NEPAL PUBLIC FINANCIAL MANAGEMENT MULTI-DONOR TRUST FUNDPROGRESS REPORT | July – December 2021 MDTF Report 1 July–December 2021 NEPAL PUBLIC FINANCIAL MANAGEMENT MULTI-DONOR TRUST FUND PROGRESS REPORT July – December 2021 ACKNOWLEDGEMENTS This progress report has been prepared by Victor B. Bonsu and Shraddha Shah, on behalf of the World Bank as MDTF Administrator. The MDTF management and team is especially grateful to the PEFA Secretariat Nepal for their continued support. Photo courtesy: Nabin Baral MDTF Report i July–December 2021 ABBREVIATIONS AND ACRONYMS BCP Business Continuity Plan BEK British Embassy Katmandu CE Citizen Engagement CGAS Computerized Government Accounting System CPA Citizen Participatory Audit CSO Civil Society Organization DFAT Australian Department of Foreign Affairs and Trade DP Development Partner e-GP e-Government Procurement EU European Union FCDO UK Foreign, Commonwealth & Development Office FCGO Financial Comptroller General Office FY Fiscal Year GRB Gender Responsive Budgeting HOA Heads of Agency IFMIS Integrated Financial Management Information System IPFMRP Integrated Public Financial Management Reform Project IT Information Technology LMBIS Line Ministry Budget Information System MDTF Multi-Donor Trust Fund MOFAGA Ministry of Federal Affairs and General Administration MTEF Medium-Term Expenditure Framework NAMS Nepal Audit Management System NBCMG National Business Continuity Management Guidelines NPSAS Nepal Public Sector Accounting Standard OAG Office of the Auditor General (of Nepal) PAMS Public Asset Management System PCC Program Coordination Committee PEFA Public Expenditure Financial Accountability PFM Public Financial Management PPMO Public Procurement Monitoring Office RMIS Revenue Management Information System SAI Supreme Audit Institution SNG Sub National Government TSA Treasury Single Account USAID United States Agency for International Development VFM Value for Money WB World Bank MDTF Report ii July-December 2021 CONTENTS ACKNOWLEDGEMENTS i ABBREVIATIONS AND ACRONYMS ii CONTENTS iii FOREWORD iv PART I. Program Results 1 1. MDTF Program 1 PART II. IPFMRP Implementation Status 3 1. IPFMRP Implementation Support Mission 3 2. IPFMRP Results Framework 4 3. IPFMRP Status of Risks (SORT) 9 Part III: 10 i. Program Management and Administration 10 ii. Activities Supported Through BETF 11 PART IV: FINANCIAL REPORT 13 MDTF Report iii July–December 2021 FOREWORD provide guidance and support to the MDTF operation. The MDTF team continues to carry on the work of the Integrated Public Financial Management Reform Project (IPFMRP) despite the COVID-19 crisis, albeit with several delays and restrictions. The team is managing virtual consultations with Implementing Agencies on a bilateral basis. While the second wave of COVID-19 has significantly impacted implementation of activities, the team has noted the following progress: finalization of an accounting manual for three tiers of government based on Victor Boakye Bonsu MDTF Program Manager Financial Procedures Regulations; finalization of internal control guidelines and Medium Term Expenditure Framework (MTEF) guidelines for three Dear Partners and Friends tiers of government; conducting an Integrated Financial Management Information System (IFMIS) During the period covered by this report, the assessment; operationalization of MTEF software; COVID- 19 crisis continued to have a significant capacity building on Project Bank for provincial impact in the South Asia Region, including with governments; and carrying out a training needs respect to the loss of lives, as well as the great anxiety assessment for three tiers of government with and emotional stress it has created, particularly as roadmap development. The interim report on drafting many families are struggling with the challenges of the citizen engagement strategy has been shared with balancing work, parenting, and virtual schooling for the Bank team and comments have been provided to children. the Government of Nepal (GoN). Further consultations on this will begin within government to advance work In Nepal, the Multi-Donor Trust Fund (MDTF) on completion of the strategy. Development Partners (DPs) continued to be highly committed to improving the various sub-systems of The MDTF team is also encouraged by the GoN’s public financial management (PFM) in the country. commitment to improved government service They have actively participated in technical meetings, delivery in response to crises by strongly supporting several bilateral discussions and high-level meetings, the initiation of the National Business Continuity including the Program Coordination Committee’s Management Guidelines (NBCMG) and Business (PCC) and Heads of Agency (HOA) meetings, to Continuity Plans (BCPs) for the three tiers of MDTF Report iv July-December 2021 government, which will enable the government ensure their continued stay in the program. to function more smoothly during crises. The Finally, I would like to thank my colleagues for their consultants will complete consultations by the end extra hard work during this difficult time and our of February and disseminate the final guidelines to MDTF Partners and Government counterparts for stakeholders by the end of March 2022. their continuous support and recommendations. Let us hope the days ahead will be safer for us and for We are also pleased to report that the final draft of our families. the Tax Policy on Tax Systems and Administration of Provincial and Local Governments is ready, and the work on the Subnational Government (SNG) Budget Execution is progressing well with delivery expected by the end of March 2022. Following successful dialogue with the GoN, the MDTF will support both national and subnational PEFA assessments in the country beginning in January 2022. Training was successfully organized by the PEFA Secretariat (Washington DC) for selected participants of the Government team. Data collection is expected to start in late February to early March 2022. A provincial PEFA assessment is also expected to start halfway through the national assessment. Based on reviews of MDTF performance in 2021, the British Embassy Katmandu (BEK) and the Australian Department of Foreign Affairs and Trade (DFAT) in consultation with the World Bank have developed Performance Improvement Plans to monitor performance of the MDTF for a specified period and decide whether to remain partners in the MDTF or withdraw from it. It is the wish of the MDTF team to MDTF Report v July–December 2021 PART I The MDTF Program Background Development Objective Strengthening Public Financial Management (PFM) is The overall program development objective (PDO) a key element of the Government of Nepal’s (GoN) of the MDTF is “to strengthen the performance, strategy for strengthening governance, optimizing transparency and accountability in public financial outputs from public resources and ensuring inclusive management in Nepal”. and broad-based development. There has also been an increasing interest in recent years on the part The key results expected from MDTF support are: of non-state actors, civil society organizations and development partners (DPs) in strengthening financial i. Improved resource management as a result of accountability, with the goal of improving the use of strengthened PFM systems and processes public resources and obtaining value for money. The ii. Increased awareness and oversight of GoN has been working closely with DPs in the design government PFM processes by diverse and implementation of PFM reform initiatives at the constituencies country and sector level. iii. Better knowledge of value for money challenges and PFM governance gaps, contributing to improved design of PFM interventions at the country and sector level. MDTF Report 1 July-December 2021 Program Components Based on the MDTF strategy, the MDTF is composed of the following components: Figure 1: MDTF Components MDTF COMPONENTS Component 1 Component 2 Component 3 Component 4 Strengthening PFM Increased Enhancing Program Management Systems professional Accountability in and Administration capacity of Public Financial Key PFM Management stakeholders Partners - Ministry of - Civil Society - Ministry of - Program Finance Organizations Finance Coordination - National Planning (CSOs) - National Planning Committe Commission - Public Accounts Commission - PEFA Secretariat - Financial Committee - Line Ministries - PPMO (Public Comptroller - Transparency - Development Procurement General Office International Partners Monitoring - Office of the Office) Auditor General - MOFAGA (Ministry of Federal Affairs and General Administration) - ICAN (Institute of Chartered Accountants of Nepal) MDTF Report 2 July–December 2021 PART II. Integrated Public Financial Management Reform Project (IPFMRP) The Integrated Public Financial Management Reform Project (IPFMRP) is the main vehicle through which the MDTF program is being implemented. (a) Overall Status and Key Project Data Key Achievements of IPFMRP To improve performance of the IPFMRP, the • There has been significant progress in the team restructured the project, which has led to last six months. Key guidelines and assessments, the dropping of non-performing activities and development and enhancement of information cancellation of US$6 million in funding. The closing systems and various capacity building activities date of the project has also been extended to July have been completed despite the pandemic 15, 2022. Following the restructuring, the current situation. These include: (a) Internal Control disbursement rate of the project is 52%. Guidelines for local level government, and various audit guidelines; (b) various assessments (b) Implementation Status involving the three tiers of government of the Integrated Financial Management Information The Bank is providing regular updates on the project’s System (IFMIS), Citizen Engagement Strategy implementation status to the DPs. On October 1, 2021 and Capacity Building Roadmap based on the a meeting was organized together with Government Training Needs Assessment, which form the basis counterparts to give a detailed update to DPs on the of planned reforms in these key areas; (c) various project. The PEFA Secretariat presented on the status software for the Medium Term Expenditure of progress of each Implementing Agency. Progress Framework (MTEF), Project Bank for federal made in the last three months, actions agreed with and provincial governments and Nepal Audit concrete timelines to accelerate implementation, Management System (NAMS) for audit of the three main challenges, as well as way forward were tiers of government; (d) software enhancements of discussed. A summary of the discussion is captured the Computerized Government Accounting System in Annex I. Subsequently, updates were provided on (CGAS), Electronic Fund Transfer System and progress up to November 2021. Revenue Management Information System (RMIS) for federal and provincial governments and Public Disbursement – The project disbursed US$4.38 Asset Management System (PAMS) for the three million (49%) as of December 2021, which increased tiers of government; (e) integration of CGAS, the to US$4.69 million (52%) as of January 2022. Treasury Single Account (TSA) and the Line Ministry MDTF Report 3 July-December 2021 Budget Information System (LMBIS); (f) integration has now completely moved from manual to of NAMS with various accounting systems; and (g) paperless audits. PAMS enhancement enabled various capacity building activities for the three multiple users of the respective cost centers to tiers of the government based on the developed account for and monitor their assets effectively. guidelines, software and important PFM areas. • Even the previously slow-moving component of • CGAS enhancement has enabled activity- the Public Procurement Monitoring Office (PPMO) based accounting as well as supported internal is now rapidly progressing with 55 percent of audit. The electronic fund transfer system has the ITC/ILO contract already completed, with 40 strengthened internal controls in addition to percent completed after August 2021. A total of increasing transaction efficiency. Internet banking, four procurement documents have also been mobile banking and the digital wallet for revenue completed. Procurement for other added activities, collection has supported revenue generation as including for the e-Government Procurement (e- well as business continuity, especially considering GP) gap assessment, has also been initiated and is emergencies such as COVID-19. The integration expected to be completed by project closing. of CGAS, TSA and LMBIS has enabled a more seamless exchange of information between (c) IPFMRP Results Framework budget, treasury, and accounting functions. Integration of NAMS with the Subnational Treasury The World Bank team periodically updates the Regulatory Application (SuTRA), CGAS, and project’s results framework and measures progress RMIS has enabled system audit of revenue and towards project development objectives and expenditure transactions. With operationalization intermediate results. Below is the updated Results of NAMS, the Office of the Auditor General (OAG) Framework as of December 31, 2021. MDTF Report 4 July–December 2021 PDO Indicators by Objectives / Outcomes Indicator Name Baseline Actual (Current) End Target Comments Contracts awarded within 30 30 70 The required information is currently the initial bid validity period being collected to assess the by 5 key sector agencies timeliness of the contract award. As and selected Sub National the procurement capacity building Governments (SNGs) activity of the key sector agencies has (Percentage, Custom only recently progressed, it will take time to realize the results. Improved aggregate capital 64 65 75 The capital budget out-turns in budget out-turns at the recent years (65 percent in FY21 and federal level (Percentage, 47 percent in FY20 compared to 76 Custom) percent in FY19) have been impacted by the pandemic situation in addition to other factors. Nevertheless, the supported activities of the Medium- Term Expenditure Framework and Project Bank are expected to contribute to improved planning and budgeting, while procurement capacity building is expected to contribute to improved capital budget execution. Comprehensive accounting (a) Consolidated annual Consolidated annual (a) NPSAS based NPSAS-based financial reporting and reporting procedures in financial statements financial statements annual financial formats have been approved for the place in Federal and SNGs are for the federal statements for federal three tiers of government, based (Text, Custom) not prepared as per government are level prepared within 9 on which NPSAS-based financial NPSAS prepared as per Nepal months from the end statements are being prepared every Public Sector of the financial year. (b) year at the federal level. Provincial Accounting Standards SNGs that cumulatively level financial statements based (NPSAS) manage 50% of overall on NPSAS are also being initiated. SNG budget have their However, as manual interventions own reporting are required in preparing and procedural manual consolidating such financial adopted statements, efforts are currently underway to enhance the information systems to enable their production. Efforts are also underway to finalize the Accounting Manual based on NPSAS for the three tiers of government, based on which subnational governments can adopt NPSAS based reporting procedures. Nevertheless, the accounting systems of subnational governments – the CGAS at the provincial level and SuTRA at the local level – are largely based on NPSAS and further enhancements are also planned to be completed by the project to ensure full NPSAS compliance. Improved audit planning SAI PMF (indicator 9) Supreme Audit SAI PFM (indicator 9) Based on the results of the various and quality management Score 2 Institutions (SAI) Score 3 supported activities, the indicator on for audit of federal and Performance improved audit planning and sub-national entities. (Text, Management quality management has already Custom Framework (PMF) been met as per the Supreme Audit (indicator 9) Score 3 Institution of Thailand’s Performance (indicator 9) Report for the Office of the Auditor General of Nepal. MDTF Report 5 July-December 2021 Intermediate Results Indicators Indicator Name Baseline Actual (Current) End Target Comments Credible MTEF in place Basic guidelines for MTEF software for Difference between The MTEF software at the federal (Text) MTEF at federal level in federal government multi-year estimates and level has been developed and place. operationalized with subsequent setting of operationalized. MTEF guidelines guidelines expected to annual budget ceilings for the federal government have be approved by are clearly explained. also been revised incorporating our February 2022. Local comments. These guidelines are level MTEF guidelines expected to be approved by February issued. Provincial 2022. Based on approval of the government guidelines federal level guidelines, the guidelines and software for provincial governments will also planned. be finalized. MTEF software will also be customized for use by provincial governments. MTEF software and guidelines for provincial governments are expected to be completed by the project closing. The MTEF guidelines for local government have already been issued. Comprehensive internal a) No coherent internal Internal control SNGs that cumulatively The Internal Control Framework control procedures adopted control framework guidelines for local manage 50% of overall has been developed based on at SNGs. (Text) exists that ensures government have been SNG budget have their international standards. Based on consistency in these issued. The guidelines own internal control this framework, internal control practices across are also being manual adopted. guidelines for the local level have the three tiers of developed for federal been developed and issued. Government and provincial Information is being collected to governments. assess the status of implementation of the guidelines by local level. The guidelines are also being developed for federal and provincial governments, which is being delayed due to concern on quality of work by the consultant. IFMIS developed and pilot Zero Pilots IFMIS assessment 2 pilot sites IFMIS assessment final tested (Text) final report received, report received. Based on its which needs to be recommendations, the Government implemented needs to approve the preferred and piloted approach. The aim is to develop the interim IFMIS solution by the Project closing to the extent possible, which is contingent on prompt approval of the recommendations. Enhancing participation 0 18% female 30% The government is struggling to meet and capacity of technical participation rate in the indicator due to limited number female staff in trainings/ trainings so far. The of female staff in PFM. In addition workshops (Text) government is to adopting an emphasis on female struggling to meet the participation, the government has indicator due to limited been requested to also organize number of female staff female-targeted trainings to the in PFM. extent possible. Unified budget guidelines No unified budget In addition to unified SNGs that cumulatively Unified Budget Guidelines that including gender responsive guidelines including budget guidelines, manage 50% of overall include GRB were previously issued to budget (GRB) processes gender responsive simplified budget SNG budget have SNGs. Given the complexity of those introduced to SNGs (Text) budget processes for guidelines on GRB also adopted the unified guidelines and capacity constraints SNGs issued to address the budgeting guidelines of SNGs, simplified GRB guidelines capacity constraints of for SNGs were further issued and SNGs first phase training provided. Various additional trainings are also planned which are being impacted by the pandemic situation. MDTF Report 6 July–December 2021 Indicator Name Baseline Actual (Current) End Target Comments Timely submission of 0 0 60 The required timeline for audit financial audit reports reports is not specified in any legal of SNGs to appropriate document. Thus, there is no legal authorities within legal time time frame. The practice has been frame (Percentage) to submit reports by nine months of the fiscal year (FY) end. Accordingly, the submission of FY 2017/18 audit reports was by nine months of FY end. However, submission of audit reports thereafter has been impacted by the pandemic situation as field audits were delayed. As the NAMS has now been operationalized and with the expected improvement in the pandemic situation, audit reports are expected to be submitted by nine months in the future. Number of citizens 80 774 400 The number of total citizens mobilized and involved in mobilized has far exceeded the audit process through CSOs end target of 400 as 774 have of which 50% are female. already been mobilized. However, (Number) OAG is struggling to attract female participation as only 19% of those mobilized have been female thus far. OAG has been requested to devise a strategy to specifically target and incentivize female participation to the extent possible. Effective audit follow-up Score of 0 SAI PMF Score of 2 in Score of 2 SAI PMF The indicator has been met based (Text) dimension 7 (iii) Dimensions 11 (iii), 14 dimension 7 (iii) on Supreme Audit Institution of (iii) and 17 (iii), which Thailand’s Performance Report for replaced the earlier the OAG. This is demonstrated by Dimension 7 (iii) the score of 2 in Dimensions 11 (iii), 14 (iii) and 17 (iii), which replaced the earlier Dimension 7 (iii) of the report. The improvement in the score is the result of previous and ongoing activities supported by the PFM MDTF. Complaints resolved 0 Dropped Dropped Indicator dropped as e-GP activity has following effective been cancelled. complaints handling mechanism in e-GP (Percentage) Basic procurement 0 40 80 Out of ten, four procurement documents and guidelines documents have been developed and developed for sub-national the rest are planned to be developed government (out of a incrementally by the Project closing. master list of sub-national level documents to be prepared) (Percentage) Procuring entities of 10 10 80 55% trained under the procurement KSAs with at least one capacity building activity and the certified procurement rest are planned to be completed by staff established (As the project closing. The pandemic a percentage of the situation is impacting the planned total procuring entities) timeline. As this activity recently (Percentage) progressed, PPMO is in the process of collecting data on the status of the number of procurement trained staff. MDTF Report 7 July-December 2021 Indicator Name Baseline Actual (Current) End Target Comments System generated 0 Dropped Generation of Indicator dropped as part of performance reporting Performance Report for restructruring as relevant activity prepared for KSAs (Text) KSA’s cancelled A citizen engagement No Strategy exists The final report on the Strategy exists and The final report for the Citizen strategy is prepared and Strategy received implemented Engagement Strategy has been implemented as per received, which needs to be promptly proposed sequence (Text) approved to enable implementation by the Project closing to the extent possible. Given the large number of recommendations, the government has agreed to prioritize key recommendations in the process of obtaining approval for initiating implementation. (d) Disbursement (Commitment and disbursement summary USD) Source of Net Total FY Disbursement Ratio Undisbursed % Disbursed Funds Commitment Disbursed TF 9.00M 4.69M 4.31M 52.14 14% Total 9.00M 4.69M 4.31M 52.14 Cumulative Disbursements (USD) 15,000,000 12,500,000 10,000,000 7,500,000 5,000,000 2,500,000 0 2018 Q3 2019 Q1 2019 Q3 2020 Q1 2020 Q3 2021 Q1 2021 Q3 2022 Q1 2022 Q3 2022 Q4 Original Amount Formally Revised Amount Actual Amount MDTF Report 8 July–December 2021 (e) IPFMRP Status of Risks (SORT) During project preparation, risks were systematically assessed and reflected in project documents. During implementation support missions, the Bank team updates the risk assessment and discusses with government appropriate mitigation measures. The progress report provided an update of the risk assessment as follows: Risk Category 19-Sep, 2017 27-Jun, 2018 09-May, 2019 25-Nov, 2019 10-Jun, 2020 04-Dec, 2020 27-Jul, 2021 Political and Governance Macroeconomics Sector Strategies and Policies Technical Design of Project or Program Institutional Capacity for Implementation and Sustainability Fiduciary Environment and Social Stakeholders Other Overall High Substantial Moderate Low None MDTF Report 9 July-December 2021 PART III. i. Program Management and Administration Technical Review Meetings Nepalgunj PEFA, focusing on the lessons learned. Overall, the assessment points out the need to put in A technical meeting was held on July 29 among the place basic reform systems for the strategic budget, GoN, World Bank and MDTF DPs. The meeting was planning, budget execution, procurement practices, organized by the PEFA Secretariat (Nepal) with all oversight needed. All DPs agreed and understood the DPs in attendance to ensure a focused discussion challenges of undertaking the SNG PEFA. on important government initiatives that cut across various engagements. The PFM Training Needs IPFMRP Monthly Review, October 1, 2021 Assessment, citizen engagement (CE) and IFMIS assessment were discussed. It was agreed that more The IPFMRP Monthly Review Wrap-up Meeting frequent discussions should be held as required was held on October 1, 2021 with government going forward. The meetings are expected to help counterparts and DPs to discuss the outcome of the government achieve synergy across various the week-long consultations (September 27 - 30, government initiatives for the best possible outcome 2021) held with each implementing agency. Progress for the PFM reforms by enhancing the quality of the made in the previous three months along with the recommendations coming out of these important actions agreed with concrete timelines to accelerate assessments. implementation were discussed. The main challenges and the way forward were also discussed. The Another technical meeting was held remotely on PEFA Secretariat presented the progress status November 22, 2021. The main topic of discussion of each implementing agency. The World Bank was Value for Money (VFM), a tool that the BEK uses presented progress on the results indicators along to assess the value of an intervention / program. It with an update on the preparation of the Business was decided that the FCDO will organize a dedicated Continuity Plans. DPs appreciated the efforts from workshop to discuss a set of ideas and indicators the Government and the Bank to provide regular with MDTF colleagues based on the experience of updates. The PFM MDTF Manager closed the meeting DPs. DFAT reiterated the need for VFM as a tool by thanking DPs and the government for their active to measure investment and advised colleagues to participation. While the progress being made was think of VFM in two stages. During the meeting, the acknowledged, the need to accelerate implementation World Bank also presented initial findings of the of remaining project activities was emphasized. MDTF Report 10 July–December 2021 HOA Meeting on Strategic Issues, December 7, of assistance for joint advocacy at the HOA level. 2021 Program Coordination Committee (PCC) World Bank (WB) Country Director, Faris H. Hadad- Meeting December 16, 2021 Zervos, chaired the Nepal PFM MDTF meeting with Heads of Agencies (HoAs) to follow up on the last A PCC virtual meeting was co-chaired by Mr. Ishwori managerial level meeting held on June 23, 2021. The Prasad Aryal, Joint Secretary of the IECCD, Ministry meeting was attended by the UK Embassy, EU, Swiss of Finance and Mr. Faris H. Hadad Zervos, Country Embassy, DFAT, USAID, Royal Norwegian Embassy Director, World Bank. All the MDTF partners were and World Bank (WB). It was agreed that this type of present at the meeting. The PEFA Secretariat meeting would be organized on a regular basis to Coordinator, Mr. Than Prasad Pangani, presented complement the technical level meetings with all DPs the status of the IPFMRP. An update on the MDTF and clients. Victor Bonsu (MDTF Program Manager) was provided by Victor Bonsu, MDTF Manager. The and Timila Shrestha (the Task Team Leader of the importance of carrying out the PEFA assessment in IPFMRP) presented an update on the MDTF, including 2022 was emphasized. It was also agreed that the the engagement with DPs with reference to the last scope of the next PFM project would be expanded to HOA agreed actions and issues on planned PEFA cover more PFM actors as well as local and provincial assessments and the IPFMRP project, respectively. governments as service delivery is crucial. Faris discussed the ongoing dialogue with the PEFA Secretariat (Nepal) regarding PEFA assessments. Performance Improvement Plans DPs expressed the need for revising the PFM Reform The FCDO and DFAT have placed the MDTF program Strategy as well as the need to respond to fiscal under Performance Improvement Plans for 12 federalism and Provincial and Local Governments. months after which each will decide whether to DPs would like to engage in more policy dialogue with continue to participate on the program. the GoN (OAG and FCGO included). They offered to be ii. Activities Supported Through BETF (a) PEFA Assessments on October 21-22 and 28, 2021. The Government has clearly indicated its interest in having ownership of (i) National PEFA Assessment the assessment, similar to the previous 2014 PEFA Assessment, with the Bank team’s support, technical Throughout the period, the Bank team had several assistance and quality assurance. The Government, meetings and discussions with key counterparts. however, has yet to announce the names for the These discussions focused on the key preparatory assessment team. The Government has also asked activities to be conducted leading up to the formal for assistance to conduct further training on the launch of the assessment by the Government in PEFA methodology in the local language for local January 2022. A PEFA methodology training was participants. delivered online by the HQ PEFA Secretariat experts MDTF Report 11 July-December 2021 (ii) Sub-National PEFA Assessment FY23. Depending on the outcome, another SNG will be assessed in FY24. The Bank team also had several meetings with government counterparts including officials from (b) Other Activities the PEFA Secretariat, Ministry of Finance (MoF), and MOFAGA. In some of the meetings, there were DPs (i) Business Continuity Plans in attendance. Discussions focused on government commitment, timing, scope, methodology, and Consultation on developing the guidelines for funding of the assessment. Government is in preparation of Business Continuity Plans (BCPs) for agreement with the Bank on the importance and need government institutions has reached the final phase to conduct the SNG PEFA assessment, and it is keen and the final report is expected by the end of March to take ownership of the assessment. Government 2022. preference, however, is for the assessment to take place after the federal PEFA assessment. The task (ii) SNG Tax Policy team, however, has pointed out the problems with this view, and suggested instead to start the SNG The study on SNG tax policy has been completed and assessment midway through the federal will be presented to DPs in the next PFM Working assessment. No conclusion has yet been reached on Group meeting. this issue, and the two teams will continue to discuss. Following discussions, the two teams agreed that (iii) SNG Budget Execution sample size should be determined based on the availability of resources and timing. It was also agreed The study on SNG Budget Execution is ongoing and that a phased approach should be adopted with one planned to be completed in March 2022. provincial government selected for the assessment in MDTF Report 12 July–December 2021 PART IV. FINANCIAL REPORT The MDTF has two active trustee accounts: TF071617 to accommodate new contributions from the six and TF072582. The TF071617 is the original TF which remaining DPs. As of December 31, 2021, total initially had seven DPs but one left the partnership pledged contributions stood at US$21,185,895 of in June 2016. As of December 31, 2021, total pledged which US$16,032,104 have been paid in by the contributions stood at US$20,957,834 which have DPs. The balance of unpaid contributions was been fully paid in by DPs. Total disbursements US$5,153,791. Total disbursements amounted to recorded were US$18,073,385. Administration US$3,585,298. Administration fees and expenses fees and expenses amounted to US$419,157 while equaled US$510,000 while total investment the investment income earned was US$566,207. income was US$718,848. The total fund balance Total fund balance stood at US$3,031,499 with as of December 31, 2021 was US$12,655,654 with commitments of US$845,730. The original TF account commitments of US$4,434,308. The parallel TF is scheduled to close on January 31, 2024. account is scheduled to close on January 31, 2026. The trustee account TF072582 is parallel to the For further financial details of the two trustee original trustee account TF071617. This was created accounts please refer to the Tables below: Table 1: Trustee:  TF071617 Paid in Unpaid in Amt in Country Eqv. Customer Name Currency Eqv. USD Country Eqv. USD Country Currency USD Currency Currency Australia-Department of Foreign AUD 2,850,000 2,991,120 2,850,000 2,991,120 0 0 Affairs and Trade EU-Commission of the European EUR 4,500,000 5,623,628 4,500,000 5,623,328 0 0 Communities Norway - Ministry of Foreign Affairs NOK 15,000,000 2,615,314 15,000,000 2,615,314 0 0 Swiss State Secretariat for CHF 3,000,000 3,066,371 3,000,000 3,066,371 0 0 Economic Affairs (SECO) United Kingdom - DFID GBP 3,500,000 5,570,360 3,500,000 5,570,360 0 0 United States Agency for USD 712,578 712,578 712,578 712,578 0 0 International Development (USAID) Denmark-Royal Ministry of Foreign DKK 2,000,000 378,465.32 2,000,000 378,465 0 0 Affairs *** Sub Total 20,957,834 20,957,834 0 *** Embassy of Denmark left the partnership in June 2016 MDTF Report 13 July-December 2021 Table 2: Trustee: TF072582 Amount Paid in Unpaid in Amount in Paid in Unpaid in Customer Name Currency in Country Country Country USD USD USD Currency Currency Currency Australia-Department of Foreign AUD 5,300,000 3,791,860 5,300,000 3,791,860 0 0 Affairs and Trade EU-Commission of the European EUR 5,000,000 5,672,675 3,500,000 3,974,825 1,500,000 1,697,850 Communities Norway - Ministry of Foreign Affairs NOK 34,000,000 3,923,661 18,000,000 2,110,835 16,000,000 1,812,826 United Kingdom - FCDO GBP 3,000,000 3,895,594 3,000,000 3,895,594 0 0 United States Agency for USD 600,000 600,000 600,000 600,000 0 0 International Development (USAID) Swiss State Secretariat for Economic CHF 3,000,000 3,302,105 1,500,000 1,658,990 1,500,000 1,643,115 Affairs (SECO) Sub Total 21,185,895 16,032,104 5,153,791 GRAND TOTAL (Trustee TF 071617 42,143,729 36,989,938 5,153,791 and TF072582) Source: SAP Report Table 3: Trustee TF071617-Grants Grant Grant Amount Disbursements Grant Name Status Project ID Execution Number USD USD TF010452 Strengthening PFM Systems and Capacity Build Legally closed P125770 Recipient Executed 4,242,311.23 4,242,311.23 TF010454 Prep,,Appraisal, Supervision, Monitoring & Rep Legally closed P125770 Bank Executed 551,555.31 551,555.31 TF010455 Strengthening the Office of Auditor-Gen Project Legally closed P127040 Recipient Executed 2,219,468.89 2,219,468.89 TF010482 Prep and Superv Costs of Strengthening Office Legally closed P127040 Bank Executed 218,757.49 218,757.49 TF010623 Program Management & Admin Costs Legally closed P121853 Bank Executed 838,176.31 838,176.31 TF012485 Strengthening CSOs Use of Social Accountability Legally closed P131860 Recipient Executed 800,000.00 800,000.00 TF012492 NP ED PETS Legally closed P131381 Bank Executed 148,346.99 148,346.99 TF012524 Strengthening CSO Use of Social Accountability Legally closed P131860 Bank Executed 699,283.48 699,283.48 TF012668 NLTA Under SPFM Project to Govt of Nepal Legally closed P125770 Bank Executed 701,440.02 701,440.02 TF013011 Operational Risk Assessment of PFM Reform Legally closed P132738 Bank Executed 199,983.75 199,983.75 TF015354 Nepal: Strengthening Budgeting Process Legally closed P145814 Bank Executed 701,591.45 701,591.45 TF017673 Nepal ROSC A&A Legally closed P147582 Bank Executed 7,720.19 7,720.19 TF0A0369 Strengthening CSOs Use of Social Accountability2 Legally closed P153514 Recipient Executed 923,734.12 923,734.12 TF0A0370 Strengthening CSOs Use of Social Accountability2 Legally closed P153514 Bank Executed 547,921.69 547,921.69 TF0A1065 Nepal: Strengthening PFM II Legally closed P154401 Recipient Executed 2,692,114.05 2,692,114.05 TF0A3254 Nepal-Support for Fiscal Management (TA) Legally closed P157724 Bank Executed 449,765.46 449,765.46 TF0A7475 IPFMRP Active P164783 Recipient Executed 2,880,000.00 2,034,269.56 TF0B5037 IPFMRP Supervision Legally closed P164783 Bank Executed 96,945.88 96,945.00 Grand 18,919,115.40 18,073,385.00 Total MDTF Report 14 July–December 2021 Table 4: Trustee: TF072582- Grants Grant Amountt Disbursements Grant Number Grant Name Status Project ID Execution (USD) (USD) INTEGRATED PUBLIC FINANCIAL MANAGEMENT REFORM Recipient TF0A7474 Active P164783 6,120,000.00 2,344,706.81 PROJECT Executed TF0A8864 PROGRAM ADMIN. AND MGMT COST Active P121853 Bank Executed 1,300,000.00 726,230.09 TF0A9105 IPFMRP SUPERVISION ALL COMPONENTS Active P164783 Bank Executed 837,025.65 513,021.80 TF0B5144 PEFA Assessment Active P175522 Bank Executed 300,000.00 1,339.20 GRAND TOTAL 8,557,025.65 3,585,297.90 MDTF Report 15 July-December 2021 Annex 1: IPFMRP Discussion of key activities Financial Comptroller General Office (FCGO) - important procurement documents. One of the The internal control guidelines being prepared by documents, Guidance on Bid Evaluation of Works the FCGO are planned to serve as overall guidance Contracts is already developed, and a few others for the three tiers of the government. In addition, are also being prepared, which are expected to be the FCGO is working on a model internal control developed by March 2022. manual for federal and provincial governments and the Ministry of Federal Affairs and General National Planning Commission (NPC) - Medium Administration (MOFAGA) is working on the same for Term Expenditure Framework (MTEF) guidelines for local governments. The Bank has been emphasizing the local level have already been issued by MOFAGA in the need for harmonization and consistency of partnership with NPC. NPC is currently finalizing MTEF documents and has been providing technical guidelines for federal and provincial governments assistance as required to ensure the model manuals based on comments from the Bank. Based on these are simple, user-friendly, and risk-focused for guidelines, trainings will also be provided to the three easy adoption and maximum use in terms of risk tiers of government by November 2022. mitigation. The model manual for the local level is almost finalized and will be approved with the appointment of the new Minister. Office of the Auditor General (OAG) - OAG has already met the relevant results indicator with Public Procurement Monitoring Office a score of 2 on audit follow-up for all three aspects (PPMO) - There has been a request from the – financial, compliance and performance audit as PPMO for e-Government Procurement (e-GP) per the Supreme Audit Institution (SAI) Performance system enhancements. As the new leadership Measurement Framework (PMF) assessment in PPMO has shown a strong commitment to conducted by the SAI of Thailand. DPs are encouraged complete enhancements by the Project closing to continue contributing to building the capacity date of July 15, 2022, the Bank is assessing the of OAG. The pandemic has unfortunately caused potential to incorporate this activity under the delays in the timely submission of audit reports by Project by reallocating funding that was saved from subnational governments in the last two FYs. Before (a) the cancellation of activities that had not yet this, while it is not a legal requirement, OAG had been initiated and could not be completed by the been submitting annual reports together with the project closing, and (b) the switch from in-person reports to subnational governments by nine months to virtual trainings during the pandemic. As e-GP from the end of each FY. Nevertheless, reports to all enhancements had previously been dropped from three tiers are submitted on the same day. The Bank the project with the removal of the relevant results has also been emphasizing the need to develop a indicator, the Bank’s lawyers are being consulted to strategy for promoting female participation in the ensure eligibility under the current project scope. The citizen participatory audit (CPA), and has requested Bank is also supporting the government in preparing that OAG explore the potential to incentivize female participation to the extent possible. MDTF Report 16 July–December 2021 Female participation in capacity building - The well as for security enhancements. Given the strong PEFA Secretariat is compiling information for training, commitment from MOF to ensure the relevance and with a target of 30% for female participation. To date, timeliness of project activities, project savings as only 18% has been achieved due to the low number of indicated above are being reallocated to fund these female staff in PFM. Nevertheless, the Bank has been enhancements. emphasizing the need for female targeted activities to the extent possible. The Training Needs Assessment Related Challenges - team has also been requested to come up with One of the main challenges for the project has always statistics on female staff in PFM if possible. been the delay in decision making, particularly in procurement. As only a few months are left for Integrated Financial Management project implementation, it will be unfortunate if information system (IFMIS) - Due to the delay of the project closes with unutilized funding while the the IFMIS assessment, the results indicator for IFMIS government would have to fund any contractual development and pilot testing will not be achieved obligation beyond project closing. Hence, the Bank by the date of project closing. The IFMIS contract has emphasized the urgency of expediting procurement finally been amended in light of the COVID-19 context and implementation by meeting the timelines agreed and the final report is expected by November 2022. during the one-week extensive consultations. The Bank has also emphasized that slow performance Ministry of Finance (MOF) - MOF has requested discourages development partners from continuing an additional activity to support enhancements of their support on much needed PFM reforms. the Line Ministry Budget Information System (LMBIS) in order to track physical progress against budget as MDTF Report 17 July-December 2021 MDTF Contact Person Victor Boakye Bonsu Governance MDTF Program Manager The World Bank Email: vboakyebonsu@worldbank.org Tel.: 4226792 Shraddha Shah www.mdtfpfm.org.np Operation Analyst Email: sshah5@worldbank.org MDTF Report 18 July–December 2021