- The Puntland Constitution which was enacted in 2012 specifies that Puntland is a federal member state of the Federal Republic of Somalia. The state is managed by an elected president and supported by a three-tier structure of government consisting of the state executive, regional governors, and district councils. There are currently nine regions each headed by a governor. The region, which is an administrative level funded through the budget of the Ministry of Local Government and Rural Development, performs mainly coordination, security, and political functions. Below the nine regions, the state is divided into 40 districts. Each district is led by a district council, which is chaired by a district commissioner/mayor. Puntland witnessed a peaceful transition of power on January 8th 2014.
- In the last several years, the government of Puntland has initiated and implemented several reforms in PFM and public administration reforms. These included tax and budget reforms and the establishment of the civil service commission among other initiatives. Some of the reforms at the Central Government (National) and the Local Government (Sub-National) levels have attracted technical and financial support from the international development partners, notably the United Nations (UN) agencies.
- The Puntland framework for decentralized governance and service delivery is embedded in the Law No. 7 2003 Local Government Act, which provides a significant degree of devolved power to the districts, backed by revenue and expenditure assignments. It also outlines the districts’ right to domestic and international borrowing, on previous approval from the state government. Because of extremely limited fiscal capacity, the state government has had little involvement with service delivery responsibilities. It has been concerned largely with regulatory functions and some revenue collection. Appointments down to the district level are made centrally, but the districts have significant autonomy over their revenue sources.
- The Puntland authorities have discussed public sector reforms issues and challenges and proposed a vision of “effective Government and sustainable service delivery for all” to be implemented through four main reform components: (i) managing public finance and procurement; (ii) managing human resources; (iii) building institutions and measuring performance; and (iv) improving service delivery. A Puntland Public Financial Management reform strategy concept note was also prepared and is used to underpin the design of the project activities to be undertaken in Puntland.
- At the Puntland Roundtable with International Partners (21 May, 2014); the Roundtable underlined the importance of ensuring equitable and fair development throughout Somalia and recognized the criticality of this issue in the New Deal. International partners welcomed the strengthened engagement with Puntland State and committed to continue this form of dialogue. It was agreed that Puntland’s priorities (Puntland’s priorities for Revenue and Public Financial Management Reform (2014-2016) – Priority 2: Increasing the Inland Revenue by elimination of tax evasion practices, and the improvement in tax collection mechanisms; and Priority 4: Strengthen Public Financial Management by improving the efficiency and effective use of resources in a transparent and accountable way that includes strengthening the budget process, establishing a chart of accounts and enhancing public procurement) should be taken into account in the Somali Compact and that Puntland’s participation in the New Deal aid architecture was important – particularly in the Somali Development and Reconstruction Facility (SRDF).
- The PFM II project will contribute to the following high level objectives.
- Donor partnerships will be strengthened as this project is part of broader PFM support effort by development partners around a common Government-owned reform agenda. PFM reforms will enable increased donor coordination under the government’s leadership consistent with the Somali Compact.
- Contributes to knowledge and learning that will improve operations in sectors for effective service delivery.
- More effective, transparent and accountable collection, management and use of public resources that builds citizen trust for the social agenda (state-citizen compact). PFM legal framework will reduce discretion and curb opportunities for corruption.
- The Project Development Objective (PDO) is “to establish and strengthen institutional capacity for the management of public funds in central finance agencies and targeted sectors”.
- Achievement of the PDO will be measured by the following key performance indicators.
- Reduced variance between actual primary expenditure and the originally budgeted primary expenditure
- Time elapsed (in months) between end of period covered and submission of audit reports to the legislature
- Increase in real terms of domestic revenue collection
Key Intermediate Results and Indicators:
Intermediate Result (IR) 1: improved realism of the budget and fiscal discipline
- Increased budget execution rate in selected sectors
- Revenue mobilization strategy implemented
Intermediate Result (IR) 2: Strengthened controls for fiscal discipline, transparency and reporting.
- Improvement in coverage and classification of data in in-year budget reports
- Improvements in information contained in annual financial reports with regard to application of International Public Sector Accounting Standards (IPSAS) – cash basis
- % of contracts using competitive procurement methods
Intermediate Result (IR) 3: Strengthened key integrity pillars to hold government accountable for the use of public funds.
- % of expenditures represented by the government entities audited in total public
- % of audit recommendations for which there is evidence of follow-up
Intermediate Result (IR) 4: number of PFM accredited staff
- Number of students completing certificate and diploma stages
Intermediate Result (IR) 5: Demand-driven Just-in-time Services (Bank Executed)
- PFM reviews and actionable advisory notes