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Republic of South Sudan
Ministry of Finance and Economic Planning
Public Financial Management Action Plan
Progress Report for November 2011- June 2012
September 2012
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Contents Ministry of Finance and Economic Planning PFM Action Plan Status Report ......................................... 1
Introduction ............................................................................................................................................ 3
Background ......................................................................................................................................... 3
Action Plan Objectives ........................................................................................................................ 3
Action Plan Structure & Monitoring ................................................................................................... 3
Highlights of Achievements and Challenges ....................................................................................... 5
Assessment of Performance by Priority Area ......................................................................................... 9
Area 1: Budget Execution Control and Cash Management ............................................................... 9
Area 2: Procurement ......................................................................................................................... 12
Area 3: Accounting and Reporting ................................................................................................... 14
Area 4: Macroeconomic Management and Sustainable Use of Oil Revenue ................................... 16
Area 5: Non-oil Revenue Improvements .......................................................................................... 19
Taxation ......................................................................................................................................... 19
Customs......................................................................................................................................... 20
Area 6: Budget Planning and Preparation ........................................................................................ 22
Area 7: Aid and Debt Management .................................................................................................. 25
Area 8: Fiscal Decentralisation and Sub-national PFM ..................................................................... 27
Area 9: Strengthening Institutional Capacity in MoFEP ................................................................... 29
Conclusion ......................................................................................................................................... 30
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Introduction
Background In order to respond to the new challenges of functioning as a national Ministry of Finance, the
Ministry of Finance and Economic Planning (MoFEP) developed a strategic Ministry Action Plan
during its Senior Management retreat held in October 2011. This action plan sought to address key
challenges faced by the Ministry in strengthening public financial management (PFM) and economic
management within South Sudan. Following an internal consultative process the MoFEP Action Plan
was finalised and formally endorsed in November 2011.
This report provides a status update of the activities undertaken since the development of the
Ministry action plan in November 2011. The report sets out cumulative performance in the
implementation of key activities, and identifies the key challenges faced in implementing the action
plan. While this report is largely a self-assessment by the ministry, it takes into account findings of a
recent1 IMF-led technical assessment of PFM in South Sudan. The report is intended to provide a
basis for updating the MoFEP action plan to reflect important changes in underlying circumstances
and priorities.
Action Plan Objectives The Objective of the MoFEP Action plan is threefold:
Deliver a credible budget through an effective budget control framework that ensures that
MoFEP has aggregate fiscal control and ensures predictability while gradually transferring
responsibility and accountability of budget execution to spending agencies
Ensure sustainable management of oil resources, mobilisation of non-oil and aid resources,
which are allocated and spent in an equitable, efficient and transparent manner, in line with
the national policy objective
Expand and update roles and responsibilities of the MoFEP to respond to the new fiscal
responsibilities and economic challenges of the RSS
Action Plan Structure & Monitoring The Action Plan is comprised of 9 priority areas aimed at addressing the key institutional and Public
Financial Management (PFM) challenges identified by the Ministry. The Action Plan is set out within
a framework of priority reforms over a two year period, with key actions identified against each
reform measure. A reporting and monitoring framework was established in conjunction with the
Action Plan.
The specific objectives of this monitoring and evaluation framework are to: ensure that the plan
delivers the planned PFM Reform objectives; and to assess progress, including identifying significant
deviations from plans to ensure that actions are taken to address these. In line with this, a number
of directorates within the Ministry prepare reports on progress on a regular basis – these are
presented to senior management for review.
1 An IMF led mission, consisting of PFM experts from the IMF Fiscal Affairs Department (FAD), the ODI- Budget
Strengthening Initiative, and the World Bank, conducted an assessment of PFM between August 22nd
and September 5
th 2012.
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The present report is prepared on the basis of these and is a first step towards a more transparent
monitoring and review process. It is also intended to provide a reference point for updating the
Ministry’s PFM reform strategy, taking into account lessons coming out of regular action plan
implementation reports and policy or situational changes with important implications on previously
envisaged plans. In order to ensure transparency regarding our success in meeting the Ministry’s
PFM reform objectives, this report is made publicly available.
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Highlights of Achievements and Challenges The table below provides an overview of progress towards implementation of key measures across
the nine priority areas. The rest of the section provides a summary of key issues emerging from the
progress report. Finalisation of this action plan half year review consisted of an initial self-
assessment by the MoFEP; following the recent IMF-led PFM technical assessment, this report was
then updated to ensure consistency with the PFM mission’s findings.
Status of Progress
Q4
2011 Q1 2012
Q2 2012
Explanation
Complete 0% 0% 11% Activity implemented/completed
On Track 55% 50% 33% Planned activities are on track for target completion date
Off Track- Minor
9% 17% 26% Activities started but behind schedule
Off Track- Major
15% 28% 28% Activities started/not started and significantly behind schedule
Not Started
21% 4% 2% Activities not scheduled to start
Since the adoption of the MoFEP Action Plan in November 2011, there has been mixed progress in
implementation of set priority reforms. The need to produce three budgets in a short period of time
because of the change in fiscal year and the oil shutdown, as well as the pressing challenge of
dealing with the oil shutdown, required that resources were diverted to address these demands. In
addition, weaknesses in institutional capacity within government remain a challenging reality to
implementing the PFM reform action plan.
Nonetheless, the challenges identified in the MoFEP action plan remain relevant, and notable
progress has been achieved in many areas particularly where considerable technical assistance was
involved. Key achievements in addressing the Challenges are set out in the table below:
Challenge Overall
Status2
Highlights of Progress
1. Budget Execution Control and Cash Management: Ensuring robust and efficient controls during budget execution to (i) avoid budget overruns, (ii) avoid unauthorized expenditure, (iii) ensure cash predictability for spending agencies, and (iv) prevent the further emergence of arrears; (v)strengthening control in procurement management
On Track PFMA Act is now in place and supporting regulations for its implementation under draft.
IFMIS fully reconfigured and used to establish controls in expenditure in line with the appropriated budget and monthly expenditure limits.
Monthly expenditure limits established as 1/12
th of FY12/13 budget for each
spending agency
New, automated payment procedures established to improve expenditure control
2“Overall Status” indicates a weighted average of the status of progress towards implementation of priority
measures under each of the nine priority areas of the action plan.
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Challenge Overall
Status2
Highlights of Progress
2. Procurement: Strengthening the procurement process, so that it is functional, transparent and competitive and delivers value for money.
Off Track
Minor
Procurement Reform Task Force established for implementation of reform activities
Stakeholder Consultation held on draft Public procurement Bill
Final draft Procurement Bill forwarded to ministry of Justice for legal editing
3. Accounting and Reporting: Producing timely and comprehensive in-year and end-of-the-year fiscal reports/accounts to inform decision making and enhance transparency and accountability, including in the use of oil revenues;
On Track Chart of accounts reviewed and implemented
IFMIS configured to record all necessary data for financial statement preparation.
Expenditures recorded daily and reports made available to spending agencies upon request.
4. Macroeconomic management and Sustainable Use of Oil Revenue: Developing macro analytical capacity and specifying the rules, procedures and mechanisms for achieving the stabilization and saving objectives (as stated in the Interim Constitution) in the use of oil revenue over a medium to longer term;
Off Track
Minor
Petroleum Revenue Management Bill was passed by the CoM and currently under amendment to incorporate feedback from the Assembly.
Implemented the use of the Hydrocarbon Economic Analysis tool (HEAT) model for forecasting long term oil revenues in order to inform development of sustainable fiscal policy
1 Quarterly macroeconomic briefing was disseminated within MoFEP to improve awareness of the economic situation.
Several high quality policy notes on the impact of the oil shutdown and the implications of the revenue management law were prepared largely with the support of technical assistants. However, there was not much discussion/feedback on these within MoFEP.
5. Non-Oil Revenue Improvements: Reforming tax and customs policy and administration to reduce dependence on oil revenues and accelerate the dismantling of the economically destructive system of revenue extraction from checkpoints and roadblocks.
On Track Policy on centralized collection and allocation of taxes between national and state government developed with implementation underway.
Amendment to Tax Act 2009 for expanded Business Profits Tax approved by the Assembly.
MoU between the Directorate of Taxation and Customs Services, setting forth agreement on streamlined revenue collection and reporting procedures, developed.
Public education campaigns conducted to improve businesses and public awareness of on-going revenue reforms.
Modernization plans and revised organizational structures for Customs and Tax services developed.
Significant improvements in tax collections have been realized over the
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Challenge Overall
Status2
Highlights of Progress
past year largely owing to reforms in tax administration as well as recording and tracking processes.
6. Budget Planning and Preparation: To improve the realism of the budget; strengthen the link between the budget and sectoral policies in the National Development Plan; and establish better procedures for managing capital investment programmes
On Track Budget formulation process automated, with the Budget Planning System used by all spending agencies in the preparation of the delayed FY11/12 and the FY12/13 budgets, and the printing of budget documents.
A National Budget Plan, compiled on the basis of sector budget strategies, was presented alongside the FY2012/13 draft budget in June 2012.
A budget calendar was developed in line with the PFMA and will guide FY12/13 budget process
Improved emphasis on greater political engagement achieved for the FY12/13 planning and budget processes.
Budget officers trained to record multi-year agency commitments to ensure more realistic budgeting in future years.
Budget execution reports highlighting overspending are currently presented to MoFEP senior management.
7. Aid and debt policy Management: Strengthening aid coordination appraisal, reporting and accountability requirements and encouraging donors to channel funds through government systems; and strengthening existing institutional structures to manage debt.
Off Track
Minor
Instituted aid management and coordination processes including; organization of Quarterly Government Donor Forums, establishment of a task force to coordinate the High-Level Partnership Forum, regularizing reporting of aid information on AIMS – for FY12/13 budget, AIMS data provided basis for preparation of sector aid financing plans (SAFPs)
Coordination mechanisms for Local Services Support Aid Instruments in Education, Health and Community Based Infrastructure established.
A Fiduciary Risk Management Strategy designed and in place
Implementation of the New Deal goals for engagement in fragile states currently underway
Draft debt management strategy developed and is due to be finalized later in the year.
ToR for a loans and debt committee within MoFEP developed.
8. Fiscal Decentralisation: Developing a framework on decentralization and rule- and need-based criteria for allocating transfers aligned with this framework;
On Track Intergovernmental technical working group (IGTW) established to coordinate the intergovernmental transfers reform agenda. TW developed new formula for
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Challenge Overall
Status2
Highlights of Progress
strengthen State & County PFM systems; and develop MoFEP capacity to develop policy on fiscal decentralization and effectively oversee and monitor State & County PFM performance.
allocation of transfers, based on per capita distribution.
County Development Grant allocated on a per capita basis in FY12/13 draft budget
Sub-national PFM Technical Working group has been formed to coordinate & support sub-national PFM reforms.
Design of a Local Government PFM manual underway.
State-level expenditure reporting established.
9. Strengthening Institutional Capacity in MoFEP: Ensuring that the PFM reform agenda, including the support received from various development partners, is coordinated and managed effectively to avoid potential overlap and inconsistencies and to bridge critical gaps, as and when they arise;
Off Track
Major
Ministry structural document developed on the basis of individual directorate/ departmental structural and functional proposals.
Developed TOR for support in structural review and institutional capacity building. A recent IMF-led PFM mission noted that a full restructure would require significant resources and therefore not advisable at this time. The mission rather recommended that the MoFEP undertake only a minor reorganization of some key functions to enhance implementation of PFM reform.
Established framework for monitoring and reporting against action plan. However to date, there was limited involvement by the senior management in overseeing implementation of the plan.
Going forward, a number of challenges still remain. Among these, is a need to finalize the legal
framework for procurement; enforce fiscal discipline and abate the ad-hoc nature of budget
execution by ensuring improved compliance with the established regulatory framework and
supporting systems and processes; develop a sustainable fiscal strategy taking account of both
future and current generations’ needs; finalize a national debt management strategy; establish an
appropriate role for internal audit; devlop an improved communication strategy both within MOFEP
and with spending agencies; and institute effective internal coordination structures within MoFEP
and strengthen the ministry’s institutional capacity to manage interventions in order to ensure the
sustainability of PFM reforms.
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Assessment of Performance by Priority Area
Area 1: Budget Execution Control and Cash Management Budget execution reforms set out in the action plan are fundamentally aimed at establishing robust
and efficient controls during budget execution to (i) avoid budget overruns, (ii) avoid unauthorized
expenditure, (iii) ensure cash predictability for spending agencies, and (iv) prevent the further
emergence of arrears; and (v) strengthen control in procurement management.
The table below summarizes the status of progress towards implementation of priority measures set
out in this area:
Status of Progress
Priority Measure
Complete
Develop a rolling expenditure plan within the annual appropriation, that is based on the annual budget submitted to the Legislative Assembly, and use this as the basis to set monthly expenditure limits of the spending agencies
Implement a system of controls Specify controls at all stages of the budget execution process Pilots for expanded IFMIS functionality including expenditure controls
On Track Take stock of all outstanding payment arrears as at end June 2011
Off Track- Minor
Identify areas in the PFMA Bill that require transitional steps and to finalise regulations and procedures to support the implementation of the PFMA Law, once the bill is passed
Off Track- Major
Improve cash management by strengthening the Treasury Single Account System
Not Started
Since the action plan was adopted progress has been made in establishing the legal framework:
- The PFMA Bill was enacted by the National Legislative Assembly (NLA). This forms a solid
foundation for strengthening Public Financial Management in RSS.
- With support from the Capacity Building Trust Fund (CBTF), instructions, currently serving
the role of regulations, have been drafted to underpin implementation of the PFMA Act–
further review and amendments to these are planned.
In line with the core plan objectives, significant efforts have been directed towards implementing
expenditure controls and the development of procedures for processing payment claims. The main
progress in budget execution control and cash management has been as follows:
- A framework for establishing monthly expenditure limits have been established, initially
using 1/12th of the annual budget appropriation for each spending agency. Given the
uncertainty of the fiscal situation, cash plans have not been prepared, but the level of
expenditure limits will be reviewed based on the availability of cash during the financial
year.
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- The IFMIS has been fully reconfigured and will be used to establish controls in expenditure in
line with the appropriated budget and monthly expenditure limits, on the basis of the new
chart of accounts. Interim annual and monthly controls were established on the IFMIS for
the Austerity Budget period – the last quarter of 11/12 - and were largely enforced, with
spending kept within budgeted levels.
- A strategy has been developed to improve cash management by strengthening the Treasury
Single Account system, as provided in the PFMA Act.
- At the end of FY2011/12 efforts were made to identify unpaid claims and validate
outstanding obligations. Moving forward, unpaid claims will be continually examined to
identify valid obligations at the outset, which will consequently allow monitoring of arrears,
if these are not paid.
- To support implementation of these and other reforms being instituted commencing
FY2012/113, comprehensive training for key system users and other stakeholders within
MoFEP and at spending agency level was undertaken in May and June 2012.
The box below provides an overview of the Budget execution reforms that will be implemented
in 2012/13
Snapshot of Budget Execution Reforms in FY 2012/13
Budget execution control procedures are being strengthened in line with the Public Finance
Management & Accountability Act (PFMAA), to ensure that:
• Only claims which have been properly approved by accounting officers and directors general
within the approved monthly expenditure limits will be paid;
• All required contracting procedures have been followed, including advance approval by the
Ministry of Justice and MoFEP;
• Cheques will be printed directly from IFMIS and the manual transfer letter system is
eliminated; and
• Payments will be made only to vendors who have delivered the goods or services in the
contract. In line with new payment procedures, with effect from the 1st of July 2012,
vendors will be paid directly and transfer of large amounts of money to spending agency
bank accounts terminated.
All of these reforms are consistent with international good practice and are a significant step
forward since the last year. However, they have only recently been put in place and it is still too early
to tell if they will work. Successful implementation of these reforms will largely depend on the
political will to enforce fiscal discipline and ensure that agencies adhere to allocated budget ceilings.
The challenges faced in implementing the key actions in this priority area have been:
- Political interference that overrides the reforms, undermining the MoFEP’s credibility and
formal lines of authority.
- Poor compliance and capacity weakness issues within spending agencies.
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- No comprehensive accounting of all government arrears has been conducted and equally, no
specific provisions have been made for arrears in the austerity budget and yet these
continue to accrue.
- Lack of proper reconciliations of revenue and expenditures since the Bank of South Sudan
(BSS) is running manual systems and no bank statements have been received since July 6
2011. This undermines the quality of fiscal reports generated from the IFMIS.
-
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Area 2: Procurement Two core objectives govern reforms envisaged in this area. These are: to strengthen the
procurement process, so that it is functional, transparent and competitive and delivers value for
money; to address the weak institutional capacities within the Procurement Policy unit in the MoFEP
and among procurement staff within spending agencies which pose significant challenges to
efficiency in procurement.
The table below summarizes the status of progress towards implementation of priority actions set
out in this area:
Status of Progress
Priority Measure
Complete
On Track
Identify direct support, recruit and strengthen institutional capacities for public procurement including reviewing institutional responsibilities and developing relevant skills in MoFEP and spending agencies in line with the law
Implementing basic rules to increase transparency and integrity in the procurement process
Off Track- Minor
Undertake consultation with key stakeholders on the draft procurement bill and follow-up on the enactment of the legislation
Clarify processes and prepare regulations in order to implement the new procurement legislation
Off Track- Major Not Started
Since the action plan was adopted progress has been made in the following areas:
- A Procurement reform implementation committee has been established to oversee and
coordinate the implementation of reforms in this area.
- The draft Procurement Bill has been finalized and presented to the Ministry of Justice for
review, with support from the MDTF and in consultation with various stakeholders. It is
envisaged that the Bill will be laid before the Assembly for enactment in the third quarter of
2012. The law provides for a centralized system but allowing for gradual decentralization of
procurement functions to spending agencies once base capacity requirements have been
established.
- Development of supporting regulations commenced in the second quarter of 2012 and is on
course for completion later in the year.
- Standard tender documents, forms and guidelines have been prepared for entities to
facilitate implementation of the new procurement legislation.
Other main achievements have been as follows:
- Skills audit surveys have been issued to spending agencies and an audit report prepared to
assess the existing skills gap.
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- Training modules based on interim regulations have been prepared for Procurement Officers
within spending agencies in order to strengthen in-house capacity.
- A seminar for private goods and service providers was conducted as part of efforts to
improve their understanding of, and adherence to procurement procedures.
- Targeted training has been provided to the roads sector engineers to strengthen
institutional capacities for public procurement.
- Guidelines for establishment of procurement committees and units have been issued to all
spending agencies and some follow up on their implementation conducted – by the end of
June however, limited progress had been made on this front.
- A Procurement Technical Assistant commenced work in November 2011 to support the
strengthening of procurement management capacity within MoFEP and spending agencies.
The advisor supported the review of directorate functions and continues to provide on-the-
job training to enable Procurement Officers develop relevant job competencies.
The major challenges faced in implementation of the key Public procurement reforms have been:
- Absence of an enabling Public Procurement law has meant that some procurement entities
continue to act without due regard to dictates of the provisional regulatory framework.
- This is exacerbated by the limited capacity of staff in procurement entities to support
implementation of existing policies and regulations, as well as MoFEP’s limited capacity to
exercise procurement oversight responsibilities. It is crucial therefore that ongoing
monitoring and enforcement programs are intensified to ensure that agencies adhere to
procedures prescribed in the existing procurement legislation.
- The absence of a computerized procurement information management system to interface
with budget and accounts presents significant challenges to the establishment of proper
control and accurate tracking of procurement activities and contractual obligations.
Nonetheless, discussions with the Directorates of Treasury and Budget, are underway to
operationalize an existing module in Freebalance to strengthen control in procurement
management.
- Current constraints in funding also limit the scale of training activities intended to enhance
procurement management capacity.
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Area 3: Accounting and Reporting The overarching objective of priority measures undertaken within this area is to produce timely and
comprehensive in-year and end-of-the-year fiscal reports/accounts to inform decision making and
enhance transparency and accountability, including in the use of oil revenues.
The table below summarizes the status of progress towards implementation of priority actions set
out in this area:
Status of Progress
Priority Measure
Complete
Undertake a comprehensive review of the chart of accounts to ensure compliance with GFSM 2001 and meets the accountability and other reporting requirements of all stakeholders for implementation in 2012/13
Identify the sources of data for preparation of financial statements and configure the IFMIS to capture all such data and use them for preparing the annual financial statements.
On Track
Off Track- Minor
Provide monthly reports to spending agencies Develop and implement non-oil revenue collection and recording procedures
Off Track- Major
Prepare monthly reconciled statements of oil revenue receipts, their transfer to various accounts (including stabilization and reserve fund accounts) and balances in these accounts and revenue recorded in IFMIS
Prepare quarterly fiscal accounts that provide a comparison of outturn with budget estimates of revenue and expenditure and include information on financing of deficit/surplus and work towards public dissemination of these reports by beginning of 2012/13
Not Started
In the period since the action plan was adopted, progress has been made on the following fronts:
- The Chart of Accounts was revised to ensure compliance with GFSM 2001, and other
budgeting, control, reporting and accountability requirements of all government agencies
and various stakeholders. This was implemented during preparation of the 2012/13 budget.
- Expenditures are currently recorded daily and reports are made available on a timely basis
to facilitate improvements in oversight of the use of public resources and to ensure
informed decision making by the MoFEP and spending agencies’ leadership.
- Equally at the state level, more training and systems support has been provided, improving
expenditure recording and reporting.
- The IFMIS has been fully configured to capture all financial data necessary for preparing
annual financial statements and to prepare quarterly fiscal accounts that provide a
comparison of outturn with budget estimates of revenue and expenditure and include
information on financing of deficit/surplus.
- Draft non-oil revenue collection and recording procedures have been developed and
circulated to all State Ministries of Finance to support improvements in non-oil revenue
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collection. However, comprehensive revenue reporting is yet to be achieved as a proportion
of collections is used to finance expenditures of some of the collection agencies.
On-going challenges in implementing envisaged reforms in this area are:
- Whilst many the foundations for quarterly fiscal reporting have been laid on the MoFEP side,
the lack of bank statements from the Bank of South Sudan (BSS), means MoFEP has been
unable to undertake bank reconciliations, which limits the quality of financial data.
- The shutdown of oil production and lack of bank statements has meant that preparation of
monthly reconciled statements of oil revenue receipts has not been possible.
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Area 4: Macroeconomic Management and Sustainable Use of Oil Revenue Reforms in this area were intended to strengthen macro analytical capacity in MoFEP, increase the
visibility and engagement of the macro function within the budget process and specify the rules,
procedures and mechanisms for achieving the stabilization and saving objectives (as stated in the
Interim Constitution) in the use of oil revenue over the medium to longer term. Following the
shutdown of oil production in January 2012 however, there was need for a shift in the focus of
activities, temporarily rendering some of the priorities in the action plan irrelevant. For example, the
2012/13 budget was prepared on the basis of a largely politically-determined resource envelope,
leaving no demand for an MTFF based on macroeconomic analysis.
The table below summarizes the status of progress towards implementation of priority actions set
out in this area:
Status of Progress
Priority Measure
Remarks
Complete
On Track
Designing the legal framework for managing the oil revenue in the future.
Identify capacity gaps, recruit qualified staff and strengthen the analytical and data collection capacity to assess the domestic macroeconomic situation, potential bottlenecks and constraints and other factors that may affect the design of the economic policy.
Following the oil shutdown, the
MPD refocused some of its
priorities, engaging in new activities
including:
An analysis of medium and long term fiscal sustainability under different borrowing scenarios for bridging the loss of oil revenues
Off Track- Minor
Off Track- Major
Provide medium and longer term oil
revenue projections (input for
MTFF), and monitor oil outturns
(together with Treasury) and update
the oil forecast on regular basis.
Prepare a comprehensive MTFF at start
of budget process based on likely, but
sustainable expenditures. Analyse and
report on the implication of different
expenditure paths for fiscal
sustainability and the reserves.
Provide macroeconomic (including oil
revenue) assessment for the quarterly
and annual fiscal outturn publications
and clarify respective roles of the
Macro-economic planning and
Accounts departments in this process.
Given the oil revenue situation and
the uncertainties around financing
the budget this fiscal year, an MTFF
for the 2012/13 budget was not
prepared. Rather, analytical work in
this area related to assessments of
fiscal sustainability.
Not Started
Develop a tax policy function within the directorate of Planning
Further clarification required from
senior management about the
institutional home of this function.
17
Since the action plan was adopted progress has been made in the following areas:
- A macroeconomic overview was prepared for the 2012/13 budget outlining recent economic
developments and likely outlook, highlighting the risks associated with a large unfinanced
fiscal deficit.
- Quarterly macroeconomic briefings covering developments in inflation, currency
depreciation and the general economic outlook are currently prepared for dissemination
within the Ministry and to improve awareness on the economic situation.
- In the context of the current fiscal situation, assessments of the fiscal sustainability of
borrowing requirements for different levels of expenditure were conducted and shared with
the ministerial leadership during the 2012/13 planning and budget process.
- A briefing paper on exploring South Sudan’s Agricultural potential was prepared and shared
within MoFEP and with the National Bureau of Statistics.
- A proposal for a revised department structure including a summary of core functions and
staff job descriptions was developed to guide implementation of envisaged structural
reforms.
- On-the-job training for staff of the Macro Planning Department has been established as part
of the departmental work plan and several training sessions were carried out in-house.
- The Petroleum Revenue Management Bill was passed by the CoM in February 2012 and
submitted to the NLA in March. Due to the Assembly's recess, the President signed the Bill
provisionally into Law through a presidential order. However, the presidential order was
rejected by the Assembly in July 2012, and the government is currently considering whether
amendments to the Bill are required before re-submission to the Assembly.
Petroleum Revenue Management Bill (PRMB)
Key aspects of the bill are:
i. to provide a sound and transparent framework for managing petroleum revenue, including
establishing a Petroleum Revenue Account where all government petroleum revenue is paid
into,
ii. to establish an Oil Revenue Stabilisation Account and a Future Generation Fund (together
defined as the Reserve Funds) as savings mechanisms to de-couple revenue and
expenditure, smooth out spending over time and ensure funds are set aside for future
generations,
iii. to establish a framework for determining the annual level of public expenditure through a
ceiling on how much petroleum revenue to spend to cater for savings (fiscal rule),
iv. to provide a framework for managing the Reserve Funds prudently in line with best
international practice for financial management,
v. to outline requirements for regular reporting and public disclosure of information related to
all aspects of government petroleum revenue, and
vi. to outline requirements for regular auditing of the petroleum revenue and associated
accounts and funds.
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The main challenges encountered in the implementation of reforms in this area have been:
- By far the biggest challenge is lack of engagement with senior officials and other MoFEP
departments, and the lack of access to critical information. The MPD is rarely included in
internal discussions, almost never directly engaged to carry out work and, when undertaking
work on own initiative, it is rarely encouraged to develop this work, nor do findings
contribute to policymaking. Unless this issue is addressed, any other challenges remain
relatively inconsequential.
- Fiscal constraints continue to encumber prospects of implementing capacity enhancement
plans in this and other areas of the action plan. As a result, efforts have focused on providing
on-the job training to support improvements in the analytical competencies of staff in the
Macro-planning Department (MPD).
New Activities in second half of 2012 include:
⁻ Develop a prototype macro-model for short to medium term forecasting and analysis
⁻ Workshop on macro interactions with budget process in cooperation with the Budget
Directorate
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Area 5: Non-oil Revenue Improvements The priority measures undertaken in this area envisaged to: reform tax and customs policy and administration to reduce dependence on oil revenues, and accelerate the dismantling of the economically destructive system of revenue extraction from checkpoints and roadblocks.
In view of this, the focus of activities has been to implement institutional and policy reforms, matching these with capacity building measures to boost efficiency in revenue collection and administration.
The table below summarizes the status of progress towards implementation of priority actions set out in this area:
Status of Progress
Priority Measure
Complete
On Track
Put in place a tax reform agenda taking into account the IGFR Working Group recommendations, the establishment of a national revenue authority, and harmonise national and state tax collection and sharing policy
Develop and implement a modernisation plan for the customs and tax administration
Establish a Publicity / Outreach campaign to reinforce policy decisions, provide clear messaging on revenue reforms, address taxpayer concerns, educate taxpayers and capitalise on reform successes.
Identify capacity gaps and establish TA requirements Off Track- Minor
Analyse potential for additional revenues from non-tax/ non-oil sources and develop a system to track collection for non-tax revenues
Off Track- Major Finalise the customs law including the harmonisation of the tariffs Not Started
The shutdown in oil production has increased the importance of improving non-oil revenue
collections. Overall, it is important to highlight that total collections between July 2011 and June
2012 registered a 500 % increase going from SSP 7.341 Million in July 2011 to SSP 48.608 Million in
June 2012, including taxes collected at the border by Customs on behalf of the Directorate of
Taxation.
Taxation
Key achievements in improving domestic tax policy and administration include:
- Implementation of a key policy of the Government resulting from the IGFR
recommendations to centralize collection of taxes in the national Directorate of Taxation.
Implementation began in May 2012 and will continue into FY 2012/2013.
o This policy initiative requires activating national Directorate of Taxation offices in each
state and coordination with states on collection of the state taxes included in the
centralization policy. Significant budgetary support will be needed in FY 2012/2013 to
fully implement the Government policy, which is the key policy for harmonizing taxes
between state and national government as well as the primary means by which harmful
state and local tax practices (roadblocks, etc) will be eliminated.
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- Revenue recording has improved, with the Directorate now tracking Personal Income, Excise
and Import taxes and non-tax revenues. Updated revenue reporting procedures were
circulated to line agencies and an amended revenue classification scheme was agreed and
circulated to State Ministries of Finance.
- An amendment to the Taxation Act 2009 was approved by the Assembly which has revised
the Business Profits Tax to include large businesses (with more than SSP 75 million in gross
turnover). A further amendment has been submitted to the Assembly to, expand the list of
excisable goods and increase the level of excise tax on some goods, as well as to implement
a sales tax at the point of import, provision of specified services, and at the point of
distribution from a domestic manufacturer.
- Agreement on the allocation and centralised collection of taxes between national and state
government was reached. A policy position was developed, and endorsed by State Ministers
of Finance and the National Council of Ministers – implementation of this commenced at the
end of the 2011/12 fiscal year.
- An MoU has been drafted between the Directorates of Taxation and Customs through which
Customs will collect tax at international border points on behalf of the Directorate of
Taxation while the Directorate of Taxation remains responsible for collections domestically.
This has simplified tax collection systems and facilitated legitimate trade.
- A large tax payer unit was established and about 5,129 taxpayers were registered with the
Directorate of Taxation by the end of FY 2011/12, increasing from 1,517 at the beginning of
the FY. Tax payer education campaigns have been conducted to improve public awareness
and compliance - in the period from July 2011 through March 2012, over 2,900 educational
visits have been made to taxpayers, and 7 seminars held for 220 taxpayers.
- During the second quarter of 2012, 5 seminars were held for businesses (including the
media). Weekly messages for key government officials on revenue reforms and progress are
being implemented. As part of wider efforts to increase public awareness of on-going
reforms, Directorate of Taxation personnel have participated in radio interviews to discuss
the centralization of collection of taxes. In addition, the Directorate of Taxation, with USAID
support, has conducted training for journalists on the key aspects of the Taxation Act.
- MoFEP is finalizing contracts with commercial banks who will collect tax and non-tax
revenue directly from the public to ensure that all collections are deposited in the Single
Treasury Account and not diverted for other purposes.
- As part of efforts to strengthen tax collection and administration capacity at the State level,
Tax Officers from the ten States participated in training on advanced Business Profits Tax as
well as other taxes contained in the Taxation Act. Monthly training plans for businesses and
personnel assigned to branch offices in the states have also been developed.
Customs
Key achievements in improving customs policy and administration include:
- A major objective in this area was to develop a strategic plan to guide implementation of
reforms in Customs administration. In April 2012, senior management from the South Sudan
Customs Services (SSCS) attended a retreat in Entebbe to discuss and agree a draft strategic
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plan for the Service. This plan has been finalised and is on track for adoption at the start of
the 2012/13 fiscal year.
- A small technical assistance program has commenced in the Customs Service with a team of
four Technical Advisors supporting Customs administration. A longer and more expansive
modernisation plan for the SSCS is currently being discussed with TradeMark East Africa
(TMEA) who have access to substantial donor funding. It is envisaged that this plan and the
associated Terms of Reference will be finalised within the third quarter of 2012.
- Discussions with commercial banks are on-going to transition to them revenue collection at
key border posts in order to prevent diversion of collections and improve transparency.
Negotiations have commenced with the Ugandan Revenue Authority (URA) with a view to
signing an MOU between the two Customs agencies. This is aimed at increasing cooperation
and simplifying customs procedures between the two countries.
- The interim computerised customs clearance system for use at the Nimule Border post has
been adapted to use TINs established by the Directorate of Taxation. Further training is
required however, before the system becomes fully operational.
- Internal procedures to streamline and regularize the process of granting exemptions and
provide transparent reporting on exemptions have been drafted and discussed with MoFEP.
To this end, a new request application form is currently being drafted. This will serve as a
useful tracking tool once the clearance process is computerised. Prior to implementation,
procedures will be sent to the Minister of Foreign Affairs in early July for review and
thereafter, finalised incorporating comments.
The key challenges going forward are:
Budgetary support to fully implement the centralized collection of taxes. Without the ability to activate national Directorate of Taxation offices in each state and provide them with resources necessary, the initiative will be at risk. Many states are already beginning to withdraw their support for the initiative.
Improving the IT capacity of the Directorate of Taxation with equipment, communications, and qualified staff.
Implementation of the sales tax provisions which were included in the Finance Bill 2012.
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Area 6: Budget Planning and Preparation Consistent with the overall objectives of the reform strategy, the focus of activities during this period
has been on strengthening linkages between the budget, sector priorities and the South Sudan
Development Plan (SSDP), and building capacities within MoFEP to support spending agencies in
implementing budget reforms.
The table below summarizes the status of progress towards implementing priority actions set out in this area:
Status of Progress
Priority Measure
Complete
On Track Strengthening the ministry’s capacity for budget analysis and monitoring
Off Track- Minor
Facilitate more realistic budgeting by taking into account known commitments of spending agencies
Strengthen political engagement in budget process by implementing measures required in PFMA bill and increase link between agency ceilings and sectoral and national priorities
Consolidate recent budget preparation improvements and clarify roles and responsibilities between budget and sectoral planning
Off Track- Major Not Started
Key Achievements are as follows:
⁻ To facilitate more realistic budgeting, at the start of the planning process, spending agencies
were provided with the previous year’s execution data to guide planning and budgeting. For
the FY2012/13 budget, efforts were made to take into account known agency commitments
as best as possible. As part of their new roles, budget officers have been trained to record
multi-year commitments to ensure more realistic budgeting in future years. For the austerity
period however, no actions were taken to address arrears. A key challenge going forward
will be to prevent further build-up of arrears in part, by ensuring that budget officers
effectively assume their new roles in implementing on-going execution reforms.
- Good progress has been made in implementing key budget preparation requirements laid
out in the PFMA Act and in strengthening the link between agency ceilings, and sector and
national priorities:
- The National Budget Plan, compiled on the basis of budget sector plans, was presented
alongside the FY2012/13 draft budget in June 2012. Furthermore, a budget calendar was
developed in line with the PFMA. This will be used as a timeline for the FY2013/14 planning
and budget process. The budget formulation process has also been automated, with the
Budget Planning System used by all spending agencies in the preparation of the delayed
11/12 and the 12/13 budgets, and the printing of budget documents.
- During the planning and budget process for the 2012/13 fiscal year, there has been an
emphasis on greater political engagement. Austerity measures were passed by the Council
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of Ministers (CoM). An Austerity Measures Committee (AMC) was empowered by
Presidential Decree to decide austerity budget ceilings. An austerity budget for April to June
was presented to the National Legislative Assembly (NLA) and passed. Additionally, the AMC
adjusted budget ceilings based on government priorities for austerity. Following this, the
CoM adjusted the budget based on their priorities, and approved the 2012/13 draft budget.
- New officers have been recruited to reinforce the capacity of the Budget directorate. During
the preparation of the 2012/13 budget, MoFEP budget officers were trained on the use of
the Budget Preparation System, and trained to review agency budget submissions and
perform a challenge function. In turn, budget officers played a key role in supporting
spending agencies to produce the 2012/13 draft budget submitted to the NLA in June 2012.
- With effect from 2012/13 fiscal year, the roles of budget officers will shift from processing
claims to managing the budget and commitment control. Training workshops were
conducted by USAID Deloitte Treasury Advisers, supported by senior MoFEP staff in June. As
part of this, Budget Officers received intensive training, on the new procedures for 2012-13
including: Overview of budget execution reforms, Training and Refreshers on the use of
IFMIS, specific training for various roles: administration, commitment, budget transfers,
expenditure limits and budget posting officers.
⁻ To strengthen MoFEP’s capacity to enforce expenditure controls, the Budget directorate
currently liaises with Accounts to provide regular budget execution reports to senior
management. These have highlighted agencies with significant overspending. In addition,
monthly execution reports are made available to spending agencies on request. A draft
execution report covering the period between July 2011 and March 2012 was submitted to
the National Legislative Assembly in June 2012 for review.
New roles of Budget Directorate in the Context of Budget Execution Reforms
In the context of the new budget execution reforms all staff under the budget directorate were
assigned specific roles in line with the new execution procedures:
DG Budget: approves all expenditure limits adjustments and advises on transactions outside of
approved budget and laws
Director Budget: reviews all rejections
D/Director Budget: monitors workflow and supports all problems experienced by officers.
Budget staff were allocated specific roles as follows: admin staff, commitment officers, budget
adjustment officers, expenditure limit adjustment officers, approval officers.
Key challenges faced in implementing the Action Plan are as follows:
- During the 9 month period, MoFEP prepared three budget proposals – two for 2011/12 and
the 2012/13 budget. This provided a challenging environment to prepare the 12/13 budget,
and made it difficult to implement a structured 2012/13 budget process based on the PFMA,
and also
- The resource uncertainty for 2012/13 presented a severe challenge for the preparation of a
more credible 2012/13 budget.
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- Following adoption of the action plan, as with other units within the ministry, a structural
proposal for reorganizing the directorate was designed, merging sectoral planning and
budget. However, no official confirmation of this proposal has been made to date.
Nonetheless, budget and planning staff worked together to support the combined planning
and budget process for FY2012/13. Sectoral planning officers have however not been
involved in the recent budget execution reforms and trainings in preparation for FY2012/13.
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Area 7: Aid and Debt Management Four core priority objectives were set out in this area. These include: implementation of the aid
strategy by strengthening aid coordination, appraisal, reporting and accountability requirements and
encourage donors to channel funds through government systems; development of Debt Policy and
assignment of debt policy mandate/institutional structure; expansion of existing institutional
structures for aid and debt management including; clarification of roles and key responsibilities of
relevant departments, and address capacity needs.
In line with this, key activities undertaken in the period between December 2011 and June 2012
were geared towards: instituting aid management processes set out in the Aid Strategy and
establishing frameworks to encourage better alignment of aid to government priorities, including
development of Local Services Support Aid Instruments (LSSAI) in three key service delivery sectors
(Education, Health, and Community Based Infrastructure), and establishment of frameworks to
strengthen local PFM capacity and service delivery.
The table below summarizes the status of progress towards priority actions set out in this area:
Status of Progress
Priority Measure
Complete
On Track
Implement aid strategy by strengthening aid coordination, appraisal, reporting and accountability requirements and encourage donors to channel funds through government systems
Implement New Deal Goals
Off Track- Minor
Off Track- Major
Develop debt policy and strategy and harmonize national and state debt contracting regulations and procedures
Development of Debt Policy and assignment of debt policy mandate/institutional structure
Expand existing institutional structures for aid and debt policy and sustainability analysis and management including; clarification of roles and key responsibilities of relevant departments, and address capacity needs.
Not Started
Key Achievements are as follows
- Coordination mechanisms and management structures for Local Services Support Aid
Instrument (LSSAI) have been established – with the formation of four technical working
groups (TWGs) representing the three LSSAI windows and the sub-national PFM TWG, as
well as the LSSAI Joint Task Force (JTF) which consists of representatives from the above four
TWGs. Additionally, a Fiduciary Risk Management Strategy was finalised following feedback
from a number of key stakeholders including the donor PFM group.
- Two Quarterly Government Donor Forum meetings (QGDF) were held in April and June,
providing a platform for government-donor dialogue on a number of fiscal and aid
coordination issues. Plans for the first High Level Partnership Forum (HPF) are underway,
26
with the establishment of a Government HPF Committee and a counterpart donor
Committee. In June 2012, the two committees formed a Joint Task Force to oversee plans
for the HPF
- Good progress has been made in improving reporting on aid information and ensuring a
more coherent country aid architecture. In the period since adoption of the action plan, five
donor agencies have submitted Country Aid Strategies to the IMAC with two further
submissions expected at the beginning of the 2012/13 fiscal year. In addition, development
partners have been trained to use the AIMS, with continued support provided on-demand.
During the FY2012/13 planning process 10 donor agencies reported aid information directly
onto the Aid Information Management System (AIMS) whilst a further 22 reported via
spread sheets – a significant improvement over the previous FY.
- Aid information was used in the preparation of Sector Aid Financing Plans which served as a
tool for mapping donor support to sector budget plans, and was integrated into overall
Budget Sector Plans and the National Budget Plan, which provided a combined picture of
RSS and Aid funded expenditure.
Challenges:
However, very limited headway was made in establishing a debt management role and capacity
within the Ministry. As part of efforts to develop debt policy and to expand existing institutional
structures for aid and debt management within MoFEP, a second Debt Relief International (DRI)
mission was hosted earlier in the year. DRI supported MoFEP to develop a draft debt management
strategy which has been reviewed internally. During this second mission, staff from the Macro and
Aid Coordination departments received basic training on debt analysis. The DRI mission also
contributed to the development of a proposal for an expanded aid and debt management
institutional structure which was included in the overall ministry structural document submitted to
Ministry management - in the period of austerity, implementation of the proposed structure
remains unfeasible.
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Area 8: Fiscal Decentralisation and Sub-national PFM To underpin reforms in this area, the following key measures were set out in the action plan:
Develop a framework on decentralization and rule- and need-based criteria for allocating transfers
aligned with this framework; strengthen State & County PFM systems; and develop MoFEP capacity
to develop policy on fiscal decentralization and effectively oversee and monitor State & County PFM
performance.
The table below summarizes the status of progress towards priority actions set out in this area:
Status of Progress
Priority Measure
Complete
On Track
Provide clarity on inter-governmental transfers: develop a decentralisation
framework clarifying roles and responsibilities of different levels of
government, and reform both block and conditional transfers from current
equal division or input-based criteria to rule- and need-based criteria.
Strengthening State and County Public Financial Management: for States,
develop model PFM Law for States, develop State budget database, budget
execution systems, and embed FMIS at centre of State PFM systems; for
Counties develop Financial Management Manual for Counties, and capacity-
building programmes roll manual out to all 79 counties.
Off Track- Minor
Strengthen MoFEP capacity for policy on and oversight of Fiscal Decentralisation: establish fully-staffed fiscal decentralisation unit to carry out this function, and integrate revenue reporting into State Transfers Monitoring Committee.
Off Track- Major Not Started
Highlights of progress towards these objectives during the period between December 2011 and June
2012 are:
- An Intergovernmental technical working group (IGTW), constituting of staff from MoFEP and
SSFFAMC, was established to coordinate the intergovernmental transfers reform agenda.
The IGTW group put forward recommendations on a per capita basis transfers allocation
formula. A 40/60 allocation formula, where 40% of block grants are distributed based on per
capita allocation and 60% equally to the ten states, was developed and formed the basis for
State transfer allocations for the draft FY2012/13 budget. The County Development Grant
was allocated solely on a per capita basis.
- MoFEP in collaboration with the Local Government Board (LGB) and other key donor and
government stakeholders has facilitated the design of the World Bank funded Local
Governance Service Delivery (LGSD) programme which has laid the foundation for donor
support to the local infrastructure and community development window of the Local
Services Support Aid Instrument. Inherent in its design, the LGSD programme also aims at
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developing systems, strengthening institutional capacity at all levels of government and
stimulating community engagement in the delivery of local services.
- As mentioned above, a sub-national PFM Technical Working Group (TWG) has been formed
to coordinate and support sub-national PFM reforms. With financial support from the
Capacity Building Trust Fund, a consulting firm has been selected to support the design of a
Local Government PFM manual which will be rolled out to all counties to strengthen local
service delivery and county PFM systems.
- A Budget Preparation System (BPS) was extended to the states and support provided in the
preparation of their FY2012/13 budgets during the State budget workshops. Furthermore,
the IFMIS is being implemented to support improvements in state level budget execution.
State-level expenditure reporting is currently in place with all states reporting to the State
Transfers Monitoring Committee (STMC). Less steady progress has been made on revenue
reporting, on the other hand.
- Two new inspectors were recruited to strengthen the capacity of the Intergovernmental
Fiscal Relation (IGFR) unit within MoFEP. In addition, the IGFR unit prepared a proposal to
reform its structure – endorsement by senior management is required to implement
proposed structural reforms.
Key challenges going forward are:
- Insufficient number of staff in MoFEP’s IGFR unit. Staffing levels are not commensurate with the broad level of responsibilities.
- In addition, existing PFM capacities particularly at the state level are still inadequate.
- Commitment of other government agencies to adhere to the new transfers policy framework will be a major determinant of success in its implementation.
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Area 9: Strengthening Institutional Capacity in MoFEP The priority measures set out in this area aimed at supporting institutional changes and enhancing
MoFEP’s capacity to facilitate the implementation of the activities set out in the Ministry’s PFM
action plan with the ultimate objective of: ensuring that the PFM reform agenda, including the
support received from various development partners, is coordinated and managed effectively to
avoid potential overlap and inconsistencies and to bridge critical gaps, as and when they arise.
The table below summarizes the status of progress towards priority actions set out in this area:
Status of Progress
Priority Measure
Complete
On Track
Off Track- Minor
Off Track- Major
Implement a plan to restructure and strengthen the MoFEP as it implements the action plan including finalising the organisational structure and develop job descriptions for All Departments.
Implement skill development programs to strengthen PFM capacity building in a sustainable manner
Review and implement coordination and management arrangements to strengthen the MoFEP in implementing the action plan including developing terms of reference for existing and new committees on an on-going basis
Hold Monthly Senior Management Meetings and regular directorate meetings
Not Started
Key achievements include
- Directorates and departments prepared regular action plan progress reports. On the basis of
these and earlier reports, a status report on implementation of the action plan until the end
of FY2011/12 is being prepared for wider publication to open up the review process and
strengthen the engagement of other key stakeholders and the international community.
- Directorates and departments within the ministry conducted an assessment of their existing
structures and prepared proposals for their future structures and functions, on the basis of a
draft institutional structure provided in the Ministry action plan. These were consolidated
into a MoFEP organisational structure document submitted to senior management for
review. During the senior management meeting convened in February 2012, a decision was
taken to hire technical consultants to take this agenda forward. Terms of Reference (TORs)
for this technical support have been drafted and await review and endorsement by senior
management. The highlights of the proposed review are set out below.
30
Structural Review of MoFEP
It is envisaged that this would include:
targeted adjustments to the organisational structure, in the short-term, to strengthen the
ministry’s effectiveness in implementing key PFM reforms, specifically to address key functional
gaps in debt management, and issues in budget preparation & execution. Technical support for a
comprehensive organizational review and restructure may be required in the long-term;
support to directorates to develop clear staff job descriptions, assess skills gaps and establish
staffing requirements;
development of a coherent strategy for enhancing skills development for staff within the
ministry.
Key challenges in implementing planned institutional reforms are:
- Given the current fiscal situation, there was also a shift in focus of priorities. This meant that
a number of planned activities did not take off as envisaged, as the attention of senior
management was diverted. Senior management is therefore cognizant of the critical need to
refocus attention on implementing the action plan.
- No formal oversight structures have been established to monitor implementation of the
action plan, and there remains no clear institutional home within MoFEP for coordinating its
implementation. In addition, it has proved challenging to convene regular senior
management meetings.
- Weak structures of internal coordination and effective communication are recognized as the
continuing challenges influencing the momentum of reforms in this area. This includes both
coordination across directorates, and also in the provision of TA.
Conclusion
This report has set out progress in the implementation of the MoFEP Action plan. Progress has been
mixed, but significant in several areas. These achievements have taken place in a challenging
environment, with the Oil Shut-down and austerity. The austerity period has presented both
challenges and opportunities for reform.
Progress has been made in establishing the legal and policy framework, and a technical foundation
has been laid in a number of areas. A key test in 2012/13 will be the implementation of these
reforms, and translation of these reforms into improved PFM outcomes. There have been
indications that these may already be contributing to PFM outcomes– for example increases in non-
tax revenue have been realised and expenditure control showed signs of improvement.
