OUTPUT BASED AID (OBA) Financial Management Perspective Saidou Diop Financial Management Specialist Senegal and The Gambia Co AFTFM The World Bank Washington March, 2008

Why Growing Interest in OBA?

Growing Interest in OBA  Definition. OBA is one method for improving the delivery of basic services such as water, sanitation and electricity, when the inability of users to pay full cost would justify performance-based subsidies to complement or replace user fees.  Main Aspects of OBA :  Focusing project implementation on results ( i.e, outputs)  Reducing transaction cost, particularly for high capacity borrowers  Providing innovative and efficient means for disbursing, using new designs that remain consistent with Bank policies and procedures.

Does OBA change Fiduciary approach ? All Bank Fiduciary and Safeguard policies required under investment lending apply to OBA operations:  Financial Management/Reports, Audit, Disbursement (OP 10.02), expenditure eligibility (OP 6.00)  Disbursement – question of expenditure-based vs OBA approach performance-based – definition of eligible expenditures/allocation  Procurement standards (OP 11.00) - OBA Projects are not exempt from Bank Procurement requirements –- distinguishing: (a) OBA through competitive selection of service providers; and (b) OBA through direct arrangements with incumbent service providers.

From design to Implementation How do we get there? SO, What Fiduciary Arrangements for OBA ?

 During Appraisal and Preparation Project Components. Define classes of Outputs, estimated their Unit cost and OBA subsidies FMA. Assess reliability on providing credible data on unit cost of output FMR/IFR. Include certified list of outputs completed and delivered, form basis for disbursement Audit TORs. Specify sampling review of outputs and UC and reporting on reasonableness Fiduciary Processes in OBA : Areas of focus (1)

 During Implementation Supervision. Sample-verification of physical delivery of outputs and their technical quality as complement to recipient reporting on output completion Disbursement. Payment based o n output delivery - upon independent verification of pre-defined output(s), in pre-agreed amount for the specified service – regardless of actual cost  MTR. Adjust unit cost if deem necessary after independent review (UC variances). Fiduciary Processes in OBA : Areas of focus (2)

MEF Auditors/ consultants Auditors/ consultants Firms / OCBs/consult. Invoices PIR PIP OVR AGETIP Validated RP ONAS RP Quarterly IFR Advance ceiling Quarterly replenishment Seed fund Quarterly reimbursement Payment Quarterly RP CFP OVC OVR AGETIP GPOBA Payment Invoices ONAS Senegal On site sanitation – A GPOBA structuring Project

Sample of IFR (1/2)

Some Examples  Morroco Social Priorities Program Basic Education Project (P005501)  Mexico Decentralized Infrastructure Reform Loan (P )  Albania Health System Modernization Project (P082814) Link to OBA -

Salient Challenges  Complexity in determining and monitoring unit costs  Joint capacity assessments in OBA Project involving other Donors  Using the borrower’s fiduciary systems  Securing agreement among stakeholders (Service Providers, CBO/NGO)  Elaborate FM Guidance note for OBA

Conclusion  OBA operations are responsive to the Bank’s heightened focus on beneficiary ownership, stronger partnerships and results, while continuing to meet the Bank’s fiduciary obligations.  Challenge is to scale up and implement in collaboration with borrowers and development partners in ways that will support a country´s poverty reduction agenda.

Some Outputs of Senegal OBA Shower+ TCM Shower TCM: Manual Discharge Toilet Shower+ BALP

Thank you.