4._Section_C-NIS_PWS_04.07.17_clean.docx

Section C - Description/Specifications

Acronyms

* note that for Guatemalan institutions, the acronym given is for the Spanish version of the institution’s name

C.1 OVERVIEW

Public Financial Management (PFM), including domestic revenue mobilization (DRM), constitutes some of the most important functions of government and pillars of efficient, transparent, and accountable service delivery and good governance. Efficient PFM and DRM (i.e. fair, equitable, and predictable tax policy and administration, and sound expenditure management) must be in place to promote good fiscal management and policy-based resource allocation that will result in a more effective government. They increase the resource envelope and efficiency and quality of its public spending (e.g. in security, education, health, and other public services), enabling the government to best address the development needs of the population.

This Statement of Work (SOW) is for a five-year, $46-52 million National Institution Strengthening (NIS) Activity, hereinafter “the Activity,” to support the Government of Guatemala’s (GOG) reform efforts to create an effective PFM system. The project’s goal is to contribute to a more accountable and responsive public administration of the Guatemalan state.

C. 1.1 Relationship to U.S. and USAID Strategies

This activity supports U.S. strategic interests in Guatemala and the region, as well as the Government of Guatemala’s own priorities. The U.S. Strategy for Engagement in Central America (CEN) is an interagency strategy focused on the underlying factors compelling migration, especially illegal migration of unaccompanied children. The CEN strategy aligns with a regional plan developed by the governments of Guatemala, El Salvador, and Honduras (known as the Northern Triangle countries) called the Alliance for Prosperity, with alignment on the three pillars of prosperity, security, and governance. Support envisioned under this Activity will address all three of the CEN strategy pillars by increasing tax revenues and improving public expenditure management and overall economic governance to increase service provision under health, education, security, and infrastructure.

USAID/Guatemala’s Country Development Cooperation Strategy (CDCS) was approved in 2012 and has been extended through 2018. The CDCS includes three Development Objectives (DOs) that contribute to the following CDCS goal: A more secure Guatemala that fosters greater socio-economic development in the Western Highlands and sustainably manages its natural resources.

This Activity will contribute to DO1, defined as “Greater Security and Justice for Citizens.” This objective will be met through Intermediate Result (IR) 1.1- Improved Governance of Key Public Institutions and IR 1.3 – Citizen Voice and Responsible Participation Increased. This Activity will contribute to IR1.1 by helping to improve the GOG’s ability to fund public institutions, improve budget execution and provide oversight. The Activity will contribute to IR 1.3 by facilitating the GOG’s responsiveness to open government initiatives, including those related to transparency.

C. 1.2 Relationship to Guatemalan Priorities

The Activity will align closely with GOG strategies. The GOG’s K’atun 2032 strategy, published in 2014, describes how improved public financial management at the national and municipal levels is necessary for the country to break historical cycles that leave much of its population without sufficient access to education, health, and other public services. [footnoteRef:1] The “General Policy of the Government: 2016-2020” presents “Zero Tolerance for Corruption and Modernization of the State” as the first of five presidential priorities. The description of this priority highlights increasing the coherence and efficiency of the state in improving planning, programming and budgeting functions as well as the honest, rational, and efficient management of public resources.[footnoteRef:2] In addition, Guatemala’s Open Government National Action Plan, 2016-2018 highlights the nexus between efficient public financial management, transparency, and the reduction of corruption.[footnoteRef:3] Active collaboration and co-participation with the GOG in the Activity will be integral to the Activity and crucial for its success. [1: K’atun 2032. “Início.” 2016. Accessed November 30, 2016. http://www.katunguatemala2032.com/index.php?option=com_phocadownload&view=category&id=1] [2: Gobierno de la República de Guatemala. “Política General de Gobierno: 2016-2020.” 2016. Accessed January 11, 2017. http://www.segeplan.gob.gt/downloads/2016/PGG2016-2020.pdf] [3: Alianza para el Gobierno Abierto Guatemala. “Open Government National Action Plan: Guatemala, 2016-2018.”]

C.2 BACKGROUND

With a 2015 estimated gross domestic product of $63.79 billion, Guatemala is the largest economy in Central America and one of the biggest countries by size and population (estimated at 16 million).[footnoteRef:4] The country has made considerable progress in consolidating democracy and peace following the signing of the Peace Accords in 1996 that ended its decades-old civil war. The country has enjoyed free and fair elections with peaceful transfers of power. However, political fragmentation and a tradition of short-lived, leadership-based political party system do not provide for a more efficient and stable political process (no party has been re-elected to the Presidency since the approval of the new Constitution in 1985). Guatemala also remains a highly divided society split by historical and cultural heritage between the majority indigenous population of Maya-descent based in the country-side and the traditional ruling stakeholders based in the capital and linked urban centers. Nevertheless, Guatemala’s various social stakeholders and institutions have made continuous efforts and progress in bridging this divide to construct a more equal and unified society. The national population doubles roughly every 25 years, and Guatemala is also a relatively young country, with the highest regional rate (37%) of the population under 15 years of age.[footnoteRef:5] [4: The World Bank. “Guatemala.” 2016. Accessed November 30, 2016. http://www.worldbank.org/en/country/guatemala] [5: United Nations. World Population Prospects. 2015. Accessed November 30, 2016. https://esa.un.org/unpd/wpp/Publications/Files/WPP2015_DataBooklet.pdf]

While Guatemala has tremendous potential based on its young and growing population and a resilient, diversified, and open economy, it faces serious challenges to its social and economic development. Poverty remains widespread and growing, particularly in rural areas. Guatemala is one of the most unequal countries, in terms of income, in the world.[footnoteRef:6] Additionally, Guatemala has some of the lowest human development indicators in the region.[footnoteRef:7] High prevalence of violence fueled by drug-trafficking, organized crime and gangs contribute to a pervasive climate of insecurity. In fact, the World Economic Forum lists crime and theft as the most problematic factor in doing business in Guatemala (corruption was the next most problematic factor).[footnoteRef:8] Guatemala is also vulnerable to recurrent natural disasters, such as volcanic eruptions, earthquakes and hurricanes. Unstable and transient political parties and system, small government structure hampered by low tax revenue, and inefficient spending all remain impediments to growth, security, and a prosperous Guatemala.[footnoteRef:9] [6: The World Bank. “Gini Index.” 2016. Accessed November 30, 2016. http://data.worldbank.org/indicator/SI.POV.GINI?locations=GT&view=chart] [7: UNDP. “Human Development Report: Guatemala.” 2016. Accessed November 30, 2016. http://hdr.undp.org/en/countries/profiles/GTM] [8: IMF. 2016 Article 4 Consultation. August 2016. Accessed November 30, 2016. http://www.imf.org/external/pubs/ft/scr/2016/cr16281.pdf] [9: Ibid.]

Corruption in particular continues to hold Guatemala back. In fact, the corruption scheme uncovered in April 2015 demonstrated the depth of corruption as the investigation led to the removal and arrest of former President Otto Perez Molina and Vice President Roxana Baldetti as well as ushering in a political and institutional crisis. The public’s outrage generated by the scandal led to a unified demand for transparent public institutions, leading to a new but as yet unfulfilled charge by Guatemala’s political leadership to address the weaknesses and accountability gaps throughout the state. The mass mobilization of citizens and expanding corruption investigations by the Public Ministry and the UN-backed International Commission against Corruption in Guatemala (CICIG, by its Spanish acronym) have changed the political calculus and led to the November 2015 election of current president Jimmy Morales. With a mandate for reform, the President has in turn emphasized transparency and improved fiscal management as key components of his anti-corruption strategy. While many obstacles still exist, there has not been a more promising moment in Guatemala’s recent history to focus on strengthening the capacities and accountability of the country’s key state institutions.

C.2.1 Guatemala’s Public Financial Management Challenge

The GOG faces several PFM challenges in order to properly administer funds to line ministries that service the public. The financial backbone of the GOG must be strong enough to lead line ministries desperate for resources necessary to meet public demand for better health, justice, education, and other public services. The demand for services continues to grow but the response has been stunted by several fiscal challenges. As a result, GOG ministries function with nominal budgets designed to meet minimal operational requirements. The lack of state services and the continued backsliding on major health, economic, and education indicators is due to both to minimal funding and a lack of accountability of government programs. While these weaknesses negatively impact all Guatemalans, the GOG’s deficiencies have a disproportionately negative effect on indigenous people (approximately 75% live in poverty and drop out of school at a much higher rate than non-indigenous), especially women and girls.[footnoteRef:10] In terms of indicators of health, education, poverty, access to social services and justice, as well as civic and political participation, rural women are the most disadvantaged segment of the population.[footnoteRef:11] Ultimately, overcoming the challenges outlined in this section will support a more democratic, secure, and prosperous Guatemala. [10: The World Bank. Gender Data Portal. 2016: Accessed November 30, 2016. http://go.worldbank.org/YMPEGXASH0] [11: USAID/Guatemala Gender Analysis 2013]

Budget Planning and Preparation:

The GOG’s current processes for planning and preparing budgets are not designed to reflect the public interest and do not incentivize government agencies’ performance. The legal framework for PFM in Guatemala does not currently link budget allocation to budget planning or preparation; therefore, ministries do not comply with any best practices in budget development. Ministries and government entities base budget requests on previous years seeking to maintain the status quo, thereby protecting their continuation. Additionally, budget plans are submitted separately from budget requests, and to different entities. Budget plans are submitted to SEGEPLAN, the executive branch agency responsible for budget planning, and budget requests are submitted to the Ministry of Finance. The budget requests and budget plans do not have to coincide. As it stands, the budget plan is insignificant in the ultimate determination of GOG entity funding levels. Furthermore, the Ministry of Finance is not required to justify its response to any budget request; therefore, budget allocation may or may not reflect any evidence of review or connection to the request.

Given the above, there is a lack of strong and thorough planning that links with short- and mid-term objectives and measurable indicators. Though desired, the GOG has failed to implement results-based budget methodology. Ultimately, ministries need more than the status quo to implement activities that address the myriad of social issues facing Guatemalans. It is difficult for ministries, municipalities, departments, or regions to advocate for budget increases based on need and plans to address many social concerns when requests are not accompanied with realistic plans that delineate the use of funds connected to ultimate expected outcomes.

In a country with growing rates of poverty (including extreme poverty) and decreasing secondary school enrollment,[footnoteRef:12] competent governmental intervention is desperately needed. Proper budget planning and preparation are essential elements to efficiently and astutely distribute state funds to targeted areas of need and improve the quality of all services provided to Guatemalans, especially women and youth. Service delivery failures stem from insufficient planning. [12: The World Bank. “Guatemala.” 2016. Accessed November 30, 2016. http://data.worldbank.org/country/guatemala]

Budget Execution:

One of the most troubling issues facing the GOG is improving the ability of all GOG entities to execute their annual budgets. State services are desperately needed to improve education, health, and economic opportunities for Guatemalans, especially youth and women. The Ministry of Health is an example of one of the many GOG Ministries that struggle with budget execution rates. For example, as of February 28, 2017, the Ministry of Health’s budget for the year was only 7.1% expended;[footnoteRef:13] consequently, its inability to execute ensures that progress will be slow or impossible. The USAID/Guatemala Health Gender Gap Analysis identified several necessary services for women that are cost prohibitive for the GOG.[footnoteRef:14] Competent budget execution will play a major role in lowering costs and extending the quantity and quality of health services. [13: MINFIN. Modificaciones del Presupuesto de Gastos por Entidad. Accessed April 4, 2017. http://www.minfin.gob.gt/images/archivos/estadisticas/doc201.pdf] [14: USAID/Guatemala Gender Analysis 2013]

While the GOG has several fiscal priorities, including generating more revenue, its general inability to spend funds elevates this obstacle as the most significant development challenge this Activity will confront. The current legal framework for GOG procurement is difficult to navigate and contributes to the budget execution issues. Additionally, civil service employees fear that the procurement process legal framework allows private citizens, companies or organizations to litigate any procurement. For example, the GOG tax authority (SAT) conducted 10 major procurements in 2016. Eight of those procurements were litigated, resulting in delays and failed procurements.[footnoteRef:15] GOG employees’ fear of being held personally liable for any irregularity or administrative failing has paralyzed them. [15: Consultations with SAT officials, including SAT legal. ]

While many external factors contribute, the following are significant bottlenecks: (1) substantial procurement rigidities; (2) late arrival of funds, which often happens mid-year and cannot be executed before expiration and must therefore be returned to source; (3) lack of coordination between the budget and sector needs; (4) lack of resources due to low levels of revenue collection; (5) procurements are often subject to appeals and injunctions based on claims of improprieties in the bidding process (e.g. documentation issues and lack of transparency); (6) potential for procurement authorizers to be held personally liable for errors; and (7) lack of technical capacity throughout the GOG to execute budgets.

Budget Oversight, Transparency and Accountability:

The Office of the Comptroller General (CGC) is the chief provider of auditing and financial oversight of government funds expenditure. While the office has become increasingly professionalized in recent years, its independence is compromised by a meager budget and political influence as political parties play a role in the selection of the Comptroller. The weakness of general oversight has led to major corruption scandals and significant waste. Ministries devise and execute budgets with aspirations for impact but there is little monitoring of spending, and almost no performance monitoring. For example, the GOG recently decided to implement an activity to address health and education concerns of rural youth. The activity provided heads of household with 300 quetzales (or $40) a month with the aspiration that the funds would be spent on healthcare for children and costs associated with education.[footnoteRef:16] In an interview with the CGC, an official stated that child health and education indicators did not improve.[footnoteRef:17] Since the GOG did not establish indicators or evaluation criteria, and since they did not monitor the use of the funds, the GOG was incapable of performing a results-based evaluation of the activity. The impact of their assistance, if any, was lost. Many GOG activities are administrated in this manner. The CGC does not have the capacity to carry out performance audits; therefore, aspirational spending continues throughout the GOG. [16: Information obtained through consultation with the CGC ] [17: Information obtained in a consultation interview with CGC ]

In order for the Comptroller to provide oversight that ensures that GOG programs serve their intended constituencies, it must maintain a degree of authority and independence. Both appear to be lacking in Guatemala. Although accountability institutions and functions formally exist (including in the line ministries), the accountability ecosystem fails to perform in practice due to a variety of constraints in (1) capacity; (2) institutional design; (3) political commitment to accountability; (4) budget planning (no objectives or fiscal goals) constrains the ability of the Comptroller to perform a substantive audit; (5) enforcement authority (weak and inconsistent); and (6) funding to perform audits.

Due to recent real and perceived corruption, the GOG needs strong civil society engagement to provide independent corruption monitoring. Corruption and a lack of transparency, particularly in PFM processes, are evidenced by the country’s ranking of 136 out of 176 countries in the 2016 Transparency International Corruption Perceptions Index.[footnoteRef:18] In 2015, with the arrest of the several high-level GOG officials, including the President and the Vice-President, corruption in Guatemala peaked and citizens began to demand accountability, access to information and options for holding the government accountable. USAID/Guatemala’s 2013 Gender Assessment noted that corruption has a disproportionate impact on women as common bribes for school fees, registration, and health services are often paid by men; therefore, men are more apt to enjoy the benefits of general corrupt practices in government than women.[footnoteRef:19] The assessment added that studies show that corruption reduces the funding of social services, again with a more direct impact on women than men because of household and family care responsibilities. [18: Transparency International. “Home.” 2017. Accessed January 31, 2017. http://www.transparency.org/news/feature/corruption_perceptions_index_2016] [19: USAID/Guatemala Gender Analysis 2013]

To help the GOG combat real and perceived corruption, civil society organizations (CSO) have been empowered by new laws and regulations to proactively engage with the GOG on issues of transparency and corruption. CSOs will have a greater role now than at any other point in recent history. In order for CSOs to proactively engage as competent watchdogs, they will need access to information, understanding of the tax and budget framework of the GOG, capacity to lobby and advocate productively for change and empowerment to provide objective monitoring. Ultimately, strong CSOs that provide third-party oversight will improve the GOG’s ability to function legally and transparently by alerting GOG authorities of anomalies or crimes; therefore, enabling the GOG to adapt, improve, and demonstrate a commitment to a more transparent and legitimate government. USAID is supporting CSOs performing watchdog roles through the Civic Participation Project, managed by Counterpart International, but the GOG needs to sustain and advance their own efforts to become more transparent.

Tax policy and administration:

Revenue generation, especially taxation, is a major public financial management concern according to other donors, international organizations, think tanks in Guatemala, and the GOG itself. GOG’s collection of tax revenue as a percentage of Gross Domestic Product (GDP) is one of the lowest in the world. Tax revenue was only 10.2% of GDP in 2015; revenue was $6.51 billion of the $63.79 billion GDP.[footnoteRef:20] Guatemala’s revenue as a percentage of GDP is significantly lower than the regional average (18%) and global average (14.4%). The benchmark tax revenue percentage the IMF and other institutions recommend to meet minimum level of government expenditure is 15% of GDP. Were Guatemala to collect 15 percent of GDP in revenue, they would have collected an additional $3.06 billion in 2015. The extremely low rate of tax collection is the primary cause of perennially scarce government resources. With high rates of poverty and one of the most unequal societies in the region, effective taxation is crucial for the Guatemalan government to expand its resources for social programs and other public spending. Despite repeated efforts, changes have yet to curb the perpetually low rate of tax collection in Guatemala. These low levels of public resources constrain public investment in general areas of need and prohibit investment in areas where new services are desperately needed, such as in infrastructure, health, education, and other critical social services. Additionally, the lack of GOG services continues to have a disproportionate negative impact on women and youth as underfunded services, especially health and education, would benefit women (reproductive health) and youth (child education). Taxation is a clear indicator of state capacity, and Guatemala’s challenges collecting tax revenue point to the country’s institutional and structural weaknesses.[footnoteRef:21] [20: Minesterio de Finanzas Públicas. Ingresos Tributarios 2016. http://portal.sat.gob.gt/sitio/index.php/estadisticas/47-estadicas-tributarias/8039-meta-de-recaudacion-y-cumplimiento.html] [21: Cabrera, Maynor and Aaron Schneider. “Instituciones, Impuestos, y Desigualdad en Guatemala. September 2013. Woodrow Wilson Center. Accessed November 30, 2016. https://www.wilsoncenter.org/publication/instituciones-impuestos-y-desigualdad-en-guatemala#sthash.qTplJvcG.dpuf]

After the major corruption findings in 2015, the new administration appointed a SAT Superintendent with years of experience prosecuting financial crimes. The new administration’s mandate is to eliminate corruption and reverse the falling tax collection rates, which dropped from 11.0 percent of GDP in 2013 to 10.2 percent of GDP in 2015.[footnoteRef:22] In order to achieve the desired outcome, the SAT has proposed hiring between 500 and 1,000 additional staff along with several legislative changes that would give the SAT more independence during investigations. Although the SAT has initiated these processes, several tax challenges remain: (1) taxpayer registration is low; (2) the tax base evades tax payments by simply failing to pay; (3) poor tax payment oversight enables nonpayment, there are minimal repercussions for tax evasion; (4) citizen trust in the GOG’s ability to legally and responsibly administer funds is low, which discourages payment; (5) audits are infrequent and sporadically applied; (6) information management system is not integrated with other GOG entities; and (7) civil service employees fear administrative and criminal sanctions. [22: Minesterio de Finanzas Públicas. Ingresos Tributarios 2016. http://portal.sat.gob.gt/sitio/index.php/estadisticas/47-estadicas-tributarias/8039-meta-de-recaudacion-y-cumplimiento.html]

Public Administration:

Due to the high perception of Guatemalan civil servant corruption, civil service employees face a variety of challenges. The culture is corrosive, but exists because of well-documented incidents of massive corruption. Real and perceived corruption remains the primary driver in regulating and monitoring civil service behaviors. As a result, a cloud of fear and anxiety hangs forebodingly over civil service employees. During consultations with the GOG, international donors and other organizations, civil service reform was a reoccurring topic. Some of the major concerns included: (1) lack of minimal hiring requirements; (2) lack of clear career track for employees; (3) lack of a database of current employees, which can, for example, allow “phantom employees” to exploit the system by receiving payment without actually providing services as the GOG does not know in all cases to whom it sends salaries; (4) lack of regular and strategic auditing of employees; (5) disproportionate pay for the same work depending on the GOG entity; (6) high turnover; and (7) lack of funding for basic administrative functions.

Gender and Public Financial Management:

Men and women are affected differently by governmental failures to manage public finances effectively and efficiently. While, on its face, budget management and tax administration appear gender neutral, the affect these activities have on underserved communities is substantial.

According to the World Economic Forum’s “Global gender gap report”, Guatemala has the greatest gender inequality in Latin America, ranking 111th out of 134 countries worldwide. Gender differences in the unpaid economy, the labor market, household decision-making, consumption patterns, and property rights among other differences need to be considered in determining the gender impact of fiscal policy and expenditure management.

USAID’s gender analyses in Guatemala have found that while women average less paid labor, they also have less free time than men and are engaged in more unpaid labor.[footnoteRef:23] Although there are no legal restrictions on women’s access and rights to land, the percentage of female landowners is extremely low due to prevailing patriarchal influences.[footnoteRef:24] These and other factors lead to differing effects of tax regimes on gender. [23: USAID/Guatemala Gender Analysis in Agriculture: 2013] [24: USAID. Property Rights and Resource Governance Country Profile: Guatemala. 2010. Accessed November 30, 2016. http://www.usaidlandtenure.net/sites/default/files/country-profiles/full-reports/USAID_Land_Tenure_Guatemala_Profile_0.pdf Page 3]

Furthermore, very little analysis has been done in Guatemala on fiscal policy from a gender equality perspective and current taxpayer data is not disaggregated by sex and age. The Ministry of Finance is currently targeting small and medium-sized enterprises for public procurement, but not yet specifically targeting women-owned businesses, or necessarily tracking women owned business participation in government procurements. As these data gaps are addressed, the GOG will be better equipped to analyze the impact of tax and procurement policy on gender inequality.

C.3 PERFORMANCE WORK STATEMENT

USAID/Guatemala intends to support the GOG’s efforts to create an effective PFM system that will improve the ability of the GOG to address citizen demands through improved public service delivery. USAID/Guatemala conducted research and a series of consultations and determined the following goal and five interrelated project areas will be prioritized:

Goal: Contribute to a more accountable and responsive public administration of the Guatemalan state.

Objectives/Project Area:

1. Improved GOG budget formulation and preparation;

2. Improved GOG public expenditure management;

3. Increased GOG domestic revenue mobilization capacity;

4. Increased oversight, fiscal transparency, accountability, and public-private dialogue of GOG PFM

5. Improved GOG civil service management

The development hypothesis for this Activity is that if the GOG is able to meet the five objectives, the Guatemalan state will be more accountable and responsive, governance of key public institutions will be improved, and citizen voice and responsible participation will be increased, leading to greater security and justice for citizens.

Over the course of a five-year activity that will span two GOG administrations, the Contractor must adopt a management approach that is closely coordinated with the GOG and builds upon GOG PFM entities’ incentives and momentum to develop and implement activities that will generate the greatest impact on the project objectives.

The NIS Project will treat the five project areas as an integrated set. Results in each program area will contribute to results in others. The Contractor must structure engagement with the GOG to coordinate across GOG partners and garner strong support from ministers and senior officials. The Contractor will engage with the Presidential Commission or entity established by the GOG to oversee the government’s open government and transparency agenda insofar as they relate to PFM. The Contractor should also seek to work with Congressional finance, audit and other relevant committees insofar as engaging those committees will improve the likelihood of achieving project results and/or the magnitude of project results. The Office of the Human Rights Ombudsman is in charge of improving compliance with the access to information law. USAID intends to establish an MOU with the GOG detailing a plan of engagement that is integrated with GOG goals to increase their engagement and commitment around the time of award startup.

The contractor must balance coordination across GOG PFM institutions with assistance tailored to the needs of each target GOG entity to develop assistance packages that meet their specific needs.

The Contractor must seek to work closely with the Presidential Secretariat for Planning and Programing (Secretaría de Planificación y Programación de la Presidencia (SEGEPLAN) to improve the government’s capacity in budget planning with a goal to create realistic medium-term goals and results through the implementation of medium-term fiscal framework (MTFF) and medium-term expenditure framework (MTEF). The Contractor must work with MINFIN to implement best practices and systems in budget preparation and budget execution with a focus in the areas of Integrated Financial Management Information System (IFMIS),[footnoteRef:25] treasury single account, accounting and reporting, internal audit, and procurement. Further, the Activity must also work with the Superintendence for Tax Administration (Superintendencia de Administración Tributaria de Guatemala (SAT) to improve revenue collection. The Contractor must work with the CGC and the Congressional finance and audit committees to strengthen their ability to perform financial, compliance, and performance audits. The Contractor must also work with National Office of Civil Service (ONSEC) to enhance civil service systems. [25: IFMIS. “Home.” Accessed November 30, 2016. http://www.ifmis.go.ke/]

USAID’s commitment to advance gender equality and pursue gender as a key development issue must be fully reflected in this Activity. Gender considerations must be integrated into this Activity, ensuring that men and women both benefit from USAID support.

The history of exclusion and isolation, and lack of experience in dealing with national institutions mean that particular measures must be taken to provide women with the tools to take advantage of these opportunities. The Contractor must ensure all interventions comply with the USAID Gender Equality and Female Empowerment Strategy Policy,[footnoteRef:26] launched in 2012 to enhance women’s empowerment and reduce gender gaps. This policy affirms the critical role women and girls play in accelerating progress in development and advancing global prosperity and security. The USAID/Guatemala Gender Analysis does not sufficiently address gender implications of PFM activities. The Contractor will therefore perform additional analysis to address this gap; alerting USAID to gender issues, identifying gaps, and proposing solutions. [26: USAID. Gender Equality and Female Empowerment Policy. March 2012. Accessed November 30, 2016. https://www.usaid.gov/sites/default/files/documents/1865/GenderEqualityPolicy_0.pdf]

C.5. RESULTS

CLIN 001 – PROJECT AREAS 1-5

Despite recent efforts by the GOG to reform key areas of its public financial management, most of its PFM functions remain fragmented. Weak institutions, a restrictive or outdated legal framework, lack of fiscal discipline, multiple systems that are not integrated, high staff turn-over, and weak staff capacity have made the government’s reform efforts difficult. The most recent World Bank published Public Expenditure and Financial Accountability (PEFA) report (2013) for Guatemala indicates several key areas of concern that the GOG must reform. Among the key PEFA indicators that received a score of C or D[footnoteRef:27] are high payment arrears, unreported government operations, multi-year perspective in fiscal planning, expenditure policy and budgeting, effectiveness of internal control and internal audit, quality and timeliness of in-year budget reports and financial statements, and weak external scrutiny and oversight of government budget and operations. [27: C and D are the two worst possible scores and indicate severe deficiencies. ]

The Contractor must assist the GOG in addressing these concerns through a sequenced and well-designed technical support program.

The GOG has actively engaged the international donor community’s assistance with PFM reform. The field of donor-funded GOG initiatives and GOG-funded GOG initiatives is evolving rapidly enough that the Contractor’s technical assistance plans will likely change substantially over the five-year program period. Therefore, the Contract period of performance requires an analysis or diagnostic stage that includes technical and political economy aspects of project areas one through five. The Contractor must finalize activities in coordination with the GOG and USAID after the analysis stage and before implementation. Because the GOG’s priorities in PFM are likely to continue to evolve rapidly, the Contractor must review performance based standards while considering available evidence, analyses, and political environment at least once annually. Based on the review, the Contractor may propose changes to performance based standards in annual work plans. USAID will approve revised performance based standards in award modification(s). This will allow ongoing flexibility for NIS to support the GOG on the GOG’s priorities within the targeted areas of assistance. Throughout the period of performance, the Contractor must maintain a life of project perspective, and link activities in support of the GOG to best practices in public financial management.

Project Area 1: Improve GOG budget formulation and preparation

The GOG is beginning to implement a new multi-year budgeting process (starting in budget year 2018) and planning to bridge several communication gaps on budgeting. Key to the GOG’s improvement in budget formulation and preparation will be the establishment of medium-term budget preparation tools of the MTFF and MTEF. The MTFF will provide aggregate multi-year projections of fiscal expenditures, revenues, and financing based on mid-term macroeconomic scenarios and analysis of fiscal risks such as debt sustainability. The MTEF will provide multi-year expenditure projections disaggregated programmatically, including a public investment program which reflects planning across Ministries and other central government entities, regional and departmental development councils, and municipalities. The Contractor must provide technical, administrative and/or material assistance to MINFIN and SEGEPLAN to improve the GOG’s capacity in budget formulation and preparation, including expanding the use of the MTFF and MTEF.

Project Area 2: Improve GOG public expenditure management.

The GOG recognizes that it is limited in its ability to effectively execute funds because procurement regulations are complex and procurement actions are stalled by litigation. The Contractor must support the development of a well-sequenced and realistic reform plan that will ensure long-term sustainable change. Working with existing GOG systems such as the Integrated Financial Administration System (SIAF) and the Guatemala Contracting and Acquisition System (Guatecompras), the Contractor must develop and implement activities that will improve budget execution and contribute to a more transparent and efficient GOG, potentially including improvements to the procurement regime, support for an IFMIS, closer tracking of expenditures, and improvements to cash management, including support for further adoption of a Treasury Single Account (TSA) by GOG entities.

Project Area 3: Increased GOG domestic revenue mobilization capacity

While the tax authority (SAT) has made progress in collecting tax arrears and the Guatemalan Congress recently passed a law to increase the tax base, the Contractor will support the GOG to advance the implementation of additional legal and normative changes. During 2017, the SAT will implement a development plan, which incorporates assistance from several donors interested in improving SAT’s ability to collect revenue through both taxes and customs revenue. As a result, Guatemala is as prepared as it has ever been to receive assistance in revenue mobilization, especially USAID-led technical assistance that will be capable of consolidating gains made through other activities ensuring sustainable change. There are also emerging opportunities to improve SAT coordination with the judicial branch given the opening of dedicated tax courts. The Contractor will provide technical, material, and/or administrative support to SAT in both tax policy and tax administration.

Project Area 4: Increased oversight, fiscal transparency, accountability, and public-private dialogue of GOG PFM

Given the recent corruption scandals and the high levels of public distrust of the government and government management of public funds, Guatemalans are particularly concerned about GOG financial oversight, transparency, and accountability. The capacity of GOG staff in the CGC, the MINFIN, and SAT remains low and must change in order to address culturally engrained practices that limit credibility and efficiency. For example, since information management systems are not integrated oversight agencies cannot independently access information to assess risk or perform audits. CSOs, think-tanks, and other advocacy groups are actively engaging the government on improving their audit capacity but lack a strategic approach. To succeed, they need the GOG to facilitate access and responsiveness.[footnoteRef:28] Transparency and fiscal responsibility have been frequently referenced in Guatemalan publications on GOG scandals, but there has been very little public-private dialogue to address real and perceived issues. [28: USAID’s Civic Participation Project, implemented by Counterpart International, has recently begun support to CSO and consortia participation in the Open Government Partnership and will help address this challenge through continued support. ]

In April 2015, the President of Guatemala appointed a Point of Contact to spearhead the GOG Open Government Partnership (OGP) national action plan and coordinate transparency and anti-corruption activities across GOG institutions (including MINFIN, SAT, SEGEPLAN, line ministries, etc.). In February 2017, the GOG announced the establishment of a Presidential Commission on Open Government, Transparency, and e-government. In addition, the Government plans to launch the Public Expenditure Observatory (OGP) in April 2017. As part of this activity, the Contractor will provide technical, material, and/or administrative support to commissions and/or entities designated by the government responsible for defining and implementing the GOG’s anti-corruption and transparency agenda in relation to ensuring sound PFM.

Project Area 5: Enhanced GOG Civil Service Management

As a result of the 2015 corruption scandal, which created an environment conducive to corrective action, civil service employees face greater scrutiny than ever before. Given the political will and public mandate to eradicate corruption, Guatemala is primed for technical assistance that improves the controls over the organization of the executive branch civil service. The civil service system requires a series of reforms to reduce the corruption produced by the hiring and retention of phantom or unqualified employees, and to improve coordination of civil service management across GOG entities. Working with the ONSEC, the Contractor must provide technical, material, and/or administrative support to improve civil service systems in the executive branch.

CLIN 002 – GENDER ANALYSIS OF PUBLIC FINANCIAL MANAGEMENT

Gender inequality in Guatemala is significant with very visible ramifications. The USAID/Guatemala Gender Analysis does not sufficiently address gender implications of PFM activities. The Contractor will therefore perform additional analysis to address this gap; alerting USAID to gender issues, identifying gaps, and proposing solutions.

The Contractor must answer the following questions, determine whether there is a gender gap, and if there is one that is relevant to the activity, plan actions that can be taken to help close it. USAID expects additional analysis from the Contractor on gender and PFM to answer the following questions:

Budget planning

· How is the differential participation of women in budget planning meetings compared to that of men?

· How are women's groups able to advocate women's issues related to budget priorities?

Budget Execution

· How are men and women affected differently through budget execution, specially focusing on procurement systems and efficiency of expenditures?

Budget Oversight

· Is there a system to registering complaints on the budget execution that is anonymous?

· What is the difference in the use of that system between men and women?

Revenue Generation

· Do tax code provisions have a differential impact on men and women? If so, what are these differences?

· How does revenue collection differentially affect men and women?

Policy Reform

· How are women able to participate in CSO/Congress/Executive dialogues on reform?

Civil Service Capacity

· Are there any gender gaps in civil service turnover rate?

· How are the opportunities for women and men to progress in civil service different?

· Is there any penalty for women when they take time off due to maternity leave and gender roles?

· What are the gender differentials in hiring patterns?

C.6 COORDINATION

The Contractor must work through MINFIN, SAT, CGC, ONSEC, and additional entity(s) as described in C.3 to empower each GOG entity to lead all reforms. These include other donors engaged or soon to be engaged in fiscal and PFM reforms, which will likely include the International Monetary Fund (IMF), the World Bank, the Inter-American Development Bank (IDB), the German international assistance agency (GIZ), the Mexican Embassy, and other U.S. Government agencies such as the U.S. Treasury’s Office of Technical Assistance (OTA) and the Millennium Challenge Corporation (MCC). The Contractor must coordinate at least quarterly with donors working with MINFIN, SAT, CGC, and ONSEC to limit overlap and maximize results. The GOG currently receives support from multiple sources on public financial management. The supported activities are varied. Therefore, it is incumbent upon the Contractor to be cognizant of all activities past, current, and future that may be operating in the public financial management space.

In January 2017, USAID awarded a two to three-year fiscal and procurement reform activity that will overlap with NIS’ work on revenue generation and expenditure management. The Contractor must coordinate directly with the Fiscal and Procurement Reform Task Order Contractor by doing the following: ensuring that there are no redundant tasks between the two awards and documenting how activities differ in the first work plan; establishing a transition implementation plan addressing all Fiscal and Procurement Reform Task Order activities after the task order’s end; and attending monthly coordination meetings involving the implementer, the Fiscal and Procurement Reform Contractor, , and the respective USAID Contracting Officer’s Representatives (CORs) for this contract and the Fiscal Procurement and Reform task order.

In addition, USAID/Guatemala also supports several CSOs that encourage transparency and accountability from the GOG.