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Millennium Challenge Corporation Presentation to the International Consortium of Government Financial Managers May, 2005 Millennium Challenge Corporation Millennium Challenge Corporation 14 Months Old Established in law January 2004 Mandate is Poverty Reduction Through Economic Growth Based on Key Lessons of Aid POLICIES MATTER COUNTRY OWNERSHIP RESULTS BASED Policies Matter Funding Alone Does Not Solve the Problem Country Eligibility Based on Sixteen Independent Indicators Ruling Justly Investing in People Encouraging Economic Freedom Candidate Pool is IDA Eligible Countries Policies Matter 17 Selected by MCC Board in FY 2004 and FY 2005 • Armenia • Honduras • Mozambique • Benin • Lesotho • Nicaragua • Bolivia • Madagascar • Senegal • Cape Verde • Mali • Sri Lanka • Georgia • Mongolia • Vanuatu • Ghana • Morocco Policies Matter MCC Eligibility Intended to be an Incentive to Improve Policies Threshold Program Reinforces this Objective Threshold Countries ▪ Close on the Indicators ▪ Demonstrated Commitment to Reform May Propose Funding to Specifically Improve on MCC Indicators Policies Matter 13 Threshold Countries Selected by MCC Board in FY 2004 and FY 2005 • Albania • Philippines • Burkina Faso • Sao Tome and Principe • East Timor • Tanzania • Guyana • Uganda • Kenya • Yemen • Malawi • Zambia • Paraguay Country Ownership Eligible Countries Submit Proposal for MCC Funding Proposals – Identify Obstacles to Poverty Reduction Through Economic Growth – Identify Actions to Eliminate Obstacles – Must be Measurable – Must be Based On a Consultative Process Results Based Specific Objectives Built Into Compacts Monitoring and Evaluation Integrated in Design of Compacts Performance on the Indicators Must Continue What is Fiscal Accountability? The Processes and Entities Responsible for Managing MCC Funds The Guidelines Governing Procurement The Entities Responsible for Administering Procurements Principles of Fiscal Accountability Mechanisms Every Country is Unique, No Single Solution Find a Solution That Best Serves Compact Objectives Build Upon Existing Mechanisms When Possible Leave Capacity In Place Wherever Possible Solution Must Have Maximum Transparency, Integrity, and Accountability ELEMENTS OF FISCAL ACCOUNTABILITY1 Audit MCC $$ GOVT MCC REP FISCAL AGENT/ FUNDS CONTROL ACCOUNTABLE ENTITY BANK ACCOUNT PROCUREMENT AGENT PROJECT MANAGER 1 VENDOR VENDOR PROJECT MANAGER 2 VENDOR VENDOR $$ 1This diagram is for illustrative purposes only. Illustrative Models Government Non-Government Accountable Entity – Prime Minister or Cabinet MCC Steering Committee Fiscal Agent – Ministry of Finance Accounting Firm Procurement Agent – Ministry of finance Private Implementer Bank Account – Central Bank Commercial Bank Project Managers -- Line Ministries NGOs Common Elements Financial and Procurement Information Available Publicly Through a Local MCC Website Money Will be in Tranches All MCC Programs Will Be Subject to External Audit Role of the MCC Inspector General Where is the MCC Today? Sixteen Proposals Received Due Diligence is Ongoing $2.5 billion Appropriated To Date Request for Additional $3 billion Compact With Government of Madagascar Signed on 18 April 2005 $110 Million over 4 Years Goal – Increase Investment In Rural Madagascar Three Projects 1) Land Tenure 2) Financial Sector 3) Agricultural Business Investment Madagascar Compact Fiscal Accountability MCA-Madagascar Established By GOM as Governing Body Steering Committee Serves as Board, both Government and Non-Government Members Professional Fiscal Agent and Procurement Agent Selected Through A Competitive Process Procurement Guidelines Based on Madagascar Law Upcoming MCC Activity At Least 4 Additional Compacts Expected This Summer More by the End of the Year Threshold Programs Expected to Be Approved Starting This Summer