Compliance Risk Assessment Framework in Armenia

A comprehensive risk assessment framework has been developed to identify potential compliance risks in Armenia’s infrastructure development projects. The framework, funded by the Asian Development Bank (ADB), aims to ensure that government agencies and implementing partners adhere to international best practices and minimize corruption.

Key Areas of Concern

The risk assessment identified several areas of concern, including:

• Weak capacity within key ministries: Ministry of Transport and Communication (MOTC), State Committee on Water Economy (SCWE), Ministry of Territorial Administration (MTA), and Ministry of Finance (MOF) to implement key budget cycle components.
• Lack of consensus on reforms: This could delay program implementation.
• Public financial management weaknesses: Poor budget planning, lack of performance information, and weak internal audit functions.

Improvement Areas

The framework highlights several key areas where improvements are needed:

• Procurement: Despite the new legislative framework, procurement procedures at the central level and in agencies such as MOTC, MTA, and SCWE remain inadequate, which can reduce value-for-money.
• Corruption: While the legal and regulatory framework for anti-corruption is adequate, actual implementation is weak, reducing incentives for government agencies to fight corruption.
• Public Financial Management: Weak internal audit functions and control environments may not be able to prevent fiduciary risks.

Mitigation Strategies

To mitigate these risks, the program will provide technical assistance (TA) to build capacity and improve budgetary and management skills in participating agencies. Stakeholders, including road and water users, civil society organizations, and government officials, were consulted during program design and will be kept informed throughout implementation.

Program Activities

The TA will support:

• Development of specific water sector studies
• Improvement of performance information availability to the general public
• Establishment of grievance and redressal mechanisms for water and roads
• Justice reforms, including new training opportunities for key national institutions, expert advice, and setting up schools for lawyers, judges, and prosecutors

Overall Objectives

The risk assessment framework aims to promote transparency, accountability, and integrity in Armenia’s infrastructure development projects.