J.10_Annex2-Technical_Instructions_for_Ramp_up_activity.pdf

Technical Instructions for “Ramp-Up” of Macroeconomic Assistance with the Ministry of Finance

Technical Area 1: Full Implementation of Treasury Single Account

Target Result: Full implementation of the Treasury Single Account (TSA) in Egypt to enhance liquidity management and fiscal consolidation.

Background: The MOF has begun to implement a treasury single account. Working in conjunction with Egypt’s Central Bank, the MOF took the decision to close the accounts of all 2,600 accounting units by December 2017. As of April 2017, accounts for 1000 units have been closed and paper checks have been destroyed. MOF is on track to close all necessary accounts by the end of 2017 including the accounts of the remaining 1,600 units despite some resistance from certain GOE units.

MOF plans to process all government salaries in the GOE budget electronically by July 2017 and would like to implement regional training on TSA in the field (as opposed to hosting all trainings in Cairo). The MOF has requested assistance in planning and implementing TSA for all affected staff in GOE’s line ministries and their relevant implementing units. Assistance should begin with a work planning meeting scheduled for early July that would define the deliverables with MOF counterparts.

Technical Instructions: To achieve this result, the Contractor must assist the MOF develop and operationalize a Treasury Single Account (TSA) system that will enable the GOE to determine its cash position in real time, and be able to access its cash resources anytime and in short notice. Assistance should begin with a work planning mission scheduled for early July that will define the deliverables with MOF counterparts (Phase 1). The work planning will focus on characterizing the current state of the TSA system adopted by the MOF, and on reviewing implementation and alignment of GOE plans and procedures with international best practices in the following areas:

o The current banking regulatory framework, GOE accounting practices, and the state of financial technology in Egypt;

o The current coverage of government organizational units including line ministries, economic authorities, state-owned enterprises, and sub-national government units under the TSA;

o The degree of decentralization of authority in the receiving of payments to the government and issuance of payments by the government;

o The current transaction processing design and its technical feasibility given the current communication and information infrastructure of the banking system, o Identifying gaps in the existing rules and regulations that hamper the smooth functioning of the proposed TSA; and o Identifying gaps in the communication and information technology, specifically the current Government Financial Management Information System (GFMIS).

After the work planning stage (Phase I), and based on the findings of the initial work planning mission, the Contractor will begin Phase II. As agreed with the MOF in Phase I, the Contractor will assist the Ministry in the implementation of a transition plan to migrate any remaining accounts to the new TSA system with maximum support from all government units affected by the change and with the least disruption of governance function and provision of public services. This transition plan will include training and capacity building of all public servants directly or indirectly involved in the receipt of revenues, issuance of payments, and recording and reporting of such transactions to ensure that they are trained to operate in the new TSA system in the most efficient and effective manner.

The LPFM II project team must have the credentials and capacity to provide technical advice to meet international best practices in the following areas:

o Recommend and assist the MOF implement transparent, efficient, and effective custodial arrangement for the TSA.

o Recommend and assist MOF implement appropriate systems to cover the cash transactions of all government organizational units including line ministries, economic authorities, state-owned enterprises, and sub-national government units under the TSA.

o Recommend and assist the MOF to implement agreed decentralization of authority in the receiving of payments to the government and issuance of payments by the government, and design appropriate TSA (i.e., centralized or distributed TSA) infrastructure.

o Provide technical input in the optimal design of transaction processing that is consistent with TSA infrastructure, including receiving of payments to government, issuance of payments by government, and consolidation of cash balances. The transaction processing design must be technically feasible given the current communication and information infrastructure of the banking system, Also, the transaction processing design must be technically compatible with the government financial management information system (GFMIS).

o Provide technical input into the MOF’s design of an accounting system for cash transactions that is consistent with current GOE accounting principles and practices, preserves geographical and organizational information in the chart of accounts, easily integrated into the existing GFMIS, and lends to periodic review and audit of the TSA.

o Recommend rules and regulations that will facilitate operationalization of the TSA in the GFMIS system.

o Recommend hardware and software upgrades that are consistent the MOF’s GFMIS as well as compatible to the current architecture used by the banking sector.

Technical Area 2: Implementing Program-Based Budgeting

Result Target: Strengthened GOE budgetary framework to connect resource allocation decisions with achieving results using program-based budgeting for an initial six GOE agencies

Background: Egypt aims to strengthen budgetary framework to improve efficiency and effectiveness of resource allocations by connecting resource allocations decisions with achieving results. To this end, the MOF will introduce medium-term budgeting framework with greater emphasis on programmatic budgeting. In the FY17/18 budgeting cycle, the MOF tasked six ministries including the Ministry of Health (MOH), to present their budgets, in addition to their standard input-based budget formats, in a manner that is organized around their major programs. This exercise is intended to pave the way for full transition from input-based budgeting to program-based budgeting. The MOF requested assistance in evaluating the efforts of the six ministries in adopting a program-based budget.

Technical Instruction: To achieve this result, the Contractor will assist the MOF in evaluating the program-based budgets developed by an initial six GOE ministries submitting program based budgets for the 2017/8 budget cycle. This will include a comprehensive review of the methodology used by the six ministries and analysis of the gaps and deviations from international standards and best practices. For example, the Contractor must review whether the program-based budgets developed by the six GOE ministries reflect that:

o Activities that have the same policy objectives are grouped under a single program;

o Number of activities is reduced to a level that is practical for resource allocation decision-making;

o Programs are clearly differentiated from one another both in policy and program name;

o Specific government organizational unit is clearly designated to manage a program and is adequately delegated with authority to fully implement the program;

o Program budgets are directly linked to key program performance objectives and corresponding indicators;

o Chart of program accounts is sufficient to cover in migrating all accounts under the input-based budgeting.

o Appropriate accounting system are developed and lends easily to the GFMIS; and o Accounting rules are clearly established such as treatment of indirect costs.

Technical Area 3: Tax Revenue Forecasting

The MOF is requesting assistance to develop a stable and predictable framework to forecast tax revenue and the impact that different tax rates would have on a range of enterprises. This would require the MOF to develop forecasting models focused on specific sectors to be able to guide tax policies.

Assistance is also needed to produce reliable estimates and ensure that the results from the forecasting models are accurate. Additional background and technical instructions will be provided if USAID determines, in consultation with MOF and LPFM II staff, there is sufficient budget to adequately support this third technical area after addressing the first two technical areas.