Section_C-NIS_SOW_Draft_for_Release.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), are 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 by increasing the resource envelope and efficiency and quality of its public spending (e.g. security, education, health, and other public services), and enabling the government to best address the development needs of the population.

This Statement of Work (SOW) is for a five-year, $49 million National Institution Strengthening for Accountable Governance (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, focusing primarily on strengthening revenue generation, efficiency of expenditure management, and oversight mechanisms.

This activity supports U.S. strategic interests in Guatemala and the region. 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. Additionally, the Activity will align with the GOG’s K’atun 2032[footnoteRef:1] strategy to improve public financial management. Support envisioned under this Activity will address all three of the CEN strategy pillars by increasing tax revenues and improving public expenditure managements and overall economic governance in order to increase available funding for public investment in social programs, security, and infrastructure. [1: K’atun 2032. “Início.” 2016. Accessed November 30, 2016. http://www.katunguatemala2032.com/index.php?option=com_phocadownload&view=category&id=1]

C. 1.1 Relationship to Policy

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. DO1 is 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 helping civil society engage with PFM and related open government and transparency initiatives.

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:2] 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:3] [2: The World Bank. “Guatemala.” 2016. Accessed November 30, 2016. http://www.worldbank.org/en/country/guatemala] [3: 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:4] Additionally, Guatemala has some of the lowest human development indicators in the region.[footnoteRef:5] 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:6] Guatemala is also vulnerable to recurrent natural disasters, such as volcano eruptions, earthquakes and hurricanes. Its weak public institutions, unstable and transient political parties and system, small government structure hampered by low tax revenue, and inefficient spending remain impediments to growth, security, and a prosperous Guatemala.[footnoteRef:7] [4: The World Bank. “Gini Index.” 2016. Accessed November 30, 2016. http://data.worldbank.org/indicator/SI.POV.GINI?locations=GT&view=chart] [5: UNDP. “Human Development Report: Guatemala.” 2016. Accessed November 30, 2016. http://hdr.undp.org/en/countries/profiles/GTM] [6: IMF. 2016 Article 4 Consultation. August 2016. Accessed November 30, 2016. http://www.imf.org/external/pubs/ft/scr/2016/cr16281.pdf] [7: 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 and ushered in a political and institutional crisis. The public’s outrage generated by the scandal led to a unified demand for transparent public institutions. Guatemala’s political leadership has consistently failed 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. 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. As a result of the massive corruption protests in 2015, the GOG has been obligated to address the festering need of fiscal reform. 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 social 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 minimal funding untethered to strategic planning. 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:8] 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:9] Ultimately, overcoming the challenges outlined in this section will support USAID/Guatemala’s CDCS Goal of “A More Democratic, Secure and Prosperous Guatemala”. [8: The World Bank. Gender Data Portal. 2016: Accessed November 30, 2016. http://go.worldbank.org/YMPEGXASH0] [9: USAID/Guatemala Gender Analysis 2013]

Budget Planning and Preparation:

The GOG’s ability to plan and prepare a competent budget is weak. 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 separate to 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.

Additionally, 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. 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. 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 innovative activities that address the myriad of social issues facing Guatemalans. It is difficult for ministries to advocate for budget increases based on need and plans to address many social, especially health and education, 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:10] 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 begin with insufficient planning. [10: 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 one of many GOG Ministries that struggle with budget execution rates. For example, as of August 31, 2016, the Ministry of Health’s budget was only 57% expended;[footnoteRef:11] consequently, its inability to execute ensures that progress will be slow or impossible. For example, the USAID/Guatemala Health Gender Gap Analysis identified several necessary services for women that are cost prohibitive.[footnoteRef:12] Competent budget execution will play a major role in lowering costs and extending the quantity and quality of health services. [11: IMF. Modificaciones del Presupuesto de Gastos por Entidad. September 2016] [12: 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 the procurement process as the legal framework allows private citizens, companies or organizations to litigate any procurement issue. For example, the GOG tax authority (SAT) conducted 10 major procurements in 2016 and eight of those procurements were litigated.[footnoteRef:13] GOG employees’ fear of being held personally liable for any irregularity or administrative failing has paralyzed procurements. [13: 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 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 plan and spend with aspirations for impact but have no plan, indicators or follow-up. For example, the GOG recently decided to implement an activity to address health and education concerns for 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:14] In an interview with the CGC, an official stated that child health and education indicators did not improve.[footnoteRef:15] Since the GOG did not establish indicators, evaluation criteria, and follow-up on the direct use of the funds, the GOG was incapable of performing a results-based evaluation of the activity; therefore, the impact of their assistance, if any, is unknown. 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. [14: Information obtained through consultation with the CGC ] [15: 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 country’s score of 28 of 100 in the 2015 Transparency International Corruption Perceptions Index.[footnoteRef:16] 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:17] 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. [16: Transparency International. “Home.” 2016. Accessed November 30, 2016. http://www.transparency.org/about/] [17: USAID/Guatemala Gender Analysis 2013]

To help the GOG combat real and perceived corruption, civil society organizations (CSO) have been empowered 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 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.

Tax policy and administration:

Revenue generation, especially taxation, is a major public financial management concern according to other donors, international organizations, and think tanks in Guatemala. GOG’s collection of tax revenue as a percentage of Gross Domestic Product (GDP) is one of the lowest in the world. Tax revenue per GDP was only 10.8% in 2015, a significantly low percentage as compared to 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. 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 decline in tax collection in Guatemala. These low and declining 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:18] [18: 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 curb the falling tax collection rates. In order to achieve the desired outcome, the SAT has proposed hiring between 500 and 1,000 additional staff and 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) tax base evades tax payments by simply failing to pay; (3) poor tax payment oversight enables nonpayment; (4) citizen trust in the GOG’s ability to legally and responsibly administer funds is low; (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.

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 incidences 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 based for the same work depending on the GOG entity; (6) high turnover; and (7) lack of funding for basic administrative functions.

C.3 Scope of Work

USAID/Guatemala intends to support the GOG’s efforts to create an effective PFM system that will improve the ability to address key governmental, civil society, international organization, and donor concerns. PFM is the system by which financial resources are planned, directed, and controlled and encompasses all aspects of the country’s budget process. A sound PFM system includes budget planning, budget preparation, budget execution, and audit, as well as continuous reporting throughout the budget cycle. USAID/Guatemala conducted a series of consultations and determined the following five technical areas of interest would be prioritized:

1. Budget Planning: strengthening the GOG’s ability to prepare its yearly budget and to implement multi-year budget preparation;

2. Budget Execution: improving the GOG’s ability to execute funds;

3. Budget Oversight: improving the quality and quantity of audits;

4. Revenue Generation: improving the GOG’s ability to collect taxes, address evasion, and increase revenue; and

5. Civil Service Capacity: improving civil service capacity, retention rates, transparency, and accountability.

The development hypothesis for this Activity is that if the GOG is able to increase its revenue as a percentage of GDP, improve and strengthen PFM systems to increase spending efficiency, and increase the capacity of the civil service workforce, then Guatemala’s economic growth and social development will be improved.

To achieve the objectives described below, the Activity must support national GOG institutions, including the Ministry of Finance (MOF), the Superintendence for Tax Administration (Superintendencia de Administración Tributaria de Guatemala (SAT), the Comptroller General’s Office (Contraloria General de Cuentas (CGC), line ministries, agencies and other GOG oversight institutions (e.g. the Open Government Partnership Coordinator appointed by President). The Contractor must also analyze the status of and plan to work with any potential Presidential Commissions or other additional entities on open government, transparency, and/or anticorruption that have not been announced as of the date of this solicitation insofar as they relate to PFM. The Activity 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 Activity must work with the MOF 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:19] treasury single account, accounting and reporting, internal audit, and procurement. The Contractor must also work with the CGC and the Congressional finance and audit committees to strengthen their ability to perform financial, compliance, and performance audits. [19: IFMIS. “Home.” Accessed November 30, 2016. http://www.ifmis.go.ke/]

C.4. Objectives

This activity has the following goal:

· Greater security and justice for citizens and improved levels of economic growth and social development [footnoteRef:20] through strengthening the GOG’s ability to increase revenue and efficiently allocate funds, allowing for better service delivery to Guatemalans. [20: USAID/Guatemala CDCS Development Objectives 1 and 2 ]

This activity has the following specific objectives:

1. A two-percent increase in tax revenue measured as a percentage of GDP over the baseline established at the end of 2016;

2. Results-oriented multi-year budget formulation implemented;

3. Increased quality and efficiency of public expenditure management; and

4. Increased fiscal transparency and accountability.

These results must lead to improved and more equitable service delivery and increased economic growth and social development, particularly benefitting women, children, and other disadvantaged groups who traditionally have limited access to these services.

C.5. Tasks and Expected Results

Despite recent efforts by the GOG to reform key areas of its public financial management, most of its PFM functions are fragmented. Weak institutions, a restrictive or outdated legal framework, lack of fiscal discipline, multiple systems that are not integrated and high staff turn-over, and weak human capacity have made the government’s reform efforts difficult. The most recent published Public Expenditure and Financial Accountability (PEFA) report (2013) 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:21] 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. [21: 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.

Task 1: GOG’s capacity in budget formulation and preparation improved

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 through 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. The Contractor must provide technical, administrative and/or material assistance to MOF and SEGEPLAN to improve the GOG’s capacity in budget formulation and preparation, including the MTFF and MTEF. At a minimum, the Contractor must implement the following subtasks:

Subtasks:

1.1 Review the legal framework in Guatemala and provide recommendations to strengthen it to support medium-term budget formulation.

1.2 Develop and institutionalize the MTFF and MTEF to support multi-year results-based budgeting in SEGEPLAN and the MOF and harmonize budget planning between SEGEPLAN and the MOF.

1.3 Develop an institutionalization plan for central agencies, ministries, municipalities, and Congress on the preparation and use of MTFF and MTEF.

1.4 Support SEGEPLAN and MOF’s rollout of the multi-year results oriented budgeting to ministries in preparation of the 2018 and subsequent budget years.

1.5 Assist the MOF to develop an effective and targeted training and communication plan for sustained training by central agencies, ministries, and the Congressional finance committee to improve budget formulation performance.

Performance Standards for Task 1

Task 2: Improve GOG’s capacity to execute budgets.

As the GOG does not currently have a short- or medium-term plan to address budget execution concerns, the Contractor must support the development of a well-sequenced and realistic reform plan that will ensure long-term sustainable change. The Contractor must develop and implement activities that will improve budget execution and contribute to a more transparent and efficient GOG. At a minimum, the Contractor must implement the following subtasks:

Subtasks:

Subtask 2.1: Procurement

2.1.1 Perform analysis of the current procurement regime, including the legal framework, systems, and human capital capacity, and provide concrete recommendations to the GOG for capacity building within the context of Guatemala.

2.1.2 Develop, design, and implement a capacity building activity that strengthens the capacity, transparency, controls and accountability both at the MOF level and at line ministries and agencies.

2.1.3 Analyze current procurement IT systems, including e-procurement, and develop and implement a plan to integrate them into IFMIS.

Subtask 2.2: Integrated Financial Management Information System

2.2.1 Prepare a diagnostic study of the current IFMIS and provide analysis and recommendations for improving the system.

2.2.2 Support the GOG to implement study recommendations in consultation with other donors assisting with IT upgrades and system integration.

2.2.3 Develop an effective and targeted training and communication plan for sustained training by central agencies and ministries in the use and application of the new system.

Subtask 2.3: Cash Management

2.3.1 Conduct a diagnostic study of the current Treasury Single Account (TSA) coverage, systems, and staff capacity and provide analysis and recommendations for improvement.

2.3.2 Provide technical and/or material assistance to assist the MOF in the roll-out of the TSA to central agencies and ministries that are still not currently covered by TSA.

2.3.3 Provide technical and/or material assist the MOF in developing a cash flow projection tool to produce weekly, monthly, annual cash flow forecasts.

2.3.4 Develop and implement an improved bank tender and contract management policy and tools.

Performance Standards for Task 2

Task 3: Increase GOG’s domestic revenue mobilization capacity

While the tax authority (SAT) has made progress in collecting tax arrears and the Guatemalan Congress passed a law to increase the tax base, the Contractor should continue to press the implementation of 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. As a result, Guatemala is as prepared as it has ever been to receive assistance in domestic revenue mobilization, especially USAID-led technical assistance that will be capable of consolidating gains made through other activities ensuring sustainable change. At a minimum, the Contractor must implement the following subtasks:

Sub-Tasks:

Sub-Task 3.1: Tax Policy

3.1.1 Perform analysis and/or provide technical, material, and administrative support to SAT’s implementation of recommendations provided by: a) previous analyses of the tax regime; and, b) proposed changes to the tax law.

3.1.2 Provide technical and material assistance that enhances the quality, accuracy, and timeliness of revenue projection, including specialized analyses of tax expenditures.

3.1.3 Provide technical, material and/or administrative assistance to enhance SAT’s capacity to review and analyze tax policy and recommend reforms, including analysis of gender implications.

3.1.4 Provide technical, material and/or administrative support to the MOF and SAT to institutionalize standard operating procedures for drafting laws and regulations.

3.1.5 Provide technical, material and/or administrative assistance to enhance SAT’s capacity to review non-tax revenue, such as fees and charges, and identify opportunities for greater efficiency.

3.1.6 Provide technical, material and/or administrative assistance to enhance SAT’s capacity to prepare policy briefs, informational guidelines, and user-friendly materials to educate and guide GOG, elected officials, civil service organizations, and tax payers on tax issues.

Sub-Task 3.2: Tax Administration

3.2.1 Perform a business process analysis by tax type of operations and provide recommendations consistent with international best practices within the context of Guatemala’s political economy realities.

3.2.2 Provide technical and/or material assistance to expand taxpayer registration for the personal income tax and strengthen the integrity of the taxpayer database.

3.2.3 Provide technical and/or material assistance to streamline and automate core tax administration functions including an increased roll- out of e-filing and e-payment systems to reduce taxpayers’ compliance burdens.

3.2.4 Provide technical and/or material assistance to develop IT interfaces between the SAT and MOF, as well as other relevant agencies, to improve interchange and crosschecks of information.

3.2.5 Provide technical and/or material assistance to enhance efficiency and effectiveness of the tax audit function to reduce tax evasion of both the income tax and value added tax (VAT).

3.2.6 Provide technical, material, and/or administrative assistance to the SAT to improve public education on tax issues.

3.2.7 Provide technical, material, and/or administrative assistance to SAT in the development and implementation of service standards and systems for individual and organizational performance management, and support the institutionalization of a strategy, controls, and measures to address misconduct and improve staff integrity.

3.2.8 Design and implement a capacity building plan to conduct tax audits, including specialized audits, develop the capacity to objectively, transparently, and efficiently manage objections and appeals.

3.2.9 Provide technical, material, and/or administrative assistance to the SAT Legal Department to review and remedy legal and regulatory provisions impeding effective application of the tax code.

3.2.10 Analyze and make recommendations on gender implications of Tax Administration reforms.

Performance Standards for Task 3

Task 4: Increase external oversight, fiscal transparency, accountability, and public-private dialogue

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 MOF, the SAT, and other relevant audit agencies remains low and must change in order to address culturally engrained practices that limit credibility and efficiency. For example, information management systems are not integrated; therefore, oversight agencies cannot independently access information to assess risk or perform audits. Civil society organizations, think-tanks, and other advocacy groups are actively engaging the government on improving their audit capacity but lack a strategic approach.[footnoteRef:22] 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. The President has appointed a Coordinator to spearhead its OGP GOG national action plan and coordinate transparency activities across GOG institutions (including MOF, SAT, SEGEPLAN, etc.). As part of this activity, the Contractor must support the Coordinator’s office and/or the final GOG open government platform to promote open governance and transparency in relation to ensuring sound PFM. At a minimum, the Contractor must implement the following subtasks: [22: USAID’s Participación Civica project, implemented by Counterpart International, has recently begun support to civil society organizations’ and consortia’s participation in the Open Government Partnership. ]

Sub-Tasks

Sub-Task 4.1: Oversight and Accountability Institutions

4.1.1 Analyze accountability institutions and provide recommendations for improving their capacity to perform credible oversight of government programs.

4.1.2 Provide technical and material assistance to the CGC to improve performance based audit systems.

4.1.3 Provide technical, material, and/or administrative assistance to the CGC in the drafting and implementing of an institutional strengthening strategy, including organizational structure, roles and responsibilities, oversight, training, and accountability.

4.1.4 Provide technical assistance to the CGC in the development and execution of its budget.

Sub-Task 4.2: GOG Open Governance and Transparency agenda and public-private dialogue

4.2.1 Analyze the legal framework and identify opportunities for CSOs, think-tanks, and advocacy organizations in Guatemala to effectively participate in GOG’s budget planning, preparations, and execution processes.

4.2.2 Provide technical and material assistance to the GOG in meeting the requirements for open governance and transparency, including Open Budget Survey participation in the three aspects of budget transparency, budget participation, and budget oversight.

4.2.3 Provide technical and material assistance to the Ministry of Finance to develop and implement a Fiscal Transparency Portal with easy access to the public.

4.2.4 Provide technical assistance to facilitate the launching of meaningful public-private dialogue on fiscal policy and economic development issues.

4.2.5 Provide Grants Under Contract (GUCs) for CSOs, think tanks, and advocacy organizations analyzing, reporting, and advocating on the GOG’s budget planning, preparations, and execution processes.

Performance Standards for Task 4

Task 5: Enhance Civil Service Systems

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 capacity of the executive branch civil service. Executive branch civil service employee capacity for implementing budget planning, execution, and oversight continues to be very low. Working with the National Office of Civil Service (ONSEC), the Contractor must work to improve civil service systems in the executive branch. At a minimum, the Contractor must implement the following subtasks:

Sub-Tasks

Sub-Task 5.1: Civil Service Systems

5.1.1 Provide technical, material, and/or administrative assistance to the GOG to establish a database of executive branch civil service employees.

5.1.2 Provide technical, material, and/or administrative assistance to integrate information management systems about civil service employees across Ministries, ONSEC, and other GOG entities.

5.1.3 Provide technical and material assistance to improve personnel audits to ensure payments are allocated correctly and legally.

5.1.4 Provide technical, material, and/or administrative assistance to integrate a user-friendly audit system that identifies risk and makes strategic use of collected data.

5.1.5 Analyze capacity building needs of civil service employees, through a PFM lens, and issue recommendations.

5.1.6 Analyze the turnover rates of civil service employees managing budgets, collecting tax revenue, auditing, or procuring goods or services for the GOG. Issue recommendations.

5.1.7 Provide technical and material assistance to ONSEC in the development and implementation of career tracks for civil service employees.

5.1.8 Provide technical and material assistance to improve the hiring process for civil service employees.

5.1.9 Analyze and make recommendations for gender inclusion in civil service hiring and retention practices Performance Standards for Task 5

C.6 Coordination

The Contractor must work through the MOF, SAT, CGC, ONSEC, and additional entity(s) as described in C.3 to empower each GOG entity to lead all reforms. The Contractor must coordinate quarterly with donors working with MOF, SAT, CGC, and ONSEC to limit overlap and maximize results. The GOG receives a great deal of support on public financial management. For example, the SAT will implement approximately 40 new activities funded by international cooperation in 2017. The activities are varied and the GOG is not strong at performance-based planning, executing, coordinating or collaborating; 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. The Contractor must coordinate with 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).

USAID will be awarding in the second quarter of the 2017 fiscal year a two-year fiscal and procurement reform activity that will overlap in some areas; specifically, revenue generation and expenditure management. The Contractor must coordinate directly with the implementer of the fiscal and procurement reform Task Order by:

· Ensuring that there are no redundant tasks between the two awards;

· Establishing a transition implementation plan addressing all fiscal and procurement reform Task Order activities after the Task Order’s end;

· Attending monthly coordination meetings with the fiscal and procurement reform task order’s Contractor and the CORs for both this contract and the fiscal and procurement reform task order during the period of performance of the task order.

In addition, USAID/Guatemala also supports CSOs that encourage transparency and accountability within government. Such activities with CSOs further support the objectives of the fiscal and procurement reform activity and vice versa. The USAID Security and Justice Sector Reform Project supports the Public Ministry and prosecution of corruption, including for financial and tax related crimes.