in the P F M U would be capable o f producing the report. The Quarterly Interim Financial Report would basically consist o f a statement o f cash receipts by source and expenditures by main expenditure classifications for the period and cumulatively; cash balances of the Project; and supporting schedules comparing actual and budgeted expenditures. The P F M U will prepare and generate the relevant informational input for this report. The three-part report will be submitted to the Bank within 45 days f rom the end o f each quarter. The report will be submitted to the Task Team Leader (TTL) with copies to the respective area Specialist to facilitate speedy review and commentary by Specialists. The TTL will consolidate the comments and present them to C S A for action.

Auditing arrangements

Total

23. The project Financial Statements will be audited annually by an independent external auditor, who would be competitively selected for the projects managed by the PFMU, in accordance with the Grant Agreement signed between the Bank and the GoL’s Min is t ry o f Finance.

24. The project financial statements including funds movements o n the Designated Account will be audited in accordance with International Standards o n Auditing (ISA) and a single opinion wil l be issued to cover the project financial statements, Statement o f Expenditures (SOEs) and the Designated Account Act iv i ty Statement, in accordance with the Bank’s audit policy.

25. The auditors’ report and opinion in respect o f the financial statements including the management letter would be furnished to the Wor ld Bank within six months o f the close o f each fiscal year.

2,300,000

31

Supervision Plan

26. In view o f the fact that this i s the first Bank-financed project focusing on SES, i t i s envisaged that during the first year o f project implementation, intensive Wor ld Bank supervision will be required in order to ensure that the project financial management arrangements are in place and functioning. The first FM supervision mission after effectiveness will include a review o f the flow o f funds arrangements and a review o f the systems established by PFMU. Generally, i t i s planned that there will be two supervision missions per year.

Conclusion o f FM Assessment

27. The financial management assessment established that the overall fiduciary risk for the project i s substantial. The actions which were initiated for the ongoing EIP, IRP and EIP-SC have been strengthened to ensure that the identified risks are adequately mitigated. The engagement o f a professionally qualified accountant and internal auditor to complement the staff o f the PFMU, the establishment o f systems and procedures by the PFMU as part o f their assignment and the agreed auditing arrangements for the project wi l l ensure that residual project risks are no higher than moderate.

28. I t i s therefore the conclusion o f the assessment that the proposed FM arrangements for the new emergency SES Project meet the Bank’s minimum requirements for FM under OPBP 10.02.

32

Annex 5: Procurement Arrangements

A. General

1. Procurement o f goods, works and services required for the Project and to be financed out o f the proceeds o f the Grant shall be governed by the provisions of: a) “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004 revised October 2006; b) the “Guidelines: Selection and Employment o f Consultants by the Wor ld Bank Borrowers” dated M a y 2004 revised October 2006; and c) the Legal Agreement as said provisions may be further elaborated in the Procurement Plan. The various items under different expenditure categories to be financed are described below. For each contract to be financed with Grant proceeds, the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, and prior review requirements have already been agreed between the Government o f Liberia and the Association and are reflected in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

2. Selection of Consultants: Consultancy services valued at about US$0.25 mi l l ion to be provided include the services o f a Human Resources (HR) firm for the assessment of SES candidates, and the project financial audit. The project has been classified as a rapid response program where, in conjunction with the N e w Policy Framework, (OP S.O), accelerated and Streamlined Procedures may apply to improve the flexibility, speed, and effectiveness o f the Bank’s emergency response. Therefore the use o f the Selection based on Consultants’ Qualifications (CQS) was considered as an appropriate method for hiring the HR firm and the auditor in accordance with Para 3.7 o f the Consultants guidelines. All contracts to be awarded following CQS will be subjected to Bank prior review and the Bank’s Standard Request for Proposals will be used. Sole sourcing o f consulting f i r m s or individual consultants already working in the areas and which have a proven track record for provisions o f similar assignments, and the extension o f contracts issued under existing projects for similar activities through increase in their corresponding contract amounts would be explored on a case by case basis and subjected to Bank non objection.

3 . Procurement of Goods: Small quantities o f goods totaling US$50,000 would be procured under the project, including one vehicle, basic furniture and office equipment for the CSA. Given the limited amounts involved these goods will be procured under shopping procedures in accordance with Para 3.5 o f the Guidelines.

4. Other; The project will finance large numbers o f individuals who deliver services on a contract basis under the SES scheme. The selection procedures wil l fol low well-established HR practices that have been determined by the Bank to be acceptable to it. The job descriptions, minimum qualifications, terms o f employment, selection procedures, and the extent o f Bank review o f these procedures and documents shall be described in the project documentation and the model contract shall be approved by the Bank.

5. SES scheme. If the services o f consultants are required, they will be selected as per Para 3 above.

Training: Training valued at about US$O. 15 include Workshops and seminars to be organized on the

6. Operating Costs: incremental recurrent expenditures incurred for Project implementation including PMU staff salary, fuel and maintenance o f vehicles, maintenance o f equipment, communications charges, etc, will be procured using the implementing agency’s administrative procedures reviewed and found acceptable to the Association.

33

Summary of Risk Analysis and Mitigation Plan Inherent Risk Risk

Country Level Poor Procurement performance due to a lack o f adequately qualified procurement professionals. Entity Level CSA lacks experience in the management o f Bank-funded projects.

Rating

H

H

The procurement functions o f the SES Un i t not established and staff lacks knowledge o f Bank procurement policies and procedures.

Overall Inherent Risks: H Control Risk: Internal Control Procedures:

Streamlined Procurement management H processes are not in place.

H

B. Assessment of the Agency’s Capacity to Implement Procurement

Risk Mitigation By whom By When Measure

Procurement positions PIC/WB As part o f the SES should be identified scheme. under the SES scheme.

Close Bank oversight WB During and guidance wil l be instituted. continually

Designate a procurement CSA Before focal point within the D i r e c t o r N B effectiveness. unit and provide training o n Bank procurement.

preparation and

thereafter.

All procurement will be subject to Bank prior review

7. The SES Unit o f CSA will be responsible for the procurement o f services and goods. The SES Unit i s under the direct supervision o f the Director General o f the CSA. Jointly, the PFMU and the CSA will prepare an annual work plan and budget approved by the Bank within three months from effectiveness for the f i rs t year and thereafter by no later than December 15 o f each subsequent year.

8. The key issues and r isks concerning procurement for implementation o f the SES scheme have been identified and include (i) the weak institutional capacity in the country, which translates into lack o f qualified procurement professionals at al l levels (ii) the CSA has no prior experience o f managing Bank-financed projects and presently lacks the capacity to manage the scheme with existing staff, (iii) the SES Unit in charge o f procurement i s a new creation which has yet to be established as an organized unit within the CSA (iv) Lack o f experience and knowledge o f Bank’s procurement policies and guidelines, particularly in the area o f the selection o f consultants. I t i s expected that the CSA will have no particular difficulties in procuring small quantities o f goods under shopping method. The above key issues and r isks to the project are mainly in the capacity to manage the selection o f consultants needed under the SES scheme. The following specific action plan was agreed with the Government to establish procurement management capacity and mitigate procurement r i sks for the project:

9. The overall project risk for procurement i s High.

C. Procurement Plan

The Government has prepared a draft procurement plan for the f i rst 6 months with schedules and processing times which provides the basis for the procurement methods and related Bank reviews. This plan will be agreed with the Government during negotiations and will be available at the SES Unit in the CSA. It will also

34

Ref. No.

01.

be available in the Project’s database and in the Bank’s external website. The Procurement Plan will be updated annually or as required to reflect the actual project implementation needs.

Estimated Selection Review Expected cost Method by Bank Proposals

(Prior I Submission Post) Date

Selection o f an HR firm for the 200,000 CQS Prior November 2007 assessment o f SES candidates

C. Frequency of Procurement Supervision

02.

03‘

10. Two supervision missions will be conducted each year to carryout a post review o f procurement actions. The procurement post-reviews should cover 100 percent o f contracts subject to post-review. In addition, post reviews o f in-country training will be conducted from time to time to review the selection o f institutions/facilitators/course contents o f trainees and justifications thereof, and costs incurred.

1 1. Contract Managements: The SES Unit will prepare procurement reports that provide information on the procurement o f services and goods showing procurement performance against plan

E. Details of the Procurement Arrangements Involving International Competition

Project Financial Auditor 50,000 CQS Prior January 2008 Prior January 20 10 Conduct o f impact evaluation o f SES

scheme 70,000 QCBS

1. Goods, Works, and Non Consulting Services

(a) L i s t o f contract packages to be procured following I C B and direct contracting: NONE

2. Consulting Services

(a) L i s t o f consulting assignments with short-list o f international f i rms.

Description of Assignment

12. (b) The selection process o f the HR firm and that o f the audit firm will be subject to Bank prior review. Similarly the terms o f employment and performance monitoring measurement o f SES employees will be subject to prior review by the Bank.

(c) Short l is ts composed entirely o f national consultants: Short lists o f consultants for services estimated to cost less than US$lOO,OOO equivalents per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

35

Annex 6: Implementation and Monitoring Arrangements

1. The proposed Emergency Senior Executive Service Project will be implemented by the C S A working jo in t ly with the PFMU o f the Ministry o f Finance in Liberia. On request o f the Government o f Liberia, the Bank will be disbursing funds directly to the PFMU. The PFRIIU, together with the CSA, will be responsible for progress reporting to the Bank as described in Annex 4.

2. As a result o f c i v i l war for more than a decade, Liber ia has suffered neglect o f the c i v i l service, local capacity i s insufficient for efficient and effective execution by the recipient. The C i v i l Service Agency which i s the natural home for the execution o f the proposed project lacks the institutional, technical and fiduciary capacity to execute the project.

3. The fol lowing institutions had been set up to provide efficient implementation o f the project:

(i) A Program Implementation Committee (PIC) has been set up to provide strategic direction for the successful implementation of the project. The P IC consist o f the fo l lowing members: Director-General o f Civil Service- Chair; Min is t ry o f Planning- Co- chair; Min is t ry o f Finance; Ministry o f State (LRDC Secretariat); Governance Reform Commission; UNDP; USAID, Wor ld Bank Country Representative and, Humanity United .

4. I t is expected that the PIC will meet o n at least quarterly basis. The P I C wil l advocate for the SES in relevant meetings in the course o f their normal working duties, report to the L R D C through the chair o f the Governance and Rule o f L a w pillar, advise o n h o w to address any issue and challenges that m a y arise, ensure high linkage with the selection mechanism and other capacity building programs and above a l l provide strategic direction for a l l aspects o f the program.

(ii) A Senior Selection Committee. This committee wil l be tasked with the responsibility o f assisting the PMU in the selection o f suitable qualified candidates who meet the requirements under the SES scheme.

5. In addition, the C i v i l Service Agency has set up a dedicated unit to work closely with the MDAs where SES staff members will be deployed. An SES Program Coordinator has already been recruited.

36

Annex 7: Project Preparation and Appraisal Team Members

37

Annex 8: Economic and Financial Analysis

1. C iv i l Service Reform projects are a challenge to analyze. While costs are usually known, the benefits are extremely difficult to measure, not least because the services produced by c iv i l servants are not valued by the market, and many o f the outputs, particularly where high level staff are concerned, are intangible. Costs, however, can fairly accurately be stated. The SES scheme will cost approximately US$7.5 mi l l ion over a three year period, with the salary component amounting to about US$2.2 mi l l ion annually. By contrast, the total wage bill o f the c iv i l service in FY06/07 was budgeted at US$46 mi l l ion and in FY07/08 the provision i s US$70 mill ion. The scheme i s planned to grow to 100 SES positions, with three recruitment tranches. The size o f the total c iv i l service payroll has been around 42,000, though this i s being reduced towards 35,000 as ghosts and other forms o f payroll fraud are eliminated. There i s further scope for reducing numbers as surplus positions are identified and staff are separated, with equitable compensation. The average cost o f a SES officer will be around US$2,000 a month (possibly more, depending on how individual positions are rewarded). The average cost o f a regular c iv i l servant, counting both pay and allowances, i s about US$145 a month.

2. If skilled and experienced Liberians can be attracted to the scheme and successfully placed in a performance framework, i t i s reasonable to assume that the value that they will add will exceed the cost o f their services, hopefully with a significant multiplier effect. The importance attached to the scheme by the Government, from the President downwards, the arrangements made for screening and selection, and the close attention that will be paid to the scheme by the funding agencies which are members o f the PIC underpin this assessment.

3. The critical issue for the Government i s whether the SES can be sustained after the period o f external financing has ended. This will depend on several factors. The f i rs t i s the growth o f domestic revenues, which have performed well in the past two years, and can reasonably expect to continue growing as economic recovery proceeds. The Government hopes that revenues will r ise to around US$300 mi l l ion in three years, and, while this i s an optimistic figure, it i s not out o f reach. Assuming the wage bill maintains i t s share o f total spending, the amount available for salaries and allowances o f the whole c iv i l service could rise to just over US$lOO million, more if donors provide budget support. In a narrow sense, this would provide more than sufficient resources for full local funding o f the SES positions, once donor support ends.

4. The unknown part o f the equation i s the claim on resources from the rest o f the c iv i l service wage bill. In the long run, the Government would want to bring into being a new pay and grading structure which would be greatly decompressed relative to present scales, paying unskilled c iv i l servants a basic living wage (perhaps around US$200 a month), and top c iv i l servants broadly in l ine with local labor market comparators, after adjusting for the difference in working conditions. This would bring the top end o f the pay structure close to the proposed SES scales, thereby enabling integration o f the SES into the rest o f the c iv i l service.

5 . H o w quickly the Government can carry though a broader program o f c iv i l service reform, leading to rightsizing and pay reform remains to be seen. Progress will be watched closely during implementation, and if necessary the scheme will be adjusted, either by reducing i t s size, redefining i t s terms, keeping it a distinct part o f government employment after the period o f donor funding has

38

ended, or terminating the experiment. As with al l novel schemes, i t i s necessary to constantly monitor whether i t is working, and make changes if required. Bo th the government and the development partners are aware o f the experimental nature o f the scheme, i t s challenges, and i ts potential for high payoff. Under the parallel LICUS Grant for capacity building in the CSA, the Bank i s financing a pay and employment study, which will shed light o n the changes needed to existing scales required to integrate the SES. The study wil l show the pathway to a more viable c i v i l service pay structure, based upon much greater differentials, restriction o f pay improvements to only those MDAs undergoing structural reform, staffing levels based upon organizational structures which reflect mandates.