Consolidating Public Financial Management Systems and Improving Procurement and Human Resource Management in Honduras

Challenge

In 2009, according to the Institutional Governance Review, patronage and clientelism negatively affected public sector, a result of limited transparency in public finances, public procurement and control over public personnel expenditure. The PFM system required technical upgrades to allow for greater access and to enable linkages with other systems to complete tracking of expenditures and obligations. Furthermore, an institutional framework to formulate, monitor and evaluate public sector programs was missing. At the time of appraisal, human resources was perhaps the weakest area as wages were increasing without any effective controls. 

Approach

Honduras’s Country Vision (2010-2038) and National Plan (2010-2022) shared the goal of creating a modern, transparent and efficient state. The Project was developed to support stronger management of public finances and the introduction of internal payroll control systems to improve control over the wage bill. In addition, the Project aimed to strengthen the administration capabilities in monitoring and evaluation and public procurement by facilitating the upgrade of the e-procurement system and the development of tools to enhance efficiency and transparency in public procurement. Overall, the Project sought to achieve more efficient business processes and improved information systems that would enable government staff to better perform their tasks. 

Results

Institutional strengthening was at the core of the project. Results were mainly achieved between 2014 and 2015. However, they were limited as few activities were implemented and the trajectory of the started reforms remains to be seen. On this regard, it is important to note that shifts in the commitment and political will of the Government and executing agencies compromised implementation form the start-up. These changes affected components 1,2 and 3, and led to significant slippages during the first two years, which eventually resulted in the non-completion of expected outputs and non-achievement of  the desired outcomes at exit. This in turn led to a partial cancellation of funds near project closure. In terms of the results achieved, the development and implementation of a new technological framework to enhance usability and access to the country’s PFM system, only the budget formulation module was completed and operationalized in all central government and 70% of decentralized institutions. In the case of public procurement, standard templates for procurement plans and standardized procurement documents were produced between 2012 and 2013 whereas six framework agreements were designed and implemented for common use goods. In the case of human resource management, payroll audits in five institutions (Education, Health, Infrastructure, and Security Secretariats and Tax Administration Agency) were completed and an institutional functional review was conducted on those Secretariats plus the Finance Secretariat and the Civil Service Directorate. These reports provided an action plan (currently pending implementation) for the strengthening of human resources and payroll management. Additionally, sectoral strategies and indicators were developed for 4 out of 7 sector cabinets and these tools were successfully integrated in the Integrated Financial Administration System (SIAFI) new budget module.

Bank Group Contribution

IDA contributed SDR 11.7 million, equivalent to US$18.2 million for the implementation of the project. Overall, SDR 3.45 million were disbursed and SDR 7.9 million were cancelled prior to the closing of the project. Despite implementation shortcomings, the project was instrumental in informing and providing key prior actions for two Development Policy Credits that were processed in 2014 and 2015 respectively. Actions included the enactment and issuance regulations for the use of framework agreements, and the creation of budget ceilings in the new SIAFI, consistent with the medium term macroeconomic and fiscal framework. 

Partners

No partners were involved in the funding of the activities. Regarding implementation, a Project Implementing Unit was created within the Finance Secretariat Project Administration Unit, and a Steering Committee was established to address implementation bottlenecks. As for the alignment, the project was the key instrument expected to deliver improved accountability in public expenditure in line with Objective 3 of the FY12-14 Country Partnership Strategy.  Moreover, it remains relevant as the FY16-20 Country Partnership Framework recognizes the importance of building institutions and increasing institutional capacity, and the Government´s “Plan for a Better Life” acknowledges enhancing transparency and modernization of the State as a key pillar.

Moving Forward 

The government is committed to continue work on the remaining modules of the new SIAFI and is keen to implement the recommendations from the action plan on improving human resources management. Following the closing of the project, a South-South Knowledge exchange was conducted between Colombia, Peru and Honduras, and conversations with donors were held to further support the government in the implementation of the recommendations and the enhancement of public expenditure effectiveness and accountability in the country.

Beneficiaries 

The main beneficiary of the project was the government of Honduras, which will benefit from more efficient business processes and improved ICT systems (SIAFI GES), as well as from knowledge and skills achieved through training activities financed by the Project.