Ministry of Finance and Economic Planning. Action Plan

Transcription

1 Ministry of Finance and Economic Planning Action Plan Page: 1

2 Table of Contents Table of Contents... 2 Introduction... 3 Challenges, Objectives and Priority Measures... 3 Main Challenges in Economic and Public Financial Management... 3 MoFEP Plan Objectives... 4 Priority Measures to Strengthen Economic and Public Financial Management... 5 Coordination and Management of Ministry Activities... 9 Action Plan Area 1: Budget Execution Control and Cash Management Area 2: Procurement Area 3: Accounting and Reporting Area 4: Macroeconomic Management and Sustainable Use of Oil Revenue Area 5: Non-oil Revenue Improvements Area 6: Budget Planning and Preparation Area 7: Aid and Debt Management Area 8: Fiscal Decentralisation and Sub-national PFM Area 9: Strengthening Institutional Capacity and Management in MoFEP Annexes Annex 1: Proposed Structure of the Ministry of Finance and Economic Planning Annex 2: Procedures for MoFEP Coordination and Approval of Technical Assistance Page: 2

3 Introduction The Ministry of Finance and Economic Planning has attained substantial achievements particularly in developing integrated planning and budgeting systems since the 2005 Comprehensive Peace Agreement (CPA) that laid the foundations for the newly independent Government of South Sudan (GRSS). Nevertheless significant challenges remained at the time of independence. Furthermore, postindependence, new challenges and modified responsibilities have emerged. The purpose of this action plan is to set out the key challenges facing the Ministry in Economic and Public Financial Management (PFM) and the priority measures to address them over a 2-year period. The action plan covers all areas of responsibility under the Ministry, and therefore excludes oversight (external audit /legislature) functions. It is divided into three main sections. Section 1 introduces this action plan. It further outlines the key challenges facing the Ministry, and sets out MoFEP s core objectives and functions in light of these issues. Section 2 gives detailed recommendations for senior management to strengthen coordination and oversight of PFM action plan. Section 3 lays out a systematic framework, including clear PFM priorities with indicative timeframes as well as lines of responsibility for implementing proposed PFM activities. This work plan was guided by a two day Senior Management Retreat, which took place between 22 nd and 23 rd October At the retreat the Main Challenges, Objectives and Priority Measures were agreed. The action plan was finalised following a final round of consultations in the Ministry between the 1 st and the 15 th of November, following which it was approved on the 16 th of November Challenges, Objectives and Priority Measures Main Challenges in Economic and Public Financial Management Various technical assessments of the Ministry s systems have been undertakenrecently. These include; an Internal Review of PFM, the South Sudan Integrated Fiduciary Assessment (SSIFA),andIMF FAD missions on PFM Priority Reforms, RSS Non-oil Tax System, and on Tax and Customs Administration. These reviews generally find that the Ministry and the Government of the Republic of South Sudan have established a sound foundation for a robust, transparent PFM system, although work still remains to further strengthen and fully implement key components of the system. Two overarching challenges are: Weaknesses in Budget execution mean that the approved budget is not implemented as approved, presenting a risk to macroeconomic stability. This puts at riskthe ability of the Government to successful implement Government policy and programmes. South Sudan has an unsustainable and unpredictable fiscal position because it is highly dependent on oil revenues which are predicted to decline sharply in the medium term The main challenges faced by the MoFEPthat have been identified are the following: Page: 3

4 1. Ensuring robust and efficient controls during budget execution to (i) avoid budget overruns, (ii) avoid unauthorized expenditure, (iii) ensure cash predictability for spending agencies, and (iv) prevent the further emergence of arrears; (v)strengthening control in procurement management 2. Strengthening the procurement process, so that it is functional, transparent and competitive and delivers value for money. 3. Producing timely and comprehensive in-year and end-of-the-year fiscal reports/accounts to inform decision making and enhance transparency and accountability, including in the use of oil revenues; 4. Developing macro analytical capacity and specifying the rules, procedures and mechanisms for achieving the stabilization and saving objectives (as stated in the Interim Constitution) in the use of oil revenue over a medium to longer term; 5. Reforming tax and customs policy and administration to reduce dependence on oil revenues and accelerate the dismantling of the economically destructive system of revenue extraction from checkpoints and roadblocks. 6. To improve the realism of the budget; strengthen the link between the budget and sectoral policies in the National Development Plan; and establish better procedures for managing capital investment programmes 7. Strengthening aid coordination appraisal, reporting and accountability requirements and encouraging donors to channel funds through government systems; and strengthening existing institutional structures to manage debt. 8. Developing a framework on decentralization and rule- and need-based criteria for allocating transfers aligned with this framework; strengthen State & County PFM systems; and develop MoFEP capacity to develop policy on fiscal decentralization and effectively oversee and monitor State & County PFM performance. 9. Ensuring that the PFM reform agenda, including the support received from various development partners, is coordinated and managed effectively to avoid potential overlap and inconsistencies and to bridge critical gaps, as and when they arise; MoFEP PlanObjectives The MoFEP Objectives in Economic and Public Financial Management for are as follows: Deliver a credible budget through an effective budget control framework that ensures that MoFEP has aggregate fiscal control and ensures predictability while gradually transferring responsibility and accountability of budget execution to spending agencies Ensure sustainable management of oil resources, mobilisation of non-oil and aid resources, which are allocated and spent in an equitable, efficient and transparent manner, in line with the national policy objective Expand and update roles and responsibilities of the MoFEP to respond to the new fiscal responsibilities and economic challenges of the RSS Page: 4

5 Priority Measures to Strengthen Economic and Public Financial Management Overall, the Ministry has identified the following measures as the most important to improve Economic and PFM over the next two years. Budget Execution Control and Cash Management (DG Accounts) Priority Measure Timing Resp. Identify areas in the PFMA Bill that require transitional steps and to finalise regulations and procedures to support the implementation of the PFMA Law, once the bill is passed Develop a rolling expenditure plan within the annual appropriation, that is based on the annual budget submitted to the Legislative Assembly, and use this as the basis to set monthly expenditure limits of the spending agencies July 2012 Feb 2012 DG accounts DG Accounts and DG Budget Specify controls at all stages of the budget execution process Feb 2012 DG Accounts Pilots for expanded IFMIS functionality including expenditure controls June 2013 DG Accounts Improve cash management by strengthening the Treasury Single Account System Feb 2012 DG Accounts Take stock of all outstanding payment arrears as at end June 2011 June 2012 Procurement (Undersecretary Finance / DG Procurement) Undertake consultation with key stakeholders on the draft procurement bill and follow-up on the enactment of the legislation Q DG Budget and DG Accounts DG Procurement Clarify processes and prepare regulations in order to implement the new procurement legislation Q DG Procurement Identify direct support, recruit and strengthen institutional capacities for public procurement including reviewing institutional responsibilities and developing relevant skills in MoFEP and spending agencies in line with the law On-going DG Procurement Implementing basic rules to increase transparency and integrity in the procurement process On-going DG Procurement Accounting and Reporting (DG Accounts) Undertake a comprehensive review of the chart of accounts to ensure compliance with GFSM 2001 and meets the accountability and other reporting requirements of all stakeholders for implementation in 2012/13 May 2012 DG Budget DG Accounts Provide monthly reports to spending agencies Apr 2012 DG Budget Prepare monthly reconciled statements of oil revenue receipts, their transfer to various accounts (including stabilization and reserve fund accounts) and balances in these accountsand revenue recorded in IFMIS Jan 2012 DG Accounts Develop and implement non-oil revenue collection and recording procedures May 2012 DG Accounts Page: 5

6 Priority Measure Timing Resp. Prepare quarterly fiscal accounts that provide a comparison of outturn with budget estimates of revenue and expenditure and include information on financing of deficit/surplus and work towards public dissemination of these reports by beginning of 2012/13 Identify the sources of data for preparation of financial statements and configure the IFMIS to capture all such data and use them for preparing the annual, quarterly and monthly financial statements. Macroeconomic management and Sustainable Use of Oil Revenue (DG Planning) Provide medium and longer term oil revenue projections (input for MTFF), and monitor oil outturns (together with Treasury) and update the oil forecast on regular basis. Designing the legal framework for managing the oil revenue in the future. Prepare a comprehensive MTFF at start of budget process based on likely, but sustainable expenditures. Analyse and report on the implication of different expenditure paths for fiscal sustainability and the reserves. Provide macroeconomic (including oil revenue) assessment for the quarterly and annual fiscal outturn publications and clarify respective roles of the Macro-economic planning and Accounts departments in this process. Improve information dissemination within the ministry and the public on economic situation. Mar 2012 Jun 2012 Quarterly beginning 2011 Q3 Biannual beginning 2012 Q Q3 to 2012 Q4 Quarterly beginning 2012 Q1 On-going beginning 2012 Q1 DG Accounts DG Accounts Develop a tax policy function within the directorate of Planning Q DG Planning Identify capacity gaps, recruit qualified staff and strengthen the analytical and data collection capacity to assess the domestic macroeconomic situation, potential bottlenecks and constraints and other factors that may affect the design of the economic policy. Non-Oil Revenue Improvements (Dep. Minister) Put in place a tax reform agenda taking into account the IGFR Working Group, the establishment of a national revenue authority, and harmonise national and state tax collection and sharing policy On-going beginning 2012 Q Q4 to 2012 Finalise and implement the amendments to the Taxation Act 2009 Q Finalise the customs law including the harmonisation of the tariffs Q MPD MPD MPD MPD MPD MPD Deputy Minister / Director of Revenue Taxation / Director of Revenue Taxation / Director of Revenue Page: 6

7 Priority Measure Timing Resp. Develop and implement a modernisation plan for the customs and tax administration Q Establish a Publicity / Outreach campaign to reinforce policy decisions, provide clear messaging on revenue reforms, address taxpayer concerns, educate taxpayers and capitalise on reform successes. Analyse potential for additional revenues from non-tax/ non-oil sources and develop a system to track collection for non-tax revenues On-going Q Deputy Minister (TMEA) Director of Revenue Director of Revenue Director of Revenue Identify capacity gaps and establish TA requirements Q Director of Revenue Budget Planning and Preparation(DG Budget) Consolidate recent budget preparation improvements and clarify roles and responsibilities between budget and sectoral planning Dec 2011 DG Budget/DG Planning Facilitate more realistic budgeting by taking into account known commitments of spending agencies June 2012 DG Budget/DG Accounts Strengthen political engagement in budget process by implementing measures required in PFMA bill and increase link between agency ceilings and sectoral and national priorities June 2012 Strengthening the ministry s capacity for budget analysis and monitoring June 2012 DG Budget Aid and debt policy Management (D-Aid Coordination) Implement aid strategy by strengthening aid coordination, appraisal, reporting and accountability requirements and encourage donors to channel funds through government systems End 2013 DG Budget/DG Planning Aid Coordination Development of Debt Policy and assignment of debt policy mandate/institutional structure Mid 2012 Minister; Aid Coordination Expand existing institutional structures for aid and debt policy and sustainability analysis and management including; clarification of roles and key responsibilities of relevant departments, and address capacity needs. Develop debt policy and strategy and harmonize national and state debt contracting regulations and procedures Fiscal Decentralization (Dep Minister) Provide clarity on inter-governmental transfers: develop a decentralisation framework clarifying roles and responsibilities of different levels of government, and reform both block and conditional transfers from current equal division or input-based criteria to rule- and need-based criteria. Mid 2012 End 2012-mid Minister; Aid Coordination New/expanded Department with Debt Policy mandate. DG Budget,DG Planning Aid Coordination Page: 7

8 Priority Measure Timing Resp. Strengthening State and County Public Financial Management: for States, develop model PFM Law for States, develop State budget database, budget execution systems, and embed FMIS at centre of State PFM systems; for Counties develop Financial Management Manual for Counties, and capacity-building programmes roll manual out to all 79 counties. Strengthen MoFEP capacity for policy on and oversight of Fiscal Decentralisation: establish fully-staffed fiscal decentralisation unit to carry out this function, and integrate revenue reporting into State Transfers Monitoring Committee. Strengthening Institutional Capacity in MoFEP (Dep Minister) Implement a plan to restructure and strengthen the MoFEP as it implements the action plan including finalising the organisational structure and develop job descriptions for All Departments. Implement a skill development programs to strengthen PFM capacity building in a sustainable manner Review and implement coordination and management arrangements to strengthen the MoFEP in implementing the action plan including developing terms of reference for existing and new committees on an on-going basis DG Budget,DG Accounts 2012 DG Budget, Chair -STMC April 12 Jan to June 2012 Feb 12 Dep Minister Mary Dep Minister Mary Deputy Marial Hold Monthly Senior Management Meetings and regular directorate meetings On-going Minister Kosti Page: 8

9 Coordination and Management of MinistryActivities Delivering the measures identified in this action plan will call for coordination of effort across departments and strengthening ministry management. Cross institutional management and coordination arrangements will improve the alignment of PFM activities, reduce overlaps and increase the impact of these actions. Donors will also find it easier to align their support under the PFM program. Lead responsibilities a. The MoFEP has assigned responsibilities for overall PFM program management and coordination tothe Deputy Minister of Finance, Minister Marial. This role will be supported by the Undersecretary of Finance and the Director General of Accounts. b. Finalisation of the Ministry structure and organization, and institutional capacity building will be the responsibility of the Deputy Minister of Planning, Minister Mary. She will be supported by the Director General of Planning. c. Minster Kosti will be responsible for convening the monthly Ministry meeting, while the Undersecretary Finance will be responsible for consolidating the written inputs into the Action Plan on a monthly basis. Regular management meetings The MoFEP will set up the following governance structures to be used to manage the action plan; i. MonthlySenior Management meetings The MoFEP will set up and commence monthly meetings of its senior management chaired by the Minister and attended by Under Secretaries for Finance and for Planning, Directors General and Directors. Senior management meetings will oversee the implementation of the action plan.these meetings will review the full range of policy and operational issues and resolve impediments to program implementation. When required, senior advisors will also attend these meetings. ii. Regular Directorate meetings Directorates will hold regularmeetings at which they will review routine directorate activities and progress on implementation of the activities of the action plan. Directorates should meet at a minimum twice a month and conduct more regular (weekly) meetings as required. Notes from these meetings should form the basis of advice to senior management.director Generals will be responsible for submitting written monthly reports detailing progress in implementation of planned activities under their respective departments. Technical Assistance Coordination The Ministry is supported by various technical assistance (TA) projects. Each area of activity identified in this action plan will be assigned a lead TA to support implementation. These advisors will report to the relevant Director Generals responsible for that area.annex 2 provides a framework for how new TA projects will be handled. Page: 9

10 Action Plan Area 1: Budget Execution Control and Cash Management Status and Challenges Past assessments acknowledge progress in implementing budget planning and budget preparation improvements over recent years. Because these have not been matched by complimentary improvements in budget execution, the performance of GRSS PFM has remained poor. Progress has however been made in a number of areas; a PFM bill, based on sound principles of good PFM system, has recently been drafted and is due for debate and enactment by Parliament; the implementation of the financial management information system (IFMIS) 1, in MoFEP and all ten states is another major step. These steps offer major opportunities to improve budget execution. The main outstanding challenges include: Implementing the PFM law once the PFM Bill has been enacted. There will be need to prioritise the implementation of the law to provide the legal backing for improvements in budget execution Increasing the predictability and reliability during budget execution including improving cash management practices and improving information on revenue expectations particularly regarding oil revenues resources on which the GRSS relies significantly to finance its budget Implementing practices that will prevent to the extent possible the emergence of new arrears Strengthening controls during all stages of the budget execution and reducing over-expenditure particularly as exhibited in the past in the non-productive sector (public administration, rule of law and security) at the expense of infrastructure and services sectors (education and health) Empowering spending agencies and making them accountable Priority Measures Key priority measures under this area (also listed in table 1) will be: to identify areas in the PFMA Bill that require transitional steps and to draft regulations and procedures to support the implementation of the PFMA Law, once the bill is passed to develop a rolling expenditure plan within the annual appropriation, that is based on the annual budget submitted to the Legislative Assembly, and use this as the basis to set monthly expenditure limits of the spending agencies. to establish expenditure controls (monthly spending limits) in IFMIS for all spending agencies to specify the controls at all stages of the budget execution process, including over commitments, verification and payments, introduce payment instrument and re-configure the IFMIS to enforce them. toestablish pilots for expanded IFMIS functionality in Spending Agencies and States. to improve cash management by strengthening the Treasury Single Account system, as provided in the PFM bill, in coordination with the Central Bank of South Sudan in order to improve the management and use of cash resources when financing its spending commitments 1 The IFMIS implementation is based on Freebalance software Page: 10

11 to take stock of all outstanding payment arrears as at end June 2011, verify/validate and classify them according to age, develop criteria and a multi-year strategy for their clearance, and implement the strategy through specific allocations in respective years budgets This area will also be concerned with improving budget execution at state level 2. However, the relevant work plan for this strategy will be covered under fiscal decentralisation. 2 This issue to be dealt with in the Fiscal decentralization Page: 11

12 Actions The table below provides details of the actions required to deliver these priority measures: Priority Measure / Action Responsible Department andta Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Provider PFMA implementation strategy once bill is passed Area 1: Budget Execution Control and Cash Management Develop and implement PFM regulations CBTF Undertake training in MoFEP TBC Undertake training in spending agencies TBC Undertake awareness sessions in the Legislative Assembly TBC Establish expenditure controls (monthly spending limits in IFMIS) Develop rolling monthly spending limits for remainder of 2011/12using IFMIS USAID Specify and agree expenditure controls for remainder of 2011/12 USAID Develop rolling monthly spending limits for remainder of 2012/13 onwards USAID Specify and agree expenditure controls for 2012/13 onwards USAID Page: 12 Accounts Accounts Budget Implement a system of controls to strengthen budget execution Accounts Establish commitment control procedures using IFMIS and undertake training USAID New payment procedures established to include verification of payments USAID Modify the payment process and produce the payment instrument from IFMIS USAID Pilot to expand IFMIS functionality Develop and implement plan for spending agencies USAID Develop and implement plan for States USAID Improve cash management by strengthening the Treasury Single Account system Close all non-essential bank accounts USAID Establish bank accounts in the IFMIS general ledger (balance sheet) USAID Explore implementation of IFMIS bank reconciliation module USAID Take stock of all outstanding payment arrears Accounts Accounts Accounts

13 Priority Measure / Action Responsible Department andta Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Provider Verify/validate and classify arrears USAID Develop criteria and multi-year strategy for their clearance USAID Implement a strategy to prevent future build-up of stocks of arrears USAID Budget Page: 13

14 Area 2: Procurement Status and Challenges A well-functioning procurement system is required to support budget execution. Past assessments have pointed to a public procurement system that is largely not transparent and one often conducted in disregard of established rules contained in the Interim Procurement Regulations. Major outstanding concerns are; to strengthen the procurement process so that it is functional, transparent, competitive and delivers value for money to address the weak institutional capacities within the procurement Policy unit in the MoFEP and among procurement staff within spending agencieswhich pose significant challenges to efficiency in procurement Priority Measures Key priority measures under this area (also listed in table 1) will be to undertake consultation with key stakeholders on the draft procurement bill and follow-up on the enactment of the legislation to clarify processes and prepare regulations in order to implement the new procurement legislation to identify direct support, recruitand strengthen institutional capacities for public procurement including reviewing institutional responsibilities and developing relevant skills in MoFEP and spending agencies 3 in line with the law to implement basic rules to increase transparency and integrity in the procurement process 3 The staff trained will belong to MoFEP Page: 14

15 Actions The table below provides details of the actions required to deliver these priority measures: Priority Measure / Action Responsible Department and TA Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Provider Area 2: Procurement Undertake consultation with key stakeholders on the draft procurement bill and follow-up on the enactment of the legislation, and clarify processes and prepare regulations in order to implement the new procurement legislation Drafting of Procurement Bill and Enactment Editing of the draft procurement bill by the MoJ Procurement, MoFEP Legal Counsel Consultative review of the Bill Procurement, MoFEP Legal Counsel Follow up at Ministry of Justice by MoFEP Legal Counsel Procurement, MoFEP Legal Counsel Submit draft Procurement Bill to Council of Ministers for consideration Procurement, MoFEP Legal Counsel Follow up and provision of support to legislature on enactment of Procurement Procurement, MoFEP Law Legal Counsel Development of Regulatory Instruments and Distribution Source a Consultant for drafting of Regulatory Instruments supporting the law Procurement, CSSO- IGAD Drafting of Regulatory Instruments (Regulations, Manual and Tender Documents) Procurement, CSSO- IGAD Organise stakeholder consultation on the draft regulatory instruments and Procurement, CSSOvalidation. IGAD Finalise & submit to Minster of Finance for approval Procurement, CSSO- IGAD Reproduction and Distribution of Regulatory Instruments to all all entities Procurement, CSSO- IGAD Review existing Tender Documents, Manual and other standard forms based on Procurement, CSSO- IPPDR, 2006 IGAD Reproduction and distribution of revised tender documents and manual to all Procurement, CSSOentities IGAD Develop and strengthen institutional capacities to implement the procurement law Page: 15

16 Priority Measure / Action Responsible Department and TA Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Provider Establishment of procurement committees/units in MDAs Source a Consultant to Study & Design Institutional Structures & Job Description Implementation Organisational of Structures & recruitment of staff Develop training modules and capacity development plan for various stakeholders Training & capacity building of staff PPU/New agency Skills audit of Procurement perssonnel of MDAs Design and roll out Training & capacity building for procuring entities/mdas Development of training providers and facilitators Training of other stakeholders (private providers) Awareness/seminar for other stakeholders including media & Civil society seminars Procure Office facilities and Vehicles for PPU/New Regulatory body Procurement, CSSO- IGAD Procurement, CSSO- IGAD Procurement, CSSO- IGAD Procurement, CSSO- IGAD Procurement, CSSO- IGAD Procurement, CSSO- IGAD Procurement, CSSO- IGAD Procurement, CSSO- IGAD Procurement, CSSO- IGAD Procurement, CSSO- IGAD To implement basic rules to increase transparency and integrity in the procurement process Monitoring and Enforcement Procurement Regular compliance checks and follow-up on MDAs Procurement Obtain periodic/quarterly reports on procurement from MDAs Procurement Annual procurement assessment and benchmarking Procurement Procurement Data Management System Develop Website for procurement information Develop Database for procurement data management Conduct price surveys and publish price norms Procurement, CSSO- IGAD Procurement, CSSO- IGAD Procurement, IGAD, CSSO- Page: 16

17 Priority Measure / Action Responsible Department and TA Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Provider Survey & Register of Vendors DProcurement, CSSO- IGAD, Page: 17

18 Area 3: Accounting and Reporting Status and Challenges Improvements in accounting and reporting, just like budget execution, have received less attention than in the case of budget planning and preparation. Progress in recent years has been in the following areas A comprehensive Chart of Accounts (CoA), largely aligned with international practice has been implemented which provides a good basis for recording, accounting and reporting. Past assessments have also pointed to progress in preparing revenue and expenditure accounts but this is based on cash release transaction data in the IFMIS and not expenditures within the spending agencies. Key outstanding areas remain with regard to: Ensuring the accuracy and completeness of accounting data both in relation to revenues, including gaps in reporting on non-tax revenues, and expenditures based on expenditure data at spending agencies and supporting accounts with reconciled bank accounts Establishing a comprehensive balance sheet in IFMIS and covering all accounts Preparing comprehensive in-year and end of year fiscal reports and accounts on a timely basis to support decisions making as well as enable Government to meet its obligations to account to the Legislature Undertaking regular and timely reconciliation of oil sales and accounting and reporting on oil revenues including transfers to other fund accounts Improving the processes for reconciling expenditure data between MoFEP and spending agencies to enable preparation of accurate consolidated statements Reviewing the chart of account to provide appropriate control and flexibility to spending agencies during budget execution Priority Measures The objective will be to build on current efforts focussing on improving capacity of MoFEP and spending agencies for accounting, the accuracy and completeness of accounting data and the timeliness in reporting. Key priority measures under this area (also listed in table 1) will be: to undertake a comprehensive review of the chart of accounts for implementation in 2012/13; to provide monthly reports to spending agencies; to prepare monthly reconciled statements of oil revenue receipts, their transfer to various accounts (including stabilization and reserve fund accounts) and balances in these accounts; to prepare quarterly fiscal accounts that provide a comparison of outturn with budget estimates of revenue and expenditure and include information on financing of deficit/surplus and work towards public dissemination of these reports by beginning of 2012/13; to identify the sources of data for preparation of financial statements and configure the FMIS to capture all such data and use them for preparing the annual, quarterly and monthly financial statements; to explore the use of the bank reconciliation module in the IFMIS; to strengthen institutional capacity to implement accounting and reporting measures. Page: 18

19 Actions The table below provides details of the actions required to deliver these priority measures: Priority Measure / Action Responsible Department Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 and TA provider Area 3: Accounting and Reporting Undertake a comprehensive review of the chart of accounts for implementation in 2012/13 onwards that complies with GFSM 2001 and meets the accountability and other reporting requirements Review the chart of accounts to strengthen the link between budget and financial reporting, to provide for the classification of all balance sheet items and enable comprehensive support of the PFM system Roll-out the revised chart of accounts USAID Commence to prepare monthly reports to spending agencies Undertake a stakeholders requirements analysis USAID Implement Crystal Report writer USAID Design and establish reporting templates USAID Accounts Budget MoFEP will start preparing monthly reconciled statements on oil accounts Accounts Implement MOU to facilitate the exchange of information Norway Design the template for the monthly oil revenue report Norway Training of MoFEP staff Norway Develop and implement non-oil revenue collection and recording procedures Prepare revenue collection and recording procedures USAID Prepare reconciliation templates USAID Train MoFEP and spending agencies USAID Explore implementation of IFMIS revenue module USAID To prepare quarterly fiscal accounts that provide a comparison of outturn with budget estimates of revenue and expenditure Undertake a stakeholder requirement analysis USAID Implement Crystal report writer (IFMIS) USAID Design and establish quarterly fiscal reporting USAID USAID Budget Accounts Accounts Page: 19

20 Area 4: Macroeconomic Management and Sustainable Use of Oil Revenue Status and Challenges With independence, MoFEP through its Macroeconomic Planning Department (MPD) will be increasingly called upon to provide strategic advice to RSS on macroeconomic policy and growth related issues.because only a small portion of total Government revenues is non-oil (approximately 1.5% in 2010),a continuing role for the MPD should be to closely monitor oil outturns and provide oil revenue forecasts.these projections will play a key role in maintaining long term fiscal sustainability and macroeconomic stability and informing strategic decisions on appropriate level of overall government expenditures in the short- to medium-term. Presently, MPD is undertaking a range of macroeconomic analysis and reporting. Dissemination of these reports however, has been largely limited to the departmental level as a mechanism for internal capacity building. Going forward, the department should strengthen the capacity to derive a comprehensive resource envelope, taking account of both oil and non-oil revenue including; tax and non-tax revenue, on- and off-budget aid flows, as well as domestic and foreign borrowing. The recently developed macro frame is a fundamental achievement and familiarisation and implementation of this tool will underpin progress to this next level. Key outstanding issues and proposed actions to address these weaknesses include the following: Addressing significant in-house capacity constraints by undertaking a strategic review of medium term training needs and developing a plan for addressing these in the most efficient manner. Strengthening macrofiscalanalysis, including development of a medium-term fiscal framework (MTFF), to guide fiscal policy development and identify a sustainable fiscal path, both in terms of size and composition of spending, especially for the use of oil revenue. Developing clear framework for the establishment and operation of the stabilization and future generationfunds. Strengthening medium- and long-term oil-revenue forecasting and monitoring as input in the annual budget process. Providing macroeconomic/oil reporting and analysis for the quarterly and annual fiscal outturn publications and providing regular and proactive macroeconomic policy briefings to Cabinet, through the Minister, and to the public on topical issues, such as inflation, economic growth, monetary policy. Priority Measures Key priority measures under this area (also listed in table 1) will be to: Provide medium and longer term oil revenue projections (input for MTFF), and monitor oil outturns (together with Treasury) and update the oil forecast on a regular basis. Prepare a comprehensive MTFF at start of budget process, based on likely, but sustainable expenditures. Analyse and report on the implication of different expenditure paths for fiscal sustainability and reserves. Designing the legal framework for managing the oil revenue in the future. Page: 20

21 Provide macroeconomic (including oil revenue) assessment for the quarterly and annual fiscal outturn publications and clarify respective roles of the Macro-economic planning and Accounts departments in this process. Improve information dissemination within the ministry and the public on economic situation and structure for development of the people s documents to. Develop a tax policy function within the directorate of Planning. Identify capacity gaps, recruit qualified staff and strengthen the analytical and data collection capacity to assess the domestic macroeconomic situation, potential bottlenecks and constraints and other factors that may affect the design of the economic policy. Page: 21

22 Actions The table below provides details of the actions required to deliver these priority measures: Priority Measure / Action Responsible Department and TA Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Provider Area 4: Macrofiscal Analysis and Sustainable Use of Oil Revenues Provide medium and longer term oil revenue projections and monitor oil outturns and update the oil forecast on a regular basis. Produce medium and longer term oil revenue projections as input to the budget process Monitor outturn and explain deviations from projection Prepare comprehensive MTFF Produce projections of non-oil revenue sources and engage with revenue department in developing assumptions and methodology. Produce annual projections for key macroeconomic variables, including scenario analysis of different spending paths, to feed into annual budget process and midterm budget review Designing the legal framework for managing the oil revenue in the future. Draft a Petroleum Revenue Management Bill Implement the legal framework once adopted (regulations, management agreement, establishing bodies etc) Macroeconomic/oil analysis and reporting Macroeconomic/oil assessment for the quarterly and annual fiscal outturn publications Improve information dissemination to the ministry and the public on economic situation Provide regular and proactive macroeconomic policy briefings on topical issues, such as inflation, economic growth, monetary policy to Ministers and senior MoFEP officials. Prepare briefings for Minister to present to Council Strengthening macro-analytical capacity Identify capacity gaps, recruit qualified staff and develop a strategic training plan. Undertake training with a strong emphasis on on-the-job training to strengthen Page: 22 MPD Norway/ODI MPD/Accounts Norway/ODI MPD Norway/ODI MPD Norway/ODI MPD Norway MPD Norway MPD Norway/ODI MPD Norway/ODI MPD Norway/ODI

23 Priority Measure / Action Responsible Department and TA Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Provider analytical and data collection capacity to assess the domestic macroeconomic situation, potential bottlenecks and constraints and other factors that may affect the design of the economic policy. Page: 23

24 Area 5: Non-oil Revenue Improvements The tax base in South Sudan is very narrow, and non-oil tax revenue was only 1.5% and 1% of total revenue in 2010 and 2011, respectively. Tax administration capacity and other supporting institutions in South Sudan are still in their infancy. However, oil revenues are forecast to decline significantly over the next few years. Whilst non-oil revenues cannot plug the gap of decreasing oil revenues in the medium term, they will be important to partly offset the decline. There are many components to non-oil revenue. In rough order of likely magnitude in the short medium term, they are categorized as follows: Customs duties Sales tax Excise tax Personal income tax Business profit tax Non-tax revenues (eg licenses, fees, charges) The South Sudanese economy is currently very dependent on imports, with little large scale domestic production. Hence imports can be seen as our most important revenue base. Customs duties are levied only on imports, whilst sales tax and excise tax will be levied on imports and domestic products. Priority Measures The priority measures for mobilising non-oil revenue (also listed in table 1) are as follows: Put in place a tax reform agenda taking into account the IGFR Working Group, the establishment of a national revenue authority, and harmonize national and sub-national tax collection and sharing policy. Finalise and implement the amendments to the Taxation Act 2009 Finalise the customs law including the harmonisation of the tariffs Develop and implement a modernisation plan for the customs and tax administration Establish a Publicity / Outreach campaign to reinforce policy decisions, provide clear messaging on revenue reforms, address taxpayer concerns, educate taxpayers and capitalise on reform successes. Analyse potential for additional revenues from non-tax/ non-oil sources and develop a system to track collection for non-tax revenues and establish TA requirements. Page: 24

25 Actions The table below provides details of the actions required to deliver these priority measures: Area 5: Non-Oil Revenue Priority Measure / Action Responsible Department and TA Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Provider Put in place a tax reform agenda taking into account the IGFR Working Group and the establishment of a national revenue authority Establish Revenue Sector Reform Steering Committee: Draft Terms of Reference for committee Establish Central Revenue Reform Project Office to provide support / secretariat Revenue Authority Establish a Revenue Authority steering committee to develop policy recommendations Develop program plan for transition to Revenue Authority Develop governance and personnel policies Determine revenue potential by conducting a study to quantify revenue sources by: Revenue type (eg PIT, BPT etc) Economic sector (eg Oil, Telecommunications, air transport etc) Location (State-by-state) Complete agreement on tax collection and sharing as per recommendations of the Inter- Governmental Fiscal Relations Working Group Establish a tax and revenue policy directorate within MoFEP Central Revenue Reform Project Office to be a part of this directorate Develop and implement proposal to improve revenue data collection and analysis Establish a peer learning programme for revenue policy officers Finalise and implement the two sets of amendments to the Taxation Act 2009 Support completion of legislative approval of Business Profit Tax Amendment to 2009 Taxation Act Organise a workshop to review proposed Sales and Services Tax Amendment Re-submit the Sales and Service Tax Amendment to 2009 Taxation Act to legislature Finalise current draft regulations, draft new regulations as necessary, and submit for approval Finalise the customs law including the harmonisation of the tariffs Deputy Minister / Director of Revenue (USAID) Deputy Minister / Director of Revenue (USAID) Director of Revenue Deputy Minister Deputy Minister / Director of Revenue (USAID) Taxation (USAID) Taxation / Director of Revenue (USAID) Taxation / Director of Revenue (USAID) Taxation / Director of Revenue (USAID) Page: 25

26 Priority Measure / Action Review and finalise Customs Act Draft new Customs Law based on a recognized model Finalise tariff schedule Draft and submit regulations Develop and implement a modernisation plan for the customs and tax administration Taxation Directorate Update and expand 2011 strategic plan for Continually update Responsible Department and TA Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Provider Director of Revenue (TMEA) Director of Revenue (TMEA) Director of Revenue / Customs (TMEA) Taxation / Director of Revenue (USAID) Expand tax-payer registration Taxation (USAID) Undertake returns processing for Advance Tax Payments and returns for 2012 BPT Taxation (USAID) Improve collection and reporting of revenues, primarily through use of commercial banks in the collection process Support implementation of the requirement for government vendors to be registered as taxpayers Obtain register of large taxpayers operating in South Sudan from Khartoum and match against RSS register Taxation / Director of Revenue (USAID) Taxation (USAID) Taxation (USAID) Conduct capacity needs assessment in all areas at HQ and state level. Taxation (USAID) Develop and implement plan to improve or establish national tax offices at state level in each state Taxation (USAID) Implement Business Profit Tax for large companies Taxation (USAID) Implement Sales and Services Tax Taxation (USAID) Establish and train tax audit function Taxation (USAID) Customs Directorate Endorse draft customs strategic plan Develop and implement a modernisation plan for the customs administration H.E. Deputy Minister (TMEA) H.E. Deputy Minister (TMEA) Transition revenue collection at key border posts to commercial banks Customs (USAID / Page: 26

27 Priority Measure / Action Adopt TIN established by Tax Directorate: establish a system for exchange of information between customs and tax Review and improve exemptions process to clarify criteria for exemptions, streamline and regularise the process of granting legitimate exemptions and provide transparent reporting on exemptions granted. Improve public outreach and taxpayer education Responsible Department and TA Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Provider TMEA) Customs (USAID/ TMEA) Revenue / Exemptions Committee / Customs (TMEA/ USAID) Improve taxpayer services Taxation (USAID) Continue development of brochures and pamphlets Taxation (USAID) Initiate taxpayer information campaign including use of dedicated website and establishment of a hotline Analyse potential for additional revenues from non-tax/ non-oil sources and develop a system to track collection for non-tax revenues Review list of non-tax revenue sources with each agency to obtain further information and estimates Develop policy framework based on principles of cost recovery for evaluating current and proposed rates for non-tax revenues Conduct a survey to establish extent and causes of non-compliance with current remittance and reporting procedures Update procedures and rules for collecting and reporting non-oil, non-tax revenues Identify capacity gaps and establish TA requirements Review TA needs assessment to support the reforms Develop and implement a training plan for HQ and state levels offices Taxation (USAID) Director of Revenue (USAID) Director of Revenue (USAID) Director of Revenue (USAID) Director of Revenue (USAID) Deputy Minister (USAID/ TMEA / IMF???) Taxation, Customs, Revenue (USAID/ TMEA) Page: 27

28 Area 6: Budget Planning and Preparation Status and Challenges GRSS has made impressive progress in the PFM area of budgeting and planning since the Comprehensive Peace Agreement (CPA) in Key achievements in this area include the following: The budget calendar is well-articulated and provides a strong framework for the annual budget process. Clear budget ceilings and guidelines set by MoFEP prior to the preparation of detailed Budget Sector Plans (BSPs) have forced spending agencies to prioritize and prepare their budget requests based on an indicative resource envelope. Strong MoFEP leadership and guidance during planning process has ensured that a unified budget structure with a comprehensive expenditure classification system is adopted by spending agencies. Implementation of a budget database- this should improve timeliness and management of the budget process. Key challenges going forward are: Budget credibilityremains a critical weakness. Aggregate and spending agency expenditure outturns commonly differ from approved budgets. The link between national objectives, sector priorities and annual budgets also remains weak. This should be further enhanced with the implementation of a MTFF and by ensuring closer alignment between Budget Sector Plans and the South Sudan Development Plan (SSDP). Implementation of PFM strengthening measures in these weaknesses will require consolidation of on-going PFM actions and further capacity building within MoFEP and line ministries. Equally, action is needed to strengthen procedures for planning and management of capital investment programs undertaken by spending agencies. Priority Measures Key priority measures under this area (also listed in table 1) will be to: Consolidate recent budget preparation improvements and clarify roles and responsibilities between budget and sectoral planning o Propose reorganization of directorates and departments o Review and revise job descriptions of directors. Assistant directors and budget and planning officers Facilitate more realistic budgeting by taking into account known commitments of spending agencies o Address Arrears Collect detailed information about existing arrears Develop and implement process for validating arrears including MoFEP officials, MoJ, Auditor General Establish process for validating dura arrears including, if necessary, contracting with a forensic auditor Develop multi-year strategy for clearing arrears o In midyear budget review, examine actual spending during the first half of the fiscal year to determine which agencies are overspending their budget. Examine that overspending Page: 28

29 to determine whether it is necessary and appropriate. Seek offsetting savings. Make recommendations for adjusting agency ceilings. Strengthen political engagement in budget process by implementing measures required in PFMA bill and increase link between agency ceilings and sectoral and national priorities: o Develop budget planning and preparation calendar for 2012/13 o Secure Council approval of the MTFF and individual agency ceilings prior to the preparation of the annualsector budget plans o Presenting consolidated BSPs to CoM annually o Submitting MTFF and annual budget sector plans to Legislative Assembly in March prior to preparation of detailed annual budget for consultation purposes Strengthen the ministry s capacity for budget analysis and monitoring o Training for budget officers in use of FreeBalance o Monthly budget execution reports distributed to spending agencies o Monthly analysis of budget execution prepared for MoFEP o Quarterly budget execution reports prepared for public distribution o Budget officers prepare analyses of agency spending, results and efficiency Page: 29