Attachment_4_MCC_Guidelines_for_Accountable_Entities_and_Implementation_Structures.pdf

July 21, 2008

GUIDELINES FOR ACCOUNTABLE ENTITIES

AND IMPLEMENTATION STRUCTURES

1.0 Introduction

In connection with entering into a Compact, the government of a Millennium Challenge Account eligible country (“Government”) must identify a legal entity that will be accountable for the projects funded by the Millennium Challenge Corporation (“MCC”). MCC will fund these projects under a grant agreement, referred to as the Millennium Challenge Compact, between MCC and the Government, using financial assistance from the Millennium Challenge Account (“Compact”). This Accountable Entity should have the authority and responsibility to oversee the MCC funded projects and their various components and activities (“Program”), allocate resources, oversee and implement a financial plan, approve expenditures and procurements, continue the consultative process, and be accountable for the Program’s results. The Accountable Entity serves as the single point of contact on behalf of the Government during implementation of the Program for MCC, other donors, contractors and consultants, as well as the general citizenry. Regardless of the entities selected to implement the Program (private sector, non-governmental organization, Government Affiliate or other organization), the Government through the Accountable Entity remains responsible for its commitments under the Compact. Thus, determining the appropriate Accountable Entity and its supporting structure is a key Government decision.

1.1 Scope

A. This policy document sets forth MCC’s guidance with respect to the Accountable Entity, the legal entity designated under the Compact between MCC and the Government of the MCC eligible country to implement the projects specified in the Compact.

B. These guidelines also address the rights and responsibilities of the Accountable Entity in relation to the other entities designated either to assist in the implementation of the Compact, specifically the fiscal agent, the procurement agent and the implementing entities, or to provide advice to the Accountable Entity, such as a Stakeholders Committee or Advisory Council.

1.2 Definitions. The following compendium of capitalized terms that are used in these guidelines is provided for the convenience of the reader.

A. “Accountable Entity” means the legal entity designated by the Government to implement the Program on behalf of the Government during the Compact term.

MCC Guidelines for Accountable Entities and Implementation Structures

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B. “Advisory Council” means the council or committee that provides formal guidance and recommendations to the Accountable Entity’s designated decision-maker if such decision-maker is an individual. For example, if the Accountable Entity is an existing ministry or other Government Affiliate, an Advisory Council can be established to advise the minister responsible for the Accountable Entity.

C. “Board” means the body responsible for making decisions on behalf of the Accountable Entity. Other names utilized by MCC countries include board of directors, supervisory board, supervisory council, steering committee and governing council.

D. “Compact” has the meaning given this term in Section 1.0.

E. “CPS” means Common Payment System which utilizes both the International Treasury Services (ITS) and/or Secure Payment System (SPS) by MCC to process payments in US dollars or foreign currency directly to vendors for goods, works or other services received.

F. “Disbursement Agreement” means the agreement between MCC, the Government and the Accountable Entity, which provides the terms and conditions for disbursements of MCC Funding. Beginning in May 2007, a Program Implementation Agreement, rather than a Disbursement Agreement, will be executed in connection with Compact implementation.

G. “Executive Committee” means a committee, comprised of selected Board members, authorized to take certain limited actions.

H. “Fiscal Agent” means the entity selected and engaged through an international competitive process, the Ministry of Finance, or another governmental entity, as agreed between the Government and MCC, responsible for performing certain financial management activities on behalf of the Accountable Entity.

I. “Government” has the meaning given this term in Section 1.0.

J. “Government Accountability Office” or “GAO” means the U.S. Government Accountability Office.

K. “Government Affiliate” means an affiliate, ministry, bureau, department, agency, government, corporation or any other entity chartered or established by the Government.

L. “Governing Documents” means the charter, decree, agreement, bylaws, articles of incorporation, governance agreement and other documents evidencing the formation, establishment and governance of the Accountable Entity.

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M. “Implementation Documents” means certain documents related to Compact implementation, including the M&E Plan, the detailed financial plan, the procurement plan and the work plans developed by the Accountable Entity and, as applicable, approved by MCC.

N. “Implementing Entity” means any Government Affiliate engaged by the Accountable Entity to implement and carry out any project, project activity (or a component thereof) or any other activities to be carried out in furtherance of the Compact.

O. “Inspector General” means the Inspector General of the United States Agency for International Development.

P. “Key Staff” means the following positions in the Management Unit or as otherwise defined in specific Compact documents: (1) chief executive officer (sometimes referred to as the director general, national coordinator or managing director), (2) deputy chief executive office (sometimes referred to as the chief operating officer), (3) chief financial officer, (4) legal advisor, (5) director of procurement, (6) director of environmental and social assessment, (7) director of monitoring and evaluation, and (8) project directors for each major project under the Compact.

Q. “Management Unit” means the employees of the Accountable Entity responsible for the day-to-day activities and assisting the Board or other relevant decision-maker with the implementation of the Program.

R. “MCC” has the meaning given this term in Section 1.0.

S. “MCC Disbursement Request” means the written requests for periodic disbursements of MCC Funding submitted to MCC by the Accountable Entity.

T. “MCC Funding” means the financial assistance provided by MCC to the Government under the Compact.

U. “M&E Plan” means the plan for monitoring and evaluating the Program that is developed and adopted by the Accountable Entity (as approved by MCC).

V. “Observer” means a nonvoting member of a Board who is an employee or representative of MCC.

W. “Officer” has the same meaning as Key Staff.

X. “Permitted Account” means any bank account established pursuant to the requirements of the Compact and maintained for the purpose of receiving and re-disbursing MCC Funding.

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Y. “Procurement Agent” means the entity selected and engaged through an international competitive process or a Government ministry or agency, as agreed between the Government and MCC, that will assist the Accountable Entity with carrying out procurement related activities to procure goods, works and services on behalf of the Program.

Z. “Procurement Guidelines” has the meaning given this term in Section 3.6(D)(11).

AA. “Program” has the meaning given this term in Section 1.0.

BB. “Program Assets” means the assets and property purchased or funded in whole or in part with MCC Funding.

CC. “Program Implementation Agreement” means the program implementation agreement between MCC, the Government and the Accountable Entity that specifies certain terms for Compact implementation. Beginning in May 2007, a Program Implementation Agreement, rather than a Disbursement Agreement, will be executed in connection with Compact implementation.

DD. “Stakeholders Committee” means a body of representatives of the private sector, civil society and local and regional governments that has been formally established to provide advice and input to the Accountable Entity regarding the implementation of the Program.

2.0 Minimum Requirements for the Accountable Entity

2.1 Legal Requirements

A. The Accountable Entity should have the legal capacity to enter into agreements with MCC and other Government Affiliates; to enter into employment agreements with employees; to enter into contracts with contractors and consultants; and to comply with the legal requirements of the Compact, including the limitations on the use of MCC Funding and certain other U.S. law requirements.

B. The Accountable Entity should be legally entitled to hold a bank account.

However, if the local law prohibits the Accountable Entity from holding a bank account, the Government and MCC can mutually agree on an alternative arrangement.

C. The Accountable Entity can take many legal forms, including administrative units within existing ministries, foundations, government-owned corporations, and newly established ministries. As long as the proposed structure of the Accountable Entity satisfies the legal requirements and requirements of independence and transparency set forth in these guidelines, the Government can

5 July 21, 2008 propose a new structure for the Accountable Entity or adapt structures similar to those utilized by other MCC countries.

2.2 Accountability, Independence and Transparency

A. MCC requires the Government to utilize an Accountable Entity for the Program to ensure that there is a central point of accountability with respect to the Program.

The Accountable Entity structure can build off of existing Government systems and structures or establish a new Government Affiliate or other type of entity that best suits the needs of the Government and the Program; however, the Accountable Entity must establish a central point of contact for MCC, other donors, contractors, consultants and the general citizenry with respect to the Program. This type of accountability will promote good governance practices within the Program and the Government and support the successful completion of the Program within the term of the Compact.

B. The Government should ensure that the Accountable Entity has the necessary operational independence and decision-making authority to effectively and efficiently implement the Compact and to fulfill all relevant Compact-related requirements. While ensuring an appropriate level of independence is helpful in preventing undue politicization of decisions, ensuring the preservation of Government accountability for the results of the Program is also important.

C. The nature and objectives of the Compact should dictate the required level of independence and the optimal structure of the Accountable Entity. For example, MCC countries have utilized the following structures with varying levels of independence from the Government:

(1) Georgia. The prime minister served as the initial chairman of the Board of the Accountable Entity, which is a public corporation established by the Government. However, each subsequent chairman has been and will be chosen by a majority vote of the Board members.

(2) Vanuatu. The Accountable Entity was established as a unit within the Ministry of Finance and Economic Management; however, the Board members are represented by director general level government officials and representatives of the NGO community and civil society. The chairman of the Board is the director general of the Office of the Prime Minister. The Minister of Finance and Economic Management does not serve on the Board of the Accountable Entity and has waived his authority over the Accountable Entity, meaning the Board members are able to a make decisions on behalf of the Accountable Entity that are not subject to review by the Minister of Finance and Economic Management.

(3) Nicaragua. The Accountable Entity was established as a foundation. The initial chairman of the Board was the Secretary of the Technical

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Secretariat of the Presidency. Each subsequent chairman has been and will be appointed by mutual agreement of the Government of Nicaragua and MCC.

(4) Ghana. The Accountable Entity was established as a new Government authority established by Parliamentary decree to oversee Compact implementation, as well as manage other donor programs. The initial chairman of the Board was the incumbent minister of the Ministry of Public Sector Reform.

For brief descriptions of each of the Accountable Entities established by Governments that have entered into Compacts with MCC, please see Annex 1 to these guidelines.

D. The Accountable Entity should be transparent with respect to its decision-making by (i) including civil society in the decision-making process of the Accountable Entity and the Program and (ii) complying with the requirements to post on the Accountable Entity’s website or make otherwise publicly available decisions of the Accountable Entity, Advisory Council and Stakeholders Committee and certain other information. For further discussion of the requirements for transparent decision-making, see Section 3 of these guidelines.

E. Civil Society and Private Sector Participation. The participation of civil society and the private sector in the decision-making of the Accountable Entity and Program implementation can take several forms, both formal and informal. First, civil society and private sector participation should be institutionalized in the decision-making process by having civil society and private sector representation on (i) the Board and/or (ii) an Advisory Council that will make recommendations to the Accountable Entity decision-maker(s). Second, it is important to ensure ongoing consultation with civil society and the private sector throughout implementation of the Program. Most MCC countries have established a Stakeholders Committee that provides an opportunity for civil society and the private sector to receive regular Program updates from the Accountable Entity and to provide feedback and oversight for the implementation process. While the Stakeholders Committees often do not have formal decision-making authority, such committees are often established to serve as a mechanism for ongoing consultations between the Government and the public throughout Program implementation, and in some cases have a voice in selecting civil society and private sector representatives on the Board or the Advisory Council.

F. Information Publicly Available. The Accountable Entity should make the following documents, agreements, and information publicly available in English and the local language, as applicable, by posting such information on the Accountable Entity’s website or through other appropriate means:

(1) The Compact and all reports required by the Compact;

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(2) All minutes of the meetings of the Board of the Accountable Entity or decisions of the relevant designated decision-maker acting on behalf of the Accountable Entity (such as the minister or senior most official of the Government Affiliate acting as the Accountable Entity);*

(3) All minutes of the meetings of the Advisory Council and Stakeholders Committee;*

(4) The M&E Plan, along with periodic reports on Program performance;

(5) All project environmental and social impact assessments and supporting documents;

(6) All audit reports by an auditor and any periodic reports or evaluations by a reviewer (each as defined in the Compact or MCC’s audit guidelines, as applicable);

(7) Disbursement Agreement or Program Implementation Agreement, as applicable, all requests for disbursements of MCC Funding, and any reports required to be submitted to MCC under the terms of the Disbursement Agreement or Program Implementation Agreement (including the quarterly reports);

(8) All procurement policies and procedures (including standard documents, procurement plans, contracts awarded, and bid challenge procedures) and any other documents required to be made publicly available;

(9) A copy of any legislation and other documents related to the formation, organization and governance of the Accountable Entity, including the Governing Documents, and any amendments thereto and

(10) Such other information, documents, reports and agreements as MCC may require after notifying the Accountable Entity.

G. The documents marked with an asterisk* do not need to be translated into English if they are written in Spanish, French or Portuguese.

H. Notwithstanding the foregoing requirements regarding making certain information public, information relating to procurements prior to the award of a contract and confidential information relating to the Accountable Entity’s agreements with employees, contractors and consultants should be excluded from the information and documents made publicly available. Determinations as to what information can be excluded should be agreed with MCC.

2.3 Utilization of Existing Implementation Structures

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A. Existing implementation structures established by other donors in the country, such as program implementation units or administrative structures, can be utilized as the Accountable Entity for the Program or as a model for the Accountable Entity to the extent such structures are consistent with MCC requirements and will be efficient for implementing the Program.

B. Existing Government systems and structures can be utilized to the extent such structures are consistent with MCC requirements and will be efficient for implementing the Program. For example, an existing Government Affiliate can be used as the Accountable Entity and the Ministry of Finance can be used as the Fiscal Agent.

2.4 Timing of Establishment of the Accountable Entity

A. The Government should include a proposed structure for the Accountable Entity in its proposal for MCC Funding.

B. The Accountable Entity should be established by the Government as early as possible to accelerate Compact implementation. As soon as the Government and MCC reach agreement on the composition and legal structure, the Government can proceed with establishing the Accountable Entity, including prior to Compact signing.

3.0 Structural Components of the Accountable Entity

3.1 Overview. The Accountable Entity should include the following structural components:

A. a decision-making body or person that will be accountable for the implementation of the Program (that is, a Board or the minister or senior most official in charge of the Government Affiliate acting as the Accountable Entity);

B. if the Accountable Entity has one decision-maker, such as a minister in charge of a particular ministry, an Advisory Council, which will encourage transparency and incorporate civil society and private sector participation into the decision-making for Program implementation;

C. a Stakeholders Committee, representing beneficiaries and local constituencies;

and

D. a Management Unit, which will be responsible for implementing the decisions of the Board or designated decision-maker and overseeing the day to day management of the Program.

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3.2 Board Structure, Composition and Duties

A. Role of the Board. While it is not an MCC requirement, the Accountable Entity may include a Board, composed of a small group of decision-makers, since it is an efficient mechanism to ensure civil society participation and transparency in the decision-making process for the Program. MCC will support implementation structures that do not include a Board, if such structures can capture the same level of independence, transparency and efficiency that a Board structure provides.

The Board should be responsible for exercising oversight and taking major decisions on behalf of the Accountable Entity. Members of the Board should discharge their responsibilities by (i) staying informed and providing appropriate oversight to the Management Unit regarding the progress of Compact implementation, and (ii) holding regular meetings to take actions and grant approvals on behalf of the Accountable Entity as required under the Governing Documents and the other relevant supplemental agreements. Board members should adhere to the following standards, which should be reflected in the Accountable Entity’s Governing Documents:

(1) Governing Documents. The Board members have a duty to follow the Accountable Entity’s Governing Documents, to carry out the Accountable Entity’s mission to implement the Compact and to ensure that MCC Funding is used only for permitted purposes.

(2) Active Participation. Board members must (i) have the authority to make the decisions at the Board meeting necessary to implement the Compact, and (ii) actively participate in overseeing the management of the organization, including attending meetings of the Board, providing strategic direction to the Accountable Entity, evaluating reports, reading Board meeting minutes, reviewing the performance and compensation of the Management Unit, and communicating relevant outcomes of each Board meeting to his/her constituents.

(3) Board Actions. A Board member who is present at a meeting when an action is approved by the entire Board is presumed to have agreed to the action unless (i) the Board member objects to the meeting because the meeting was not lawfully called or convened, (ii) the Board member did not participate in the meeting, (iii) the Board member voted against the action, or (iv) the Board member is prohibited from voting on the action because of a conflict of interest.

(4) Minutes of Meetings. Written minutes should be taken at every Board meeting, the form and substance of which is outlined in Section 3.2(G)(1) below.

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(5) Books and Records. Board members should have general knowledge of the books and records of the Accountable Entity, as well as its general operations. The Accountable Entity’s Governing Documents, accounting records, and Board meeting minutes should be made available to Board members who wish to inspect them.

(6) Accurate Record Keeping. Board members should not only be familiar with the content of the books and records, but should also ensure that the organization's records and accounts are accurate and complete. The Compact requires the Government to take steps to obtain regular audits by independent auditors and to permit MCC, the Inspector General of the United States Agency for International Development (OIG, USAID), and the General Accountability Office to review the books and records of the Accountable Entity. The Board members should be aware of what the financial records disclose and take appropriate action to ensure there are proper internal controls, as specified in the fiscal accountability plan.

(7) Program Assets. Board members have the duty to protect, preserve, and manage the Program Assets and to do so consistent with the Compact and applicable law. Board members may delegate such responsibility to members of the Management Unit; however, the Board should require an annual accounting for all Program Assets.

(8) Investigations. Board members have a duty to investigate warnings or reports of Management Unit, employee, or contractor theft or mismanagement. In some situations, a Board member may have to report misconduct to MCC and the appropriate local authorities (for example, if Program Assets are missing or MCC funds are unaccounted for).

B. Composition; Role of the Observer.

(1) Composition. The composition of the Board should be dictated by the needs of the Program and should incorporate relevant Government ministries and departments, non-governmental organizations (NGOs), and civil society and private sector representation. The Government should be represented by senior level officials who have the authority to act on behalf of the relevant ministry or department, as well as the capability to make the time commitment required of Board members. Representatives from NGOs, civil society, and the private sector should be chosen or elected for their representation of interest groups relating to the projects involved in the Program as well as their availability to make the required time commitment. Representatives from NGOs, civil society, and the private sector should not be selected by the Government, but rather selected through a transparent process established by the Stakeholders Committee or relevant NGOs, civil society organizations, and private sector organizations, as agreed with MCC.

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(2) Role of the Observer. The Board will contain a nonvoting member who is an employee or representative of MCC. The Observer is a nonvoting member of the Board. The Observer represents MCC’s interests, not the Accountable Entity’s interests, with respect to the implementation of and compliance with the Compact. The Observer role can be served by the resident country director or any MCC employee/contractor. It is extremely important that the Observer participates in all meetings of the Board either in person or by conference telephone and be provided with the agenda and related documentation for each meeting of the Board. The Observer has the obligation to share documentation relating to the meetings of the Board with MCC and to participate in the discussions arising during the meetings of the Board.

The Observer also serves a vital role in identifying implementation issues and encouraging transparency in the Board decision-making process.

Implementation issues should be referred to MCC and addressed in accordance with MCC policy and internal review requirements.

Transparency is most effectively advanced by the Observer encouraging open discussion of agenda items and ensuring participation of the non- Government members of the Board.

C. Size. The Board should generally be large enough to include a multitude of interests within the country but small enough to operate efficiently (for example, ideally, the Board should be at the lower end of a range of 5 to 11 members). The number of voting members should be odd to prevent deadlock, unless otherwise agreed with MCC. Each voting member should designate a deputy with clear decision-making authority who can attend Board meetings when the voting member cannot attend. Nonvoting members should include the Observer and such other nonvoting members as are appropriate for the Program and agreed with MCC. Nonvoting members should have the same rights of access to information relating to the Accountable Entity as voting members of the Board.

D. Chair. The activities of the Board should be managed by the chair of the Board.

The chair should either be appointed by the Government as a permanent position or selected by a majority of the voting members of the Board to serve a specified term, such as two years. All documents and reports submitted to MCC by the Board in accordance with the Compact should be certified by the chair as

(1) having been approved by the Board, and (2) being true, accurate and complete.

E. Review and Approval Requirements.

(1) In addition to the documents and reports referenced in Section 3.2(D) above, the Board should also be responsible for reviewing and approving the following documents, agreements and actions on behalf of the

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Accountable Entity, which cannot be delegated to the Executive Committee or Management Unit:

i. Procurement plans and M&E Plan and any material amendments or supplements thereto;

ii. Agreements between the Government or the Accountable Entity and MCC, and any material amendment, suspension or termination of such agreements;

iii. Material Agreements (as defined in the Compact or Program Implementation Agreement, as applicable, except as otherwise agreed to by MCC) between the Accountable Entity and third-parties, and any material amendment, suspension or termination of such agreements;

iv. Employment agreements with Key Staff (at a minimum the general director or chief executive officer);

v. Audit findings and reports of the results of audits received from the audit committee;

vi. Entering into any agreement that is (a) with a party related to the Accountable Entity or any of its affiliates or (b) not at arm’s length (that is, the parties are not dealing from equal bargaining positions, one party is subject to the other's control or dominant influence, or the transaction is not treated with fairness, integrity and legality);

vii. Any pledge of Program Assets;

viii. Any material amendments or supplements to the Governing Documents;

ix. Any decision to dispose of, liquidate, dissolve, wind up, reorganize or effect other changes to the Board or Management Unit;

x. Any change in the character or location of any permitted account;

xi. Any formation or acquisition of a subsidiary or other affiliate of the Accountable Entity;

xii. Any material changes to the components or structure of the Accountable Entity, including adding or removing Board members and Key Staff;

xiii. Any decision to engage, to accept or to manage any funds from any donor agencies or organizations in addition to MCC Funding during the Compact term; and

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xiv. Any other activity, agreement, document, transaction or any other action that requires Board approval pursuant to the Compact, Program Implementation Agreement, applicable law, any Governing Document or other supplemental agreement.

(2) Either the Board, or, if so designated in the bylaws or by a resolution of the Board, the Executive Committee or the chief executive officer (or equivalent) of the Management Unit may be responsible for reviewing and approving the following documents, agreements and actions on behalf of the Accountable Entity; provided that, if the Executive Committee or chief executive officer (or equivalent) approves such documents, the Executive Committee or chief executive officer (or equivalent) shall provide a complete, written copy of each of the following approved documents to the Board within 7 calendar days after such approval:

i. Implementation Documents, other than the procurement plans and M&E Plan, and any material amendments or supplements thereto;

ii. MCC Disbursement Requests;

iii. Audit plans submitted to MCC; and

iv. Reports (quarterly and annual) delivered to MCC.

F. Meetings. Each meeting of the Board should satisfy certain minimum standards in order to be considered a valid meeting at which actions taken by the Board are valid and effective.

(1) Frequency of Meetings. The Board should hold as many meetings as are necessary to discharge its duties and to ensure the effective implementation of the Compact. The Board should meet (i) at least quarterly on a regular schedule determined as far in advance as possible, and (ii) perhaps monthly in the initial stages of implementation of the Compact.

(2) Notice and Agenda. Adequate notice should be provided to all members of the Board (voting and nonvoting) setting forth the date, time and location of the meeting, as well as, an agenda of issues and documents for consideration. The specific time period for adequate notice should be set forth in the governance agreement or bylaws. Prior to the effective date of the governance agreement or bylaws, adequate notice should be determined by local law applicable to the Accountable Entity or special rules may be approved by consensus/unanimous decision of the Board members to apply until the governance agreement or bylaws become effective.

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The notice should specify whether the meeting is special or regular.

Regular meetings of the Board should occur quarterly or monthly in accordance with the requirements of the Compact and the governance agreement or bylaws, as appropriate. Special meetings are usually called on an ad hoc short notice basis by the designated chairman or secretary of the Board. Notice for regular meetings usually requires 7 to 10 days prior notice, while notice for special meetings can require as little as 24 hours prior notice.

(3) Attendance and Quorum. Attendance at Board meetings is very important.

Members can attend meetings (i) in person, (ii) by sending a deputy (subject to certain limitations specified in the Compact or Governing Documents), or (iii) by telephone or video-conference (if permitted under local law, by special rule adopted by the Board or as specified in the governance agreement or bylaws).

Quorum is the number of voting members required to be in attendance at a meeting to permit the Board to make decisions that will be binding on the Accountable Entity. The governance principle behind establishing a quorum is that there should be a determinable number that is sufficient to reflect the will of the Board and the Accountable Entity itself. Quorum should be specified in the governance agreement or bylaws and require the presence in person, by deputy or by teleconference/videoconference of (i) all voting members, (ii) majority of the voting members, or (iii) a specific number of voting members (such as 2/3 or 3/4 of all voting members).

Prior to the effective date of the governance agreement or bylaws, quorum should be determined by local law applicable to the Accountable Entity or special rules approved by consensus/unanimous decision of the Board members to apply until the governance agreement or bylaws become effective.

(4) Deliberation and Actions of the Board. All issues and documents for consideration by the Board should be presented and discussed by the Board. It is appropriate for one member of the Board, either a voting or nonvoting member, to provide a summary of the issue or document for consideration.

The decision-making process can be accomplished by reaching consensus among the voting members of the Board or by taking a vote. A specific number of votes in favor of an action by the Board should be specified in the governance agreement or bylaws for such action to be binding on the Accountable Entity. Prior to the effective date of the governance agreement or bylaws, voting requirements should be determined by local law applicable to the Accountable Entity or special rules approved by

15 July 21, 2008 consensus/unanimous decision of the Board members to apply until the governance agreement or bylaws become effective.

(5) Standard of Review. It is appropriate and efficient for the Board members to review summaries of the documents, agreements and reports being presented to it for consideration or approval. However, Board members should be made aware that reliance on such summaries does not relieve or excuse such members’ responsibility for approving and taking action on the actual content of such document, agreement or report. Although efficiency in the administrative processes of the Accountable Entity is desirable, it should not be sought to the detriment of the accountability of the Board. The Board remains responsible for making decisions on behalf of the Accountable Entity and the Program.

G. Transparency of Board Decisions. The Board is charged with operating in a transparent manner. The most efficient way for the Board to achieve transparency is to record its decisions and discussions in the written form of meeting minutes.

MCC requires that the Board evidence the discharge of its duties, including publishing the minutes of the Board meetings on the Accountable Entity’s website or through other appropriate means within two weeks, and providing evidence of certain approvals as conditions precedent for MCC disbursements.

(1) Content. The meeting minutes should be prepared by the person acting as secretary or record-keeper of the meeting and include, at a minimum, the following information: (i) the agenda and information regarding when notice was delivered to the Board, (ii) the list of attendees and absentees (for purposes of evidencing quorum), and (iii) summaries of the discussion of agenda items and the actions taken by the Board.

The amount of detail to be included in the minutes with respect to the discussion of agenda items should be dictated by the Board in consultation with MCC, but should be sufficient to reflect that a valid meeting of the Board occurred and to evidence that the Board took valid actions consistent with the requirements of the Compact, the Governing Documents and any other relevant supplemental agreement. It may be appropriate to exclude references to specific statements made by members of the Board, unless such member requests statements to be attributed to them (for example, to evidence dissent with respect to a particular decision). It may also be appropriate to list the voting results, but exclude the names of the voting members deciding in favor or disapproving an action of the Board.

(2) Publication. MCC requires that the Accountable Entity publish the Board meeting minutes on the Accountable Entity’s website or through other appropriate means. This publication requirement is intended to promote transparency and good governance. It may be appropriate, however, to

16 July 21, 2008 exclude any confidential information relating to negotiations of contracts or procurement activities from the version of the minutes that is published.

The minutes can be drafted and certified by the chairman of the Board in the local language; however, if the minutes are taken in a language other than Spanish, French or Portuguese, the minutes should be translated into English and published in the local language and English.

H. Action by Written Consent. The Board may take actions by written consent in lieu of holding a meeting if permitted by the governance agreement or bylaws of the Accountable Entity (or, if the governance agreement or bylaws are not yet effective, if permitted by the local law applicable to the Accountable Entity).

Good governance and best practices regarding the proper discharge of responsibilities by a Board suggest that a Board should deliberate collectively prior to taking actions in order to ensure that Board members have the opportunity for open discussion. Therefore, written consents should generally be used only when the Board has previously deliberated over an issue and is waiting for additional information to take action on such issue.

Actions by written consent also may require a higher standard of approval by the voting members than Board actions taken by meetings. For example, the Board could require unanimous approval by all voting members to be taken by written consent. The higher standard, while not required, is usually incorporated to take into account the lack of open discussion before the Board takes a decision and to ensure that Board members are not excluded from the written consent process.

I. Confidentiality. MCC encourages transparency with respect to Program implementation as part of the Compact requirements and the requirements of these guidelines; however, certain documents, reports, data and other information relating to the Program should be treated by the Board as confidential information and handled in a reasonable and appropriate manner to avoid public disclosure.

Confidential information includes information, documents and data relating to Accountable Entity personnel matters, conflicts of interest, procurement matters prior to final contract award, contract administration and such other data, documentation or information specified by the Accountable Entity and agreed with MCC. The Board should ensure that only those with a need to know and under similar obligations of confidentiality should have access to any and all of such confidential information, documents, data and other information provided to such party or otherwise generated in connection with the Program. The Board should ensure that each member of the Board, Stakeholders Committee, and Management Unit complies with the confidentiality obligations set forth in this Section 3.2(I). Notwithstanding the foregoing requirements on confidentiality, all such confidential documents, reports, data and other information may be provided to MCC, the Inspector General, the Government Accountability Office, or other independent auditors and investigatory bodies that may be designated by MCC.

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J. Conflicts of Interest. The Board should ensure that no Board member, employee, agent, member of the Stakeholders Committee, member of the Management Unit, or representative of the Accountable Entity shall participate in the selection, award, or administration of a contract, grant or other benefit or transaction financed in whole or in part by MCC Funding in which (1) such person, members of such person's immediate family or household or his or her business partners, or organizations controlled by or substantially involving such affiliate, has or have a financial or other interest, or (2) such person is negotiating or has any arrangement concerning prospective employment. In either case, the conflict of interest should first be disclosed in writing to the Accountable Entity and MCC and, following such disclosure, the Accountable Entity and MCC should agree in writing to proceed notwithstanding such conflict. The Board should also ensure that no Board member, employee, agent, member of the Stakeholders Committee, member of the Management Unit, or representative of the Accountable Entity solicits, accepts from, or offers to a third party or is promised directly or indirectly for himself or for another person or entity, any gift, gratuity, favor or benefit, other than items of de minimis value and otherwise consistent with such guidance as MCC may provide from time to time, or engages in any activity which is, or gives the appearance of being, a conflict of interest.

K. Committees. The Board may establish one or more committees to assist with the review and analysis of reports, documents and agreements requiring their review under the Compact and Section 3.2(E) of these guidelines. Committees may make recommendations to the Board and may be composed of voting and nonvoting members of the Board and such other persons that may have particular expertise necessary for the committee. For example, the Board may establish an audit committee to review audit findings and to make recommendations to the Board. It would be appropriate for such audit committee to be composed of Board members and non-Board members that have expertise in audits or financial matters. The Board may rely on information, opinions or reports produced by such committees; however, the members of the Board remain responsible for actually taking decisions based on the recommendations of the committees.

L. Executive Committee. The Board should consider establishing an Executive Committee to take the actions authorized under the Compact or Governing Documents. All Board members will be entitled to receive the documents provided to the Executive Committee and to participate as observers in the meetings of the Executive Committee upon request. The Board must review the actions of the Executive Committee for consistency with the Compact, the Governing Documents and overall Program implementation during regular meetings of the Board. The Executive Committee should be responsible for reviewing and approving agreements, documents and reports as are appropriate for the Program and agreed with MCC.

(1) Composition. A majority of the Executive Committee should be composed of voting members of the Board. The Executive Committee

18 July 21, 2008 should include: (i) at least one non-Government voting member and (ii) the chief executive officer of the Management Unit.

(2) Size. The Executive Committee should generally be a small number to facilitate efficient meetings.

3.3 Existing or New Government Affiliate as Accountable Entity with a Single Decision-maker

A. Ministry as Accountable Entity. To the extent that the Government and MCC agree to utilize an existing or newly formed Government Affiliate as the Accountable Entity and a Board (as described in Section 3.2 of these guidelines) is not included in the governance structure, then the decision-making authority for the Accountable Entity should rest with the relevant minister or senior most official responsible for the Government Affiliate. MCC will support such alternative implementation structures, if such structures can capture the same level of independence, transparency and efficiency contemplated by these guidelines.

B. Review and Approval Requirements; Standard of Review.

(1) The designated decision-maker should be responsible for reviewing and approving the documents and agreements set forth above in Section 3.2(E).

(2) Standard of Review. It is appropriate and efficient for the designated decision-maker to review summaries of the documents, agreements and reports being presented to him or her for consideration or approval.

However, the designated decision-maker should be made aware that reliance on such summaries does not relieve or excuse such decision-maker’s responsibility for approving and taking action on the actual content of such document, agreement or report. Although efficiency in the administrative processes of the Accountable Entity is desirable, it should not be sought to the detriment of the accountability of the designated decision-maker. As provided in the Compact, the designated decision-maker remains responsible for making decisions on behalf of the Accountable Entity and the Program.

C. Transparency of Decisions. The designated decision-maker is charged with operating in a transparent manner. The most efficient way for the designated decision-maker to achieve transparency is to record its decisions and discussions in the written form of meeting minutes or resolutions. MCC requires that the designated decision-maker evidence the discharge of his or her duties, including periodically publishing the decisions of the designated decision-maker on the Accountable Entity’s website, and providing evidence of certain approvals as conditions precedent for MCC disbursements.

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D. Confidentiality; Conflict of Interest. The designated decision-maker should abide by the confidentiality and conflict of interest rules set forth in Section 3.2(I) and

(J) of these guidelines.

3.4 Advisory Council Structure, Composition and Duties

A. Role of the Advisory Council. To the extent the Government and MCC agree to utilize a Government Affiliate as the Accountable Entity and the relevant minister or senior most official of such Government Affiliate and legal, political or other considerations prohibit such minister or relevant senior most official from waiving or delegating his or her constitutional decision-making authority to a Board established in accordance with Section 3.2 of these guidelines, MCC recommends that an Advisory Council should be established to advise the relevant Government Affiliate acting as the Accountable Entity. In general, the Advisory Council should incorporate the principles of accountability and transparency otherwise required of the Board under these guidelines and should follow the standards set forth for a Board in Section 3.2.

The Advisory Council should actively participate in the governance and decision-making of the Accountable Entity by providing advice and making recommendations to the designated decision-maker acting on behalf of the Accountable Entity. Members of the Advisory Council should discharge their responsibilities by (i) staying informed and providing appropriate oversight to the Management Unit regarding the progress of Compact implementation, and (ii) holding regular meetings to take actions and approvals on behalf of the Accountable Entity as required under the Compact, the Governing Documents and the other relevant supplemental agreements.

B. Composition. The composition of the Advisory Council should be dictated by the needs of the Program and should attempt to incorporate relevant Government ministries and departments, non-governmental organizations, the private sector and relevant civic actors. The Government should be represented by senior level officials who have the authority to act on behalf of the relevant ministry or department, as well as the capability to make the time commitment required of Advisory Council members. Representatives from NGOs, civil society, and the private sector should be chosen or elected for their representation of interest groups relating to the projects involved in the Program, as well as their availability to make the required time commitment. Representatives from NGOs, civil society, and the private sector should not be selected by the Government, but rather selected through a transparent process established by the Stakeholders Committee or relevant NGOs, civil society organizations, and private sector organizations, as agreed with MCC.

C. Size. The Advisory Council should generally be no larger than eleven voting members and the number of voting members should be odd to prevent deadlock, 20 July 21, 2008 unless otherwise agreed with MCC. Nonvoting members should include the MCC observer (having the same rights and responsibilities as outlined above with respect to the Observer to a Board) and such other nonvoting members as are appropriate for the Program. Nonvoting members should have the same rights of access to information relating to the Accountable Entity as voting members of the Advisory Council.

D. Review of Agreements, Documents and Reports. The Advisory Council should be responsible for reviewing and providing recommendations to the designated minister or senior-most official making decisions on behalf of the Accountable Entity with respect to the documents, agreements, reports and actions reserved for the Board in Section 3.2 of these guidelines. The Advisory Council is responsible for making recommendations and providing general advice on implementation to the designated decision-maker acting on behalf of the Accountable Entity.

E. Transparency of Advisory Council Meetings and Recommendations. In compliance with the requirements of the Compact and the Governing Documents, the Advisory Council is charged with operating in a transparent manner.