annual report (year 4)

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Public Financial Management Strengthening Project (PFMSP)

Annual Report (Year 4)

October 2019 to September 2020

October 30, 2020 Version: Redacted, April 2021 Contract Number AID-367-C-16-00001 Project Start and End Date: August 15, 2016 to August 14, 2021

Submitted To: David Isaak, COR, USAID

Submitted by: WSP/Louis Berger Group 1316 Lamtangin Marg, Baluwatar - 4, Kathmandu Tel : +977 01 442 5462 Email : [email protected]; [email protected]

This document was produced for review by the United States Agency for International Development. It is prepared by Louis Berger Group. The contents of this document are the responsibility of Louis Berger Group and do not necessarily reflect the views of USAID or the United States Government.

mailto:[email protected]

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Abbreviations and Acronyms

ADB Asian Development Bank

AWP Annual Work Plan

CGAS Computerized Government Accounting System

CEHRD Center for Education and Human Resource Development

COA Chart of Accounts

COP Chief of Party

DCC District Coordination Committee

DCOP Deputy Chief of Party

DDA Department of Drug Administration

DFID Department for International Development

DOAAM Department of Ayurveda and Alternative Medicine

DTCO District Treasury Control Office

EU European Union

FCGO Financial Comptroller General Office

FMIS Financial Management Information System

GARIS Government Accounting and Reporting Information System

GESI Gender Equality and Social Inclusion

GHSC-PSM Global Health Supply Chain – Procurement and Supply Chain Management

GON Government of Nepal

ICM Internal Control Manual

ICT Information & Communication Technology

IDPG International Development Partner Group

IPSAS International Public Sector Accounting Standards

IRs Intermediate Results

ICT Information and Communications Technology

IFMIS Integrated Financial Management Information System

IT Information Technology

LG Local Government

LOE Level of Effort

LMBIS Line Ministry Budget Information System

M&E Monitoring and Evaluation

MDTF Multi-Donor Trust Fund

MOEST Ministry of Education, Science and Technology

MOF Ministry of Finance

MOFAGA Ministry of Federal Affairs and General Administration

MOHA Ministry of Home Affairs

MOHP Ministry of Health and Population

MOPIT Ministry of Physical Infrastructure and Transport

MOSD Ministry of Social Development

MTOT Master Training of Trainers

MuAN Municipal Association of Nepal

NARMIN National Association of Rural Municipality in Nepal

NASC Nepal Administrative and Staff College

NFY Nepali Fiscal Year

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NHSSP Nepal Health Sector Support Program

NNRFC National Natural Resource and Fiscal Commission

NPC National Planning Commission

NPR Nepali Rupees

NRA National Reconstruction Authority

OAG Office of the Auditor General

PBO Parliamentary Budget Office

PEFA Public Expenditure and Financial Accountability

PFM Public Financial Management

PFMSP Public Financial Management Strengthening Project

PLGSP Provincial and Local Governance Support Program

P-LMBIS Provincial Line Ministry Budget Information System

PMO Prime Minister’s Office

PMP Performance Management Plan

PPMO Public Procurement Monitoring Office

P-TSA Provincial Treasury Single Account

RMP Risk Management Plan

SAS School Accounting Software

SNG Sub-national Government

SUTRA Subnational Treasury Regulatory Application

TABUCS Transaction Accounting and Budget Control System

TOGAF The Open Group Architecture Framework

TOT Training of Trainers

TSA Treasury Single Account

USAID United States Agency for International Development

WB World Bank

WNP Whole of Nation Portal

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TABLE OF CONTENTS

EXECUTIVE SUMMARY ............................................................................................................... 4

1. CONTEXT ..................................................................... ERROR! BOOKMARK NOT DEFINED.

1.1 Current PFM Environment in Nepal................................................................ Error! Bookmark not defined.

1.2 Budgetary and PFM Reform: .......................................................................... Error! Bookmark not defined.

1.3 Year 4 Update – PFMSP’s Activities and Achievements .................................. Error! Bookmark not defined.

2. PROJECT INTRODUCTION................................................................................................. 10

2.1 Project Goal and Expected Results (IRs) ......................................................... Error! Bookmark not defined.

2.2. Project Stakeholders/Beneficiaries ............................................................... Error! Bookmark not defined.

2.3. Project Geographical Coverage ..................................................................... Error! Bookmark not defined.

3. RESULTS FOCUS, STRATEGIC APPROACHES AND RISKS/ASSUMPTIONS .............................................................................................. ERROR! BOOKMARK NOT DEFINED.

3.1 Results Focus ................................................................................................. Error! Bookmark not defined.

3.2 Lessons Learned and Adaptive Management: Review of PFMSP’s Strategic Approach Error! Bookmark not defined.

3.3 Risk Assumptions and Mitigation Strategies: Year 4 Assessment ................... Error! Bookmark not defined.

3.4 Sustainability Plan and Exit Strategy (SPES) Update ....................................... Error! Bookmark not defined.

4. ACTIVITY DESCRIPTION ..................................................................................................... 13

4.1 IR1/Component A: Improved Budget Planning and Execution Capacity of GON ...................................... 13

4.2 IR2/Component B: Improved Control Environment and Procurement Capacity in Targeted Ministries and/or Agencies ........................................................................................................................................... 25

4.3 IR3/Component C: Strengthened Financial Management Functions of National Reconstruction Authority ..................................................................................................................................................................... 31

5. INCORPORATION OF CROSS CUTTING INTERVENTIONS .................................. 33

6. COMMUNICATION, COORDINATION AND COLLABORATION ACTIVITIES ACCOMPLISHED ......................................................................................................................... 36

7. MONITORING, EVALUATION AND LEARNING (MEL) PROGRESS ................... 43

8. FINANCIAL PLAN/EXPENDITURES .................. ERROR! BOOKMARK NOT DEFINED.

8.1 Expenditures Against the Planned Budget and Variance Analysis .................. Error! Bookmark not defined.

8.2 Expenditures Against the Planned Budget by Component (Detail) ................. Error! Bookmark not defined.

8.3 Expenditure Against the Planned Budget by Component (Summary) ............. Error! Bookmark not defined.

9. HUMAN RESOURCES USAGE – YEAR LEVEL OF EFFORT (LOE) USAGE AGAINST LOE PLAN .................................................... ERROR! BOOKMARK NOT DEFINED.

10. TRAVEL CONDUCTED ......................................... ERROR! BOOKMARK NOT DEFINED.

11. DETAILS OF ACTIVITY/TARGETS VS PROGRESS ............................................... 50

12. INDICADOR MATRIX (PITT): MLE PLAN ...... ERROR! BOOKMARK NOT DEFINED.

12.1 PFMSP Results/Outcome Indicators ............................................................. Error! Bookmark not defined.

12.2 PFMSP Results/Output Indicators: ............................................................... Error! Bookmark not defined.

13. MAIN ACTIVITIES PLANNED FOR QUARTER 1, YEAR 5 ... ERROR! BOOKMARK

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NOT DEFINED.

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Executive Summary

Background: Since 2017, Nepal has undergone a major restructuring of government from a Unitary to a Federal System. With this devolution of powers, responsibility for major public services like education and health have been delegated to sub-national governments (SNGs), including 753 Local Governments (LGs) and seven Provincial Governments. Consequently, the resourcing of these services – both human and financial resources – has also changed significantly. Under this new paradigm, all major education and health service delivery points -- 29,0351 community schools and 4,3772 health centers, health posts, and district or zonal hospitals – located in the LGs and Provinces are now significantly funded through grants and other revenue transfers from the Federal Government.

Nepal is in the midst of a simultaneous, dual transition: bureaucratic restructuring through a constitutional devolution of powers, and modernization of the bureaucracy so it may become transparent and accountable to citizens. Improved Public Financial Management (PFM) is essential for equitable and quality-oriented service delivery, but a modern PFM system is challenged by tensions among government levels and capacity limitations at all levels, especially in the new SNGs.

With support from Public Financial Management Strengthening Project (PFMSP) and other development partners (DPs), Nepal’s PFM systems are in the process of shifting from a multitude of disparate “mini” financial management information systems to a more integrated system – with the ultimate goal of having an Integrated Financial Management Information System (IFMIS) in place across to serve all 761 of the country’s governments. After several years of diving directly into the dual transition, the Ministry of Finance (MOF) has recently recognized the need to formulate a new strategic plan with shared political will across the three government levels to achieve the country’s PFM reform goals.

PFMSP Goal: The main goal of PFMSP is to contribute to enhanced capacity of targeted Government of Nepal (GON) ministries and agencies for improved transparency and accountability of PFM systems. Good PFM, in short, is an enabling tool, without which good delivery of promised services cannot be achieved effectively or efficiently. Accordingly, PFMSP’s theory of change is: If the GON receives adequate PFM training and capacity-building support, as well as targeted Information and Communication Technology (ICT) and systems support, then budgeting and budget execution – and the associated PFM and service delivery outcomes – will significantly improve.

Key Results for Year 4/FY 2020: PFMSP’s priorities and expected results for Year 4 were organized by the project’s Intermediate Results/Components and Outputs, per below.

IR 1/Component A: Improved budget planning and execution capacity of the Government of Nepal.

Output 1.1 (IR 1.1): Improved procedures, guidelines and systems for PFM functions established in targeted agencies; and GON’s capacity to operate and maintain them.

In Year 4 PFMSP resumed work with the Financial Comptroller General Office (FCGO)/Public Expenditure and Financial Accountability (PEFA) Secretariat on the PEFA Self-Assessment tool presented by the project in Year 3. PFMSP and FCGO jointly developed TORs for the expert consultants to pilot the tool in Year 5, with the goal to improve the capacity of the PEFA Secretariat to assess the PFM performance of ministries and the GON as a whole and design

1 Education in Figures 2017 (At A Glance), 30 June 2018 2 This includes: 123 public hospitals, 200 primary health centers, 3,808 health posts, and 246 urban health centers, according to the Annual Report (2016/17), Department of Health Services, April 2018

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performance improvement solutions.

In response to the COVID-19 crisis and Nepal’s remote landscape, PFMSP moved forward to expand e-learning, remote and/or virtual learning, and thus reduce reliance on traditional classroom-based training methods. E-learning packages on the Subnational Treasury Regulatory Application (SUTRA), the School Accounting Software (SAS), and Provincial Line Ministry Budget Information System (P-LMBIS) reached partial completion by the end of the year. PFMSP’s and the FCGO’s initial virtual trainings were successful, and they may become essential for Nepal’s PFM reforms to be sustained, but it remains to be seen how effectively virtual learning can be utilized outside urban areas where the Information Technology (IT) infrastructure available to the target audience is inconsistent. International learning opportunities were postponed in Year 4 due to COVID-19.

Output 1.2 (IR 1.2): Selected ministries/agencies are capable of executing the budget and producing timely, uniform and accurate reports on different aspects of the budget cycle in compliance with GON requirements:

Just prior to the COVID-19 crisis, in March 2020, PFMSP conducted six provincial trainings on P-LMBIS, the software updated with PFMSP support used by provincial governments to prepare program budgets as per the current GON requirements (one provincial training for Bagmati Province was cancelled due to COVID-19). PFMSP also began to help MOF to conduct training on virement modules on the upgraded/new LMBIS to federal line ministries and entities.

PFMSP added a local subcontractor to enhance PFMSP’s work with the National Natural Resources and Fiscal Commission (NNRFC). In a broader institutional strengthening effort, the subcontractor began close collaboration with the NNRFC to develop transfer formulas, access data, and provide greater public understanding to ensure NNRFC fulfills its constitutional mandate.

In December 2019 PFMSP conducted a Master Training of Trainers (MTOT) to 24 GON officials and, through them and selected proficient users at local levels, trained a total of 2145 LG officials on SUTRA. The COVID-19 crisis and lockdown forced a halt to a few SUTRA training sessions. Nonetheless, excellent progress has been made to date as most LGs use the system to approve their budgets and to maintain their accounts. PFMSP continued to support the critical SUTRA Help Desk throughout the COVID-19 crisis, which has helped thousands of users prepare budgets and expenditure reports. PFMSP also procured and installed critical new central IT hardware to support SUTRA’s functioning. Evidenced by its addition of support staff in the SUTRA Help Desk, and senior staff (Under Secretary and Officer level) in overall supervision of SUTRA, the FCGO is already moving towards taking over the operation of SUTRA and the Help Desk without PFMSP support, which is critical to maintaining the sustained use of the system. SUTRA has proven to be very useful for LGs the FCGO and others as it is an IFMIS-like system, in that SUTRA supports all key PFM functions and all users operate the software on the same database hosted by the FCGO.

Output 1.3 (IR 1.3): The PFM is strengthened and extended resulting in modern, transparent, reliable, secure and resilient system that follows international best practices:

In Year 4, PFMSP continued the complex enhancements and linkage between the budget software LMBIS and the payment process software Treasury Single Account (TSA) at the federal level; between P-LMBIS and the provincial TSA (P-TSA) at the provincial level; and other software linkages as part of the essential medium term PFM IT system until a complete IFMIS or IFMIS-like system is developed for all of Nepal’s 761 governments. COVID-19 slowed but did not stop these critical improvements, and by the end of Year 4 many of the desired functions were in place and being utilized.

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PFMSP also completed the upgradation of the Revenue Management Information System (RMIS) that records and processes revenues received by ministries; completed work on the installation, configuration, and deployment of the Enterprise Document Management System (EDMS) to selected divisions of the MOF; and coordinated and consulted on the World Bank-led Multi-donor Trust Fund (WB/MDTF) support for upgraded Computerized Government Accounting System (CGAS) and study/roadmap for Nepal’s longer-term IFMIS solution. Together, the recently upgraded PFM IT systems will likely be in use for the next five to ten years in lieu of development of an expensive, complete IFMIS3 is implemented. Updating and technical support will be needed to run the upgraded system after PFMSP ends and before a full IFMIS is in place, as is the case with all software.

IR2/Component B: Improved control environment and procurement capacity in Targeted Ministries and Agencies

Output 2.1 (IR 2.1): Strengthened capacity of selected line ministries to operationalize and sustain adequate control environment policies and procedures and Output 2.2 (IR 2.2): Strengthened capacity of selected line ministries to manage the procurement process in adherence with the Public Procurement Act and related rules and regulations.

MOEST: MOEST’s Internal Control Guidelines-2077, developed with the support of PFMSP, were approved and published by MOEST in Year 4. PFMSP also supported training for 27 MOEST officials on the guidelines in September 2020. PFMSP continued to support drafting of the Planning and Budgeting Guidelines, which will be completed in Year 5, as MOEST requested the inclusion of indicators.

Under federalism LGs provide funding to schools directly so it is essential that LGs and schools have the capacity and tools to manage their finances. MOEST approved and published the School Accounting Manual (SAM) on its website, following support that began in Year 2. PFMSP also finalized the procurement and distribution process for 30,000 SAMs to be distributed to all schools and LGs, which will be very helpful for LGs and schools to manage their finances effectively and in compliance with GON and MOEST requirements.

In Year 4 PFMSP completed development of the school-level SAS software; pilot tested it at several schools; disseminated the pilot report and received concurrence from MOEST to proceed with a SAS roll-out plan initially presented in Year 3. PFMSP thus finalized the SAS user operating manual and the training manual and translated them into Nepali. PFMSP finalized a SAS MTOT curriculum for implementation early in Year 5. The SAS roll-out plan relies on the Master Trainers who will then train trainers to develop to capacity to train thousands of potential users. The COVID-19 crisis has understandably created challenges and

3 IFMIS generally refers to a computer-based automation of PFM processes that includes budget formulation, execution, accounting, and reporting in one software package or a closely linked set of software applications. An IFMIS system supports financial management of government line ministries, spending agencies, and other public sector operations. A complete or full IFMIS in Nepal would be a single platform system, but no locally-developed options are available and purchase of an internationally-developed IFMIS (such as Oracle) has been prohibitively expensive and too complex to implement while the country goes through the transition to fiscal federalism. An alternative “IFMIS-like” system of locally developed, integrated, but different IT systems has the potential to serve all the functions of a complete IFMIS. (SUTRA, for example, is “IFMIS-like” but only serves LGs and it is not directly integrated with national and provincial systems.) USAID/PFMSP and other development partners are supporting various pieces of an IFMIS-like system in Nepal to converge various PFM functions. Full integration/automation of PFM processes will take more time, but significant steps have been made towards consolidating processes, facilitating whole of government financial reports, providing easier access to and use of financial performance data, and facilitating OAG audits. The WB/MDTF’s study and potential roadmap for achieving a domestically-drive robust “IFMIS-like” system in Nepal or use of an international platform remains pending.

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PFMSP began working with MOEST and other stakeholders to develop the best way forward, including use of the SAS e-learning package.

In Q1 of Year 4 MOEST formed an Audit Support Committee and PFMSP provided the MOEST with a draft TOR for an Audit Committee that was aligned with international best practices and current GON requirements. PFMSP also supported MOEST to produce financial and audit reports, but additional audit training has been deferred to Year 5.

Improving procurement is essential to ensure that MOEST and its offices comply with all GON laws and requirements but also to ensure the education sector utilizes its financial resources efficiently. In Year 4 PFMSP collaborated with MOEST to finalize education-related Procurement Improvement Plans (PIPs) at the federal and provincial levels (approval of Sudurpaschim Province’s plan remained pending, but once approved it may be able to serve as a model for other provinces).

Ministry of Health and Population (MOHP): In Year 4 MOHP approved the Planning and Budgeting Guidelines of Health Sector- 2076, and the four separate Business Plans of the MOHP and its three departments. These documents have been published on the MOHP website. PFMSP had planned to train MOHP and other health sector officials in the guidelines and the business plans; however, the COVID-19 crisis forced these trainings to be deferred to Year 5. PFMSP also had to delay the training on audit compliance and clearance. PFMSP is collaborating with MOHP to develop methodologies to deliver these trainings online or through other tools.

PFMSP further developed the Procurement Guidelines for the Health Sector and incorporated several rounds of feedback received through validation workshop and informal meetings. Due to MOHP’s priority of managing the COVID-19 crisis, approval of these guidelines was deferred by MOHP to Year 5; however, PFMSP was able to incorporate aspects of procurement during emergencies such as the COVID-19 crisis. Once approved in early Year 5, PFMSP will support training for key staff on the guidelines.

IR3/Component 3: Strengthened PFM functions of National Reconstruction Authority

Output 3.1 (IR 3.1): NRA develops policies and procedures for transparent and accountable execution of reconstruction and recovery funds and Output 3.2 (IR 3.2): The 2015 post earthquake recovery process is perceived credibly by Nepal's citizens and the international community:

PFMSP continued to support the NRA and the embedded consultant ensures the full and complete use of the NRA’s Financial Management Information System (NRA-FMIS) to collect and report financial data accurately. PFMSP completed three trainings on PFM and the use of the system to NRA staff and its cost centers in December 2019 and January and February 2020. The trainings were co-financed by the NRA and its cost centers, which was a good step towards taking ownership of the system by the NRA. PFMSP supported the NRA to publish donor-wise and sector-wise budget and expenditure reports for the first six months of Nepali Fiscal Year (NFY) 2076/77. This is essential for the NRA to assure the public that reconstruction funds are being utilized – and utilized appropriately. Although FCGO required NRA to shift to using the newly upgraded CGAS, PFMSP’s support has provided a potential model for improving accountability and transparency in financial management.

Gender Equality and Social Inclusion (GESI)/Gender Results Budgeting: USAID approved PFMSP’s Technical Paper as Guidance to GON on Advancing the Practice of Gender Budgeting in February 2020. In collaboration with Niti Sambad/NDI, PFMSP supported training to members of the parliamentary Women and Social Committee along with Finance Committee members and National Planning Commission (NPC) officials on results-based budgeting and modern views of GRB in May 2020. Subsequently, MOF’s Chair of the GRB Committee at

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MOF expressed interest and enthusiasm to follow up on this topic, in coordination with the GRB committee and the Nepal Administrative and Staff College (NASC). Thus, in late Year 4 PFMSP began discussions with USAID on engaging NASC staff on ways to best contribute to advancing GRB practice in Nepal through consultations, trainings, and/or other targeted activities early in Year 5 to help institutionalize government knowledge of and commitment to an enhanced, transformative GRB system for Nepal.

Collaboration and Coordination: Given the nature of the programmatic interventions in Year 4, and the need to ensure effective collaboration and coordination with relevant stakeholders in an evolving environment, PFMSP developed a detailed communication and coordination plan for Year 4. With USAID’s support, PFMSP planned to set up an overarching, whole of project steering committee including members from all key project counterparts which, through bi-annual meetings, would provide strategic guidance on PFM reform within the project framework, feedback on progress on the Year 4 Annual Work Plan (AWP), lessons learned, and advise/facilitate on areas requiring buy-in and coordination on broader PFM systemic reforms. However, PFMSP did not receive feedback from MOF on the PFMSP Steering Committee TOR, despite repeated requests. Nonetheless, recognizing the great challenges of bureaucratic transformation due to federalism and modernization, and in spite of challenges to coordinate in-person due to the COVID-19, PFMSP enhanced cross-counterpart collaboration on an activity-level basis, such as with the successful development and piloting of SAS; finalization, approval, and publicizing of the Planning and Budgeting Guidelines of Health Sector-2077, four Business plans for the MOHP and its three departments; MOEST’s Internal Control Guidelines-2077; MOEST’s Procurement Improvement Plan and SAM; and other project deliverables. PFMSP also took an active approach to coordinate with other DPs in-person or virtually, engaged with donor working groups, and worked with multiple other USAID projects to enhance programmatic synergy and support cross-project learning on PFM issues.

Lessons Learned/Adaptive Management/COVID-19: Remaining flexible to GON's evolving capacity needs has been essential for PFMSP, as Nepal is undergoing a simultaneous, dual transition: bureaucratic restructuring through a constitutional devolution of powers, and modernization of the bureaucracy so it may become transparent and accountable to citizens. Such reform is fundamentally a process of “continuous learning” that presents continuous challenges and necessitates adaptive management in project implementation. The onset of the COVID-19 pandemic in the middle of Year 4 necessitated significant programmatic and operational changes. Examples of PFMSP’s adaptive management this year included:

• After reaching agreement on cost-sharing, PFMSP accommodated FCGO's request to train three staff per LG in SUTRA (PFMSP had planned for two staff per LG).

• The development and integration of the new LMBIS/P-LMBIS and TSA/P-TSA continued remotely to ensure readiness for the new fiscal year, despite the constraints caused by the COVID-19 crisis.

• PFMSP supported MOF’s socially distanced in-person training on the new LMBIS virement module (one of five trainings completed in Year 4).

• PFMSP carried out two half-days of virtual trainings on Internal Control Guidelines to MOEST officials, which has provided a model and lessons learned for increased use of virtual training expected in Year 5.

• Based on new comfortability with virtual learning, PFMSP gained new insight and direction on development of e-learning modules in collaboration with MOF, FCGO, and MOEST.

• Given PFMSP’s limitations on Level of Effort (LOE) approved by USAID, PFMSP adjusted hiring plans in order to maximize a programmatic implementation period in Year 5 (which previously had been expected to focus solely on close-out).

• Despite strong coordination with PFMSP’s counterpart agencies, some activities could not be completed as planned, but PFMSP reached agreement to continue unfinished Year 4 activities in Year 5.

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• With USAID consent, PFMSP responded positively to include MOHP’s new request for support on inventory management issues.

Conclusion: Overall, PFMSP’s Year 4 progress included significant steps towards achieving the project’s goal and expected outcomes and outputs/results, despite progress being impeded by the COVID-19 pandemic. Although the project goal is a long-term one and the desired results will take years to come – especially given the ongoing transition to fiscal federalism – PFMSP’s support has helped provide Nepal the backbone for the improved governance and service delivery envisioned by Nepal’s federal constitution of 2015. Expected progress for PFMSP’s fourth year was ambitious, with limited projected carry-over of activities in FY2021. However, COVID-19’s effects, and PFMSP’s adaptive management is expected to allow completion of critical agreed-upon activities in Year 5, which had previously been expected to involve primarily close-out activities. The nature of complex PFM reforms – they require significant reorientation of GON bureaucracies, which are slow to change and are hampered by high turnover of staff – also has contributed to slower than anticipated implementation. Nonetheless, PFMSP remained clearly “pointed in the right direction” on PFM reform and in the long run, PFMSP’s important interim support will result in greater transparency in use funds and reduce opportunities for corruption, thereby reducing Nepal’s need for continued international assistance.

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1. Project Goal and Expected Results (IRs)

The modern day conception of “good PFM” is broad- touching on issues like government policy setting (“Is a policy affordable within revenue constraints?”, or “are there adequate funds in the budget to implement previously approved policies/projects?”), determining whether a particular implementation strategy will be “good value for money”, assessing whether the outcomes of spending were actually achieved, and communicating to legislative bodies and the general public in a meaningfully transparent way how all of these many dimensions of PFM work together to enable quality service delivery. The complexity of the PFM cycle is illustrated in Figure 1 below which shows not only the many pieces of this complex process, but also identifies the many “clients” that it must serve- not only to enable delivery of the services government has promised to its citizens, but also to keep many groups clearly informed about how well funds are being used so that they can act as “countervailing” powers to keep the system operating in the public’s interest.

Good PFM, in short, is an enabling tool, without which good delivery of promised services cannot be achieved effectively or efficiently. Accordingly, PFMSP’s theory of change is: If the GON receives adequate public financial management (PFM) training and capacity-building support, as well as targeted ICT and systems support, then budgeting and budget execution – and the associated PFM outcomes – will significantly improve. Figure 2 presents a graphical description PFMSP’s theory of change, as approved in PFMSP’s Monitoring, Evaluation and Learning Plan.

Figure 1- PFM Cycle and Key Actors in Nepal

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The main goal of PFMSP as conceived by USAID is to contribute to enhanced capacity of targeted GON ministries and agencies for improved transparency and accountability of Public Financial Management (PFM) systems through three Outcome Results (IR) by accomplishing the seven output level results as shown in the Table 1 below:

COMPONENTS

PFMSP Goal: To enhance the capacity of targeted Government of Nepal (GON) Ministries and

Agencies to improve the efficiency, transparency and accountability of PFM systems and practices at the national and subnational levels

Improved PFM procedures,

guidelines and systems

Adequate control environment and

strengthened procurement capacity

Transparent and accountable spending of post EQ- reconstruction funds

Targeted Training and ICT Support

Targeted Training and Capacity Building

Targeted Training and Technical Assistance

Component A: Strengthen the Line Ministry Budget Information System

(LMBIS/LLFMIS-SUTRA)

Component B: Institutionalize Control

Environment and Improve Procurement Practices

Component C: Increase Transparency and Accountability of Post-EQ

Recovery and Reconstruction

Figure 2- PFMSP’s Theory of Change

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Table 1- Results Framework of PFMSP

Impact/Goal: To enhance the capacity of targeted ministries and agencies of Government of Nepal to improve the transparency and accountability of PFM systems.

Component A Component B Component C

Outcome 1 (IR 1)

Improved budget planning and execution capacity of the government of Nepal

Outcome 2 (IR 2)

Improved control environment and procurement capacity in targeted ministries/agencies

Outcome 3 (IR 3)

Strengthened PFM functions of NRA

Output 1.1 (IR 1.1) Improved procedures, guidelines and systems for PFM functions established in targeted agencies; and GON’s capacity to operate and maintain them

Output 2.1 (IR 2.1)

Strengthened capacity of selected line ministries to operationalize and sustain adequate control environment policies & procedures

Output 3.1 (IR 3.1)

NRA develops policies and procedures for transparent & accountable execution of reconstruction & recovery funds

Output 1.2 (IR 1.2)

Selected ministries/agencies are capable of executing the budget and producing timely, uniform and accurate reports on different aspects of the budget cycle in compliance with GON requirements

Output 2.2 (IR 2.2)

Strengthened capacity of selected line ministries to manage the procurement process in adherence with the Public Procurement Act and related rules and regulations

Output 3.2 (IR 3.2) The 2015 post earthquake recovery process is perceived credibly by Nepal's citizens and the international community

Output 1.3 (IR 1.3)

The PFM is strengthened and extended resulting in modern, transparent, reliable, secure and resilient system that follows international best practices

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2. Activity Description

COVID-19 Impact Note: In the wake of the worldwide outbreak of the COVID-19, in the middle of Year 4 the GON instituted restrictive measures4 including complete lockdown, travel restrictions, and a halt in non-essential services since March 2020, in an attempt to stop the spread of the virus. The GON lockdown order remained in effect for most of Q3 and Q4. In line with the GON restrictions and per instructions received from USAID, PFMSP continued to suspend implementation of major programmatic activities such as in-person trainings and workshops that required physical presence but continued with activities that did not essentially require meeting and travelling and could be performed per teleworking policies. Implementation of most of the activities planned for Year 4 were impacted under this situation. The narrative under the activities in this section reflects, wherever relevant, if and how the activity was impacted by COVID-19.

PFMSP submitted its COVID-19 RMP to USAID on May 15, 2020, and USAID approved it on June 18, 2020. Annex 1 of the RMP includes an activity impact update that outlined on the effects of COVID-19 on the implementation of PFMSP activities. Overall, PFMSP carried out its Year 4 operations under USAID’s stop work order directives due to COVID-19 and under its formally approved RMP from June 18, 2020 onwards, and followed various GON restrictions in order to prevent exacerbation of the COVID-19 pandemic.

2.1 IR1/Component A: Improved Budget Planning and Execution Capacity of GON

Output 1.1 (IR 1.1): Improved procedures, guidelines and systems for PFM functions established in targeted agencies; and GON’s capacity to operate and maintain them

FCGO/ PEFA Secretariat

A.1.1.1 Support FCGO in piloting the PEFA Self-assessment Excel based workbook of selected Federal ministries/agencies.

This activity, originally planned for Q3, could not be carried out in Year 4 given FCGO’s priorities to be able to address COVID-19 reporting demands and the lockdown. PFMSP in Q3 hired a Senior PFM expert who started leading this work in Q4 in close collaboration with the FCGO. The work has been deferred be completed by Q1 of Year 5.

All PFMSP Target Ministries/ Agencies

A.1.1.2 Organize experiential training to GON staff on fiscal federalism, results-focused budget formulation, and good Public Financial Management (PFM) system

Per the Year 4 AWP, this activity was scheduled for Q3. Given the COVID-19 situation, this activity was too complex to undertake in Year 4. In consultation with MOF/FCGO, PFMSP has included this activity in the Year 5 AWP, which is expected to be conducted in Q1/Q2 of Year 5, most likely through virtual learning/sharing sessions with experts/counterparts from other countries.

4 Available at: https://www.spotlightnepal.com/2020/03/21/nepal-go-lock-down-22-march-april-3/ https://kathmandupost.com/national/2020/03/29/nationwide-lockdown-extended-until-april-8-ban-on-international-flights-until-april-15 http://www.nepalimmigration.gov.np/post/updated-urgent-notice-regarding-travel-restriction-related-to-covid-19-dated-13t; http://www.moha.gov.np/public/upload/e66443e81e8cc9c4fa5c099a1fb1bb87/files/Press_Release(6).pdf

https://www.spotlightnepal.com/2020/03/21/nepal-go-lock-down-22-march-april-3/

https://kathmandupost.com/national/2020/03/29/nationwide-lockdown-extended-until-april-8-ban-on-international-flights-until-april-15

https://kathmandupost.com/national/2020/03/29/nationwide-lockdown-extended-until-april-8-ban-on-international-flights-until-april-15

http://www.nepalimmigration.gov.np/post/updated-urgent-notice-regarding-travel-restriction-related-to-covid-19-dated-13t

http://www.nepalimmigration.gov.np/post/updated-urgent-notice-regarding-travel-restriction-related-to-covid-19-dated-13t

http://www.moha.gov.np/public/upload/e66443e81e8cc9c4fa5c099a1fb1bb87/files/Press_Release(6).pdf

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A.1.1.3 Develop e-learning modules on PFM areas (e.g. Upgraded LMBIS/P-LMBIS, SAS and/or SUTRA)

Following approval from USAID to proceed with the activity in the context of COVID-19 and related to USAID’s directives to IPs, PFMSP commenced the contracting process to undertake the development of an e-learning program on SUTRA. However, given FCGO’s other priorities and an initially selected vendor that withdrew, PFMSP could not proceed with the development until late Q4. PFMSP subsequently contracted Saipal Technologies (the SUTRA software developer) in Q4 to complete this task as early as possible, especially given the long-term uncertainty and threat that the COVID-19 pandemic imposes.

Per the Year 4 AWP, PFMSP also planned to develop e-learning programs on P-LMBIS and/or SAS, which is now deferred to Year 5 due to COVID-19.

Output 1.2 (IR 1.2): Selected ministries/agencies are capable of executing the budget and producing timely, uniform, and accurate reports on different aspects of the budget cycle in compliance with GON requirements

Ministry of Finance

A.1.2.1 Train GON staff on LMBIS and P-LMBIS

In Q2, PFMSP assisted MOF’s Budget Division to conduct P-LMBIS trainings to provincial officials involved in planning and budgeting functions in provincial line ministries. PFMSP/MOF completed trainings for six of the seven provinces. An average of 28 officials were trained in each province and altogether a total of 181 provincial officials (25 women, 156 men) were trained. MOF/PFMSP was unable to complete one training event scheduled to take place in Hetauda, for the Bagmati Province due to the GON lockdown order amid the COVID-19 crisis. Given that all provinces had finalized their annual budgets for FY 2020/21, the training for Bagmati province was dropped for this year. A full report of the P-LMBIS training was shared with USAID in Q4.

With the upgradation of LMBIS and addition of new modules in LMBIS, especially relating to virements, MOF with the support of PFMSP and subcontractor Dry Ice conducted a two-day, socially-distanced, in-person training on Sept 28-29, 2020 for a total of 16 GON officials (4 women, 12 men). Additional training events were started on the last day of Year 4, which will be reported in the Q1 of Year 5. PFMSP and MOF have planned additional trainings on LMBIS and P-LMBIS in Year 5. Contingent upon GON’s and USAID’s directives, the training methodology may become virtual.

The newly upgraded LMBIS/P-LMBIS system and the newly linked TSA/P-TSA are expected to become functional in the first quarter of Year 5, and PFMSP will further explore how to ensure users can adapt to the new, more user-friendly, and enhanced system with minimal formal, in-person training.

National Natural Resources and Fiscal Commission

Institutional Strengthening:

Following a delay in programming in Q1 and a meeting between USAID and the NNRFC’s Commissioner, PFMSP issued a full and open solicitation in Q2 seeking potentially qualified firms to help provide technical assistance to the NNRFC to carry out Year 4 activities, including support for overall institutional strengthening of the Commission. Niti Foundation (which was the only bidder) was selected for this task given their technical strengths and their experience working with NNRFC. Based on USAID’s approval per restrictions/directives during COVID-19

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related lockdown, PFMSP issued a subcontract in Q3 to commence these activities, which were scheduled through December 2020 due to the mid-year start-up.

In Year 4, PFMSP made some important progress towards institutional strengthening of NNRFC, as follows.

Fiscal Federalism: PFMSP through Niti has placed one full time expert at the NNRFC to provide technical assistance to the Chairman of the Commission and other officials on various aspects of fiscal federalism. The primary job of the NNRFC-based expert has been to provide advisory services to the Chairman on an as-needed basis. Most of the advice is given through in-person meetings and other verbal briefings. On several occasions, experts provided their advice in written form—through policy briefs and presentations. Other experts who are based at Niti Foundation and Niti’s program team supported development of these documents, engaging in background research, and providing expert views. The team produced 11 briefs and reports and six presentations for internal use by the Commission. These were prepared in response to the Commission’s emergent needs.

• Knowledge products prepared for internal use by the NNRFC (not for public dissemination).

1) An Assessment of School Funding in Federal Nepal

2) Highlights of Provincial Budget NFY 2077/78

3) Summary of Key Economic Statistics (June 25, 2020)

4) Provincial Government Budgetary Analysis

5) Crowding Out Impact of Public Borrowing on Private Sector Debt.

6) NNRFC’s Scope and Mandates

7) Suggestions Regarding Budget Formulation for NFY 2077/ 78

8) Provincial Borrowing Limits

9) Analysis of Fiscal Indicators

10) Recommendations Regarding Conditional Grant to be Transferred from the

GON to the Provincial and Local Levels for NFY 2077/78

11) Main findings of the Public Expenditure Review Report

• Internal Presentations 1) Fiscal Federalism in Nepal: Opportunities and Challenges

2) Conditional Grant in Education Sector

3) LG Budget at the Time of COVID-19

4) Monetary Policy 2077/78 – A Review

5) Assessment of Public Borrowing at the Subnational Level

6) Key Issues about Intergovernmental Fiscal Transfers and Local PFM Discussed

in the Consultation Meeting with LGs Held During September 10-16, 2020

These reports and presentations covered wide-ranging issues of fiscal federalism – reviewing fiscal transfers and the distribution of natural resources royalties, performing sectoral assessments, providing internal borrowing recommendations for subnational governments, making recommendations for conditional grants, and so on. Some of these policy briefs were prepared only for the purpose of providing background information for the Commission, whereas others were prepared to enable to Commission to make a specific policy decision. Similarly, some presentations were developed for internal purposes only, while others were used to disseminate information to external parties; some have been used for training purposes. In addition, the experts have interacted with external parties on behalf of NNRFC. For example,

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the regular expert took a leading role in the Commission’s assessment of education sector funding at the local level and interacted with high-level officials from MOEST including the Secretary and all joint secretaries. The regular expert also presented the findings and recommendations of the assessment to the Minister of Education, Science and Technology, Hon. Giriraj Mani Pokharel. The regular expert also interacted with other development partners working with the NNRFC. For example, he continued to work closely to review the fiscal gap study being carried out by the WB and provided detailed feedback and commentary. The regular expert also interacted with the NNRFC’s Secretariat members. He sat in on most of the internal meetings of the NNRFC and contributed analysis on the subject being discussed. The regular expert was closely involved in finalizing the previous round of fiscal transfer grant formula and recommendations. He also participated in reviewing the Commission’s annual report which was submitted to the President by mid-October. He regularly interacted with the NNRFC’s joint secretaries and the Under Secretary to discuss matters pertaining to their areas of work. Natural Resources: While the Commission has spent more than three years working on its fiscal role, comparable attention has not been given to the natural resource component of its mandate. While the Commission began working on the distribution of natural resources royalties (two rounds were completed in August 2020), thus far, the Commission is acutely aware that the natural resource area has been under-explored. This part of its mandate, however, is mission-critical for the Commission to fulfill its constitutional function.

Therefore, from July 2020, the PFMSP/NITI experts have worked closely with the Commission to strategize ways to proceed with regard to natural resources. This culminated in a formal meeting chaired by the Commission’s Chairperson and attended by the Commission’s Secretary, other members of its Secretariat, subcontractor’s regular and intermittent experts, and PFMPS staff, to discuss priority themes and begin developing a future action plan. An assessment, based on interaction with NNRFC regarding natural resources and a future action plan, is as follows:

• The natural resource component of the NNRFC’s mandate is as important as its

responsibility for fiscal transfers to the subnational level.

• In Nepal, natural resource management in a federal setting is unchartered territory.

• There is an urgent need to unbundle the roles and responsibilities of NNRFC vis-à-vis

natural resources.

• The deliberations in the Constitution Assembly can be an appropriate starting point for

clarifying challenges related to natural resources use and management.

• Numerous laws and actors –both government and non-governmental –in the arena add

complexity to Nepal’s already stressed natural resource landscape.

• Given the multiplicity of actors present in the arena, the NNRFC’s role can be thought of

as custodian of natural resource federalism with respect to specific stewardship

responsibility and its role as a facilitator and interlocutor.

• Even after unbundling the NNRFC’s responsibilities, there will be knowledge gaps.

• Review of international practices on natural-resources federalism is crucial for

knowledge generation and anticipating implementation challenges.

Based on these interactions, the expert team continued to develop a comprehensive policy note that unbundles the NNRFC’s roles and responsibilities pertaining to the natural resources and to outlines key activities to be carried out.

A.1.2.2 Support NNRFC to extract financial data from various systems (database management) to help in preparing formulae for fiscal transfer

The availability of quality and disaggregated data has been one of the biggest challenges for

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the NNRFC’s functioning. The NNRFC itself does not produce data and rather relies on several government entities for the data that it needs. For example, expenditure and revenue data is produced by the FCGO/MOF; census and development indicatory by Central Bureau of Statistics (CBS) and National Planning Commission (NPC); performance data needs to be fed by respective provincial and local governments; price data from Nepal Rastra Bank (NRB); and programmatic data from relevant line ministries (e.g. Education Management Information System (EMIS) - MOEST or the Health Management Information System (HMIS) - MOEST). In Q4 PFMSP staff along with Niti representatives held consultations with the FCGO and MOF to discuss data protocols for extracting and utilizing key data from the various PFM IT systems such as LMBIS, TSA, SUTRA, and RMIS to help the Commission access data to prepare fiscal transfer formulas. Niti began preparation of a preliminary report, and by the end of Year 4 it was being discussed with NNRFC officials. Pending a final report expected by the end of 2020, and upon the approval from NNRFC, PFMSP will share the final document with USAID. A.1.2.3 Provide training program covering different pillars of fiscal federalism, including support NNRFC to prepare data simulation data analysis through STTA and training

PFMSP’s subcontractor Niti started preparations regarding possibility of organizing working review and discussion session(s) for members of NNRFC and experts on the different pillars of fiscal federalism. The activity could not be completed in Year 4 due to the COVID-19 situation and related restrictions/directives by GON and USAID. PFMSP continued to work with NNRFC to identity different modalities of training and/or adjustments to activities given this situation.

A.1.2.4 Support NNRFC to develop knowledge products on Fiscal Federalism and Local Finance for educating local governments

LGs are effectively left to their own devices when it comes to planning, budgeting, financial management, reporting, and auditing. However, in the absence of clear and appropriate standards and systems, sound financial management practices are unlikely to emerge in most LGs. A lack of adequate knowledge of PFM principles means that LGs may sometimes step out of their legal mandate. Weak PFM systems and high fiduciary risk, especially at the subnational government level, continue to be key challenges. It is essential that subnational PFM be improved in line with the requirements of the new federal structure to strengthen the fiscal devolution framework of the new Constitution. This will require detailed and operationally relevant studies, and assistance to be given to LGs to engage in coherent fiscal planning. As the constitutional body responsible for intergovernmental fiscal transfers, the NNRFC should educate LGs with regard to effective and efficient use of fiscal transfers. In Year 4, a preliminary report was developed and the subcontractor continued to discuss this with NNRFC officials. The final draft will be discussed in Year 5 among wider stakeholders like MOFAGA, MOF, Prime Minister’s Office (PMO), National Association of Rural Municipality in Nepal (NARMIN), the Municipal Association of Nepal (MuAN) as well as local and provincial governments. Conditioned upon the approval from the NNRFC, PFMSP shall share the final document to USAID in Year 5. This information booklet will enhance the capacity and readiness of the LGs to adopt fiscal federalism, to improve transparency, accountability, and the inclusive delivery of public goods and services, make effective and efficient use of revenue and expenditure allocations, including provisions taxation. The aim is to enable LGs to fulfill their expanded mandates in ways that ensure they are financially productive, equitable and transparent. This will also inform LGs of the need to

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provide the NNRFC and other agencies with reliable and timely information about their funding needs, and their performance in collecting revenue and implementing their budgets. By the same token, the NNRFC will need to provide LGs with accurate information on the amounts to be transferred from the central budget. There has been a slight change in the way the activity is being executed compared to how it was originally conceived at the commencement of the program. The initial idea was to prepare a comprehensive book on PFM and print 1,000 copies to distribute to each LG. The Commission now thinks that this booklet would be more strategic if it covers issues in plain language so that a lay literate person can understand these issues. The booklet will still cover a wide range of issues applicable to both local and provincial governments. They have requested 36,000-plus copies be printed — enough to send one to each and every elected representative at the local level. PFMSP also continued to seek NNRFC’s written endorsement of resources books on fiscal federalism and taxation, which were drafted in Year 3.

A.1.2.5 Support NNRFC to design an incentive-based performance measurement system for local governments

Fiscal transfers can create incentives and accountability mechanisms that affect the fiscal management, efficiency, and equity of public service provision and government accountability to citizens. Performance-based grant systems are intended to be integrated into national intergovernmental fiscal transfer systems, providing LGs with tangible incentives to improve their institutional, organizational and functional performance, thereby reducing the risks associated with fiscal transfers and making decentralization more effective, efficient and responsive as a strategy for delivering public goods and services.

Currently, LGs need to show that they have complied with basic or minimum conditions in order to access their grants (or part of them). These conditions, which are usually based on statutory provisions and represented as either complied with or not (binary results), are intended to measure the basic capacity of a given LG to perform its functions. LGs that can demonstrate this performance are incentivized with additional weight to a fiscal transfer formula. Therefore, when LGs are able to demonstrate compliance with minimum conditions, which are designed to ensure a minimum capacity to handle grants, they become eligible to receive additional grants. This minimum condition-based incentive system is applied because the evidence base is currently thin. More robust performance-based incentives to inform intergovernmental fiscal transfers could be used to incentivize performance on key sector results such as technical efficiency (e.g. improve pass rates), allocative efficiency (e.g. reduce inequalities in service) and student performance (e.g. increase learning). Going forward, it is a matter of putting the evidence together in order to produce a stronger evidence base. Implementing more robust reforms should be done gradually, moving from top-down schemes to systemic reforms over time. As of the end of Year 4, PFMSP’s subcontractor developed and continued to discuss an initial draft of the “State and Local Level Performance Indicators and Measurements” report with NNRFC officials. This report complements another report that the NNRFC is currently preparing on an incentive-based performance measurement system for intergovernmental fiscal transfers. The NNRFC’s own report, however, does not account for natural resources. The identification and design of a robust incentive-based performance measurement system for natural resource revenue sharing, which would work alongside the intergovernmental fiscal transfer system, is also critical and is a future priority for the support. The proposed guideline will help the NNRFC to design an incentive-based performance measurement system to inform intergovernmental fiscal transfers. This performance measure

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can provide incentives for subnational governments to improve themselves in a range of areas such as revenue collection, planning, budget execution, downward/upward/horizontal accountability, financial management, and good governance in general. Given the right arrangements (mostly in case of timely information collection), these incentives can give subnational government capacity-building more meaning and greater purpose, encourage greater all-round performance, and significantly reduce the fiduciary and other risks associated with fiscal decentralization. This will be a significant improvement over what is currently being practiced by the Commission. Training LGs in the incentive-based performance measurement system could not commence in Year 4 due to COVID-19 restrictions. Despite the disruptions, the Commission held a week-long online consultation with LGs on various issues relating to local PFM between September 10-16, 2020. The meeting was facilitated by the NARMIN and the MuAN. Elected representatives from LGs from each of seven provinces participated. During this meeting, the elected representatives raised several issues regarding the general functioning of the NNRFC and also specific issues on fiscal federalism. The questions pertained to the data used in fiscal transfer formulas; the deviation between revenue ceilings and actual disbursements and the resultant difficulty in budget management at local level; distribution of royalties from natural resources, especially for the LGs, which have not received any royalties and how NNRFC could adjust formulas so LGs can benefit;; infeasibility of the current structure of the conditional grants; feedback on the equalization grant formula; difficulties in increasing own source revenue for LGs; queries on internal borrowing ceiling; and support to LGs from NNRFC for capacity development on fiscal aspects. These points, as well as others raised, were thus slated for NNRFC’s consideration in developing/preparing an incentive-based performance measurement system. In view of prolonged restriction in the movement and gathering of people, the NNRFC is of view to move the training to a virtual platform of its own.

FCGO/ PEFA Secretariat

A.1.2.6 Support FCGO to deliver training to LGs on SUTRA

In Q2 of Year 4, PFMSP supported the FCGO to conduct co-financed user trainings on SUTRA for users from 736 LGs of 76 districts.5 FCGO deployed the 24 master trainers developed through the PFMSP-supported Master Trainer of Trainers (MTOT) session conducted in December 2019, along with 329 trainers from the district and local levels who were previously trained/mobilized, to conduct these new trainings. A total of 82 user-level training events were conducted to train a total of 2145 LG staff (233 women, 1912 men).6

PFMSP prepared a comprehensive report of the 2020 trainings including learnings, recommendations, and sustainability prospects, which was shared with USAID in early Q4.

A.1.2.7 Operate SUTRA Help Desk at the FCGO and prepare for transition to direct FCGO management

The PFMSP-supported SUTRA help desk at FCGO continued to perform a critical role providing continuous capacity development through remote support to operate the system accurately and effectively throughout the COVDI-19 lockdown period. The help desk continued to assist the LGs address practical implementation issues and challenges they face while operating the SUTRA. As a result of this support, the number of LGs using SUTRA for budgeting and accounting, as mandated by the GON’s Cabinet of Ministers, has increased significantly. By the end of NFY 2076/77, 99.73 percent of the 753 LGs were using at least one

5 SUTRA Training in Surkhet District, the date for which had not be finalized in February, was placed on hold due to the nation-wide lockdown by GON in response to COVID-19 outbreak. Kathmandu trainings were also postponed. 6 Note slight correction in the data reported in Q3 report.

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module of the SUTRA, and 96.41 percent are using it for accounting the expenditures of the current fiscal year. Figure 3 compares the use of SUTRA by LGs in the last three NFYs.

Figure 3- Status of SUTRA use by LGs, per Nepali Fiscal Years

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Figure 4 shows the status of SUTRA use in the current fiscal year by the end of PFMSP’s Year

4.

Figure 4- SUTRA Users in NFY 2077/78 (2020/21)- by September 30, 2020

In the wake of COVID-19 pandemic and the subsequent GON lockdown orders, PFMSP’s help desk staff worked from their home to support the LGs. In the last quarter of Year 4, the help desk received on average 150 calls per day and a total of 11,677 calls during office hours (this total does not include repeated calls from less competent users and calls received outside office hours, which can be repetitive and significant, respectively). Details of monthly calls to the help desk and trend in the last six months of Year 4 is shown below in Figure 5.

Figure 5- Monthly calls to SUTRA Help Desk in the last six months of Year 4

As reported earlier, PFMSP intends to help FCGO institute a more formal call logging and routing system, but COVID-19 has stalled this effort.

A.1.2.8 Support FCGO on SUTRA module enhancements.

FCGO and PFMSP’s experts continued to work with the United Kingdom-supported contractors on SUTRA system enhancements, adding new modules and moving SUTRA to the JAVA platform, which benefits directly from PFMSP’s help desk and training efforts.

PFMSP shared the SUTRA training report with FCGO and the contracted developers in Q4. The report included feedback received from the training participants on the training content, quality, and technical enhancements/improvements needed in the system for FCGO’s

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consideration.

Output 1.3 (IR 1.3): The PFM is strengthened and extended resulting in modern, transparent, reliable, secure, and resilient system that follows international best practices

MOF/ FCGO

A.1.3.1 Finalize and implement the new LMBIS system enhancements and Integration with TSA

In Year 4 PFMSP continued to work with MOF and FCGO to make necessary upgradation/enhancements in the LMBIS and TSA systems, to develop the upgraded P-LMBIS and P-TSA, and to develop linkage between these systems and with the upgraded CGAS (CGAS upgradation was supported with the MDTF funding). As of the end of Year 4, most of the critical upgraded systems have been tested and rolled out, and full handover of the system is expected in November 2020. A.1.3.2 Finalize the development of “Receptacle” programming through the Whole of Nation Portal.

The receptacle to consolidate financial information from the various levels of government, under the WNP is hosted on FCGO’s website. The latest version of the portal can be accessed at: http://wnp.fcgo.gov.np:8082/.

FCGO has not suggested any further enhancements at this time given other priorities and their plan to integrate the receptacle into the medium-term system that PFMSP is helping support before a fully functional IFMIS is feasible. However, if the FCGO has plans to enhance this receptable at a later time, PFMSP and the subcontractor remain ready to provide any needed assistance to upgrade the receptacle within PFMSP’s limited implementation timeframe.

A.1.3.3 Rationalize the hardware and software layers to integrate various PFM systems such as enhancement of Revenue Management Information System (RMIS) to National Revenue Platform with extended services support to Provincial Governments and interface Revenue Collecting Agencies (RCAs), TSA and FMIS

In Q3 of Year 4, PFMSP through its subcontractor Simply Soft completed support to the FCGO to make further enhancements to the existing RMIS to become what is expected to be known as a “National Revenue Platform.” As part of the subcontract, Simply Soft will provide support services to FCGO for a one-year time period after the system went live.

The completed work was formally handed over to the FCGO in Q3 and the RMIS is fully functioning. The government also endorsed the pending policy related issues and the electronic funds transfer system is active and operational.

A.1.3.4 Support for upgrades in the Data Center

Per the Year 4 AWP, this support for security upgrades was planned for Q3. However, given MOF’s priority to put in place a proper security system at the Data Center in time for the budget process, in Q2 PFMSP, in collaboration with the MOF, competitively subcontracted an IT firm, OBCI, to supply, install and commission the on-premise Security information and Event Management (SIEM). A SIEM solution includes but is not limited to design, supply, configuration, implementation, customization, integration, monitoring, managing backup, documentation and training for securely monitoring MOF’s IT system, network devices, installed applications and other equipment in order to provide the holistic approach for complete security analytics of MOF’s private cloud solution (proposed) for the applications at the MOF Data Center.

http://wnp.fcgo.gov.np:8082/

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However, with the subsequent COVID-19 situation and allegations related to procurement malpractices by OBCI in one of the GON’s/MOHP’s procurement contracts (unrelated to PFMSP), this activity was delayed in consultation with MOF and USAID. The contract with OBCI was later terminated. Hence, in Q4 PFMSP and MOF initiated a new solicitation to put in place the SIEM in the first quarter of Year 5

A.1.3.5 Support for regular maintenance and system operation of Hardware and Software - Anti-Malware and Data Center Support Regular maintenance and licensing agreements are built in as a part of the Hyper-Converged Infrastructure (HCI) contract starting in Year 2 and the support continued through Year 4. This support is scheduled to continue for three years on an annual renewal basis, through the end of the contract, i.e. until November 25, 2021. Recognizing both PFMSP’s current end date of August 14, 2021 and expectation that funding and LOE issues may require earlier cessation of PFMSP operations, PFMSP plans to discuss this situation further with USAID and MOF to ensure allowability of pre-payment for services and/or discussions with MOF to pick up costs after PFMSP can no longer charge to USAID. A.1.3.6 Continue development of system on Document Digitization, Document Archiving, Document Management and Workflow management system In Year 4, PFMSP completed work on the installation, configuration, and deployment of the EDMS to selected divisions of MOF. The main objectives for installing this EDMS are to help:

• Document capture with centralized storing, organization and locating documents;

• Integration with core system (LMBIS, P-LMBIS, AMIS, HRMIS, and other system);

• Controlled searching and access to documents by the number of distributed users;

• Document workflow through previously defined routes, adjusted with individual business processes;

• Tracking activities of documents during their lifespans;

• Versioning of documents (i.e. handling different versions of the same document); and

• Archiving documents.

To meet these objectives, the subcontractor has completed the required work, including the supply, delivery, and installation of licenses for 15 Libraries and 10 Concurrent Users, and providing two years’ warranty from the completion date. This system will ensure that policy and decision makers can have instant reference to supporting documents and past decisions, as well as streamline the file decision process at MOF so that service delivery is consistent and uniform. A.1.3.7 Prepare roadmap to perform ISO Audit to ensure MOF system complies with ISO 27000 IT Security Planning and Compliance Audit Information security remains a top priority of the GON. With the numerous systems that MOF is hosting or planning to host, an information security management system) is important to ensure a systematic approach to managing sensitive information so that it remains secure. In Q2 of Year 4 PFMSP and MOF’s IT section jointly worked with PFMSP subcontractor, Green Tick Pvt. Ltd., to complete the development of a roadmap for refining and realigning its internal processes in line with international best practices described in the ISO 27001 standards. In Q1, PFMSP's subcontractor had provided a six-day training on “Lead Implementer ISO 27001:2013 Information Security Management System” to 10 GON IT staff (10 men, 0 women) from MOF, FCGO, Inland Revenue Department, Department of Customs and Department of Information Technology. PFMSP’s subcontractor also completed a Gap Analysis Report for Data Center Security against the ISO 27001 Standard.

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A.1.3.8 Conduct study and prepare road map on Architecture for PFM Segment (Enterprise Architecture Artifacts and Architecture Building Blocks corresponding to PFM business, data, application, and technology)

In the course of review of the TOR provided by MOF, and given that some of the work that is being carried out by the WB/MDTF-funded consultant PWC India on its study of IFMIS pathways for Nepal, PFMSP identified potential duplication of work with MDTF’s work and discussed this with MOF/FCGO early in Year 4 when a draft TOR was under development. Later, during the Year 4 review and Year 5 AWP planning meeting and consultation process, PFMSP and MOF subsequently agreed that this activity was not a current priority and could be dropped from Year 4 and not included in Year 5.

A.1.3.9 Assist in implementation of a standard Government Accounting and Reporting Information System (GARIS); support IT infrastructure (equipment) at the center (FCGO), and districts (DTCOs),

Per request of the FCGO, PFMSP began assistance with hardware/equipment support at FCGO’s data center and selected districts to operationalize the upgraded CGAS system; to integrate it with other FCGO financial management systems; and to support existing systems. In Q2 PFMSP through a full and open competition selected Thakral One Nepal to supply a SAN device and switches. PFMSP delivered, installed, and handed over the equipment to FCGO in Q4.

PFMSP also provided support to FCGO and its District Treasury Controller Offices (DTCOs) with power backup equipment to facilitate uninterrupted business processes. Approximately 4,000 federal and provincial cost centers are expected to use CGAS. Given the urgency for all spending units to start using CGAS, FCGO themselves carried out a series of virtual trainings in batches to train the users in September 2020. Contingent upon budget availability and timing, PFMSP and FCGO agreed that PFMSP may be in a position in Year 5 to assist FCGO to provide some support on CGAS, if requested.

A.1.3.10 Support FCGO to complete the roadmap for accrual accounting

Building on the note on accrual accounting submitted by PFMSP to FCGO in Year 3, PFMSP has prepared a draft roadmap for GON's transition to accrual accounting.

Completion of this activity has been deferred from Q4 to Year 5, given the COVID-19 situation and priorities of FCGO to address the pandemic and the delays in general operations that it is causing.

A.1.3.11 Support trainings on PFM such as accounting /IPSAS and fiscal reporting for FCGO, selected PTCOs and MOF staff

The activity was originally scheduled for Q2 per the Year 4 AWP; however, it was deferred to Year 5 per FCGO's priorities. PFMSP remained in continuous consultations with FCGO to prepare a training plan, but the circumstances necessary to finalize a plan and carry it out did not materialize, primarily due to COVID-19.

A.1.3.12 Arrange for MOF/ FCGO staff to take certification on TOGAF (carried over target)

One GON official from the Department of Information and Technology completed The Open Group Architecture Framework (TOGAF) certification in Year 4, in line with PFMSP's support initiated in Year 2. Altogether four officials have completed the TOGAF certification through Year 4. Two officials are now expected to take the certification in Year 5. PFMSP regularly

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followed up with the two GON officials regarding their pending exams. Accordingly, this activity has thus been rescheduled to be completed in Year 5.

2.2 IR2/Component B: Improved Control Environment and Procurement Capacity in Targeted Ministries and/or Agencies

Ministry of Education, Science and Technology

Output 2.1 (IR 2.1): Strengthened capacity of selected line ministries to operationalize and sustain adequate control environment policies and procedures

B.2.1.1 Finalize planning and budgeting guidelines for MOEST

In Year 3, PFMSP, in consultation with MOEST, prepared a draft Planning and Budgeting Guidelines for MOEST in the new context of federal structure. However, in Year 4 MOEST further requested PFMSP to revise and update the guidelines based on the latest developments in the federal context. In Q2 of this year, PFMSP submitted the revised guidelines to MOEST for further feedback and organized a validation workshop on February 14, 2020 to collect the inputs from the related MOEST officials.

By the end of Q4, MOEST was making further changes in the guidelines in consultation with other agencies and incorporating indicators. PFMSP and MOEST agreed at the end of Year 4 that PFMSP will resubmit the guidelines for MOEST’s approval in early Year 5 after incorporating MOEST’s pending comments.

The new guidelines, once implemented, will help strengthen the comprehensiveness of planning and budgeting at the Federal and Provincial levels to ensure alignment with national and sector strategic plans; introduce a medium-term results-based approach to planning and budgeting; and develop objective budgets (based on realistic expected costs) for the operation of community schools based on adopted and uniformly applied standards for service delivery.

B.2.1.2 Deliver training on Planning and Budgeting guidelines for federal and provincial officials

This training activity was delayed and deferred to Year 5 pending finalization and approval of the guidelines.

B.2.1.3 Pilot SAS at five selected schools

In Q2 PFMSP, including the subcontracted software developers Saipal Technologies, completed piloting of SAS by entering real financial data of the seven community secondary schools of Madhyapur Thimi Municipality, Bhaktapur, and Budhanilkantha School, Kathmandu for the current fiscal year. The accountants were also given hands-on training on the operations and functionalities of the system. The developers have incorporated direct feedback received from the pilot testing process into the software which is now ready to be rolled-out to the schools. PFMSP finalized the Pilot Study Report on SAS which was shared with USAID in Q3. PFMSP also circulated the report widely in Q3 to MOEST, CEHRD, FCGO and EDCU, Bhaktapur (which coordinated the pilot test locally) following USAID review and approval.

B.2.1.4 Prepare SAS user operating manual to implement SAS in community school

In Year 4 PFMSP finalized the SAS user operating manual and the training manual, incorporating feedback and recommendations received from the pilot testing, translated the manuals into Nepali, and submitted them to MOEST for approval. These manuals were designed to be helpful to the trainers and the schools to use SAS accurately and more effectively to record and report revenue and expenditure statements required by LGs,

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provinces, and the federal government. Moreover, the manuals will be expected to also help increase the number of users in the community schools.

B.2.1.5 Conduct Master TOT on SAS

In Q4 of Year 4, PFMSP supported MOEST to design a two-day MTOT on SAS. Two MTOT events were scheduled to be conducted virtually in the initial weeks of Year 5. Once trained, these master trainers will deliver Training of Trainers (TOT) in Year 5 to help develop a pool of trainers on SAS. MOEST has also indicated the need of a formal IT system audit of the SAS, which will boost the prospect of ownership of the system by the entire GON.

B.2.1.6 Conduct TOT on SAS

Please see above under B.2.1.5.

B.2.1.7 Support the roll out of SAS in 20 USAID priority districts (Q3) and 14 Earthquake districts (Q4)

This activity was originally scheduled for Q3, per the Year 4 AWP. However, the rollout training to the schools has been pushed back to Year 5 due to the COVID-19 situation.

B.2.1.8 Support to establish SAS Help Desk at MOEST/CEHRD

This activity was scheduled for Q3, per the Year 4 AWP. PFMSP began initial consultations regarding the software and hardware requirements with MOEST in Year 4, however, the actual implementation of this activity has been deferred Year 5, due to the impact of the COVID-19.

B.2.1.9 Support MOEST to collect and produce timely consolidated reports and prepare required financial statements for the year 2019/20

In Year 4 PFMSP, through a deliverables-based consultant embedded in MOEST, continued the support to the MOEST to collect and produce timely consolidated reports and prepare required financial statements for the year 2019/20.

B.2.1.10 Conduct follow up study to assess outcomes of School Accounting Training in selected districts

PFMSP, jointly with MOEST officials, conducted a follow-up study in Bardiya district to evaluate the effectiveness of School Integrated Financial Management (SIFM) trainings conducted by PFMSP and MOEST in Year 1 and Year 3. The overall conclusions of this assessment are summarized below:

• PFMSP support for the SIFM training conducted by MOEST was useful for the schools and the topics covered were directly relevant to their operations.

• In general, the surveyed schools found the three days of training adequate for the scope of training provided during PFMSP’s Year 3. However, considering other factors listed in the recommendations above, the content and duration of the training could be reviewed and optimized for the next training program, including through more practice sessions and inclusion of training on the forthcoming SAS. PFMSP will continue to work with MOEST on how to optimize integration of SAS training with an enhanced SIFM training package.

• Involving the SMCs, headteachers, and accountants as joint participants in the same training sessions was an effective adjustment to the Year 3 SIFM training methodology. This has helped to facilitate discussion on some of the common problems faced by schools in a single training forum. The training has also helped the SMCs and

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headteachers to become aware of the important matters related to their roles and responsibilities at schools including account keeping, procurement, inventory management, and internal control.

• The training has helped the community schools to strengthen and enhance their capacity to maintain accounts, handle procurement, manage inventory, and improve the internal control environment.

The follow-up study (i.e. tracer study) was helpful to analyze the effectiveness of training program and will guide future trainings on school accounting.

An assessment report including the key findings and recommendations was shared with USAID in April 2020.

B.2.1.11 Support MOEST to publish and disseminate School Integrated Financial Management (SIFM) Manual

In Q1 of Year 4, PFMSP supported MOEST to finalize the updated School Accounting Manual (SAM), which was approved by MOEST in Q2. In Q3 MOEST published the SAM (in lieu of the SIFM Manual, as explained in previous reports) on its website at the following location: http://moe.gov.np/article/1316/School-Accounting-Guideline.html

Although PFMSP had originally planned to print 20,000 copies of the manual per the Y4 AWP, upon request of MOEST, PFMSP has agreed to print 30,000 copies to be distributed to all schools and LGs. PFMSP finalized the procurement process to print the manuals in Q2, which was then put on hold for most of the Q3 given distribution challenge due to COVID-19 and subsequent GON lockdown orders. In the latter part of Q3, PFMSP resumed the process of printing and distribution which was re-planned to be completed in early Year 5, most likely through PFMSP support to distribute the SAM copies to all LGs, which in turn would be responsible for distribution to all government schools across the country through the LGs’ own oversight mechanisms of schools.

B.2.1.12 Finalize Internal Control Guidelines and deliver training to federal and provincial education staffs

In Q3 MOEST approved the Internal Control Guidelines 2077, developed with support of PFMSP. PFMSP had been assisting MOEST since Year 2 to develop MOEST’s new guidelines in order to improve the financial management and internal control functions of MOEST, as well as to consolidate standard rules and regulations in one document. The finalization process was delayed so that the new MOEST guidelines could incorporate elements of the FCGO’s new guidelines regarding the internal controls as well as the new Financial Procedures and Fiscal Accountability Act 2076.

MOEST has published the approved guidelines through its website which can be accessed at: http://moe.gov.np/article/1332/internal-control-guideline.html.

In September 2020, PFMSP and MOEST conducted a virtual training (two half days) on the Internal Control Guidelines - 2077 for the concerned education staff of federal and provincial governments. At MOEST’s request, PFMSP also printed and handed over 150 copies of the guidelines for delivery to the MOEST’s federal entities.

The guidelines will help to assess and mitigate financial and control risks at the different level of the business processes, improve the quality of budget execution, and help reduce the potential for audit irregularities.

http://moe.gov.np/article/1316/School-Accounting-Guideline.html

http://moe.gov.np/article/1332/internal-control-guideline.html

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B.2.1.13 Support for MOEST's audit committee, e.g. to develop Terms of Reference (ToR), policy and procedure documents

In line with PFMSP's consultations with MOEST regarding formation of an audit committee, MOEST formed an audit support committee in Q1. In Q1 PFMSP had developed a draft suggested TOR for the newly formed audit support committee and shared it with the MOEST for feedback and potential adoption. The draft TOR contains details for the committee to also serve as a policy and procedure document that outlines the committee’s membership, the frequency of meetings, key tasks to be undertaken, and possible tools to be used to support the committee’s work. While the MOEST must determine whether to adopt PFMSP’s suggestions, with a proper TOR in place, it is expected that the newly formed MOEST audit support committee can become functional and active in helping reduce audit irregularities concerned with the ministry.

PFMSP remains responsive to MOEST’s emerging needs and is in continuous dialogue with the ministry to help their new committee become as strong and functional as possible within PFMSP’s timeframe. The process for GON audit, which cuts across the bureaucracy and is not fully owned by MOEST, however, has limited the ability of MOEST to make wholesale reform and will require a broader whole-of-government reform approach to update the GON’s overall audit system.

B.2.1.14 Conduct training and workshops on audit compliance and clearance for MOEST

On January 8, 2020 (Q2), PFMSP supported a workshop on audit compliance and clearance under the chairmanship of MOEST’s Secretary. The objective of the workshop was to discuss the roles and responsibilities of the newly formed audit support committee and to lay out a plan to settle outstanding audit irregularities per GON target. The minutes of the workshop were shared with the Q2 progress report. One more event related to this activity was scheduled for Q3. However, it was delayed to Year 5 due to the COVID-19 situation and GON’s directives.

B.2.1.15 Provide technical assistance to the MOEST in settling audit irregularities through collection and consolidation of required documents from operating level offices.

In Year 4 PFMSP commenced the needed technical assistance to MOEST in helping settle audit irregularities by deputing technical staff to work under the supervision of MOEST to prepare and review documents for settling audit irregularities particularly in infrastructure works. This support will continue in the first quarter of Year 5, as the COVID-19 related lockdown restrictions inhibited their work in Year 4. The specialists will also help develop a system to track and monitor the audit irregularities. Through this support, it is expected that MOEST will be able to reduce negative audit findings and resolve greater number of outstanding audit irregularities particularly in infrastructure works.

Given the ongoing COVID-19 pandemic situation, PFMSP will support MOEST/CEHRD to depute technical staff in adopting safety measures.

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Output 2.2 (IR 2.2): Strengthened capacity of selected line ministries to manage the procurement process in adherence with the Public Procurement Act and related rules and regulations.

B.2.2.1 Prepare procurement improvement plan.

In Q3 of Year 4, the MOEST approved the Procurement Improvement Plan (PIP) of the federal level developed with the support of PFMSP. To strengthen procurement functions of the education sector at the federal and sub-national levels, PFMSP had supported MOEST in Q1 to prepare a total of two education-related PIPs at federal and provincial levels, conducted a validation workshop in Q2 and submitted the final versions to MOEST and MOSD Sudurpaschim province in Q3.

MOEST published the federal PIP through its website which can be accessed at: http://moe.gov.np/article/1331/procurement-improvement-plan.html

PFMSP has printed and handed over to MOEST a total of 150 copies of PIP for distribution to MOEST federal entities.

With some delays caused by COVID-19 in Q3, MOSD, Sudurpaschim province is now likely to approve the document in early Year 5.

B.2.2.2 Train Federal and Provincial GON staff on procurement planning and execution systems and processes

With the establishment of the federal structure, GON has new capacity development needs at

the federal, provincial, and local levels to enhance the knowledge and skills on procurement

planning and execution. In Q2 PFMSP conducted a training on procurement planning and

execution at Dhangadhi, Kailali for 39 participants (0 women, 39 men) which included officials

from LGs and provincial ministries of Sudurpaschim Province, and federal entities. A report

was shared with MOEST in Q3 following USAID’s review and approval.

Ministry of Health and Population


B.2.1.1 Deliver training on Planning and Budgeting guidelines

In Q2 of Year 4, MOHP approved the Planning and Budgeting Guidelines of Health Sector- 2076 which PFMSP supported to prepare and finalize in Year 3. This is a significant achievement which will help strengthen the comprehensiveness of planning and budgeting at the Federal and Provincial levels to ensure alignment with national and sector strategic plans; introduce a medium-term results-based approach to planning and budgeting; and develop objective budgets (based on realistic expected costs) for the operation of health services based on adopted and uniformly applied standards for service delivery. In Q4, MOHP published the guidelines in MOHP’s website- https://mohp.gov.np/eng/images/PB-Guidelines--MOHP--Final.pdf.

PFMSP remained in continuous consultation with the MOHP vis-a-vis possibilities of conducting online or direct (in-person) training on the newly approved guidelines for 40 selected officials from the federal and provincial entities of MOHP. The training has now been deferred to Year 5 due to COVID-19 situation.

PFMSP also supported printing of 500 copies of the guidelines and handed them over to MOHP, which took responsibility for delivering/sharing with MOHP federal and Provinces’ entities.

http://moe.gov.np/article/1331/procurement-improvement-plan.html

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B.2.1.2 Deliver training on Business Plan of MOHP and its departments

In Q2 MOHP approved the four business plans for MOHP and its three departments [DOHS, Department of Drug Administration (DDA), Department of Ayurveda and Alternative Medicine (DOAAM)} for a five-year period which PFMSP supported to develop in Year 3. In Q4 MOHP published the business plans in MOHP’s website. The business plans can be accessed through the following links:

• MOHP: https://mohp.gov.np/eng/images/Business-Plan--MOHP--Final.pdf;

• DOHS: https://mohp.gov.np/eng/images/Business-Plan--DOHS--Final.pdf;

• DOAAM: https://mohp.gov.np/eng/images/Business-Plan--DOAAM--Final.pdf; and

• DDA: https://mohp.gov.np/eng/images/Business-Plan--DDA--Final.pdf.

PFMSP remained in continuous consultation with the MOHP regarding the possibility of conducting online or direct (in-person) training in Q4 on the newly approved Business Plans of MOHP and its three departments. The trainings would be for officials who are involved in their business processes in both the federal and provincial entities of MOHP. The training was originally scheduled for Q2 but has now been pushed to Year 5 due to the COVID-19 situation.

PFMSP also supported printing of 100 copies each of the MOHP and DOHS business plans, and 50 copies each of the DOAAM and DDA business plans and handed them over to MOHP for distribution.

B.2.1.3 Support to prepare basic costing norms for allocation of resources to the provinces and LG to provide basic health services

In Q2 of Year 4 PFMSP met with USAID regarding this challenge and came to the agreement that the activity would be dropped, given the specific technical skills and time that may be required to effectively conduct this task. It was scheduled to be dropped through Modification 12 of the PFMSP contract, expected to be issued early in Year 5.

B.2.1.4 Deliver training on public financial management and internal control

With the establishment of the federal structure and changes in the act and regulation, GON has new capacity development needs at the federal and provincial levels to enhance the knowledge and skills on PFM and internal controls. In Q2 PFMSP supported a training on Financial Management and Internal Control in Sauraha, Chitwan on February 28-29, 2020 for a total of 29 officials (2 women, 27 men) from MOHP and its entities.

The training report was shared with MOHP in Q3 following USAID’s review and approval.

B.2.1.5 Conduct training and workshops on audit compliance and clearance for MOHP/DOHS and selected hospitals

This activity was scheduled for Q2 and Q3 per the Year 4 AWP. However, the training was delayed to Year 5 given MOHP’s current priority being to address the COVID-19 pandemic.

Output 2.2 (IR 2.2): Strengthened capacity of selected line ministries to manage the procurement process in adherence with the Public Procurement Act and related rules and regulations

B.2.2.1 Deliver procurement trainings based on updated procurement guidelines

This was a continuation of work started in Year 3. PFMSP engaged in high-level consultations with MOHP senior officials to obtain their feedback on the procurement guidelines. At MOHP’s request, PFMSP organized a validation workshop on December 31, 2019, to collect inputs on

https://mohp.gov.np/eng/images/Business-Plan--MOHP--Final.pdf

https://mohp.gov.np/eng/images/Business-Plan--DOHS--Final.pdf

https://mohp.gov.np/eng/images/Business-Plan--DOAAM--Final.pdf

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updated procurement guidelines from the procurement related MOHP’s high-level officials. After incorporating the inputs collected during the validation workshop, the procurement guidelines were finalized and submitted to the MOHP for approval in Q2.

Given the series of news regarding transparency/corruption issues related to procurement of health/COVID-19 related goods/equipment, PFMSP commenced discussions with MOHP on further updating the procurement guidelines to address procurement issues and processes in crisis situations such as COVID-19. PFMSP updated the guidelines and re-submitted to MOHP for approval in Q4. Final approval was deferred to Year 5, pending outstanding clarifications involving PPMO.

2.3 IR3/Component C: Strengthened Financial Management Functions of National Reconstruction Authority

Output 3.1 (IR 3.1): NRA develops policies and procedures for transparent and accountable execution of reconstruction and recovery funds

C.3.1.1 Support for periodic review of accuracy of data entered in NRA/FMIS

In Year 4 PFMSP continued its support of periodically reviewing the accuracy of data entered into the system by NRA-FMIS users, through its embedded consultancy and PFMSP staff. This helps NRA to maintain the accuracy of the reports it produces. NRA-FMIS continues to produce complete and accurate reports, an accomplishment achieved initially during Year 3. At the end of Year 4, however, FCGO had indicated that NRA would have to switch to using the newly upgraded CGAS as part of the FCGO’s effort to standardize financial accounting. Although the new requirement for NRA to switch to CGAS use can be expected to cause some duplicative work for the remainder of NRA’s existence, the principles of reporting accurately and completely in NRA-FMIS may be expected to carry over as NRA utilizes CGAS going forward.

C.3.1.2 Conduct trainings on updated NRA-FMIS

Due to staff integration process and other transfers of GON staff, some staff of NRA cost centers required training on the use of the NRA-FMIS. Therefore, in December 2019 (Q1) and January and February 2020 (Q2) PFMSP and NRA conducted a total of three training events on NRA-FMIS for a total of 84 selected accountants (76 male, 8 female) representing NRA's 75 cost centers. The NRA co-financed these trainings, as part of the overall handover and sustainability process as PFMSP moves to close-out activities during PFMSP’s Year 5.

Output 3.2 (IR 3.2): The 2015 post earthquake recovery process is perceived credibly by Nepal's citizens and the international community

C.3.2.1 Provide support for appropriate public reporting of NRA financial information on regular basis.

In Q1 of Year 4 PFMSP supported the NRA to produce and publish a detailed article on PFMSP's support to the NRA from Year 1 till date. NRA published the article in its regular newsletter outlet in print and online.7 In Q3 NRA with the support of PFMSP published in its website the donor-wise and sector-wise budget and expenditure reports of the NRA for the first six months of NFY 2076/77.8 This is essential for the NRA to assure the public that reconstruction funds are being utilized and utilized appropriately and NRA’s ability to prepare such public reports should serve as broader inspiration for improving transparent and

7 http://www.nra.gov.np/np/resources/details/ksVZPdS2UIi23d4TQrK2Cb-A2HUCFpZJArZ1aSYeJIE.

8 http://nra.gov.np/en/content/othermedias/0

http://www.nra.gov.np/np/resources/details/ksVZPdS2UIi23d4TQrK2Cb-A2HUCFpZJArZ1aSYeJIE

http://nra.gov.np/en/content/othermedias/0

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accountability PFM in Nepal.

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3. Incorporation of Cross Cutting Interventions

USAID's cross-cutting issues are Resilience, GESI, Youth, Science and Technology, Innovation, and Participation. PFMSP activities intersect primarily with the issues of GESI, Technology and Innovation. In connection with GESI issues, PFMSP has been specifically working on expanding the concept and practice of Gender Responsive Budgeting (GRB) so that it becomes a more transformative process, rather than an exercise in classifying gender-related budgeting.

USAID GESI Reporting: In addition to gender, USAID requires reporting on the issue of social inclusion, including disaggregation of data as outlined in the PFMSP contract and described in Figure 6 below:

Based on the USAID’s required GESI indicators in Figure 6, the disaggregation of social inclusion data of PFMSP’s Year 4 progress is displayed in Table 2 below:

Table 2- GESI Disaggregation of PFMSP Year 4 Beneficiaries

GESI Indicators # of person trained in Year 4 Percentage

Total 2543 100%

Beneficiaries by Gender

Women 285 11%

Men 2258 89%

Beneficiaries by Caste/Ethnicity

Brahmin/ Chhetri 1771 70%

Dalit 63 2%

Indigenous 292 11%

Newar 70 3%

Muslim 18 1%

Other 329 13%

Beneficiaries by Age Group

15 - 19 13 1%

20 - 24 357 14%

25 - 29 816 32%

30 - 34 573 23%

35 – 39 295 12%

40 and Above 489 19%

Beneficiaries by Position

1st Class 0 0%

2nd Class 23 1%

3rd Class 1052 41%

Assistant Levels 1468 58%

All person-level indicators for which data are collected (either through quarterly/annual reports, training/workshop reports, and reports of evaluation or assessments) will be disaggregated by sex, age, and caste/ethnicity.

The caste/ethnicity disaggregation will be as follow, at a minimum, the following six categories: (i) Dalit, (ii) Muslim, (iii) Brahmin/Chhetri. (iv) Newar, (v) Janajati, and (vi) Other.

The age disaggregation will be by the following groupings: 15-19, 20-24, 25-29, 30-39, and 40+.

The number of participants will be disaggregated by their ministry/agency and their positions by the following groupings: First Class, Second Class, Third Class and Assistant Level.

Further disaggregation may be needed as agreed upon in the approved M&E Plan. And the progress against the M&E Plan will be reported in an annex to the quarterly and annual reports in a format agreed upon between the PFMSP and COR.

Figure 6- Social Inclusion Reporting requirement of USAID

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Table 2 indicates that, in PFMSP for Year 4:

• Eleven percent of the trainees were women while 89 percent were men, reflecting the current composition of budget and finance related staff in the GON (GON trainee participants were chose by GON, not PFMSP);

• Despite Nepal's diversity in ethnic/caste composition: o the Brahmin/Chhetri group ranked in first group with 70 percent of the total

beneficiaries; o ‘Other’ group ranked second with 13 percent and ‘Indigenous Nationalities’ group

ranked third with 11 percent of the total beneficiaries; o Newar and Dalit group each represent about three and two percent respectively;

and o Muslim are the least represented group with one percent of the total beneficiaries of

2545.

GON’s GRB Classification: In Year 4 PFMSP continued to collect and report information on allocations for GRB by using the GON’s three-category classification system of budgeting that began with its FY 2007/08 budget.9 In this system, line items are classified as: (i) direct gender related, (ii) indirect gender related, or (iii) gender neutral. The reported figures are subjective and amount to estimates which are guided by the following criteria:

• 50 percent or more of a budget line item is directly beneficial for women – Directly Responsive;

• 20 percent or more and less than 50 percent of a budget line item is directly beneficial for women – Indirectly Responsive; and

• less than 20 percent of a budget line item is beneficial for women – Neutral

Table 3 shows that the amount of budget classified as directly benefiting women has steadily increased since GRB initiation in the FY 2007/08 budget and has continued to increase during PFMSP’s implementation period from FY2016/17 to FY2020/21.

Table 3- Gender Budget Classification across Different Fiscal Years

Gender Budget Categories

FY 2007/08

FY 2015/16

FY 2016/17

FY 2017/18

FY 2018/19

FY 2019/20

FY 2020/21

Direct 11% 22.26% 23.10% 37.42% 38.65% 38.17% 38.16%

Indirect 33% 47.98% 48.45% 32.66% 34.28% 35.56% 35.12%

Neutral 56% 29.75% 28.45% 29.92% 27.07% 26.27% 26.72%

Source: Annex 8 – Function-wise Gender Responsive Budget (Including Financial), Fiscal Year 2018/19 and Red Book 2020.

GRB Expenditures: It was expected that beginning with FY2019/20 (NFY 2076/77), GON/MOF/FCGO would be able to report on expenditures against the GRB categories since MOF/FCGO is upgrading its national budgeting systems to include related reporting sections for the current GRB classification system.

While recognizing the limited value added of recording GRB expenditures, given PFMSP’s position in working with GON/MOF/FCGO on SUTRA and LMBIS/P-LMBIS for federal/provincial budgeting, PFMSP advocated as well as advised MOF/FCGO to integrate GRB expenditure reporting with the budget classification system. However, PFMSP does not “control” the software programming contracts for SUTRA or the CGAS upgrade, and thus does not have a direct ability to work with counterparts on TORs that would help effectuate such an

9 Gender Assessment and Gender Budget Audit in Seven Ministries (Compilation of synopsis of executive summary and conclusion & recommendations of the studies)

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improvement. Currently, there is a field under the ‘Other’ category module in SUTRA where GESI and/or GRB related budget by activities could be utilized. Accordingly, GRB expenditure can be tracked by selecting GESI related activities and its expenditures. Critically, the software or broader or system itself does not provide GRB expenditure automatically.

Transforming GRB: In Year 4 PFMSP continued advocacy support for mainstreaming GRB into the GON’s budgeting system with the purpose to improve Nepal’s budgeting so that it is both results-oriented and gender responsive. However, this process is primarily political, and reform continued to take time through consensus building and strong GON leadership. Building on PFMSP’s Year 2 report assessing Gender Responsive Budgeting in Nepal and Year 3 workshop and training conducted in collaboration with other DPs and USAID projects, in February 2020 PFMSP revised and USAID approved PFMSP’s Technical Paper as Guidance to GON on Advancing the Practice of Gender Budgeting. Based on this prior work, PFMSP planned to provide more extensive GRB training in Year 4. However, USAID preferred to hold off on training until further work through the International Development Partner Group (IDPG) would lead to a more conducive environment for advancing GRB reforms. Thus, soon after the approval of the paper, USAID’s GESI Advisor, including through USAID’s role in the IDPG GESI Working Group’s GRB group, shared this report to the GON, donor community, and other projects.

Meanwhile, PFMSP’s Year 4 GRB priority was thus adjusted to support an increased understanding of proactive GRB, as a better understanding of GRB has to be built at the senior levels of government and among all stakeholders in PFM and GRB in Nepal. Hence, with the key priority of improving the understanding of GRB that would lead to progress incorporating GRB into all GON budgets, PFMSP in collaboration with Niti Sambad/NDI provided training to members of the parliamentary Women and Social Committee along with Finance Committee members and NPC officials on result-based budgeting and modern views of GRB in May 2020. This joint effort led by NDI proved to be useful to get a better understanding of these concepts as the chairperson of the parliamentary panel Niru Devi Pal said the committee decided to direct the federal and provincial governments to put gender rights at the heart of the GON’s budgets.

Subsequently, MOF’s Joint Secretary of the Budget Division, Dhani Ram Sharma, who is also the Chair of GRB Committee at MOF, expressed his interest and enthusiasm to follow up on this topic, in coordination with the GRB committee and NASC). USAID’s GESI Adviser thus shared PFMSP’s technical report with GON counterparts including GRB Committee members during a GRB committee meeting on August 6, 2020. Joint Secretary Sharma expressed interest in how some of the recommendations from the technical paper could be practically applied during the next year's budget cycle (NFY 2078/79).

Thus, in late Year 4 PFMSP began discussions with USAID on engaging NASC staff and other GRB stakeholders on ways to best contribute to advancing GRB practice in Nepal through consultations, trainings, and/or other targeted activities early in Year 5 to help institutionalize government knowledge of and commitment to an enhanced, transformative GRB system for Nepal. This effort will follow squarely in line with PFMSP’s effort to advocate for mainstreaming GRB into the GON’s budgeting system with the purpose of improving Nepal’s budgeting so that it both results-oriented and gender responsive.

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4. Communication, Coordination and Collaboration Activities Accomplished

Given the nature of the complex programmatic interventions in Year 4, and the need to ensure effective collaboration and coordination in an evolving environment, PFMSP developed an ambitious coordination plan to help ensure effective communication and synchronization of workplan programmatic interventions with relevant stakeholders. The Table 4 lists by major counterpart PFMSP’s plan for coordination, and a self-assessment of its implementation. Lessons learned from Year 4 practice will inform Year 5 implementation.

Table 4- Coordination and Collaboration Practice in PFMSP Year 4

Stakeholders at different Levels

Coordination and collaboration Areas

Year 4 Practice

Government

Implement-Whole of project Steering/Coordination Committee comprising members from MOF/ FCGO/ PEFA/MOEST/ MOHP and NRA

● Bi-annual meeting for strategic guidance on PFM reform within the project framework, to share progress on AWP; lessons learned and areas requiring buy-in and coordination on broader agency-wide systemic reforms as well as help resolve issues around VAT refunds for USAID projects.

● None this year. PFMSP did not receive feedback on the PFMSP Steering Committee TOR, despite repeated requests. The revival of the donor-based PFM working group during PFMSP’s Q1 should become the anchor for larger coordination efforts; PFMSP actively interacts across primary and secondary counterparts to ensure programmatic synergy.

MOF/ FCGO/ PEFA Secretariat

● Quarterly review meetings with MOF, FCGO and PEFA Secretariat to review the progress on AWP and share the lessons learned.

● Completed regular meetings and discussion including day-to-day coordination and communication.

● Conducted annual progress review of Year 4 and Year 5 planning workshop in August 20, 2020 jointly with MOF/FCGO and PFMSP.

● Held regular discussions with MOF and FCGO trough teleworking in Q3 and Q4 regarding the implementation of Year 4 AWP, particularly to discuss the plans for LMBIS enhancements and integration with TSA, security upgrade at the Data Center, SAN and other IT equipment support and RMIS upgrade.

National Natural Resources and Fiscal Commission (NNRFC)

● Quarterly strategic review meeting with NNRFC on national level grant, transfer, and SNG own-source revenue policies.

● PFMSP regularly consulted with NNRFC chairperson and senior officials directly or through subcontractor and their in-house experts based in the NNRFC.

Ministry of Health and Population (MOHP) and Department of Health Services (DoHS)

● Quarterly progress review meeting with the Policy Planning and Monitoring Division, Health Coordination Division, Finance Administration, and Department of Health Services.

● Monthly activity progress review meeting with Finance Administration Section.

● Continued support by embedding one PFMSP staff in the Finance Section of MOHP for close coordination, communication and cooperation.

● Completed regular meetings and discussion including day-to-day coordination and communication, and virtual meetings due to COVID-19 restrictions.

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Year 4 Practice

● Participate in PFM Committee Meeting.

Ministry of Education, Science and Technology (MOEST) and Center for Education and Human Resource Development (CEHRD)

● Quarterly progress review meeting with Policy and Planning Division, Finance Administration Division, CEHRD.

● Attend PFM Reform Working Group Meeting.

● Monthly activity progress review meeting with Financial Management, and Planning and Monitoring units within the ministry.

● Completed regular meetings and discussion including day-to-day coordination and communication, and virtual meetings due to COVID-19 restrictions.

● Conducted virtually the annual progress review of Year 4 and Year 5 planning workshop in August 25, 2020 jointly with MOEST, CEHRD and PFMSP; and outlined possible new activities for Year 5.

National Reconstruction Authority (NRA) and its Central and District Offices;

● Quarterly progress reviews meeting with Policy and Planning Division and Financial Administration Division.

● Monthly reviews to monitor performance of Financial Management & Accounting System with Financial Management Division in NRA.

● Completed meetings and discussion as needed including day-to-day coordination and communication through embedded staff.

● Supported with two PFMSP staff embedded to NRA for:

• close coordination, communication and cooperation regarding training supports and technical supports for improving of NRA’s internal PFM activities such as operate NRA-FMIS for timely and quality reports production on regular basis;

• Monitoring and technical supports to all existing cost centers.

Sub-national Governments (SNGs): 1. Provincial

Governments (PGs); 2. Local Governments

(LGs); 3. Interim coordination

entities (such as the DTCOs and District Coordination Committees- DCCs) at the district level.

● Feedback/comments

gathered from LG staff

particularly on

effectiveness of SUTRA,

and on implementation of

LMBIS and other PFM

reform initiatives from

officials in provincial

governments.

● Information received in

discussions with Sajhedari II,

CS:MAPS, and USAID’s

Policy Dialog projects for

insights into SNG thinking.

PFMSP’s close coordination and cooperation with financial and technical supports to MOF/FCGO for SNGs resulted as:

● Training to six provincial governments on the newly upgraded PLMBIS.

● Provincial Governments produced Provincial Red Book for FY2077/78 using the LMBIS/P-LMBIS software.

● Accomplishment of a huge coverage of training to all LGs on the Use of SUTRA and production of LGs Red Book of FY2077/78.

● Training on procurement, financial management and internal control to health and education related provincial entities.

● Operation of SUTRA at LGs for LG level accounting processes.

Donors

World Bank /Multi-donor Trust Fund (MDTF)

● Participate in and actively contribute to

● PFMSP, along with USAID, held a coordination meeting with MDTF on

39



Year 4 Practice

whole-of- government PFM reform action plans; share AWPs and progress reports.

● Share workplans and quarterly progress report.

● Attend Technical Committee meetings and share relevant information.

● Sharing issues, challenges and lessons regarding system integration periodically.

November 27, 2019, PFMSP shared its redacted workplan thereafter. A follow-up meeting was held on December 17. PFMSP pro-actively requested these meetings to ensure synergy across all relevant program areas.

● PFMSP awaited formal contact through MDTF and/or FCGO with PWC India regarding its IFMIS diagnostic study. A senior member of PWC India’s team contacted the COP in mid-June through LinkedIn. PFMSP few staff and PWC staff had direct virtual communications to discuss on PFMSP’s and PWC’s work and collaboration.

Education Donor PFM Working Group

● Provide periodic updates on financial management information system comparisons, SUTRA, SAS, and the grants development work started with NNRFC;

● Share AWP and quarterly progress reports.

● Met with ADB TA team on PFM education work, SUTRA, and NNRFC work (Oct 17, 2019).

● Participated on November 15, 2019 PFM Working Group meeting; provided comments on FMAP, AFR, and other relevant working documents.

● Attended SSDP JRM (November 25, 2019 week) and assisted MOEST on SAS presentation.

● Shared updates with PFM Working Group on SAS and SUTRA. PFMSP attended the virtual PFM TWG meetings on April 14 and May 8, 2020.

Health Donor Working group

● Provide similar input as with the Education Working Group above.

● Meeting with DFID/NHHSP lead on PFM work.

● PFMSP participated in the PFM working group meeting held at MOHP on February 10, 2020.

NRA Donor Working Group

● Provide periodic updates on NRA’s PFM issues – particularly those related to the FMIS implementation; share progress report.

● PFMSP conducted coordination through its embedded staff within NRA.

GESI Working Group ● Support USAID’s GESI Advisor on continuation of GRB work supported by PFMSP.

● Attended two GESI meetings on February 13, 2020, March 4, 2020 and virtual meetings in Q3.

Provincial and Local Governance Strengthening Project (PLGSP)/MOFAGA

● Have regular meeting and exchange of information about PLGSP and PFMSP on PFM reform area.

● PFMSP had an introductory meeting with the newly appointed secretary of MOFAGA regarding coordination with PLGSP for implementing SUTRA and SAS. PFMSP actively sought a joint USAID/PFMSP/Sajhedari-STF meeting when the new

40



Year 4 Practice

secretary joined, but his schedule, and then the COVID-19 crisis, did not allow the meeting.

USAID

PFM Group ● Quarterly interactions regarding developments on fiscal federalism and other important PFM topics

● Sharing of workplan and discussion on quarterly progress report; reflection workshops.

● Hold regular consultation and meetings with USAID health, education and DR4 offices.

● PFMSP was not invited to attend USAID’s PFM Working Group meetings.

D&G Meetings ● Present analytical overview of specific PFM issues at monthly meetings.

● PFMSP attended all physical and virtual monthly D&G meetings and led a GRB presentation and discussion session in June 2020.

USAID/D&G Projects where USAID has directly encouraged more cooperative joint activities:

● Providing input on all PFM related issues at the local government and designated provincial level; including a process-oriented dialog with the NNRFC on resource allocation.

● Provide tools for assessing PFM practices; show how good policy and results-focused medium-term budget processes should be conducted and what the budget documents for parliamentarians and the public should contain; provide approaches for evaluating fairness/transparency of grant/transfer programs.

● Helped identified experts for the training to the Finance Committee of Parliament, in collaboration with NDI/Niti Sambad, and worked to present the concept and importance of establishing a Budget/Finance Office.

● Maintained regular contact with CS: MAP and Sajhedari-STF project leadership on potential program synergy/collaboration.

● Participated in meeting with Acting USAID Assistant Administrator for the Bureau for Asia, Gloria Steele.

● Strong coordination with Sajhedari- STF during the user trainings in SUTRA and P-LMBIS in Sajhedari-STF implemented provinces and districts. In coordination with PFMSP training coordinators at the ground level, seven Sajhedari staff in Bajhang and Kanchanpur districts participated in SUTRA trainings and shared back their feedback/observation with PFMSP. One SSTF staff participated in P-LMBIS training in Sudurpaschim province.

● PFMSP collaborated with NDI/Niti Sambad in March to present on

Sajhedari- Support to Federalism (STF)

CS: MAP

Policy Dialog

HAMRO SAMMAN

41



Year 4 Practice

results-based budgeting at a GRB meeting requested by the Women and Social Committee of the Parliament

Cooperation with other relevant USAID projects:

Strengthening Systems for Better Health Project and

Early Grade Reading Project

Global Health Supply Chain Program-Procurement and Supply Management (GHSC-PSM) (Added in Q2/Q3)

● Meet at a minimum every six months to discuss cooperation opportunities of mutual benefit.

● Data/costing issues for MOHP and NNRFC (Added in Q2/Q3).

● Sharing of PFMSP's GRB related works in GRB WG meeting, which includes 10 implementing partners of USAID PFMSP remained in touch with different USAID projects regarding PFMSP’s ability to support training on GRB in Year 4.

● Collaboration with SSBH Team on developing PFM capacity of the LGs through various training models. Five SSBH staff participated in SUTRA user trainings in Dolpa, Jumla, Rukum west, Salyan and Bardiya supported by PFMSP.

● Meeting with EGRP team to discuss on working together to improve the schools’ financial reporting capacity in EMIS, SAS.

Individual Updates to Departments

● Monthly update meetings with CoR/ ACoR and Activity Managers of Health, Education, DR4.

● Monthly Project Newsletter to D&G, Health Group, Education Group, and DR4 on PFMSP Activities.

● Quarterly program review with OAA staff on contract related matters.

● Weekly/biweekly meetings with COR.

● Monthly updates on PFMSP activities have been submitted to COR.

● Regular emails on all key activity implementation progress shared as follow-up to monthly calendar submissions.

Key Collaboration with USAID Projects:

PFMSP’s general approach to collaborating with other projects was to provide: 1) PFMSP staff/consultants and related travel costs to other USAID projects for PFM-related staff training in Kathmandu or selected implementation sites as determined appropriate by USAID; and 2) PFMSP staff/consultants and a travel budget for PFMSP staff and GON counterparts to provide training/support at SNG locations for counterparts who need localized, more intensive support to “ground-truth” the use of the IT systems and/or other tools PFMSP continued to develop.

SNG Level Support: In Q2 PFMSP held several discussions with Sajhedari Support to Federalism and CS:MAP about potential collaborative activities on GRB, procurement, and IT systems use (i.e. SUTRA and SAS) during late Q2 and Q3, in time for the concurrent budget cycle. However, COVID-19 impacted PFMSP’s ability to undertake specific activities in locations outside Kathmandu where the other projects were limited.

Gender Responsive Budgeting (GRB): On November 1, 2019 PFMSP submitted responses

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to USAID’s September 23, 2019 comments on the GRB technical report on Guidance to the GON on Advancing the Practice of Gender Budgeting drafted by PFMSP’s GRB consultant, Sheila Quinn. On February 19, 2020 USAID approved the technical paper. USAID’s GESI Advisor shared the approved deliverable with appropriate stakeholders in Nepal. PFMSP shared the technical paper during DGO partners meeting in Q3 and remained in touch with other USAID projects about PFMSP’s ability to support training on GRB in its remaining project period.

For a session held on May 22, 2020 with the members of the parliamentary Women and Social Committee along with Finance Committee members and National Planning Commission (NPC) officials, NDI asked PFMSP for technical support to make a presentation on results-based budgeting with the purpose of highlighting its connection to GRB. PFMSP’s PFM expert, DCOP participated as technical experts in this virtual orientation program. The joint effort of PFMSP and NDI proved useful, especially as it was organized at the request of the Women and Social Committee to get a better understanding of these concepts. The Committee Chair told the NDI and PFMSP teams that they discussed the issue with the NPC Chair on how to frame suggestions for GON to bring about improved GRB for NFY 2077/78, especially under the adverse situation created by the COVID-19 pandemic. This has been a very encouraging commendation to PFMSP. On May 26, 2020, The Himalayan Times published an article stating:

The Women and Social Development Committee of the House of Representatives has directed the federal and provincial governments to bring gender responsive budget for the 2020/21 in the wake of COVID-19 pandemic. The chairperson of the parliamentary panel Niru Devi Pal said the committee decided to direct the federal and provincial governments to put gender rights at the heart of the new fiscal budget after holding discussion with member of the National Planning Commission Min Bahadur Shahi and thematic experts Khimlal Devkota and Dhruba Prasad Dahal, recently.

The news article is available here: https://thehimalayantimes.com/kathmandu/bring-gender-responsive-budget-hor-panel/

Technical Assistance on PFM (Sectoral Local): In Q2 of Year 4, PFMSP collaborated with NDI/Niti Sambad to draft a concept paper on the importance of a budget/finance office in the Parliamentary Budget Office (PBO) in Nepal for the Finance Committee of the parliament. PFMSP’s PFM Expert presented on the role of a PBO, a PBO’s importance, how PBOs and similar offices are functioning in other democracies, and how to create a PBO in Nepal.

Communication and Outreach: PFMSP developed relevant communication materials in Year 4 to demonstrate the work done by project to support the GON in strengthening its PFM.

PFMSP developed newsletter articles and infographics to demonstrate the work done by project to support the GON in strengthening its PFM. For example, USAID/PFMSP's support to NRA since the inception of the project till date is outlined in an article published in the NRA's quarterly newsletter. To access the article, please visit the following link.

http://www.nra.gov.np/np/resources/details/ksVZPdS2UIi23d4TQrK2Cb-A2HUCFpZJArZ1aSYeJIE.

PFMSP visited to several LGs who received SUTRA trainings to collect their feedback and learning and prepared a learning report based on the visit. The learnings were shared with USAID and the FCGO as part of the SUTRA User Trainings report shared in early Q4.

https://thehimalayantimes.com/kathmandu/bring-gender-responsive-budget-hor-panel/



43

PFMSP also developed a SAS piloting report, SIFM training assessment report, Report on P-LMBIS trainings, SUTRA user trainings and other training reports and shared with USAID and GON stakeholders to disseminate key learnings and recommendations. PFMSP also collaborated with NRA, MOHP and MOEST regarding uploading of documents and graphics in their websites.

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5. Monitoring, Evaluation and Learning (MEL) Progress

5.1 Performance Monitoring and Evaluation

Performance Monitoring and Evaluation

PFMSP adopted remote monitoring practices to continue monitoring programs in the current operating environment of COVID-19 Pandemic. PFMSP utilized email, cell phones, and other communication apps such as Skype for Business and Google Meet to communicate, collect program information and field level data, and produce reports. During the COVID-19 lockdown, PFMSP held virtual team meetings on a weekly basis and on an as-needed basis to monitor progress, review and discuss program activities, and ensure PFMSP’s targets have been met to the maximum extent allowed by the lockdown. Through such regular virtual meetings PFMSP continued to discuss the operational and programmatic effects due to the COVID-19 pandemic and possible activities which could be continued through working remotely/from home. The PFMSP team remained in constant contact with its counterpart ministries, subcontractors, and consultants via email and cell phone to carry out activities remotely that are doable. For instance, system enhancements for LMBIS, TSA, RMIS were carried out remotely and in virtual consultations. The SUTRA Help Desk service staff worked from their home to support the LGs. On a regular basis, the PFMSP’s MEL team including the COP and DCOP monitored activity progress. Specific MEL activities completed in Year 4 included:

1. Collating, maintaining, analyzing, verifying performance data as specified in the MEL Plan and producing programmatic progress reports;

2. Producing monthly and second quarterly report, and evaluating progress against the planned activities and results;

3. Tracking cross-cutting indicators focusing on Gender/GESI issues;

4. Preparing, entering and updating data into the USAID M&E Portals such as DIS (former AIDTracker+), TEAMS (former TraiNet) and uploading products to DEC/DDL;

5. Revision of the MEL Plan based on new target values of Year 5 and feedback from USAID and/or internal team that may include adjustment of the target values and indicators per required;

6. Tracking alignment of PFMSP’s planned goals, outcomes, outputs and activities with achievement levels; and reporting to management and USAID on a regular basis;

7. Providing technical support to prepare materials for review workshops and/ or survey studies to the program team;

8. Updating PFMSP’s Database and reviewing the existing forms and formats of internal data collection tools if required; and

9. Coordinate for follow-up on the coordination plan.

MEL Plan Update

USAID approved PFMSP’s MEL Plan update on July 29, 2020 (an incorrect version had been approved on February 14, 2020). USAID subsequently asked for an additional update, which PMFSP submitted on September 10, 2020.

Internal Continuous Monitoring and Evaluation

Following the basic principle of internal self-evaluation that helps to improve the performance of the project, the PFMSP team held regular virtual review meetings. This process involved sharing of activities as well as overall project status in various meetings and reviews, as listed

45

below.

PFMSP Team Weekly Review: With the purpose of close implementation oversight and rigorous back-up to ensure enough progress and ensure synergy across the project’s integrated components, PFMSP held weekly virtual meetings to review/ or follow up of implementation progress. The review meeting discussion start with “Where we are?” and lead the discussion with “Are we achieving what we are to achieve?” If not, the team discuss solutions and support levels (M&E team, management, USAID) needed to keep the project’s activities on track.

PFMSP’s team continued the weekly meeting process despite COVID-19 challenges. Through such regular virtual meetings, the team discussed COVID-19’s effects and ways project activities and operations could be continued, whether remotely, through telecommuting, in-person meetings, or partial office attendance. The meetings also encouraged team members to be active to support the government and MOHP who have been working continuously on the crisis.

Bi-weekly Review with USAID/COR: At the COR’s request, in Year 4 PFMSP shifted from monthly to scheduled bi-weekly meetings with the USAID oversight team to review implementation progress, based on PFMSP’s monthly calendars and reports to USAID. The PFMSP COP participated in this regular meeting with the COR and other USAID DGO team members, and the DCOP joined most meetings during the year. The biweekly format has proved effective and supportive to the project. With the COR and COP both working remotely from the US due to COVID-19, they also initiated ad hoc telephone calls to discuss specific issues/activities.

Quarterly Review: Based on information collected through weekly and monthly review meetings, as well as regular program implementation updates, the collated data/information and achievement levels against the planned quarterly activities, the PFMSP team identified the number of completed, on-going, and/or not completed activities (that need to be carried forward to next quarter). The team discussed the reason for deviation or justification for not completing the planned action during such review meeting.

The activities which require requests/notifications for delays, expansion, or possible deletion and/or amendment were thus indicated as early as possible for discussion with the USAID COR/CO. Key relevant information was also reported through biweekly meetings with the COR and provided in PFMSP’s monthly and/or quarterly reports for USAID concurrence; potential adjustment to the Year 4 AWP; and/or modification to the PFMSP contract.

PFMSP had planned to conduct quarterly review meetings with each GON counterpart separately to review the progress against Year 4 AWP and to discuss further plans for Year 5. Unfortunately, the quarterly review meeting with GON counterparts could not be performed in-person in a formal way due to their high priority on budget formulation and other counterpart priorities, as well as COVID-19 issues. Therefore, PFMSP maintained extensive regular contact (i.e. continuous communication/follow-up) with all counterparts to ensure implementation proceeded as quickly and judiciously as possible. Pending restrictions due to COVID-19, PFMSP conducted virtual review meetings in Q4, which was helpful for preparing the Year 5 AWP.

Joint reviews with CO/COR/USAID teams and Health and Education development partners: PFMSP updated the USAID team (COR, ACOR and two Activity Managers) about the regular activities and accomplishments through frequent emails, biweekly meetings, monthly and quarterly progress reports, etc.. PFMSP did not identify the need to hold formal joint reviews with counterparts development partners, and USAID did not call for such during Year 4.

46

Joint review workshop/meeting with Government Counterparts and Stakeholders: PFMSP did not conduct formal joint review meetings/workshops with primary counterparts due to heavy engagement of GON officials in their own priorities and COVID-19-related restrictions. However, PFMSP regularly maintained phone contact and discussed current year’s achievements and ongoing activities to date, remaining activities/expected results, challenges/risks, synergies, and strategies for implementation harmonization, and decide on the way forward when conflict or duplication or issues were discovered.

Through close and intensive meetings with NNRFC officials, the work on new requirements of NNRFC has been commenced during lockdown situation as a result of joint meetings and close communications (See Section 2 above on NNRFC work).

Overall, in Year 4, no major concerns were raised by GON counterparts, and miscommunications and minor concerns were addressed expeditiously when actual or perceived conflict arose.

Follow Up Study/Tracer study: PFMSP has discussed with SUTRA Help-Desk officials to conduct an online survey on Effectiveness of SUTRA Training in Year 4 but was highly disrupted by COVID-19 and GON’s lockdown order, as well as the annual budget process for FY2020/21. Therefore, PFMSP has incorporated this particular activity in Year 5 AWP after having discussion with FCGO’s senior officials.

Observation and Field Visits: There was not any observation or field visits due to GON’s

lockdown caused by COVID-19 issue during after mid of Year 4. Please refer to Section 10

[redacted] of this report regarding monitoring field visit details of Year 4.

Mid Term Evaluation of PFMSP

In Q3 the PFMSP COR informed that PFMSP’s external mid-term evaluation report was finalized and it was later uploaded to DEC. PFMSP’s request to include its extensive response to negative findings in the evaluation was rejected by USAID.

As part of the evaluation process, there were concerns/differences of opinion that were communicated in detail by PFMSP. As was highlighted in the detailed responses, the main concerns raised by WSP that compromised the validity of this evaluation, included:

a) an inaccurate depiction of the GON’s joint ownership of the program, in particular the rollout of priority activities; overseeing the implementation of the PFM program; and being actively involved with PFMSP in coordination and collaboration efforts;

b) an inadequate understanding and appreciation for the demand-driven support provided to the government;

c) an unrealistic role expected of the PFMSP project in the context of the rapidly evolving fiscal federalism structure (e.g. recommending PFMSP work more directly with Local Government elected officials which was not its specific mandate); and

d) a lack of appreciation for the project’s flexibility and the IP’s ability to adjust to changing GON demands (e.g. PFMSP was one of the first development partner-funded projects to successfully support the GON as it moved forward with federalism).

The above-mentioned issues resulted in observations and recommendations that PFMSP believes were not completely justified. PFMSP also believed that the evaluation understated the significant role that PFMSP played in positioning USAID as a major player in the PFM reform space – a significant achievement given the rapidly changing landscape that took place under the GON federalism initiative.

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Progress Reports and Dissemination

PFMSP produced reports including Monthly Reports, Event Reports, Consultants Reports, Quarterly Report and Annual Report using the standard USAID report templates and guidelines outlined in the PFMSP contract and submitted necessary reports to the USAID COR formally as per the due dates outlined in the contract. The Monthly Status Report submitted and shared with the USAID team, and follow-on emails, are used to help ensure effective coordination and efficient implementation.

In addition, PFMSP ensured the agreed actions in conjunction with USAID to prepare for the use of the new DIS System (succeeding AIDTracker Plus), TEAMS (succeeding the TraiNet System) and VAT reporting system.

Finally, PFMSP produced COVID-19 potential effects updates beginning in late Q2 and into Q3, which was then incorporated into the PFMSP RMP for COVID-19, approved by USAID in June 2020.

5.2 Lessons Learned and Adaptive Management: Review of PFMSP’s Strategic Approach

Strategic Approach: In alignment with international best practices for capacity building PFMSP’s strategic approach has been to collaborate effectively with all stakeholders during all phases of the capacity building processes; assessing the current situation and identifying capacity gaps, developing solutions to the capacity gaps, implementing solutions, and ensuring sustainability. Representatives from all GON partner agencies – MOF, FCGO, NNRFC, MOHP, MOEST and the NRA – are engaged in all phases of implementation, augmented as well through appropriate collaboration with USAID staff, implementing partners, and other DPs and their projects, as described further in Section 4 below. PFMSP’s strategic approach specifically in working with GON in Year 4 included the following, as planned in the Year 4 AWP, and updated as the year progressed, especially given the advent of COVID-19:

1. Advocating for and implementing sustainable changes in PFM business processes and systems through this high-level coordination committee consistent with international best practice and crucial to setting Nepal on a path to self-reliance;

2. Training delivery at both the national level (on LMBIS and various accounting, internal control trainings for MOEST and MOHP) as well as the LG level (SUTRA);

3. Increasing engagement to design, customize, implement, or integrate systems for improved financial management (TABUCS for NRA, SAS for schools, SUTRA for SNGs, and procedures to link these to existing GON systems for improved reporting);

4. Institutionalizing training skills/knowledge on LMBIS/P-LMBIS/SUTRA/SAS within the GON system and relevant curriculum

5. Improving other business processes that arose as fiscal decentralization took shape, particularly developing transparent and objective guidelines for allocating resources to SNGs for the provision of crucial public services like education and health;

6. Upgrading accounting and reporting systems and their usage so that SNGs will be able to report to the GON and their citizens on how they are spending the resources they receive;

7. Developing GON ownership of the reforms; 8. Promoting government leadership and ownership on the project implementation; 9. Developing experts/champions within government system to pave path for self-reliance; 10. Providing technical assistance to other USAID partners and other stakeholders to apply

gender responsive budgeting at the federal, provincial, and local governments; and 11. Remaining as responsive, flexible, and safe as possible to mitigate chances of

PFMSP’s operations and programmatic activities from contributing to the spread of the

48

COVID-19 pandemic.

Remaining flexible to GON's evolving capacity needs has been essential for PFMSP, as Nepal is undergoing a simultaneous, dual transition: bureaucratic restructuring through a constitutional devolution of powers, and modernization of the bureaucracy so it may become transparent and accountable to citizens. Such reform is fundamentally a process of “continuous learning” that presents continuous challenges and necessitates adaptive management in project implementation. The onset of the COVID-19 pandemic in the middle of Year 4 necessitated significant programmatic and operational changes. Examples of PFMSP’s adaptive management this year included:

• After reaching agreement on cost-sharing, PFMSP accommodated FCGO's request to train three staff per LG in SUTRA (PFMSP had planned for two staff per LG). The higher number of trained SUTRA users contributed to more regular use of SUTRA by LGs, especially given the high rotation rate among GON civil servants.

• The development and integration of the new LMBIS/P-LMBIS and TSA/P-TSA continued remotely to ensure readiness for the new fiscal year, despite the constraints placed by the COVID-19. In addition, the upgraded LMBIS will incorporate new changes introduced by government during Year 4 implementation, while the upgraded TSA will enable FCGO to be able to report on activity wise expenses and align the expenses to LMBIS, which in turn will help resolve one of the key reporting challenges that FCGO has been facing. Enhancements of the budgeting and expenditure systems that are being carried out at the Provinces (i.e. P-LMBIS and P-TSA) will also help government to increase financial accountability and transparency through modern PFM software.

• PFMSP began its financial and logistical support of MOF’s socially distanced, in-person training on the new LMBIS virement module. The first of five batches of two-day trainings for up to 18 participants each was completed on September 29. The remaining four batches were scheduled to complete early in Year 5. These trainings could not be held remotely given internal GON challenges.

• PFMSP moved towards exploring virtual training modalities to carry out its capacity building activities, but counterparts were initially reluctant. Subsequently, PFMSP carried out two half-days of virtual trainings on Internal Control Guidelines to MOEST officials in late September, which has provided an initial model and lessons learned for increased use of virtual training in Year 5 to come. This was well received by the participants and PFMSP began an effort of continuous assessment of the new modality to refine virtual training methods to help ensure maximum effectiveness of virtual training.

• Based on the emerging comfortability with virtual learning in GON-supported and PFMSP-supporting training methods, PFMSP gained new insight and direction on development of e-learning modules in collaboration with MOF, FCGO, and MOEST.

• Given PFMSP’s limitations on Level of Effort (LOE) approved by USAID, PFMSP adjusted hiring plans (e.g., by reallocating planned STTA LOE to LTTA staff, subject to USAID approval) in order to extend the project’s programmatic implementation period in Year 5 (prior to COVID-19, PFMSP had previously expected to focus solely on close-out in Year 5).

• Despite strong coordination with PFMSP’s counterpart agencies, some activities could not be completed as planned, but PFMSP reached agreement to continue unfinished Year 4 activities in Year 5.

• With USAID consent, PFMSP responded positively to include MOHP’s new request for support on inventory management issues.

This approach was critical to enhance Year 4 progress towards the project’s expected results and prepare for a short year of Year 5 implementation, inclusive of full project handover. Flexible implementation towards self-reliance: PFMSP’s Year 4 AWP and activities were

49

guided by the principle of self-reliance and ultimate handover of all PFMSP project elements under the project’s draft Steering Committee TOR and approved Sustainability Plan and Exit Strategy (SPES).The Year 4 AWP retained the flexibility to respond to requests from MOF/FCGO, NNRFC, MOEST, and MOHP for new or changed technical assistance activities to support capacity-building requirements that PFMSP can support in Year 5 to help Nepal take over PFMSP’s innovations with the goal of self-reliance. Requests to Add Activities: In Year 4, as part of the Year 5 AWP process, PFMSP received one request from counterparts: MOHP requested PFMSP support related to conducting a third-party inventory audit, which has been included in the Year 5 AWP. In addition, the FCGO requested that TSA be enhanced to generate activity-based reports, and MOEST and MOHP requested additional printing of selected materials developed with PFMSP support.

Requests to Drop Activities: In Year 4 PFMSP did not receive direct requests to drop any activities, but MOF and FCGO agreed with PFMSP to drop selected training sessions on P-LMBIS and SUTRA due to the COVID-19 crisis, and MOF and PFMSP agreed during Year 5 planning sessions to drop PFM architecture work, given perceived overlap with work on the IFMIS study supported by WB/MDTF . PFMSP also worked with USAID to drop the costing norms study for MOHP. Requests to Adjust Activities: In Year 4 PFMSP received some requests to adjust some of the Year 4 AWP activities:

• In Q1 PFMSP received a request from the NNRFC to revise the planned Year 4 activities, following internal adjustments to its ongoing strategic planning process and staff rotations. Following USAID’s meeting with NNRFC in December 2019, PFMSP worked with NNRFC to issue an RFP and selected a local subcontractor to undertake the planned activities approved in the Year 4 AWP. While most of the activities in the RFP were aligned to the Year 4 AWP, broad support for strategic, institutional strengthening was added following discussions with USAID, and a meeting between USAID and the NNRFC’s Commissioner.

• PFMSP had originally planned to train approximately 1000 select users on SUTRA, in collaboration with FCGO. However, FCGO requested support for training three SUTRA users from each LG, and FCGO and PFMSP agreed that the training would be co-financed. This adjusted approach dramatically increased the actual numbers of trainees. Similarly, NRA requested a greater number of trainees on NRA-FMIS than previously planned, and PFMSP adjusted plans and accommodated this request in part through co-financing with NRA.

• Given the COVID-19 crisis and GON lockdown, PFMSP in collaboration with GON counterparts made some changes on how activities are implemented. Some of the activities that did not comply with social distancing requirements, such as traditional in-person/large trainings could not be implemented, while some of the trainings were conducted virtually. PFMSP provided regular updates to USAID on potential and actual COVID-19 effects beginning in mid-March and continued to assess all program activities in light of the crisis, including considering shifting to more e-learning and virtual training options.

• In general, the GON preferred to defer several activities such as trainings in the hope that the COVID-19 crisis will abate to the point that traditional training activities can re-commence as they generally believe these to be the most effective. There is no doubt that traditional trainings offer attendees the opportunity to interact directly with subject matter experts and for the trainers to adjust trainings to the audience.

Conclusion: Overall, PFMSP’s Year 4 progress included significant steps towards achieving

50

the project’s goal and expected outcomes and outputs/results, despite progress being impeded by the COVID-19 pandemic. Although PFMSP’s goal is a long-term one and the desired results will take years to come – especially given the ongoing transition to fiscal federalism – PFMSP’s support has helped provide Nepal the backbone for the improved governance and service delivery envisioned by Nepal’s federal constitution of 2015. Expected progress for PFMSP’s fourth year was ambitious, with limited projected carry-over of activities in FY2021. However, COVID-19’s effects, and PFMSP’s adaptive management, will allow completion of activities in Year 5, which had previously been expected to involve primarily close-out activities. The nature of complex PFM reforms – they require significant reorientation of GON bureaucracies, which are slow to change and are hampered by high turnover of staff – also has contributed to slower than anticipated implementation. Nonetheless, PFMSP remained clearly “pointed in the right direction” on PFM reform and in the long run, PFMSP’s important interim support will result in greater transparency in use funds and reduce opportunities for corruption, thereby reducing Nepal’s need for continued international assistance.

51

6. Details of Activity/Targets vs Progress

Color Legend Green= Completed Yellow= Ongoing Red= Not completed

Color

code

Activities Unit

Progress against the Year 4 Targets

Actual Achievement

to Date

Total 5 Years Target (LoP)

Annual Q1 Q2 Q3 Q4

Target Progress Target Progress Target

Progress Target

Progress

Target

Progress

Outcome 1 (IR 1): Improved budget planning and execution capacity of the government of Nepal

Output 1.1 (IR 1.1): Improved procedures, guidelines and systems for PFM functions established in targeted agencies; and GON’s capacity to operate and maintain them

A.1.1.1 Support FCGO in piloting the PEFA Self-assessment Excel based workbook of selected Federal ministries/agencies.

Report on Piloting

1

n/a 1 0 (hold by PEFA/ FCGO)

- - FCGO trained on draft PEFA tool and tool

handed over to PEFA/FCGO in

Year 3

A.1.1.2 Organize experiential training to GON staff on fiscal federalism, results-focused budget formulation, good Public Financial Management system.

No. of people

5 n/a 5 0 (On hold due to COVID-19

effect)

- - (Deferred to

Year 5)

23 GON senior officials in Year

3

31

A.1.1.3 Develop e-learning modules on PFM areas (e.g. Upgraded LMBIS/P-LMBIS,

Number of E-learning Modules

2 ToR finalized

for e-learning

on SUTRA

ToR finalized

1 (e-

learning on

SUTRA)

Vendor Selected

1 (e-

learning on

SAS)

0

(Pending at

HQ/ LBG)

- -

(Deferred to Year 5)

LMBIS e-Learning in Year

2; NRA-FMIS e-

Learning

52

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

SAS and / or SUTRA)

submitted to NRA in Year 4 (Year 3 target).

.

Output 1.2 (IR 1.2): Selected ministries/agencies are capable of executing the budget and producing timely, uniform, and accurate reports on different aspects of the budget cycle in compliance with GON requirements

A.1.2.1 Train GON staff on LMBIS and P-LMBIS

No. of people

1000 181 300 0 400 181 300 0 (No training

due to COVID-19:

GON lockdown and USAID Stop Work Order).

0 16 2526 (2444 users, 82

Trainers)

4100

A.1.2.2 Support NNRFC to extract financial data from various systems (database management) to help in preparing formulas for fiscal transfer

System 1 0 1 0 On going - - Ongoing

A.1.2.3. Support NNRFC to prepare data simulation and data analysis through STTA and training

No. of people

n/a 15 On going

- - Ongoing

A.1.2.4 Support NNRFC to develop knowledge products on Fiscal Federalism and

No. of Booklet

1 1 5

(Drafts) - - 2 knowledge

products prepared in Y3; and 5 draft Knowledge

53

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

Local Finance for educating local governments

products prepared in Y4.

A.1.2.5 Support NNRFC to design an incentive-based performance measurement system for local governments. (A.1.2.6)10

System 1 1 0 On going - - Ongoing

A.1.2.6 Support FCGO to deliver training to LGs on SUTRA.

No. of people

1000 2087 300 24 500 2063 200 Completed in Q2. Annual target has

been achieved although quarterly

target is not

matched.

- 8211 6392 3256 including refresher (Mod 6)

A.1.2.7 Operate SUTRA Help Desk at FCGO and prepare for the transition of the support desk to FCGO management.

Months of Support

12 6 3 3 3 3 3 3 3 3 36 months

10 The activity numbers in parenthesis are Year 3 AWP activity numbers. Activities that have activity numbers in parenthesis () at the end of the title are either deferred from Year 3 AWP or were initiated in Year 3 and are continuing into Year 4. 11 Due to GON’s lockdown, Sindhupalchowk and Dhanusha districts reported data on SUTRA training in July only. In fact, the training was completed in February.

54

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

A.1.2.8 Support FCGO on SUTRA module enhancements, if requested. (A.1.2.13)

number of new

Modules

n/a n/a - -

Output 1.3 (IR 1.3): The PFM is strengthened and extended resulting in modern, transparent, reliable, secure, and resilient system that follows international best practices

A.1.3.1 Finalize and implement the new LMBIS system enhancements and Integration with TSA. (A.1.3.2)

System 1 In final stage.

Initiated In final stage.

1 Partially

completed.

Work is ‘on

going’ due

to covid-19

effect.

- Completed Completed

A.1.3.2 Finalize the development of “Receptacle” programming through the Whole of Nation Portal. (A.1.3.10)

Software 1 In final stage

Initiated 1 In final stage.

Partially completed. Work is ‘on going’ due to covid-19

effect.

Completed Completed

A. 1.3.3 Support enhancement of Revenue Management Information System (RMIS) to National Revenue Platform with extended services support to Province Governments and interface RCAs, TSA and FMIS

Software/ System

1 In final stage

Initiated 1 In final stage.

Partially completed. Work is ‘on going’ due to covid-19

effect.

Completed Completed and support service

ongoing.

55

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

A.1.3.4 Support for upgrades in the Data Center. (A.1.3.3)

Upgradation report

1 Ongoing. Initiated Initiated 1 On going Support service ongoing.

support service ongoing.

1

A.1.3.5 Support for regular maintenance and system operation of Hardware and Software - Anti malware and Data Center Support. (A.1.3.7)

No. of Months

12 6 3 3 3 3 3 3 3 3 36 months 1

A.1.3.6 Continue development of system on Document Digitization, Document Archiving, Document Management and Workflow management system. (A.1.3.4)

Software 1 1 0 Completed and

reviewed by MOF.

Completed Completed 1

A.1.3.7 Continue preparation of roadmap to perform ISO Audit to ensure MOF system complies with ISO 27000 IT Security Planning and

Roadmap 1 Completed Initiated 1 Completed na

Completed Completed 1

56

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

Compliance Audit (A.1.3.5)

A.1.3.8 Conduct study and prepare road map on Architecture for PFM Segment (Enterprise Architecture Artifacts and Architecture Building Blocks corresponding to PFM business, data, application, and technology). (A.1.3.6)

Study Report

1 Initiated Initiated 1 Initiated

On hold by MOF.

Initiated

A.1.3.9 Assist in Developing a standard GARIS (Government Accounting and Reporting Information System); support IT infrastructure (equipment) at districts, and support Desk. (A.1.3.12)

System/ Software

1 Initiated Initiated Initiated 1 On hold by

FCGO. Deferred to Year

5 Initiated

A.1.3.10 Support FCGO to complete

Roadmap document

1 Draft 1 0 Ongoing

(a senior Deferred to

Year 5 Note on

transition to

57

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

the roadmap for accrual accounting. (A.1.2.10)

PFM expert

commenced

work)

accrual accounting

system developed and

submitted to FCGO in Year 3

A.1.3.11 Support trainings on PFM such as accounting /IPSAS and fiscal reporting for FCGO and selected PTCOs

Training report

1 Not initiated

yet

1 0 0

(FCGO hold) 0

Deferred to Year 5

A.1.3.12 Arrange for MOF/ FCGO staff to take certification on TOGAF (carried over target) (A.1.3.8)

No. of people

4 1 (Subash

Dhakal, DOICT)

1

(Subash Dhakal, DOICT)

0 4 0

(Deferred to

Year 5)

4 7

Outcome 2 (IR 2): Improved control environment and procurement capacity in targeted ministries and / or agencies - Ministry of Education, Science and Technology


B.2.1.1. Finalize the Planning and Budgeting guidelines for MOEST. (B.2.1.1)

No. of Guidelines

1 Final 1 Drafted Final Final (Waiting for approval)

Final

B.2.1.2 Design and deliver training on Planning and Budgeting guidelines for

No. of People

60 0 60 0 0

(Waiting for

approved

guideline)

0

(Waiting for approved

guideline and deferred to Year

5)

58

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

federal and provincial officials (B.2.1.2)

B.2.1.3 Pilot SAS at five selected schools. (B.2.1.4)

Report on Piloting

1 Completed 1 Initiated Completed - -

- - Completed

B.2.1.4 Prepare SAS user operating manual to implement SAS in community school. (B.2.1.5)

No. of manuals

1 1 Drafted 1 Completed Completed. (Nepali

Version is produced)

- - Completed

B.2.1.5 Support to conduct Master TOT on SAS

No. of people

40 0 40 0 O (On hold) -

B.2.1.6 Support to conduct TOT on SAS

No. of people

342 0 342 0 O (On hold)

- 0 Deferred to Year

5

0

B.2.1.7 Support the roll out of SAS in 20 USAID priority districts (Q3) and 14 Earthquake districts (Q4) (B.2.1.6)

No. of Schools (2 trainees per

school)

672 0 n/a 362 O (On hold)

310 0 Deferred to Year

5

0 500

B.2.1.8 Support to establish SAS Help Desk at MOEST/CEHRD

Help Desk 1 n/a 1 O (On hold)

0 Deferred to Year

5

59

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

B.2.1.9 Support MOEST to collect and produce timely consolidated reports and prepare required financial statements for the year 2019/20 (trimester basis) (B.2.1.7)

Financial Reports

3 Initiated Initiated 1 Initiated 1 Ongoing 1 Ongoing Initiated

B.2.1.10 Conduct follow up study to assess outcomes of School Integrated Financial Management (SIFM) Training in selected districts

Report 1 Completed 1 Completed Completed Completed Completed

B.2.1.11 Support MOEST to publish and disseminate SIFM Manual. (B.2.1.9)

No. of Manual Copies

Initiated 20000 Initiated O

(On hold)

Completed Initiated

B.2.1.12 Deliver training on Internal Control Guidelines to federal and provincial education staff. (B.2.1.12)

No. of People

35 0 35 0 O

(IC guideline

has been

approved and

uploaded to

website of

MOEST.

Training is on

hold, still)

25 25

60

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

B.2.1.13 Support for MOEST's audit committee, e.g. develop Terms of Reference (ToR), policy and procedure documents

Documents 1 1 1 1 n/a n/a

n/a 1

B.2.1.14 Conduct training and workshops on audit compliance and clearance for MOEST Audit Committee and other key staff

Event reports

2 initiated initiated 1 initiated 1 0 0 Deferred to Year

5

initiated

B.2.1.15 Provide technical assistance to MOEST in settling audit irregularities through collection and consolidation of required documents from operating level offices

Progress Reports

3 initiated initiated 1 initiated 1 Ongoing 1 Ongoing initiated


B.2.2.1 Prepare procurement improvement plan (B.2.2.1)

No. of Documents

1 1 1 Drafted Completed 1 Completed. (Approved by MOEST and uploaded to its website)

- - Completed. In process of approval.

61

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

B.2.2.2 Train Federal and Provincial GON staff on procurement planning and execution systems and processes.

No. of People

30 39 30 39 n/a

- - Completed and trained 39

MOEST officials.

Outcome 2 (IR 2): Improved control environment and procurement capacity in targeted ministries and / or agencies - Ministry of Health and Population Output 2.1 (IR 2.1): Strengthened capacity of selected line ministries to operationalize and sustain adequate control environment policies and procedures

B.2.1.1 Deliver training on Planning and Budgeting guidelines (B.2.1.4)

No. of people

40 0 40 0 0 (On hold by

MOHP due to priority work

given to address

COVID-19 effect)

0 Deferred to Year

5

0

B.2.1.2 Deliver training on Business Plan of MOHP and its departments

No. of people

25 0 25 0 0 (On hold by


given to address

COVID-19 effect

0 Deferred to Year

5

0

na B.2.1.3 Support to prepare basic costing norms for allocation of resources to the Province and LG to

Guidelines

n/a

n/a

n/a Proposed to Drop

62

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

provide basic health services. (B.2.1.3)

B.2.1.4 Deliver training on public financial management and internal control

No. of people 25 29

29

0 (On hold by


given to address

COVID-19 effect

25 Completed in Q2.

Completed and trained 29 MOHP related officials.

B.2.1.5 Conduct training and workshops on audit compliance and clearance for MOHP/DOHS and selected hospitals

Event reports 2 0

1 0 1 0 (On hold by

MOHP due

to priority

work given

to address

COVID-19

effect

- 0 Deferred to Year

5


B.2.2.1 Deliver procurement trainings based on updated procurement guidelines

No. of people

50 0 50 25 0 25 0 (On hold by


given to address

COVID-19 effect

0 Deferred to Year

5

0

Outcome 3 (IR 3): Strengthened PFM functions of National Reconstruction Authority

Output 3.1 (IR 3.1): NRA develops policies and procedures for transparent and accountable execution of reconstruction and recovery funds

63

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

C.3.1.1 Support for periodic review of accuracy of data entered in NRA/FMIS

Report 12 6 3 3 3 3 3 3 3 36 months

C.3.1.2 Conduct trainings for updated NRA-FMIS system

No. of people

40 84 40 33 51 n/a n/a n/a n/a 410 300

Output 3.2 (IR 3.2): The 2015 post earthquake recovery process is perceived credibly by Nepal's citizens and the international community

C.3.2.1 Provide support for appropriate public reporting of NRA financial information on regular basis

Published Information

2 1 1 1 0 n/a 1 0 Under discussion

PROJECT MANAGEMENT

Coordination with Government

Whole of Project Coordination Committee Bi-annual meeting to share progress on annual workplan; lessons learned and areas requiring buy-in and coordination on broader agency-wide systemic reforms

Meeting 2 1 n/a 0 1 0 No coordination committee formed yet

MOF/ FCGO/ PEFA Sec.

Meeting 4 1 1 1 1 0

64

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

Quarterly progress review meetings

Continuous activity

Frequent meetings for day to day

proceedings.

NNRFC Quarterly strategic reviews between NNRFC and USAID/PFMSP on national level grant, transfer, and SNG own-source revenue policies

Meeting 4 2 1 1 1 1 1 Virtual

meeting; Contracted

a senior PFM

Expert; commenced

work.

Completed strategic reviews between

NNRFC and USAID/PFMSP

on working modality and

new requirements of

NNRFC.

MOHP Quarterly progress review meeting Review meetings with Financial Management and Planning Units/ PFM Reform Working Group/ contribute to PFM Committee

Meeting 4 1 1 1 0 1 0 (On hold by MOHP due to priority

work given to address COVID-19

effect

1 Virtual meeting due to GON’s

Lockdown

Continuous

activity Frequent

meetings for day to day

proceedings.

MOEST Quarterly Review meetings with Financial Management and Planning Units/

Meeting 4 1 1 1 0 1 0 (On hold by MOEST due

GON’s lockdown

order

1 Virtual meeting due to GON’s

Lockdown

Continuous

activity Frequent phone calls and virtual

meetings for

65

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

PFM Reform Working Group/ contribute to PFM Committee

caused by COVID-19

effect)

day to day proceedings.

.

NRA Quarterly meeting to share progress on annual workplan; lessons learned and coordination on broader agency-wide systemic reforms

Meeting 4 1 1 1 0 0

(On hold by

NRA due

GON’s

lockdown

order

caused by

COVID-19

effect)

1 Telephone

communication

due to GON’s

Lockdown

Continuous

activity

Frequent phone

calls and virtual

meetings for

day to day

proceedings.

Coordination with Donors

MDTF/WB Participate in and actively contribute to whole-of-government PFM reform action plans; share annual workplans and progress reports. Sharing issues, challenges, and lessons regarding system integration

Meeting 2 2 2 1 0 0 1 0

66

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

Education Donor Working Group Provide periodic updates on financial management information system integration (SUTRA, SAS) and the grants development work started with NNRFC. Share annual workplan and quarterly progress reports

Meeting 2 3 3 1 0 0 1 0

Health Donor Working Group Provide periodic updates on financial management information, and the grants development work started with NNRFC; Share annual workplan and quarterly progress reports

Meeting 2 2 1 1 112 0 1 0 4

NRA Donor Working Group Provide periodic updates on NRA’s PFM issues –

Meeting 2 1 0 0 1 0 0

12 COP attended a meeting on February 10, 2020.

67

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

particularly those related to the FMIS implementation, share progress report

PLGSP Attend meeting with PLGSP/MOFAGA on PFM reform issues

Meeting 4 1 1 113 1 0 1 0 1

Coordination with USAID and its IPs under D&G

PFM Working Group Interactions regarding developments on fiscal federalism and other important PFM topics - Sharing of workplan and discussion on quarterly progress report; reflection workshops; participation on field trips and other events (PFMSP calendar)

Meeting 2 1 0 1 0 0 0

D&G Meetings Attend monthly DG meetings and Present analytical

Meeting 12 11 3 3 3 314 3 2 3 3 11

13 PFMSP team met new secretary of MOFAGA regarding coordination with PLGSP for implementing SUTRA and SAS. 14 COP attended D&G meetings regularly since Q1 to March 4, 2020

68

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

overview of specific PFM issue

USAID's Implementing Partners under D&G Projects where USAID has directly encouraged more cooperative joint activities Meeting and collaborative activities with Niti Sambad, CSMAP and Sajhedari as mentioned above in Subsection "Collaborative Activities with USAID Projects" of Section 3

Meeting and Activities

6 3 315 2 1 6

USAID Departments funding PFMSP Monthly update to USAID on PFMSP Activities

Updates 12 12 3 3 3 3 3 3 3 3 12

15 Conducted meeting with Sajhedari and SSBH regularly for implementing SUTRA in LGs; and conducted meeting with Niti Sambad/NDI in order to support Financial Committee.

69

Color

code

Activities Unit


Actual Achievement

to Date


Annual Q1 Q2 Q3 Q4


Progress Target

Progress

Target

Progress

MONITORING

Conduct Monitoring of activities

visit 10 25 1 2 3 2316 3 0 3 0 25

Conduct joint monitoring visits with MOF/ FCGO/ MOHP/ MOEST/ NRA

visit 2 77 1 7717 0 1 0 77

Attend USAID MEL Working Group Meetings

Meeting 2 2 1 1 118 0 1 1 3

Attend USAID GESI Working Group Meetings

Meeting 2 2 1 219 1 1 1 4

Conduct project level quarterly review and learning meeting between PFMSP and USAID.

Meeting 4 1 1 1 1 1 0 1 1 2

16Lalitpur, Kavrepalanchowk, Dhading, Chitwan, Nawalparasi west, Kaski, Sankhuwasabha, Terathum, Syangja, Mustang, Baglung, Myagdi, Jhapa, Dhankuta, Morang, Sunsari, Saptari, Siraha, Udayapur, Dhanusha Kailali, Dadeldhura, Surkhet. 17 77 districts for conducting and observing/ evaluating the training on SUTRA by FCGO officials and six provinces by MoF officials for conducting and observing P-LMBIS training. 18 Attended DIS training on Feb 19, 2020 conducted by USAID at MEL Project of CAMRIS. 19 Attended GESI meeting on February 13, 2020 and March 4, 2020.

70

6. List of Annexes submitted by Quarter

Annexes Submitted by Quarter

# Deliverable/Document AWP Activity No. Remarks

1st Quarterly Report, Year 4

Annex 1 Resource Book on Fiscal Federalism Year 4 AWP, A.1.2.4

Annex 2 Report on SUTRA MTOT Year 4 AWP, A.1.2.6

Annex 3 Meeting Notes with FCGO on LMBIS and TSA Enhancement and Integration Year 4 AWP, A.1.3.1

Annex 4 Progress Presentation on RMIS Enhancement Year 4 AWP, A.1.3.3

Annex 5 Gap Analysis Report for Data Center Security Year 4 AWP, A.1.3.7

Annex 6 Report: Training on Lead Implementer ISO 27001:2013 Information Security Management System Year 4 AWP, A.1.3.7

Annex 7 Updated SAS User Manual Year 4 AWP, MOEST, B.2.1.4

Annex 8 Report: Training on NRA-FMIS, Pokhara Year 4 AWP, C.3.1.2

2nd Quarterly Report, Year 4

Annex 1 Unofficial translation- ExSum-Half Yearly Budget Review Report- 2076/77 NA

Annex 2 "COVID-19 Potential Effects"- submitted to USAID on March 24, 2020 NA

Annex 3 Scope of Work for Year 4 support to NNRFC Year 4 AWP, A.1.2.2 to A.1.2.5

Also shared separately on February 20, 2020

Annex 4 Draft Resource Book on Local Taxation Year 4 AWP, A.1.2.4

Annex 5 Preliminary report- SUTRA User trainings

Year 4 AWP, A.1.2.6

Revised versions shared with USAID as annex to Q3 progress report (see below), and in Q4 separately.

71


Annex 6 Progress Update- LMBIS and TSA Integration Year 4 AWP, A.1.3.1

Annex 7 Progress Update- RMIS Enhancement Year 4 AWP, A.1.3.3

Annex 8 Final Report and MOF's acceptance- PFMSP Year 4 AWP Activity A.1.3.7 Year 4 AWP, A.1.3.7

Annex 9 Minutes- Workshop on Audit Compliance and Clearance- MOEST

Year 4 AWP, MOEST, B.2.1.14

Annex 10 Report- Training on Procurement Planning and Execution- MOEST- Dhangadhi

Year 4 AWP, MOEST, B.2.2.2

Also shared a revised version separately on May 29, 2020.

Annex 11 MOHP Approval Letter- Planning and Budgeting Guidelines and Business Plans

Year 4 AWP, MOHP, B.2.1.1 and B.2.1.2

Annex 12 Report- Training on Financial Management & Internal Control- MOHP, Chitwan

Year 4 AWP, MOHP, B.2.1.4

Also shared a revised version separately on June 5, 2020.

Annex 13 Report- Training on NRA-FMIS- Chitwan Year 4 AWP, C.3.1.2

Annex 14 Report- Training on NRA-FMIS- Godavari Year 4 AWP, C.3.1.2

Annex 15 Presentation on Parliamentary Budget Office (PBO) NA

3rd Quarterly Report, Year 4

Annex 1 Report- P-LMBIS Trainings, 2020 Year 4 AWP, A.1.2.1

Also shared separately with USAID in July 8, 2020.

Annex 2 Report- SUTRA User Trainings, 2020 Year 4 AWP, A.1.2.6

Also shared separately with USAID in July 15, 2020.

Submitted Separately

# Deliverable/Document AWP Activity No. Remarks/ Date

1 Assessment of Maturity Level of CGAS and TABUCS-Nov 8 to USAID and FCGO Year 3 AWP, A.1.3.11 November 8, 2019

2 SAS Pilot Launch Meeting Minutes-Nov. 21, 2019_Draft to USAID

Year 4 AWP, MOEST, B.2.1.3 November 21, 2019

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3 LG SUTRA Monitoring Field Visit Report-Dec 12, 2019_Final

Year 3 AWP, A.1.2.11 and A.1.2.12 December 12, 2020

4 MOEST meeting minutes-Jan 82020 (Audit Committee)

Year 4 AWP, MOEST, B.2.1.13 January 8, 2020

5 Attachment 1 Audit Committee TOR (MOEST) Year 4 AWP, MOEST, B.2.1.13 January 8, 2020

6 MOEST meeting minutes-Jan 13, 2020 on SAS-to USAID

Year 4 AWP, MOEST, B.2.1.3 January 13, 2020

7 School Accounting Manual final Draft 2076 Year 4 AWP, MOEST, B.2.1.11 January 29, 2020

8 Nepal Annual Budget Calendar 2020-21 NA January 29, 2020

9 Planning and Budgeting Guidelines of Health Sector, and Business Plans of MOHP, DOHS, DDA (approved versions)

Year 4 AWP, MOHP, B.2.1.1 and B.2.1.2

February 5, 2020- Busines plan of DOAAM not attached in this email

10 Draft Procurement Improvement Plans (for MOEST and MOSD-Sudurpaschim Province) Year 4 AWP, MOEST,

B.2.2.1

February 18, 2020 (Approved version of Federal PIP shared on June 29, 2020)

11 Report- Assessment of SIFM Training-Bardiya-April 8 to USAID

Year 4 AWP, MOEST, B.2.1.10 April 8, 2020

12 PFMSP_COVID-19 potential effects-April 10 2020

NA

April 10, 2020 (Updated version shared on April 24, 2020)

13 Conflict Sensitivity Report_Y4 Update-Revised April 17_to USAID NA April 17, 2020

14 PFMSP Sustainability Plan and Exit Strategy _March 10 2020_clean to USAID NA April 17, 2020

16 Approved Internal Control Guidelines (ICG) of MOEST

Year 4 AWP, MOEST, B.2.1.12 June 29, 2020

15 PFMSP MEL Plan-and annexes-March 6 to USAID-approved on Jul 29, 2020 NA July 31, 2020

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17 Assessments, policy papers and presentation prepared by subcontractor Niti Foundation for NNRFC

Year 4 AWP, A.1.2.4, and Institutional Strengthening September 25, 2020