[{"bbox": [93, 152, 1164, 233], "category": "Text", "text": "Linked to the point above, is the **risk of stagnant revenue mobilisation**, insufficient to ensure a meaningful role of the state in service delivery, coupled with lack of clarity in **functional assignments** across levels of government, and of a viable model for **resource equalisation** via revenue sharing/fiscal transfers from FGS to FMS."}, {"bbox": [93, 243, 1164, 405], "category": "Text", "text": "Of particular relevance to budget support to a country with weak PFM and accountability systems, is the risk of misappropriation of public funds, or of the abuse of public resources to pursue narrow political agendas. In particular, there are significant **governance risks associated with the granting exploration rights in the petroleum sector**, in absence of a strong governance and institutional framework, which can ensure transparency and prevent corruption in the concession award process, as well as undue exposure to the risks of future compensation claims, legal dispute and poor value for money. Such risks have partially materialised during the implementation period of the current SRBC."}, {"bbox": [93, 415, 1164, 497], "category": "Text", "text": "Rapid increase in external financing channelled via country systems could also place stress on still undeveloped PFM and accountability systems, coupled with weak or absent legal and institutional frameworks and/or basic bureaucratic capabilities; predictable policy development, and reliable data."}, {"bbox": [93, 507, 1164, 615], "category": "Text", "text": "As regards PFM and accountability issues, risk mitigation will comprise support to CSOs to perform their vertical accountability function; support to the Financial Governance Committee (FGC) as well as support to the Office of the Auditor General (OAG), and a contribution to the IMF Somalia Country Fund for capacity development. **These are all to be funded from the Economic Governance and Anti-Corruption Programme under AAP 2022.**"}, {"bbox": [93, 626, 1164, 814], "category": "Text", "text": "The FGC is a specially designed mechanism established jointly by development partners and Somali Authorities to reduce corruption in a limited number of strategic high value procurement and concession contracts. Commitment to the mechanism by the FGS, coupled with dedicated TA, has been part of SRBC conditionality. The effectiveness of the initiative has been widely recognised, and as EU we have been closely engaged through funding the sensitive position of Donor Delegate to the FGC, as well as providing ad-hoc TA to specific transactions under FGC review. Continuing and enhancing our direct engagement in what is de facto Somalia's most effective anti-corruption initiative, will be an important feature of the EU's overall engagement in Somalia."}, {"bbox": [93, 824, 1164, 985], "category": "Text", "text": "Support to OAGS will also contribute to risk mitigation, by strengthening external scrutiny of FGS and FMS finances and support the gradual implementation of an effective independent audit function in Somalia. This will build on the encouraging progress made to date with the support of the first SRBC that enabled, for instance, the OAGS to undertake since 2019 (for the first time in its history) financial and compliance audits of FGS institutions, broadly in line with internationally accepted standards. However, the continued absence of a modern legal framework reduces the OAGS ability to discharge its role, particularly with regards to independence from the executive."}, {"bbox": [1027, 1680, 1144, 1706], "category": "Page-footer", "text": "Page 16 of 26"}]