1. January 30, 2013 I MPLEMENTATION S TATUS OF SPFMP

2. O UTLINE OF P RESENTATION  Introduction and Objectives of the Project  The PEFA Framework in Nepal  Project Components  Project Financing  Physical and Financial Achievements of Project  Implementation Issues  Ongoing Activities  Way forward  Capability plan and resource gap

3. I NTRODUCTION AND O BJECTIVE OF THE P ROJECT  Government of Nepal has introduced a Project on Public Financial Management (PFM) reform focusing on strengthening PFM system with the support of Multi Donor Trust Fund. ( Starting Date: October 1 st 2011, Ending Date: December 31 st 2014 )  Higher Level objectives of the project are to improve the PFM System of GoN and to contribute to the fiscal consolidation agenda of GoN.  The Specific objective of the project is to improve expenditure and enhance government accountability and transparency by strengthening treasury system, improving financial reporting and building up PFM capacity.

4. PEFA F RAMEWORK IN N EPAL  PEFA is an Integrated Public Financial Management Reform agenda of Government of Nepal.  PEFA Assessment was conducted in 2007-08 and Report published in 2008 with 31 performance indicators (of which 3 are Donors related) which are recognised globally,  The main objective of PEFA Nepal is to enhance accountability and transparency of the public expenditure.

5. SPFM P C OMPONENTS Component 1: Implementation of Treasury Single Account (TSA) System (Total Costs US$ 3.8 m) Component 2: Strengthening accounting and reporting practices in public and private sector (Total Costs USD $1.00 m) Component 3: Supporting the Capacity Building of the PEFA Secretariat (Total Costs: USD 0.90m)

6. P ROJECT FINANCING Component and /or activity Project Cost (USD million) Grant Financing through MDTF GoN Contribution Component 1. Implementation of Treasury Single Account (TSA) System 3.80 2.80 1.00 Component 2. Strengthening accounting and reporting practices in public and private sector 1.00 0.75 0.25 Component 3. Supporting the Capacity Building of the PEFA Secretariat 0.900.750.15 Total 5.704.301.40

8. O VERALL P ROGRESS P HYSICAL T ARGET AND A CHIEVEMENT OF FY 2011/12 ComponentsActivities/TargetsAchievement 1.Implementati on of TSA 2. Strengthening accounting and reporting practices in public and private sector 3. Supporting the Capacity Building of the PEFA Secretariat Roll out of TSA IFRS, Commitment Accounting and Piloting of NPSAS Strengthening PEFA Secretariat, implementation of PFMRP Strategy Phase I Research and Analysis in High priority PFM areas Develop and implement communication strategy TSA Rolled out in 60 districts 5 Regional IT Hub Established High Capacity RISC Server 740 IVM (128GB) Procured and Installed. Studies, Procurements, Trainings, Seminars and Workshops conducted on IFRS. NPSAS prepared, mandatory part of its translation into Nepali has been completed and ministries finalized for piloting (MoPPTM and MoCWSW) Establishment of PEFA Resource Center 34 PEFA orientation programs conducted. National training on PFM/PEFA conducted Interaction Program on PFM with Society of Economic Journalist(SEJON) PEFA Website Developed and updated IEC Materials published regularly

9. P HYSICAL P ROGRESS ON C OMPONENT 3 Activities as per AgreementAchievement Secretariat manual and procedures preparation and implementation Conduct PEFA Steering Committee Meetings Conduct of research studies Conduct of Seminar and Workshop on PFM PEFA Newsletter and Journal publication Repeat PEFA Assessment Information, Education and Communication (IEC) Strategy has been developed and is being implemented. 12 Steering Committee Meetings conducted. Studies on establishing Debt Management Office and Debt Sustainability Analysis conducted 34 PEFA orientation programs (7 Central, 3 Regional and 24 District level) conducted. National training on PFM/PEFA conducted (1) Interaction Program on PFM with Society of Economic Journalist(SEJON) (1) 4th series of PEFA Newsletter and Volume 1 of PEFA Journal published (2 nd volume in final stage of publication) Concept Note is being prepared on PEFA repeater survey

10. F INANCIAL T ARGET (NR S.) Components Category Allocation Total Last yearCurrent Year Component 1: Implementation of Treasury Single Account (TSA) System 1 15446480350234814 Component 2: Strengthening accounting and reporting practices in public and private sector 3 6900390010800 Component 3. Supporting the Capacity Building of the PEFA Secretariat 4 19025965028675

11. F INANCIAL A CHIEVEMENT.... In percentage ComponentCategory Expenditure Total* Percentage Progress Remarks Last year Current Year Component 1: Implementation of Treasury Single Account (TSA) System 1 1375124560 142072 (1648.54) $ 60.50% Component 2: Strengthening accounting and reporting practices in public and private sector 3 5864- (68.04) $ 54.29% As the translation process delayed, the training and piloting process could not proceed Component 3. Supporting the Capacity Building of the PEFA Secretariat 4 66001102 7702 (89.58) $ 26.86% The exposure visits held up, activities at NPC slacked and activities in MLD were paid by themselves. Total 149976 (1740) $ 5662 (65.69) $ 155638 (1805.96) $ 56.74%

12. C OMPONENT 3: F INANCIAL STATUS ComponentsProject cost GrantGovt. source Expenditure grants($1=Rs.86) Exp. Govt. sources Total Support to PEFA Secretariat 0.390.350.040.02550.00450.03 Finance in PFMR strategy0.190.150.040.02550.00450.03 Research and Analysis0.190.150.040.0170.010.027 Awareness programs0.130.100.030.00850.00150.01 0.900.750.150.09

13. Statement of Activity-wise Progress S.N.Program/ActivitiesStatusBudget AllocationExpenditureProgress % 2011/122012/13Total2011/122012/13Total 1Capacity Building of PEFA Secretariat 1.1 Activities Under Capital Expenditure aFurnuture Procurement Ongoing 2000 0 100 bMachinery and Equipment Procurement Ongoing 5000 4940 98.8 Total of Capital Expenditure 7000 6940 99.14 1.2Activities Under Recurrent Expenditure Implementation of IEC Stratedy PEFA Operational Guideline Publication Completed 1500 1490 99.33 Publication of PEFA Progress Report Ongoing 0100 0000 Publication of IEC Material (PEFA Handbook, Brochure, Journal, Newsletter strategic plan ) Ongoing 4401005404309552597.22 Development of PEFA Website Completed 1003013010030130100 Management of PEFA Resource Center Established 300503502943733194.57 Research and Study PEFA Assessment Support Ongoing 5000 000 PEFA Innovative Grants Postponed 500755750000 PFM Intership Support Postponed 100201200000 National PEFA/PFM Consultant In Eval Proc 7350 0000 Awareness Programs Central, Regional and District PEFA Orintation Programe 7+3+24=34 250028527851070236130646.89 Interaction with SEJON on PEFA and PFM Completed 035 0 100 PEFA/PFM TV Talk Program Ongoing 050 0000 Interaction with University on PEFA and PFM Ongoing 050 0000 Capacity Enhancement 3 Days PEFA/PFM National Training Completed 4000 3710 92.75 PEFA ToT Completed 6000 1930 32.17 Exposure Tour on PEFA/TSA/NPSAS Ongng 55000 0000 Participation on International Conference Ongoing 5000 3240 64.8 Capacity Enhancement of Staff Ongoing 3002832860288826.83 Monitoring and Evaluation of PEFA/PFM activities Ongoing 0100 071 Strengthening DPIUs Ongoing 0100 0000

14. 1.3Co-ordinatory Programe Ministry of Local Development aFiduciary Risk Reduction Action Plan Completed 5000 0000 Office of Auditor General bPreparation of Risk Based Audit Manual Completed 10000 8890 88.9 National Planning Commission cStrengthening MTEF System Completed 10000 2230 22.3 Financil Comptroller General dStudy on Establishment of DMO Completed 3000 2950 98.33 eDebt Sustanability Assessment Completed 3000 2960 98.67 Total of Recurrent Expenditure 157251023167484694532522631.20 Administrative Expenditure 260057231721213570178356.21 Total of Recurrent Expenditure 1832515951992059071102700935.19 Grand Total 1902515952062066011102770337.36

15. O NGOING A CTIVITIES  Roll-out the TSA System in all districts  Enrichment and strengthening of IT HUBs (7)  Support to DTCOs for TSA Implementation (for the improvement of physical facilities and capacity development)  PEFA Orientation Programs, Seminars, Workshops and PFM related Trainings,  Further Development of PFM/PEFA related IEC materials  Strengthening PIUs and DPIUs  Preparation for Repeat PEFA Assessment (NPPR Action plan )  Preparation of NPSAS implementation  Exposure visits on PEFA/TSA/NPSAS study cum observation  Local PFM Donors Forum (Meeting every two months)

16. I MPLEMENTATION I SSUES  Poor understanding on PFM/PEFA among the stakeholders  Budget not fully policy and programs  Relatively Complicated procurement legislation and weak HRD on public procurement  Weak interagency coordination and cooperation in enhancing PFM  Human Resource Management  Political instability

17. T HE W AY F ORWARD Overall: Roll out of TSA with full functional Core Treasury System. Implementation and institutionalization of the NPSAS based on the cash based IPSAS. Repeater PEFA Assessment Internalize and integrate PEFA tool as a challenge and opportunity to improve transparency and accountability in PFM A fully functional Debt Management System of global standards Expenditure control (capping over expenditures) and forecasting mechanism Effective human resources planning,PFM capacity development Implementation of the recommendations of the Government Budget Management and Expenditure Review Commission Enhancing IT system for smooth and consistent operation in FCGO and DTCOs

18. Implementation of PFMRP Strategy Phase I Conduct Research studies into high priority areas of PFM; which are as under:Debt Management Expenditure Tracking surveys Commitment Accounting Public property management and accounting Establishment of PFM Training Academy HRM Strategic Plan in PFM Capability Development Plan Trainings:  Master trainers for PEFA Assessment  Master trainers for NPSAS/ IFRS  PFM area Exposure visits:  PEFA Assessment Best Practices  PFM Reform Best Practices  IPSAS, IFRS Best Practices  TSA Best Practices T HE W AY F ORWARD ……

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