VZCZCXRO3904
OO RUEHDE RUEHROV RUEHTRO
DE RUEHNR #1460/01 1910758
ZNR UUUUU ZZH
O 100758Z JUL 09
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0303
INFO RUCNSOM/SOMALIA COLLECTIVE PRIORITY
RUEHAR/AMEMBASSY ACCRA 0950
RHEHNSC/NSC WASHDC
RUEKDIA/DIA WASHDC
RUEAIIA/CIA WASHDC
RHMFIUU/CJTF HOA
RUZEFAA/CDR USAFRICOM STUTTGART GE
RUZEFAA/HQ USAFRICOM STUTTGART GE
RHMCSUU/CDR USCENTCOM MACDILL AFB FL
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 03 NAIROBI 001460 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR AF/E AND A/S CARSON 
ACCRA PLEASE PASS TO A/S CARSON 
 
E.O. 12958:  N/A 
TAGS: PGOV PREL ECON EAID SO
SUBJECT: SOMALIA - TFG Begins Partnership with Price Waterhouse 
 
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Summary 
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¶1.  (SBU) On June 29, Somalia's Transitional Federal Government 
(TFG) signed a contract with PricewaterhouseCoopers Associates 
Africa (PWC) for financial management, tracking and monitoring of 
development donor funds, government procurement management, and to 
develop and implement a financial management capacity-building plan. 
 The contract, which will begin July 29, will provide a mechanism 
for increased oversight and transparency by establishing 
standardized financial management systems for the TFG.  The TFG has 
three months to attract donor funds to the mechanism, after which 
time the TFG will have to pay a maintenance fee to PWC to continue 
the program.  While the agreement is only for the management of 
donor contributions, the Ministry of Finance plans to replicate the 
system for all internally-generated revenue.  PWC has already 
identified a fourteen-member Kenyan team, and subcontracted with a 
Mogadishu business institute and a Somali-Canadian firm to contract 
trainers, verification staff, and other partners on the ground.  The 
driving force behind the agreement between the TFG and PWC is an 
AmCit advisor to the Minister of Finance, Abdusalam Omer, who 
negotiated the agreement.  This agreement represents an important 
step forward for much needed transparency and accountability that 
should translate to more resources for the TFG to use in key 
priority areas.  End Summary. 
 
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Comprehensive Financial Management 
Monitoring and Oversight Contract 
---------------------------------- 
 
¶2.  (SBU) On June 29 PricewaterhouseCoopers Associates Africa signed 
an agreement with the TFG to provide financial management, tracking 
and monitoring of development partners funds.  This contract also 
includes oversight of procurement processes and will have PWC 
develop and implement a capacity building plan.  The contract 
includes objectives, activities, and outputs in each of these areas. 
 A copy of the entire contract has been sent to AF/E.  The key 
components of the agreement between the TFG and PWC follow. 
 
¶3.  (SBU) Financial Management of Development Partners Funds 
Key Activities: 
-- Establish administrative, procurement and financial systems and 
procedures within the TFG that allow for rapid but transparent 
procurement 
-- Develop an acceptable and efficient fund disbursement and timely 
reimbursement process 
-- Set up and monitor bank accounts 
-- Track the flow and usage of funds 
-- Prepare adequate documentation and justification for 
reimbursement of expenditures pre-financed by development partners 
-- Set procedures for review and approval of all reimbursement 
requests, with a covering note recommending or not recommending 
payment 
-- Review the budgets for these expenditures 
-- Develop a standard financial management system including an 
accounting manual containing instructions, policies, reporting 
timetable and procurement systems 
 
¶4.  (SBU) Procurement Management Key Activities: 
-- Devise transparent, competitive and cost effective procurement 
procedures 
-- Plan procurement based on a clear and concise procurement 
strategy that details the procurement methodology, schedule, time 
frame, logistics, inventory receipt, and hand over 
-- Conduct procurement by observing competitive bidding procedures 
-- Obtain confirmation of receipt of procured goods and services as 
per specification 
-- Ensure that valid contracts were executed between the TFG and 
suppliers of goods and services 
-- Ensure that strict procurement procedures and prompt payments 
were applied 
-- Ascertain that the contractors/service providers are not being 
rewarded for poor performance by being awarded more contracts 
-- Physically verify existence of tangible items procured 
-- Review the timeliness of supply of goods and services 
-- Monitor adherence to the procurement plan 
 
NAIROBI 00001460  002 OF 003 
 
 
 
¶5.  (SBU) Tracking and Monitoring Funds Key Activities: 
-- Ensure disbursed funds are used effectively and efficiently for 
purposes in which they are intended 
-- Carry out monthly spot checks on all expenditure incurred, 
checking conformity of expenditure with approved budgets 
-- Review expenditures to ensure that payments are adequately 
supported, classified and authorized 
-- Review procurements to ensure value for money was obtained on all 
purchases 
-- Verify bank and cash transactions and balances 
-- Review the accuracy and completeness of financial reports 
-- Verify fixed assets 
-- Report and take immediate action where discrepancies are 
discovered 
 
¶6.  (SBU) Develop and Implement a Capacity Building Plan Key 
Activities: 
-- Develop a capacity building plan and program which identifies 
training needs and specifies how TFG staff will be trained 
-- Prepare and discuss the capacity building plan with the TFG, 
development partners and participating stakeholders 
-- Identify critical success factors necessary to implement the 
capacity building plan such as top management commitment, timely, 
structured and effective communication, availability of funds, 
transfer of skills, and timely availability of resources including 
required teams, feedback and documentation 
-- Deploy skilled and experienced resources to roll out a capacity 
building plan 
-- Provide on-the-job training on financial and procurement 
management and any other related issues 
-- Devise solutions that are value-adding, innovating and workable 
-- Prepare quarterly assessments based milestones in 
capacity-building plan 
 
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Implementing Contract Terms 
--------------------------- 
 
¶7.  (SBU) The contract states that it will go into effect July 29. 
Although the contract is not yet officially in force, PWC has 
already begun certain activities.  On June 30, the day after the 
agreement was signed, PWC opened a US Dollar bank account at the 
Nairobi branch of Standard Chartered Bank of Kenya Ltd.  There are 
no TFG officials who are currently signatories on this account (much 
to the chagrin of several ministers).  Both of the signatories are 
from PWC, but any disbursement must be requested with a signed 
letter from the Minister of Finance.  PWC's comprehensive best 
practice accounting and procurement manuals are being translated 
into Somali and should be completed by the week of July 13. 
 
¶8.  (SBU) In order to implement the contract, PWC has identified a 
team of fourteen Kenyan staff (full bios are in the contract copy 
sent to the Department).  When we told PWC team leader Alphan Njeru 
that the PWC staff should go into Mogadishu, he assured us that they 
will regularly travel into the country.  In order to ensure daily 
fiscal oversight, PWC is negotiating a sub-contract with the 
Mogadishu-based Somali Institute of Management and Administration 
Development (SIMAD).  (Note: We are very familiar with this 
institute which provides an excellent business and management 
courses.)  PWC intends to build the capacity of SIMAD to be the core 
training center for all of the government administrators who have 
some financial management responsibilities.  PWC is also negotiating 
a contract with a Somali-Canadian firm to provide verification and 
other services on the ground and to train the necessary PWC contract 
staff in Mogadishu. 
 
------------------------------- 
AmCit Advisor Driving Oversight 
------------------------------- 
 
¶9.  (SBU) In 2008 then Prime Minister Nur Hassan Hussein opened 
discussions with PWC to establish a financial management system. 
Current Prime Minister Omar Sharmarke has also prioritized 
re-establishing of credibility in the area of financial management. 
Both men have lamented to us that while the international community 
is in full support, this often does not translate to tangible 
operational funds due to lack of government financial transparency. 
 
NAIROBI 00001460  003 OF 003 
 
 
The TFG's success in sealing the deal at this time can be largely 
attributed to the work of Abdusalam Omer, Senior Advisor to the 
Ministry of Finance.  Dynamic, and with considerable financial and 
administration experience, Omer began working with the TFG only two 
months ago.  In this short time, he successfully negotiated all of 
the contractual terms and persuaded both parties, each of which held 
serious reservations about the partnership. 
 
¶10.  (SBU) Omer told us PWC was willing to take the risk of working 
with the TFG at this time because of previous discussions with 
Embassy Nairobi about how to support the TFG.  As payment for 
managing the program, PWC charges a percentage of the funds under 
management.  PWC is charging a management fee of 4.0% for 1 to 100 
million dollars, 3.5% from 100 million to 200 million dollars, and 
3.0% above 200 million.  (NOTE:  the UN's Somalia Trust Fund 
management fee is 18%.  End Note.) Importantly, Omer noted that if 
no funds come through the account within the first three months, PWC 
will require the TFG to pay a retainer to continue the project, and 
PWC may be less anxious to move as quickly as they already have.  He 
requested that the United States quickly use the PWC mechanism to 
funnel assistance to the TFG. 
 
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Comment 
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¶11.  (SBU) This agreement is a major achievement for the TFG.  By 
working with a reputable firm, the TFG has the opportunity to build 
the trust of the international community and all Somalis in its 
financial management.  While building the capacity of the Ministry 
of Finance and other administrators throughout the government, it 
will also give the TFG some independence from UN and other agencies 
to deliver services in the country.  We expect that the oversight 
system's initial stages will be rough, but if the Ministry of 
Finance and advisors like Omer remain committed, this program has 
the potential to greatly improve a core government function.  We 
fully support any new USG funds to use the system. 
 
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Biographical Note: 
Dr. Abdusalem Omer 
------------------ 
 
¶12.  (SBU) Abdusalam Omer was born in Northern Somalia, attended 
school in Mogadishu, and left Somalia as a teenager.  He completed 
high school in Boston and then went to Brandeis University and 
completed a degree in Economics from Boston College.  He began his 
career as a researcher at MIT then went to University of Oklahoma 
where he earned a Master's in Public Administration.  He went on to 
the University of Tennessee where he earned a PhD in Public 
Administration and began teaching.  Omer migrated to the DC area in 
the 1980s where he worked in the Budget Office of the VA Dept. of 
Transportation.  He was attracted to the DC Public School system "to 
help the poorest in a land of riches" where he held various 
leadership positions in the offices of budget and planning.  Omer 
eventually became the Budget Director and then Chief of Staff of 
former Mayor Anthony Williams.  In 2001, Omer left Washington to 
work for UNDP with Somali remittance companies, and then for five 
years as the UNDP's Somalia program manager for governance and 
finance.  During this time, he met Sharif Hassan who was serving as 
Speaker of Parliament.  Omer returned to Washington to serve as the 
Chief Operating Officer of the DC Public School system and then went 
to the World Bank for a project in Bande Ache, Indonesia.  After 
being selected as Deputy Prime Minister and Minister of Finance, 
Sharif Hassan contacted Omer and over the course of several months, 
persuaded him to become his Senior Advisor. 
 
SLUTZ