New Fiduciary Services Unit Formed to Enhance Financial Management Practice
The Ministry of Finance and Economic Development (MFED) has established the Fiduciary Services Unit (KFSU) with donor assistance, aimed at improving financial management practices in infrastructure projects. The unit will lead the Financial Management (FM) practice on behalf of donor-financed projects, conforming to international best practices.
Entity-Specific Risks Identified
A risk assessment conducted by MFED identified several entity-specific risks that need to be addressed:
- Low In-House Capacity: Low capacity for project FM will be mitigated by recruiting qualified and experienced experts into the Project Management Unit (PMU).
- Insufficient Staff: Lack of sufficient staff to undertake project FM functions will be addressed by hiring qualified professionals.
- Inadequate Contingencies: Inadequate physical and price contingencies provided in cost estimates will be reviewed and updated accordingly.
Project Risks Identified
The risk assessment also identified several project-specific risks:
- Capital Cost Overrun: Capital cost overrun due to inadequate physical and price contingencies.
- Delayed Payments: Delay in payments due to inefficient funds flow management.
- Financial Reporting Reliability: Reliability, regularity, and timeliness of financial reporting.
Action Plan Developed
Based on the risk assessment, an action plan has been developed to improve financial management capacity at the Public Utility Board (PUB). The plan includes:
- Business Analytics Module: Development of a business analytics module to improve management accounting and disclosure.
- Staff Training: Regular training of accounting staff to improve their financial management capacity.
- Consultancy Services: Engagement of consultants to strengthen critical capacities of internal auditing, project supervision and monitoring, and financial management training.
Implementation Plan
The Ministry of Finance and Economic Development will be the Executing Agency for the project. The Public Utility Board (PUB) and the Ministry of Infrastructure and Sustainable Energy (MISE) will be responsible for implementing the project. The Asian Development Bank (ADB) will monitor the project’s progress to ensure that loan proceeds are spent as agreed upon.
Conclusion
The establishment of the Fiduciary Services Unit is a significant step towards enhancing financial management practices in the country, ensuring transparency and accountability in the use of donor funds.