ATTACHMENT J.5_RCE_DCN 2024-UKR-004_RevGRO.pdf

DCN: 2024-UKR-004

USAID/Ukraine/Public Financial Management1 E&E Bureau RCE Template (Version 7 October 2022)

US Agency for International Development (USAID) Ukraine

Request for Categorical Exclusion (RCE)

Program/Project/Activity Data

Activity/Project Name:

USAID Revenue and Expenditure Governance Reforms Operationalized (RevGRO) Activity (a.k.a. Public Financial Management (PFM) Activity)

Assistance Objective: Democracy, Human Rights and Governance Program Area: Good Governance Country(ies) and/or Operating Unit: USAID/Ukraine Originating Office: ODG Date: April 29, 2024

Original RCE Original RCE LOP Start Date: July 1, 2024 IEE/RCE History DCN LOP End Date Original RCE 2024-UKR-004 September 30, 2029 Purpose of Amendment: N/A Contract/Award Number (if known): TBD Sector Type(s) from the ECD Advanced Search Tab (https://ecd.usaid.gov) Major: Governance Minor: Governance Recommended Environmental Determination (s): Categorical Exclusion Additional Elements:

Government to Government Local Procurement

Donor Co-Funded Climate Change Vulnerability Analysis (included) Climate Change Vulnerability Rating: Low

1. Background and Project Description

1.1 Purpose of the RCE

This RCE covers the USAID Revenue and Expenditure Governance Reforms Operationalized (RevGRO) Activity (a.k.a. Public Financial Management (PFM) Activity), which will run from July 1, 2024, through September 30, 2029. No construction or equipment procurement is envisioned.

1.2 Project/Activity Description

The USAID Revenue and Expenditure Governance Reforms Operationalized (RevGRO) Activity (a.k.a. Public Financial Management (PFM) Activity) will strengthen Ukraine’s fiscal resilience, transparency, and accountability by enhancing state revenue generation and financial management. Ukraine’s economy, and therefore its public finances, have significantly decreased as a result of Russia’s full-scale invasion. As a result, Ukraine continues to rely on external budget financing to fund critical public services to stay resilient during wartime; however, sustained external financing is becoming politically more challenging over time. Accordingly, USAID will support efforts to generate domestic revenues and stop leakages in current collections through tax and customs reforms.

Objective 1: Increase national revenue mobilization through support to tax and customs policy, administration, and institutional reforms

USAID/Ukraine/Public Financial Management2 E&E Bureau RCE Template (Version 7 October 2022)

- Advance pro-revenue tax and customs policy reforms (through expert technical assistance);

- Improve the capacity of the State Tax Service and State Customs Service to facilitate, monitor, and enforce taxpayer compliance and to implement policy changes (through targeted trainings and technical assistance, digitalization and software development, and possible small scale office IT hardware provision);

- Advance institutional and organizational reforms strengthening the efficiency, effectiveness, integrity, and public trust of revenue bodies (through expert technical assistance, training, digitalization, and possible small scale office IT hardware provision)

Objective 2: Strengthen public investment management, expenditure management, and audit in line with international standards

- Enhance capacities to effectively select, fund, implement, and manage public investment projects in line with national priorities (through expert technical assistance and training);

- Strengthen internal and external audit capacities in line with international standards, including supporting State Audit Service and Accounting Chamber of Ukraine organizational capacity (through expert technical assistance, embedded experts, targeted trainings, assessment work, digitalization and software development);

- Bolster organizational capacities of PFM institutions to improve institutional efficiency and effectiveness, including through digitalization and human resources management reforms.

Objective 3: Enhance civic oversight and private sector engagement in fiscal policy

- Promote meaningful private sector engagement in GOU tax and customs policy and administration reform (through convening workshops and roundtables, commissioning policy papers);

- Strengthen civic monitoring and oversight of tax and customs policy and administration reform, revenue collection, and public spending (through small grants for technical assistance, study tours, development of digital tools through software creation).

2. Environmental Analysis Component 1 – Increase national revenue mobilization through support to tax and customs policy, administration, and institutional reforms Sub-activities Categorical Exclusion Citation

1.1 Advance pro-revenue tax and customs policy reforms; §216.2(c)(2)(i)

1.2 Improve the capacity of the State Tax Service and State Customs Service to facilitate, monitor, and enforce taxpayer compliance and to implement policy changes;

§216.2(c)(2)(i)

1.3 Advance institutional and organizational reforms strengthening the efficiency, effectiveness, integrity, and public trust of revenue bodies.

§216.2(c)(2)(i)

Component 2 – Strengthen public investment management, expenditure management, and audit in line with international standards

Sub-activities Categorical Exclusion Citation

2.1 Enhance capacities to effectively select, fund, implement, and manage public investment projects in line with national priorities;

§216.2(c)(2)(i)

2.2 Strengthen internal and external audit capacities in line with international standards, including supporting State Audit Service and Accounting Chamber of Ukraine organizational capacity;

§216.2(c)(2)(i)

2.3 Bolster organizational capacities of PFM institutions to improve institutional efficiency and effectiveness, including through digitalization and human resources management reforms.

§216.2(c)(2)(i)

USAID/Ukraine/Public Financial Management3 E&E Bureau RCE Template (Version 7 October 2022)

Component 3 – Enhance civic oversight and private sector engagement in fiscal policy Sub-activities Categorical Exclusion Citation

3.1 Promote meaningful private sector engagement in GOU tax and customs policy and administration reform;

§216.2(c)(2)(i)

3.2 Strengthen civic monitoring and oversight of tax and customs policy and administration reform, revenue collection, and public spending.

§216.2(c)(2)(i)

2.1 Climate Change Vulnerability Analysis

Climate risk management (CRM) for this activity has been conducted in accordance with CRM for USAID Projects and Activities, Mandatory Reference for ADS Chapter 201. CRM for the recently approved Mission’s CDCS (2019-2024) was conducted at the country strategy-level, with the expectation that subsequent climate risk screening will occur as part of the design process for projects and activities (e.g., at the PAD and activity-level). Therefore, climate risks have been assessed at the activity level and the results of this assessment are summarized in the table below.

As all activities covered under this RCE are for assessments and evaluation, transfers of information, and technical assistance, the Climate Risk is deemed Low.

3. Justification for Categorical Exclusion Determination The activities described in this document will not have an effect on the natural or physical environment and are among the classes of activities listed in 22 CFR 216.2(c)(2) Therefore, under §216.2(c)(1), neither an IEE nor an EA will be required for these activities. Instead, a categorical exclusion threshold determination is recommended for the following identified activities under 22 CFR 216.2(c)(2):

Activity 1.1–1.3; 2.1–2.3; 3.1–3.2 under §216.2(c)(2)(i) Education, technical assistance, or training programs except to the extent such programs include activities directly affecting the environment (such as construction of facilities, etc.);

4. Mandatory Inclusion of Requirements in Solicitations, Awards, Budgets and Workplans

4.1 Appropriate environmental compliance language, including limitations defined in Section 5, shall be incorporated into solicitations and awards for this activity.

4.2 The IP shall ensure annual work plans do not include activities that are defined as limitations, as defined in Section 5.

4.3 The IP is required to comply with applicable host country environmental requirements.

5. Limitations of the RCE: This RCE does not cover activities that:

5.1 Normally have a significant effect on the environment under §216.2(d)(1), including:

Programs of river basin development;

Irrigation or water management projects, including dams and impoundments;

Agricultural land leveling;

Drainage projects;

Large scale agricultural mechanization;

New lands development;

Resettlement projects;

Penetration road building or road improvement projects;

Powerplants;

Industrial plants;

Potable water and sewerage projects other than those that are small scale.

USAID/Ukraine/Public Financial Management4 E&E Bureau RCE Template (Version 7 October 2022)

DCN: 2024-UKR-004

In addition, unless the nature of the support is determined by the Resident Legal Officer or Office of General Counsel to fall under one of the defined categorical exclusions in 22 CFR §216.2(c)(2), this categorical exclusion does not cover activities that:

5.2 Support project preparation, project feasibility studies, engineering design for activities listed in

§216.2(d)(1);

5.3 Affect endangered species;

5.4 Result in wetland or biodiversity degradation or loss;

5.5 Support extractive industries (e.g. mining and quarrying);

5.6 Promote timber harvesting;

5.7 Provide support for regulatory permitting;

5.8 Support agro-processing or industrial enterprises;

5.9 Result in privatization of industrial or infrastructure facilities with heavily polluted property;

5.10 Lead to construction, rehabilitation, or renovation of buildings or other structures;

5.11 Assist the procurement (including payment in kind, donations, guarantees of credit) or use

(including handling, transport, fuel for transport, storage, mixing, loading, application, cleanup of spray equipment, and disposal) of pesticides or activities involving procurement, transport, use, storage, or disposal of toxic materials and /or pesticides (cover all insecticides, fungicides, rodenticides, etc. covered under the Federal Insecticide, Fungicide, and Rodenticide Act); or

5.12 Procure or use genetically modified organisms.

Any of these actions, unless determined to qualify for a categorical exclusion under 22 CFR §216.2(c)(2), would require an IEE amendment with a Negative or Positive threshold determination approved by the Mission Director and with concurrence from the Europe and Eurasia Bureau Environmental Officer (BEO).

6. Revisions

6.1 Under §216.3(a)(9), if new information becomes available that indicates that activities covered by this RCE might be considered major and their effect significant, or if additional activities are proposed that might be considered major and their effect significant, this categorical exclusion determination will be reviewed and, if necessary, revised by the Mission Environmental Officer (MEO) with concurrence by the BEO and approval by the Mission Director. It is the responsibility of the USAID Contract Officer’s Representative (COR)/Agreement Officer’s Representative (AOR) to keep the MEO and BEO informed of any new information or changes in the activity that might require revision of this RCE.

POOJAN BHASKER

TRIPATHI

Digitally signed by POOJAN

BHASKER TRIPATHI

Date: 2024.05.16 11:48:56 -04'00'

Jack Mills Text Box

/S/ Theodora Dell

USAID/Ukraine/Public Financial Management6 E&E Bureau RCE Template (Version 7 October 2022)

Distribution:

Activity File

AOR/COR

MEO

BEO

ECD

Attachments:

Annex A: Climate Risk Screening and Management Tool

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5:

H ow

C lim at e

R is ks a re A dd re ss ed in th e Ac tiv ity

6:

A cc ep te d C lim at e R is ks

O bj ec tiv e 1:

I nc re as e na tio na l re ve nu e m ob iliz at io n th ro ug h su pp or t t o ta x an d cu st om s po lic y, a dm in is tra tio n, a nd st itu tio na l r ef or m s

-A dv an ce p ro

-re ve nu e ta x an d cu st om s po lic y re fo rm s;

-I m pr ov e th e ca pa ci ty o f t he

St at e Ta x Se rv ic e an d St at e

C us to m s Se rv ic e to fa ci lit at e, m on ito r, an d en fo rc e ta xp ay er co m pl ia nc e an d to im pl em en t po lic y ch an ge s;

-A dv an ce in st itu tio na l a nd or ga ni za tio na l r ef or m s st re ng th en in g th e ef fic ie nc y, ef fe ct iv en es s, in te gr ity , a nd pu bl ic tr us t o f r ev en ue b od ie s

0-ye ar s -P ol iti ca l i ns ta bi lit y, s oc ia l u nr es t a nd w or se ne d ec on om ic a nd in fra st ru ct ur e co nd iti on s du e to in cr ea se d fre qu en cy a nd

/o r in te ns ity o f e xt re m e w ea th er e ve nt s su ch a s dr ou gh ts a nd fl oo ds , d ec re as ed w at er av ai la bi lit y an d qu al ity

, a nd in cr ea si ng te m pe ra tu re s

-U nd er m in ed tr us t i n go ve rn an ce a nd s er vi ce de liv er y du e to d is pr op or tio na te im pa ct s to di sp la ce d po pu la tio ns fr om in cr ea se d in te ns ity an d/ or fr eq ue nc y of fl oo ds

, d ro ug ht s an d he at w av es a ffe ct in g th e ag ric ul tu ra l s ec to r, w at er re so ur ce s, n at ur al re so ur ce s, e ne rg y an d hu m an h ea lth

-Im pa ct s to s oc ia l s ta bi lit y du e to e xa ce rb at ed in eq ua lit ie s ex pe rie nc ed b y m ar gi na liz ed po pu la tio ns

(e .g in cr ea se d vu ln er ab ilit y of

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-D ec re as ed s ta bi lit y of c ul tu ra l n or m s an d de te rio ra tio n of th e st at us a nd tr ea tm en t o f w om en a nd g irl s, a s w el l a s of

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I in di vi du al s, d ue to d is pl ac em en t a nd im pa ct s fro m e xt re m e w ea th er e ve nt s

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-p er so n tra in in gs

, m ee tin gs

, e ve nt s an d ca pa ci ty bu ild in g ac tiv iti es d ue to e xt re m e w ea th er ev en ts

Lo w lim at e ris k ra tin g is lo w a nd a s su ch is n ot re qu ire d to b e ad dr es se d.

N /A

O bj ec tiv e 2:

S tre ng th en p ub lic ve st m en t m an ag em en t, ex pe nd itu re m an ag em en t, an d au di t i n lin e w ith in te rn at io na l st an da rd s

-E nh an ce c ap ac iti es to ef fe ct iv el y se le ct , f un d, im pl em en t, an d m an ag e pu bl ic in ve st m en t p ro je ct s in li ne w ith na tio na l p rio rit ie s;

-S tre ng th en in te rn al a nd ex te rn al a ud it ca pa ci tie s in li ne w ith in te rn at io na l s ta nd ar ds

0-ye ar s at e ris k ra tin g is lo w a nd a s su ch is ire d to b e ad dr es

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Ac co un tin g C ha m be r o f U kr ai ne or ga ni za tio na l c ap ac ity

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in st itu tio ns to im pr ov e in st itu tio na l e ffi ci en cy an d ef fe ct iv en es s, in cl ud in g th ro ug h di gi ta liz at io n an d hu m an re so ur ce s m an ag em en t re fo rm s.

O bj ec tiv e 3:

E nh an ce c iv ic ov er si gh t a nd p riv at e se ct or ga ge m en t i n fis ca l p ol ic y

-P ro m ot e m ea ni ng fu l p riv at e se ct or e ng ag em en t i n

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U ta x an d cu st om s po lic y an d ad m in is tra tio n re fo rm

-S tre ng th en c iv ic m on ito rin g an d ov er si gh t o f t ax a nd cu st om s po lic y an d ad m in is tra tio n re fo rm , r ev en ue co lle ct io n, a nd p ub lic s pe nd in g.

0-ye ar s at e ris k ra tin g is lo w a nd a s su ch is ire d to b e ad dr es

*m ea ns a re qu ire d el em en t, ac co rd in g to th e

M an da to ry R ef er ce