El Salvador Domestic Resource Mobilization Project

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El Salvador Domestic Resource Mobilization Project

First Year Work Plan May 2017 - April 2018

June 2017

This publication was produced for review by the United States Agency for International Development. It was prepared by DAI Global, LLC.

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EL SALVADOR DOMESTIC RESOURCE

MOBILIZATION PROJECT

FIRST YEAR WORK PLAN

May 2017 - April 2018

Project Title: Domestic Resource Mobilization

Sponsoring USAID office: USAID/El Salvador Economic Growth Office

Contract Number: AID-519-C-17-00002

REQ-519-16-000023

Contractor: DAI Global, LLC

Date of Publication: June 2017

The authors’ views expressed in this publication do not necessarily reflect the views of the

United States Agency for International Development or the United States Government.

USAID El Salvador Domestic Resource Mobilization Project

TABLE OF CONTENTS

ACRONYMS ................................................................................................................................... i

I. INTRODUCTION AND BACKGROUND ............................................................................ 1

A. PROJECT GOALS AND OBJECTIVES ........................................................................ 1

B. MANAGEMENT AND ADMINISTRATION ................................................................ 6

C. INTERNATIONAL DONORS, PARTNERS AND SUBCONTRACTORS

COORDINATION ...................................................................................................................... 8

II. COMPONENT 1: BUDGET PLANNING AND PREPARATION IMPROVED .............. 9

SUMMARY OF COMPONENT 1 MILESTONES FOR YEAR ONE ..................................... 9

SCHEDULE OF ACTIVITIES FOR YEAR ONE ................................................................... 10

DISCUSSION OF ACTIVITIES .............................................................................................. 11

III. COMPONENT 2: BUDGET EXECUTION IMPROVED ................................................ 14

SUMMARY OF COMPONENT 2 MILESTONES FOR YEAR ONE ................................... 15



IV. COMPONENT 3: TAX POLICY AND ADMINSTRATION IMPROVED .................... 22




V. COMPONENT 4: TRANSPARENCY AND PUBLIC - PRIVATE DIALOGUE ON

FISCAL POLICY STREGTHENED ............................................................................................ 29




VI. PROJECT START UP ACTIVITIES ................................................................................ 33

TASK 1: ESTABLISH WORKING RELATIONSHIP AND PROTOCOLS WITH USAID .. 34

TASK 2: ESTABLISH A BASE OF OPERATIONS FOR THE PROJECT............................ 34

TASK 3: MOBILIZE AND ONBOARD APPROVED KEY PERSONNEL ........................... 34

TASK 4: ESTABLISH DAI AND USAID COMPLIANT PROJECT SYSTEMS, POLICIES,

AND PROCEDURES ............................................................................................................... 35

TASK 5: RECRUIT TOP PRIORITY PROJECT STAFF ........................................................ 35

TASK 6: FINALIZE SUBCONTRACTS ................................................................................. 36

TASK 7: ACQUIRE NECESSARY DOCUMENTATION FOR PROJECT OPERATIONS ..... 36


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ACRONYMS

AECID Spanish Agency for International Development

COMPRASAL E-Procurement System

COP Chief of Party

CSMS Case Selection Management System

DAI DAI Global, LLC

DGA Customs General Directorate

DGCG General Directorate for Government Accounting

DGII General Directorate for Internal Revenue

DGP Budget General Directorate

DGT Treasury General Directorate

DINAFI National Directorate for Financial Administration and Innovation

DPEF Fiscal and Economic Policy Directorate

EU European Union

FAS Field Accounting System

FPEMP Fiscal Policy and Expenditure Management Program

GDP Gross Domestic Product

GOES Government of El Salvador

HR Human Resources

ICEFI Central American Institute of Fiscal Studies

IDB Inter-American Development Bank

IMF International Monetary Fund

IPSAS International Public Sector Accounting Standards

ISA International Standards on Audit

IT Information Technology

MOE Ministry of Education

MOH Ministry of Health

M&E Monitoring and Evaluation

MTFF Medium Term Fiscal Framework

MTEF Medium Term Expenditure Framework

MTIF Medium Term Institutional Framework

OTA US. Treasury Office of Technical Assistance


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PFM Public Financial Management

PPOO Public Procurement Ombudsman Office

ROB Result Oriented Budget

SAFI National Financial Management System

SAFIM Municipal Financial Management System

TAMIS Technical and Administrative Management Information System

TAS Tax Administration Specialist

TPAR Tax Policy and Administration Reform Program

TSA Treasury Single Account

UNAC National Procurement Office

USAID United States Agency for International Development

USG United States Government

WB World Bank


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I. INTRODUCTION AND BACKGROUND

This report presents the first year work plan for the United States Agency for International

Development (USAID) funded Domestic Resource Mobilization Project. It covers the period

from May 1, 2017 through April 30, 2018. USAID and DAI Global, LLC (referred to as DAI)

signed the contract on April 27, 2017. The Project is for five years and concludes on April 26,

2022.

The previous USAID fiscal project, known as the Fiscal Policy and Expenditure Management

Program (FPEMP) had successfully supported the Ministry of Finance (MOF) in the

implementation of reforms that generated an increase in tax collection of 4% of Gross Domestic

Product (GDP). Nevertheless, the gap between revenues and expenditures has remained high

over the past 15 years, generating a situation of structural deficit that is currently challenging the

fiscal sustainability of the country. The Domestic Resource Mobilization Project will continue

supporting the MOF in implementing the reforms on revenues and expenditures to solve the

short term fiscal deficit and to implement the structural reform to guarantee that the GOES fiscal

and financial environment get to a safe harbor that guarantee fiscal sustainability, sound

economic growth and a better life for all Salvadorians.

The first year of Project implementation is of critical importance to build strong foundations of

the project’s activities, to maintain continuity of previous USAID technical support provided to

the MOF, and to ensure achievement and sustainability of the project’s goals. As such, this first

year work plan defines in detail how DAI has organized its work to implement the Domestic

Resource Mobilization Project and achieve the expected results. The work plan presented herein

is the result of numerous meetings with different stakeholders, and contains a set of activities

carefully developed in concert with the MOF and USAID.

The report is divided in six (6) sections. The first section describes the Project itself, including its

goals and objectives, project management and administration, and a summary of the main

activities. Sections two through five present each component’s objectives, results, milestones and

activities expected for the first year of the Project while the last section, section six, reviews the

project star-up activities including recruitment and office establishment process.

A. PROJECT GOALS AND OBJECTIVES

The GOES is engaged in the modernization of its Public Financial Management (PFM) system

and the strengthening of its revenue collection. The reforms include the budget system reform,

the treasury system modernization, the adoption of International Public Sector Accounting

Standards (IPSAS), the development of a state-of-the-art Government Financial Information

System, the development of a fully transactional e-procurement system and the enhancement of

fiscal transparency. Through Tax Policy and Administration Reform (TPAR) and FPEMP,

USAID has supported the Government of El Salvador (GOES) over the last 11 years, carrying

out the reforms and providing transparency, efficiency and revenues increase.

Through the Domestic Resources Mobilization Project, USAID’s goal is to continue improving

public financial management practices, increase domestic revenue mobilization and generate

additional revenue for the public sector in El Salvador. The Project’s expected goals are to


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contribute to the GOES effort to achieve a tax revenue increase of 2% of GDP over the baseline

established at the end of 2017; a result-oriented budget formulation in place; an improved public

expenditure management; an increased fiscal transparency and a strengthened public-private

dialogue.

The goals above are comprised of four components, which are:

Component 1: Budget Planning and Preparation Improved

Component 2: Budget Execution Improved

Component 3: Tax Policy and Administration Improved

Component 4: Transparency and Public-Private Dialogue on Fiscal Policy Strengthened

On Budget Planning, Component 1, the GOES has been adopting a new system of multi-year,

results-oriented budgeting with a Medium-Term Fiscal Framework (MTFF) and the associated

Medium-Term Expenditure Framework (MTEF). The MTFF will provide aggregate multi-year

projections of fiscal revenues, expenditures, and financing based on macroeconomic scenarios

and an analysis of risks.

The MTEF will provide multi-year expenditure projections disaggregated programmatically,

including the public investment program. The European Union (EU), Inter-American

Development Bank (IDB), International Monetary Fund (IMF), and German International

Development Cooperation (GIZ) have been providing assistance for the development of these

frameworks, with the IDB having a particular role in the evaluation of risks in the MTFF. EU

and GIZ assistance has also been instrumental in creating the internal capacity within the MOF

for developing and monitoring the implementation of its Strategic Plan. The MTEF will also be

instrumental in the gradual formulation and implementation of the government budget based on

performance or results oriented budget (ROB).

The gradual formulation of the first ROB was planned to start in 2014 for the 2015 budget, but

has been delayed. Donors have indicated that future assistance programs will include software

development and training. The Minister and Vice Minister of Finance have confirmed high-level

engagement during the implementation stage. GIZ has provided assistance for conceptual design,

including monitoring and evaluation. USAID has supported software design and implementation,

and has also provided support to three ministries for the formulation of pilot ROB in 2016

(Agriculture, Economy, and Health), which need to continue during 2017-2018.

The project will review the frameworks methodologies and will recommend the necessary

changes to the revenue and expenditure forecast model and the microsimulation models for the

MTFF. Extensive training will be provided to the DPEF and the Budget General Directorate

(DGP) staff to successfully implement the MTFF and MTEF. Training on the MTIF will be

provided to the GOES institutions.

Software for the standardization and successful development of the frameworks will be

developed. During the first year, the Project will support the development of the use cases.

Regarding the budget formulation, the project will continue supporting the DGP, Ministry of

Education (MOE) and Ministry of Health (MOH) in the successful implementation of the

program based budget system. Technical support will continue including the trilateral initiative

with the Argentinean MOF.


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We expect that by the end of the second year the MOF will be fully implementing the MTFF and

MTEF, using them as the bearing point for public expenditure planning, execution and

management. The MTIT should be fully implemented by the end of the Project’s third year at all

GOES institutions.

On Budget Execution, Component 2, the GOES is moving forward in the adoption of IPSAS,

TSA, the E-procurement system, the Result Based Budget execution program under accruals

methodology, the SAFI II development and implementation, and an integral strategy for civil

society oversight and accountability.

The IPSAS adoption will dramatically change public accounting practices by fully adopting

international standards, avoiding discretionary accounting registration, improving accountability,

and providing accurate financial information to the PFM policy makers. During the past five

years, the MOF, with USAID support, has being moving forward with the IPSAS adoption,

updating the conceptual model, charts of accounts, and accounting framework; additionally, the

IPSAS accounting policy manual has been approved and incorporated in the accounting

legislation, and training has been provided to all GOES entities. During the first year, the Project

will deliver extensive training on IPSAS modules two and three, accounting matrices and IPSAS

accounting practices logic and implementation. Additionally, the Project will support the General

Directorate for Government Accounting (DGCG) administrative and functional reform.

The Treasury Single Account (TSA) System implementation will continue with the adoption of

the new SAFI II. Additionally, extensive support most be provided to the Treasury General

Directorate (DGT) to implement the budget commitment installments using microsimulation

methodologies, the closing of the GOES institutions bank accounts and the proper banking

reconciliations, and the DGT administrative and functional reform. The project, in coordination

with the OTA resident advisor, will coordinate the support to the DGT in the successful

implementation of the tasks.

In addition, the MOF is implementing the E-Procurement system and the reform of the current

LACAP to adopt the reverse auction and framework agreements modalities. During FPEMP

PAAC, Libre Gestión, Licitaciones, Contratación Directa y Concursos Públicos modules were

developed. The PAAC is fully implemented and the Libre Gestión is in the process of

implementation; Licitaciones, Contratación Directa and Consursos Públicos modules were fully

developed and are ready for implementation. The Domestic Resource Mobilization Project will

continue developing the remaining modules of COMPRASAL II and will support the training

programs of the modules already developed and in currently implementation. The Project will

continue supporting the drafting of the LACAP reform and will provide training and advocacy

for the GOES and the National Assembly to fully adopt the reverse auction and the framework

agreements.

On the program based budget system implementation, the project will continue supporting the

DGP and GOES institution in the new budget adoption with extensive training and the

development of the Budget Monitoring and Evaluation Module within the SAFI II. During the

first year, the Project will support the module use cases development and will provide extensive

training to the DGP and Technical Secretary of Presidency on Budget M&E methodologies.

Additionally, it is expected that an assessment of the proper Program Based Budget adoption will

be conducted at the end of the first year.


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In order to implement the public modernization agenda, it is necessary that the SAFII II be

developed and implemented. SAFI II development has faced critical challenges during the last

three years, and its development is in a critical phase. FPEMP developed more than 70 percent of

the accounting and treasury system. The Domestic Resource Mobilization Project will continue

developing the systems and will support the deployment by January 1, 2018. The Project agreed

with DGT and DGCG directors in developing the core component for both systems and the

remaining modules (that are necessary only by the end of 2018) will be developed during the

first five months of 2018. Extensive training to GOES institutions will be provided by the end of

2017.

The previous USAID project, FPEMP, supported an integral strategy for civil society oversight

and accountability. The fiscal transparency portal was upgraded under a trilateral initiative with

the Brazilian Government, forums were developed to discuss the fiscal matters with civil society,

and the Public Procurement Ombudsman Office (PPOO) was created. The MOF is fully

committed to continue implementing the strategies for civil society oversight and better

accountability. The Project will continue supporting the PPOO strengthening and the

development of new strategies to create a civil society oversight tools taking advantage of the

SAFI II, the fiscal transparency portal and the COMPRASAL II.

On Tax Policy and Tax Administration, Component 3, the MOF is implementing important

reforms in the tax control system and the taxpayer service program to increase voluntary

compliance and enforce the tax law in a way that will increase in revenue by at least 2% of GDP

during the following five years. Implementation and strengthening of the recently created Tax

Arrears Collection directorate is a priority for the Viceminister of Revenue, and the integral and

full reform of the Customs authority is being planned by the project with the MOF.

The Project will support the General Directorate for Internal Revenue (DGII) in the full reform

of the tax control model, taking advantage of the impressive results provided by the Case

Selection Management System (CSMS) II. The data mining model will incorporate new data and

better algorithms, a new model of tax control integrated in a pipe line model will be

recommended and implemented, and the necessary protocols and procedures will be drafted and

implemented. In order to implement the new model, the project will provide extensive training in

tax control and auditor technics to DGII auditors. Special attention will be provided to the DGII

Internal Audit office to improve their tools and skills to audit the proper adoption and

implementation of the new tax control protocols and systems. A new taxpayer current account

will be developed, and during the first year the project will support the development of the

conceptual model and the use cases. Regarding fiscal reforms, the project will advocate with the

GOES and the National Assembly on the need to approve it as a way to boost tax revenues; once

enacted, full support will be provided to the implementation. For the Simplified Tax System, the

project will advocate with the MOF authorities and the Presidential House to fully draft the

regulation for the new system that will integrate the economic agents that are on the informal

economy to the fiscal system, granting them access to financial services and support and helping

them to fully comply with the fiscal system.

The project will support the DGT in the development of a new SITEP system. Five modules of

the SITEP are being developed within the SAFI II, and the remaining modules must be migrated

to a new system. The Project will support the DGT to develop the use cases and will train the

DGT IT staff on JAVA and Oracle to prepare them to develop the migration program. The


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Project will provide support and supervision to the staff in the development, testing and

deployment.

The Project will fully support the implementation of the recently created Tax Arrears Collection

Directorate. The implementation of the new tax arrears management system will be fully

supported by the Project. Currently, the new directorate is working hard in organizing and

detecting tax arrears to properly begin the collection of due taxes. IT staff and tax experts will

fully support the data mining program that will detect and clean the tax arrears and the

development of protocols and procedures for the new collection model, and the development of

the transactional system of the tax arrears collection within the CSMS II will begin. During the

first year, the Project will support the development of the use cases. The Tax Arrears Crackdown

Program recommended by FPEMP will be fully supported by the Project.

The Viceminister of Revenue is fully committed to reform the entire Customs Administration,

based on the assessment develop by a Colombian Government expert under the trilateral

initiative. The experts detected that the Salvadorian customs administration had serious problems

and needed to be fully reform and modernized. The goal of the Project on the customs

modernization program will be to leave in place a world-class trade facilitation system and a

strong customs administration that enforce the law with full attachment to the Constitution and

the due process. The first task the Project will support is the development of a draft of the

Custom Code that will integrate the disperse customs regulations and will incorporate the

reforms for the private customs regulation, the electronic customs clearance process, the private

customs warehouse system, the customs statutory power to control secondary zones (post

customs clearance areas) customs value declaration, among others.

The Domestic Resource Mobilization Project will recommend the new administrative and

functional reforms of the Customs General Directorate (DGA) and will support its

implementation. Additionally, a customs fraud crackdown program will be recommended and

supported. The project will develop within the CSMS II the customs operations transactional

system, and during the first year the use cases will be developed. All these activities will be

complemented with an extensive training program.

Finally, on Fiscal Transparency and Public-Private Dialogue, Component 4, the main goal is to

support the GOES to improve fiscal transparency and improve public-private dialogue on fiscal

matters. It is key that the government improve the fiscal transparency portal expanding the open

data model to the level of Item, providing more transparency and better information to civil

society, private sector and academic community. It is necessary to recommend and support the

creation of a Transparency and Accountability Office under the Viceminister of Finance; the

office will be constantly working in the creation and implementation of mechanism of citizens

participation providing broader information in a user-friendly format, and will work with the

Public Procurement Ombudsman Office (PPOO), the taxpayer advocate and all MOF

directorates to improve accountability. The PPOO will receive technical support from the

Project. Extensive training will be provided and the project will support the development of a

risk management matrix system. The taxpayer advocate office within the DGII will receive full

support in training, technical tools and models, and standards of investigation and analysis. The

Project will continue working with the donor committee and the MOF in a public-private sector

agenda and the GOES-political parties’ agreement to support the fiscal stabilization of the

country.


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The activities included in the first year work plan have been refined to prioritize the needs

identified in the different government units developed together by the MOF and USAID. This

will provide the basis to assist the GOES to advance tax reform and public financial and

expenditure systems while promoting government transparency, accountability, and more

efficient use of public resources.

B. MANAGEMENT AND ADMINISTRATION

The Domestic Resources Mobilization Project is led by a Chief of Party (COP) and three Key

Personnel. The Project has its office located on the sixth and fifth floor, Tower 3 of the MOF’s

DGII building. Figure 2 presents the current Project management and team structure.

The Project is comprised of a strong technical team lead by Mr. Enrique Giraldo and supported

by component leaders with extensive international experience in public expenditure, revenue and

change management. While the Leaders of Components 1 and 3 will have full delegation from

the COP, they will be fully monitored and coordinated by Mr. Giraldo. The team leaders will be

supported by junior experts and a large team of top-notch international experts on IPSAS,

treasury, public procurement, tax, customs, tax collection, change management, among others.

The COP will ensure that the relations with the MOF executive and technical staff be managed in

a technical, respectful and professional manner and will address any issue that arise.

Due to the complexity of the Project and the large budget, the administrative team is integrated

by a Financial and Administrative Office supported by a Financial and Administrative Manager,

Accountant, Human Resources (HR) Coordinator, Administrative and Financial Assistant, IT

System Administrator/Help Desk and a Driver. This unit will be in charge of human resources

recruitment, support the COP in evaluating the long-term staff, payroll, vendors payment, among

other administrative and financial. The Procurement Manager will be in charge of managing and

developing procurements and guarantee adherence to USAID regulations and proper due

diligence.

The IT Unit will include an IT Manager, IT Supervisor, IT Programmers and Database

Management Administrator. This office will be in charge of the development of the IT software

necessary for the accomplishment of the project goals.

The Monitoring and Evaluation (M&E) Unit will be integrated by the M&E Specialist and M&E

Assistant. This unit will be in charge of the implementation of the Monitoring, Evaluation and

Learning Plan approved by USAID.

The following staff members currently comprise the Project Management Team:

Chief of Party and Component 2 Leader: Mr. Enrique Giraldo

Expenditure Management Specialist and Component 1 Leader: Mr. Mario Gutierrez

Revenue Administration Specialist and Component 3 Leader: Mr. Jose Lopez

Public Sector Change Management Advisor and Component 4 Leader: Lee Niederman

IT Manager: Mr. Renato Bonilla

IT Coordinator: Mr. Nelson Hernandez

Monitoring and Evaluation Specialist: Mr. Carlos Quiteño

Financial and Administrative Manager: Mr. Cesar Sagastume

Procurement Manager: Mrs. Karen Melendez


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FIGURE 2: PROJECT ORGANIZATIONAL CHART

Chief of Party Enrique Giraldo

Program Assistant

TBD

Expenditure Management Specialist

Mario Gutierrez

Public Sector Change Management Advisor

Lee Niederman

Accountant TBD

Procurement Manager Karen Melendez

PPP, Transparency, Civil Society Specialist

TBD

Executive Assistant

TBD

Change Mgmt Specialist/Training and

Capacity Building Advisor TBD

Budget Expert TBD

M&E Specialist Carlos Quiteno

M&E Assistant TBD

= Key positions

Revenue Administration Specialist

Jose Luis Lopez

Tax Expert TBD

Finance & Admin Manager Cesar Sagastume

HR Coordinator TBD

Finance & Admin Assistant

Ariel Lopez

Driver Omar Ortiz

IT System Admin/Help Desk TBD

IT Manager Renato Bonilla

IT Coordinator Nelson Hernandez

Database Admin. TBD

IT Programmers (17)

Communications Specialist TBD


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C. INTERNATIONAL DONORS, PARTNERS AND SUBCONTRACTORS COORDINATION

The MOF is receiving additional technical assistance from the European Union (EU), German

Agency for International Development (GIZ), Spanish Agency for International Development

(AECID), World Bank (WB), Inter-American Development Bank (IDB), US. Treasury Office of

Technical Assistance (OTA) and the International Monetary Fund (IMF). Making USAID

investment more effective and efficient will require discussing and coordinating ideas and

programs with these donors and multilateral agencies.

The Project will engage in constant communication with other donors and multilaterals to

develop synergies, and will assist the MOF in gaining greater control over donor commitments

and shaping the development agenda.

In addition, the Project has two subcontractors that will provide support in several areas. Data

Mining International will support the customs data cross reference system that will improve the

customs control and the trade facilitation. TechChance will support the e-learning program

providing a state of the art e-learning system that will support all the change management

strategy. Additionally, Project partner Central American Institute of Fiscal Studies (ICEFI) will

support the development of fiscal and economic studies that will be used to support the program

activities.


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II. COMPONENT 1: BUDGET PLANNING AND PREPARATION IMPROVED

Following best international practices, five years ago the GOES decided to adopt the

development and use of the medium-term fiscal framework, medium-term expenditure

framework, and the institutional framework. These macro-fiscal tools have the purpose of

providing the government fiscal and economic targets and the fiscal data and instruments that

must be guide the budget ceiling, the key budget programs and resource allocations. The

frameworks enforce a fiscal discipline that could help the government guarantee fiscal

sustainability.

Additionally, the MOF decided to reform the budget system, transitioning from a budget line

system to a program based budget on a result-oriented approach. The new budget system

enforces the GOES institutions to develop budget programs with a full set of indicators of output,

efficiency and economy, helping the GOES to improve public value creation and the

rationalization of resource allocation.

Finally, the fiscal rule requires from the government a fiscal adjustment of 3% of GDP, among

other fiscal targets and actions. The adjustment must be achieved by January 2020. The targets

are ambitious and require from the government the immediate and successful adoption of the

macro-fiscal tools and the adoption of the new budget formulation methodology.

The Project team leader, with the support of the junior budget expert and Project international

experts will work with the DPEF and the EU in the review and implementation of a strong

MTFF and MTEF. Special attention will be paid to the multiyear revenue and expenditure

forecast and the microsimulation of fiscal and economic growth scenarios. It is critical to

standardize the methodologies that support the MTFF and MTEF. Additionally, the Project will

develop software to help the DPEF, DGP and the GOES institutions develop these macro-fiscal

instruments and link them to policy decisions.

The adoption of the MTIF by the GOES institutions will be a very challenging task that will

demand extensive training and the development of a standardized model. Following the MTFF

and MTEF, the Project will develop software that will help the institutions in the development of

the MTIF.

Regarding the program-based budget formulation, full support will be provided to the Ministry

of Education (MOE), Ministry of Health (MOH), Ministry of Public Works (MPW) and the

Ministry of Defense (MOD) , which comprise more than 60% of the entire GOES budget). The

support to the MOE and MOF will be developed in coordination with the IDB, and support to

MOD with the US Department of Defense. The Project will advocate with other donors to

guarantee the support to other ministry lines. The trilateral initiative with the Argentinean

Ministry of Finance will be used to provide additional support to the MOE and MOH.

SUMMARY OF COMPONENT 1 MILESTONES FOR YEAR ONE

The following table presents the various milestones planned for Component 1 for the first year

work plan period:


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Table 1 – Component 1 Milestones

Component 1 Milestones Q1 Q2 Q3 Q4

Activities Matrix for the Medium-Term Framework developed in

coordination with the MOF and European Union Fiscal Project

Medium Term Framework Assessment Developed

Training on Medium Term Fiscal Framework implementation

delivered

Training on Medium Term Expenditure Framework implementation

delivered

Training on Medium Term Institutional Framework implementation

delivered

Study of tax gaps by tax categories for monitoring of tax collection

developed

Training on ROB to Ministries in the preparation of the 2018 and

subsequent budgets delivered

Program Costing Methodology Training delivered

Ministries of Education and Health budget formulation improved

Assessment of productivity in selected government activities

developed

Initial Assessment of government investment

Initial Assessment of government spending on social programs and

recommendations

Change Management Plan for the Medium-Term Frameworks

implementation developed

Change Management Plan for the ROB adoption developed

DGP and DPEF Organizational Assessment Tool developed

SCHEDULE OF ACTIVITIES FOR YEAR ONE

Table 1 provides a list of specific tasks for each area of assistance planned for Component 1

during year one. The table is followed by a summary discussion of year one activities.

Table 2 – Component 1 Schedule of Activities

Activities by Work Area Q1 Q2 Q3 Q4

Medium Term Frameworks

Coordinate with the MOF and the European Union to work on an

activities matrix for the Medium-Term Frameworks support

Develop an assessment of the advances and challenges for the

implementation of the Medium-Term Frameworks

Deliver training on Medium-Term Fiscal Framework implementation

Deliver training on Medium-Term Expenditure Framework

implementation

Deliver training on Medium-Term Institutional Framework

implementation

Study of “tax gaps” by tax categories for monitoring of tax collection.


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Result Oriented Budget

Deliver training on ROB to Ministries in the preparation of the 2018

and subsequent budgets

Support the development of a Program Costing Methodology

Support the Ministries of Education and Health to improve their

budget formulation

Assessment of productivity in selected government activities

Initial Assessment of government investment expenditure (procedures

for selecting investment projects)

Initial Assessment of government spending on social programs

Change Management for Budget Formulation

Develop the Change Management Plan for the Medium-Term

Frameworks implementation

Develop the Change Management Plan for the ROB adoption

Develop an Organizational Assessment Tool for the DGP and DPEF

DISCUSSION OF ACTIVITIES

The Project will develop a road map to discuss the different tasks, n a chronological order, with

the directors of the DPEF and DGP. Special attention will be provided on the definition of

activities of the project and the MOF, milestones and the necessary commitments. Additionally,

a conflict resolution mechanism will be established with the Viceminister of Finance in order to

avoid delays in the task implementation and targets accomplishments. Extensive coordination

will be done with the IDB, EU and the Argentinean MOF.

Medium Term Frameworks

The Project’s first year work plan will focus on activities oriented to further develop a robust

MTFF and gradually extend the development of a MTEF and ROB formulation to equip the

MOF with key tools for supporting a sound formulation and monitoring of fiscal policy and the

government budget. The support to strengthen the MOF MTFF includes ensuring consistency

between the macro-fiscal assumptions and projections; consistency between the fiscal projections

of government revenue, expenditure, and financing; and consistency between the projected

government finance and the real sector, external sector, and the monetary sector under alternative

projected scenarios. The MTFF will simulate alternative medium term budgetary scenarios based

on changes in external and internal variables, including tax and expenditure policy changes, and

consideration of key fiscal risks.

The MTEF is a key budget tool for linking policy, planning and budgeting over a medium-term

(usually three years). It connects a top-down resource envelope with the bottom-up estimation of

current and medium-term costs of existing policies, and involves rolling over this exercise each

year to reflect possible policy changes. The Project’s activities for supporting the development

and use of MTEFs in the budgeting process consider ensuring consistency between the MTFF

and government spending priorities. This would include close examination of key expenditure

categories: government wages; subsidies and transfers; spending on social protection; the

investment budget, and government spending on social security. Provision of capacity building is


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crucial for the adequate formulation and implementation of the MTFF and MTEF in the

budgeting process. The development of “tax gap” indicators is also included as part of the first-

year activities of Component 1 to support the macro fiscal assessment of government revenues

and projections in the MTFF and MTEF.

The tasks that will be performed on the medium-term frameworks activity are:

Coordinate with the MOF and EU to work on activities matrix for the medium-term

frameworks support.

Develop an assessment of the advances and challenges for the implementation of the

medium-term frameworks.

Deliver training on medium term fiscal framework implementation.

Deliver training on medium term expenditures framework implementation.

Deliver training on medium term institutional framework implementation.

Develop de use cases of the medium-term frameworks module.

Results Oriented Budget

Results-oriented budgeting (ROB) aims at improving the efficiency and effectiveness of public

expenditure by linking the funding of public sector organizations to the results they deliver. A

performance or results-oriented budget (ROB) is a key budgetary tool to hold agencies’

accountability in terms of service production and delivery, while at the same time, enabling the

budgeting process to link the country’s policy priorities with the agencies’ missions and

spending. ROB is a natural complement of the MTEF. The MTEF aims at improving expenditure

prioritization and the ROB focus on managing the efficiency and effectiveness of government

expenditure by making use of performance indicators. The Project’s activities for the first year

includes the examination of productivity in government sector activities a crucial for supporting

pillar for the formulation of a ROB.

Component 1 activities in the first year will support the formulation of a ROB approach shifting

gradually the budgetary approach from inputs and activities to outcomes. The first year plan

considers continued support to the ministries of health, public works, defense and education for

improving the budget formulation based on a ROB approach and integrating it into their MTEFs.

The work plan considers activities required in the formulation of a ROB: (1) identification of

agencies’ goals, missions, and objectives and their relation to national policy priorities (National

Development Plan); (2) identification of potential programs and quantification of the amount of

resources required (program-costing); (3) institutional procedures to ensure that budget resources

are closely linked to program output and anticipated outcomes; and (4) indicators for monitoring

agencies’ execution and the auditing of programs’ performance.

The tasks that will be performed on the ROB support activity are:

Deliver training on ROB to ministries in preparation of the 2018 and subsequent budgets.

Support the development of a program costing methodology.

Support the ministries of education, public works, defense and health to improve the

budget formulation.


13

Assessment of productivity in selected government activities.

Initial assessment of government investment expenditure (procedure for selected

investment projects).

Initial assessment of government spending on social programs.

Study of tax gaps for tax category.

Change Management for Budget Formulation

The change management process will initially begin by working with MOF counterparts to

identify internal and external stakeholders. The stakeholder will be those groups affected by the

changes being promoted by the project. This will be an evolving process as we identify new

groups. Once we have identified the stakeholders, we will begin meeting with them to develop a

communications strategy. Each stakeholder, whether internal or external, may have a unique

need that will have to be addressed. The Project will develop a strategy and tools for analyzing

the organizational needs to implement the strategy.

Working with the MOF counterparts, the Project will identify the most appropriate training

solutions for each component. The Project will develop a training delivery plan depending upon

the needs of the trainees. Some of the considerations will be content, population size, employee

location, etc.

The training methodologies may include e-learning, computer based training, web-based training

and classroom training. As noted above, this will vary upon the trainee’s needs, location and

population size.

The tasks that will be performed on change management for budget formulation activity are:

Develop the change management plan for the medium-term frameworks implementation.

Develop the change management plan for the ROB adoption.

Develop and organizational assessment tool for DGP and DPEF.


14

III. COMPONENT 2: BUDGET EXECUTION IMPROVED

Budget execution reform has been advancing over the past three years. The new ROB, IPSAS,

TSA and e-procurement implementation will address the current structural issues in the public

expenditure system, responsible in mayor part of the current structural deficit of the GOES.

The ROB execution will require the implementation of the budget commitment installment and

the monitoring and evaluation system, while the budget commitment will control expenditures

based on cash flow availability. The ROB M&E will help the GOES measure the public value

creation and the accomplishment of goals, efficiency and performance standards. The DGP and

DGT must receive an extensive training program to successfully implement and monitor the

budget commitment installments. The DGP and Technical Secretary of Presidency will be

trained on the M&E model and practices. An M&E module will be developed within the SAFI II,

and the module will include tools that will be used by the GOES institutions, primary registration

units, as well as the the TSP and DGP who will use it for monitoring and evaluation purposes.

The IPSAS adoption program will continue toward its implementation in 2018. Currently, the

legal system includes the conceptual model, conceptual framework, charts of accounts and the

accounting policy manual. During the first year, the Project will provide extensive training on the

matrices and IPSAS system operation and accounting logic and IPSAS rules. Additionally,

extensive recommendations and support will be provided to the DGT for its administrative and

functional reform.

The advance TSA system will start implementation in 2018. The project will support the

implementation of the budget commitment instalment and will develop a microsimulation and

forecast model, which will be used as well for cash management purposes.

The COMPRASAL II system will continue the deployment of the Libre Gestión, Licitaciones,

Concursos Públicos and Contratación Directa modules. The Administración de Contratos,

Registro de Proveedores, Garantias and Procedimientos Sancionatorios modules will be

developed. The Project will support the drafting of the Framework Agreements and Reverse

Auction modalities and will advocate with the MOF authorities on the importance to promote the

fiscal reform.

The SAFI II system development will continue during the first year. The Accounting and

Treasury system development will be finished during the year, and extensive training will be

provided to GOES institutions and technical support will be provided during the stabilization

period.

The project will start the development of the SAFIM use cases that will integrate the municipal

budget, accounting, treasury and revenues modules.

On the oversight and accountability of institutions activity, the Project will start the technical

support to the Corte de Cuentas. In coordination with the IDB, the Project will advocate on the

International Standards on Audit (ISA) adoption and will provide extensive training.


15



work plan period:



DGT administrative and functional reform proposal developed

Cashflow Projection Tool developed

General Accounting Policy Manual implemented within GOES

institutions

GOES institutions trained on IPSAS and Accounting matrices

DGCG administrative and functional reform proposal developed

DGCG administrative and functional reform implemented

SAFI II Treasury Subsystem developed

SAFI II Treasury Subsystem tested and deployed

SAFI II Accounting Subsystem developed

SAFI II Accounting Subsystem tested and deployed

SAFI II Government Accounting Subsystem, Treasury Subsystem and

COMPRASAL II integrated with the Budget Formulation Subsystem

Medium-Term Frameworks Module Use Cases developed

Training on Accounting and Treasury Subsystem Implementation

delivered

SAFIM use cases developed

COMPRASAL II Licitaciones, Concursos Públicos, and Contratación

Directa module deployed

COMPRASAL II Administración de Contratos uses cases designed

LACAP reform proposal that includes framework agreements and

reverse auction approved

Use Cases for a Procurement Control System designed

Assessment of the Corte de Cuentas capacity to control GOES

expenditure and revenues developed

Corte de Cuentas auditors trained on ISA adoption

Change Management Plan for the SAFI II implementation developed

Change Management Plan for the IPSAS implementation developed

Change Management Plan for the COMPRASALII implementation

developed

Organizational Assessment Tool for DGT, DGCG and UNAC

developed






16


Cash Management

Support the development of the DGT administrative and functional

reform proposal

Support DGT in the development of a Cashflow Projection Tool

In coordination with OTA, provide advice and technical assistance in

the reconciliation and closing of unnecessary GOES bank accounts

In coordination with OTA, provide technical assistance to DGT to

improve Bank Tenders and Contract Tracking and Management

IPSAS

Follow up the implementation of the General Accounting Policy

Manual within the GOES institutions.

Training on IPSAS to GOES

Training on Accounting Matrices and IPSAS procedures to GOES

institutions

Develop a technical proposal for the DGCG administrative and

functional reform

Support the administrative and functional reform implementation of

the DGCG

SAFI II and SAFIM

Development of the Treasury Subsystem

Testing and deployment of the Treasury Subsystem

Development of the Accounting Subsystem

Testing and deployment of the Accounting Subsystem

Support the integration of the Accounting, Treasury and

COMPRASAL II with the Budget Formulation Module

Development of the Medium-Term Module Use Cases within the

SAFI II

Support the development of a training program for the SAFI II

Accounting and Treasury Subsystem implementation

Support the development of the use cases for the SAFIM

Procurement

Support the deployment of the licitaciones, concursos públicos, and

contratación directa module

Support use cases design for the COMPRASAL II Adminsitración de

Contratos module use cases

Advocate and support the drafting and approval of LACAP reform

proposal that includes framework agreements and reverse auction

Support the updating of the public sector vendors and contractors

registry

Support Use Cases design for a Procurement Control System for the

Public Procurement Ombudsman

Oversight and Accountability Institutions

Assessment of the Corte de Cuentas capacity to control GOES

expenditure and revenues

Provide support to the Corte de Cuentas in the ISA adoption

Change Management for Expenditure

Develop the change management plan for the SAFI II implementation


17


Develop the change management plan for the IPSAS implementation

Develop the change management plan for the COMPRASAL II

implementation

Develop an Organizational Assessment Tool for DGT, DGCG and

UNAC


The project will develop a road map to discuss the different tasks, in chronological order, with

the directors of the DGT, DGCG, DPEF and DGP. Special attention will be provided on the

definition of activities of the Project and the MOF, the milestones and the commitment, and

additionally a conflict resolution mechanism will be established with the Viceminister of Finance

in order to avoid delays in task implementation and targets accomplishments.

Cash Management

The Treasury Single Account System implementation will continue with the adoption of the new

SAFI system. Additionally, extensive support most be provided to the DGT to implement the

budget commitment installments using microsimulation methodologies, the closing of the GOES

institutions bank accounts and the proper banking reconciliations, and the DGT administrative

and functional reform. The Project, in coordination with the OTA resident advisor, will

coordinate the support to the DGT in the successful implementation of these tasks.

The tasks that will be performed under the cash management activity are:

Support the development of the DGT administrative and functional reform proposal.

Support DGT in the development of a cash flow projection tool.

In coordination with OTA, provide advice and technical assistance in the reconciliation

and closing of unnecessary GOES bank accounts

In coordination with OTA, provide technical assistance to DGT to improve bank tenders

and contract tracking and management.

IPSAS

The Project will continue with the GOES support in the IPSAS adoption provided by FPEMP.

During year one, the project will focus on two IPSAS related activities: continue with the

training plan for the GOES centralized institutions initiated by FPEMP, and support the

administrative and functional reform of the DGCG.

The IPSAS trainings to central institutions will consist of a series of five trainings sessions:

1. Session One will be delivered to the GOES Ministries. The training will be on

presentation of financial statements, chart of accounts and income (IPSAS 1, 2, 3, 10, 14,

18, 22, 24, 33, 9 and 23) and personnel expenses (IPSAS 25), consolidation (IPSAS 20,

34, 35, 36, 37 and 38), related parties (IPSAS 5, 13, 19 and 26), provisions (IPSAS 29)

and basic financial instruments (IPSAS 3, 9, 12, 16 y 26).


18

2. Session Two will be delivered to the national hospitals and decentralized entities. The

trainings will be on accounting conceptual model and government accounting system

model, property and cost module (IPSAS 11, 12, 16, 17, 21, 27, 31 and 31), presentation

of financial statements, chart of accounts and income (IPSAS 1, 2, 3, 10, 14, 18, 22, 24,

33, 9 and 23), consolidation (IPSAS 20, 34, 35, 36, 37 and 38), related parties (IPSAS 5,

13, 19 and 26), provisions (IPSAS 29) and basic financial instruments (IPSAS 3, 9, 12,

16 y 26).

3. Session Three will be delivered to the DGCG and Audit Court. This training will be on

personnel expenses (IPSAS 25), consolidation (IPSAS 20, 34, 35, 36, 37 and 38), related

parties (IPSAS 5, 13, 19 and 26), provisions (IPSAS 29) and basic financial instruments

(IPSAS 3, 9, 12, 16 y 26).

4. Session Four will be delivered to the DGCG. The trainings will be on consolidation and

practical exercises, including study cases, based on the needs detected.

5. Session Five will be delivered to the GOES centralized institutions, social security

administrator and financial and non-financial public sector. The training will be on

superior financial instruments.

Finally, the DGCG reform proposal that will be developed by the Project will seek to optimize

the administrative and functional structure of the DGCG, preparing it to face the IPSAS adoption

process. It will be necessary to contemplate the development of tasks and functions that, despite

being the best practices, DGCG is currently not carrying out.

The tasks that will be performed under IPSAS activity are:

Follow up the implementation of the General Accounting Policy Manual.

Train on IPSAS to GOES institutions.

Training on accounting matrices and IPSAS procedures to GOES institutions.

Develop a technical proposal for the DGCG administrative and functional reform.

Support the DGCG administrative and functional reform implementation.

SAFI II and SAFIM

The primary goal of the Project during the first year is to finish the development and deployment

of the SAFI II Government Accounting and Treasury subsystems, continuing the work FPEMP

started. To complete the development and deployment of these subsystems, the Project will carry

out the following task: first, it will review the functional specifications of the subsystems in order

to guarantee their integrality with the other subsystems and modules that are part of the SAFI II

and to ensure that the functional aspects embodied in their use cases comply with their

conceptual models. Second, using the use cases developed by the counterpart teams, the Project

will perform the analysis and IT design to incorporate each of the functional specifications in a

modular way, complementing what was developed during FPEMP. Third, the Project will

continue the software development process and IT programming, following the development

standards specified by the MOF. Once the subsystems are developed, the fourth task will be the

performance of a quality control process. During this phase, the project will ensure that what was

requested by the Counterpart Team in the use cases has been fully developed; the software will

then be sent to the counterpart team to perform the proper tests and give final approval. Finally,

if the counterpart team has any observation to the developed software, the project will fulfill the

requested adjustments.


19

On the other side, during the first year the project will support the following SAFIM related task:

First, the project will analyze the status of the SAFIM and determine the possible development or

improvement options and check DGCG plans for this software. Second, the Project will create a

development strategy that responds to the DGCG and municipalities needs. Finally, during the

first year the Project will review all the SAFIM modules use cases to ensure the integration of

the old modules and the new ones that the Project will develop during its life.

The task that will be perform under this activity are:

Development of the Treasury Subsystem

Testing and deployment of the Treasury Subsystem

Development of the Accounting Subsystem

Testing and deployment of the Accounting Subsystem

Support the integration of the Accounting, Treasury and COMPRASAL II with the

Budget Formulation Module

Support the development of a training program for the Accounting and Treasury

Subsystem implementation

Support the development of the Medium-Term Module Use Cases within the SAFI II

Support the development of the use cases for the SAFIM

Procurement

During the first year, the Project will continue FPEMP efforts of providing technical assistance

and support the testing and deployment of the Licitaciones, Concursos Públicos, and

Contratación Directa module. This task is focused on performing internal tests to the FPEMP

developed software, with the objective of guaranteeing the optimal functioning and compliance

of the requirements and business rules established in the use cases delivered by the National

Procurement Office (UNAC). After performing internal tests, UNAC technical teams will

perform their own tests to make sure the software meet their requirements. Once the module is

finally approved by UNAC, the project will start supporting its deployment by providing help in

the development and implementation of the trainings plans for the use of the software to some

public pilot institutions.

The Project will also start supporting the use cases design and software development of the

Administración de Contratos module. The Administración de Contratos module must contain the

transactional logic of the contracting process in the monitoring and purchase order phase of the

contracts, and must be integrated with the financial and accounting system. During the use cases

design, the Project and UNAC will have to consider all the possible scenarios in which a

requirement of contract modification could emerge, as well as to establish a mechanism to

determine the level of contract compliance in order to determine possible non-fulfillment of the

vendors.

In addition, the Project will support the development and approval of the LACAP in order to

contribute to the implementation of best international public procurement practices, such as the

adoption of new contracting procedures like framework agreement and reverse auction. The

support will include discussion and review of the reform proposal, trainings and/or study tours to

Latin American countries that follows the best procurement practices. If the LACAP reform


20

proposal is approved by the President of the Republic and the Legislative Assembly, the Project

will eventually incorporate the new contracting procedures to the COMPRASAL II.

In year one, the Project will also start supporting UNAC in the upgrading and updating of the

Public Sector Vendors and Contractors Registry. The purpose of this activity is to provide the

Salvadoran public sector institutions with relevant information of the market for its

procurements, such as: prices, potential vendors and list of vendors with negative records, among

others. However, at this moment, the registry is not fully able to comply because there is not a

centralized register that gathers the legal, financial and technical documentation of the vendors.

Vendors currently need to present the very same documentation for each procurement process in

which they participate, increasing the costs of developing technical and economic proposals. The

Project technical support will make the registry comply with what is required in the LACAP and

the Access to Public Information Law, and reduce the costs of public procurement process to

vendors and the public administration.

Finally, in the first year, the Project will start supporting the PPOO in the use cases design and

development of an electronic system that will allow monitoring and control of public institutions

behavior in the procurement processes that they perform, ensuring compliance with the current

regulations and the detection of possible improvements. During the first year, the PPOO needs to

be strengthened enough to be able to able to provide.

The task that will be performed under procurement activity are:

Support the deployment of Licitación, Concursos Públicos and Contratación Directa.

Development of the Administración de Contratos module.

Advocate and support the drafting and approval of LACAP reform proposal that includes

framework agreements and reverse auction.

Support the updating of the public sector vendors and contractors registry.

Support the strengthening of the Public Procurement Ombudsman Office.

Oversight and Accountability

The audit and control role that the Salvadorian agencies perform to the public resources

management and allocation is poor and had no impact on the GOES transparency, accountability

and efficiency duties. The extensive assessments of the Corte de Cuentas performance evidence

the serious inefficiencies and lack of impact of the agency results and performance. The project

will perform an assessment of horizontal and vertical accountability to the Corte de Cuentas, as a

result of the task the project will provide recommendation on strategies and ways to improve the

agency capacity an outputs.

The IDB has been supporting the Corte de Cuentas in the adoption of ISA, nevertheless, the

agency has been reluctant on adopting the standards. The project will work with the IDB in

advocating on the need for the Corte to adopt the ISA, and will provide extensive training on the

standards adoption.

The tasks that will be performed under oversight and accountability of institutions activity are:

Assessment of the Corte de Cuentas Capacity to control GOES expenditures and

revenues.


21

Provide training to the Corte de Cuentas auditors on ISA.

Change Management for Expenditure


identify internal and external stakeholders. The stakeholders will be those groups affected by the




need to address.

Working with the MOF counterparts, the Project will identify the most appropriate training

solutions for each component. Staff will develop a training delivery plan depending upon the

needs of the trainees, for example some of considerations will be content, population size,

employee location, etc. Training methodologies may include e-learning, computer-based

training, web-based training and classroom training. As noted above, this will vary upon the

trainee’s needs, location and population size.

For this component, the Project will rely heavily on computer-based training. The system

contains a testing mode that can be adapted with simulated cases for employees to practice that

would be like real work. Hopefully, the system can be programmed to provide immediate

feedback on trainee performance.

A communications plan will be developed in coordination with the MOF communications office

in order to provide clear and suitable information on the implications and content of the reforms

to the GOES agencies employees and to civil society when needed.

The tasks that will be performed under this activity will be:

Develop the change management plan for the SAFI II implementation.

Develop the change management plan for the IPSAS adoption.

Develop the change management plan for the COMPRASAL II implementation.

Develop an Organizational Assessment Tool for DGT, DGCG and UNAC


22

IV. COMPONENT 3: TAX POLICY AND ADMINSTRATION IMPROVED

The fiscal deficit and the goals of the fiscal rule are imposing huge challenges to the

Viceminister of Revenue. Mobilizing greater resources is a goal of paramount importance for the

MOF and the entire GOES. As such, the project will provide extensive support to the DGII,

DGA and the Tax Arrears Collection directorate.

The Project will continue providing support to the DGII in the implementation of the tax evasion

crackdown program, and the new model will include improved data mining models, tax control

programs pilots and protocols, and control procedures development. The creation of the tax

studies unit that will develop on a customary manner the economic map for tax control purposes

will be supported by the Project, and extensive training will be delivered. will develop an

integral change management plan and training program to improve the DGII tax control and

auditor’s skills and operational practices, this task will foresee the improvement of the DGII

performance and increase in the tax collection. Extensive support will be provided in the

stabilization of the e-filing system and in the change management strategy to facilitate taxpayers

adapting to the new system. The taxpayer current account will be improved, integrating the tax,

customs and collection data. The Project will continue advocating on behalf of the tax reform

proposal made by FPEMP and will support the implementation is enacted. The Project will

continue advocating with the MOF on behalf of the simplify tax system for small taxpayers

recommended by FPEMP. Extensive transfer training will be provided to the transfer Pricing

Unit in order to strengthen its capacity and help improve tax collection. The Project will

recommend the creation of a Fiscal Reform Unit that should be responsible for drafting and

supporting the tax reforms requested by the GOES.

The Tax Arrears Collection directorate that was created recently will be supported by the Project.

The tax arrears crackdown program recommended by USAID will continue, and the tax debt

selection and the data mining program to clean and manage the actual tax arrears will received

full support from the IT staff and the international experts. The development of the tax arrears

collection module under the CSMS II will begin with the use cases development. The Project

will support the directorate with the furnishing of the new areas. A tax collection procedure

manual will be developed under the Team Leader coordination and a change management and

training strategy will be developed and implemented. If the enforced tax collection bill is

approved, the project will support its dissemination and implementation.

The Project will support the comprehensive Customs Administration reform. The first task will

be the development of a Customs Code that will comprise customs regulation including a large

reform focused on trade facilitation and stronger statutory power. A customs fraud crackdown

program will be recommended and supported, using data mining tools as a way to improve the

control of customs violations and facilitate trade. The use cases of the customs module within the

CSMS II will be developed with Project support, and the new system will improve the customs

operations. Additionally, a customs clearance electronic system will be recommended in order to

speed up the process and support the facilitation on trade while successfully controlling customs

fraud.


23

The project will support the DGT in the development of the SITEP. The SAFI II already

incorporate five modules of the SITEP, but the remaining modules must be migrated to a new IT

platform; as such, the Project will coordinate and support the use cases development. Before the

use cases are finished, extensive training will be provided to the DGT IT staff so they can

prepare for the software development. Once the development begins, the Project will provide

coordination and monitoring.



work plan period:



Tax reform approved by the Legislative Assembly

Tax reform implemented

DGII Fiscal Reform Unit created and established

Simplified Tax System for micro and small enterprises implemented

At least 10.000 taxpayers controlled under the Tax Evasion

Crackdown Program

Model for tax control using data mining developed

DGII Transfer Pricing Unit trained on Transfer pricing control

practices

Tax Arrears Collection Enforcement Directorate fully established

CSMS II Tax Arrears Collection Module use cases developed

E-filing System stabilized

Use Cases developed for the new SITEP

IT Training for the DGT IT staff provided

Assessment of the current customs regulations developed

Custom Code Draft developed

CSMS II Customs Modules use cases developed

Customs Fraud Breakdown Program developed

Customs Administration Reform implemented

Change Management Plan for the new tax control system


Change Management Plan for the customs administration reform


Organizational Assessment Tool for DGII and DGA developed





24



Tax Policy

Support the MOF in the tax reform approval process

Support the MOF in the implementation of the approved tax reform

Support the MOF in the creation and establishment of a Fiscal Reform

Unit within the DGII

Support the implementation of a Simplified Tax System for micro and

small enterprises

Tax Administration

Support the implementation of the Tax Evasion Crackdown Program

Development of a model for tax control using data mining

Support the development of a tax arrears collection system

Support the strengthening of the DGII Transfer Pricing Unit

Support the implementation of the Tax Arrears Collection

Enforcement Directorate

Development of the use case for the Tax Arrears Collection Module

within the CSMS II

Support the stabilization of the e-filing system

Development of the use cases for the new SITEP

Provide IT training for the DGT IT staff

Customs Administration

Review and assessment of the current customs regulations

Development of a Draft Custom Code Regulation

Development of the use cases Customs Modules within the CSMS II

Development of a Customs Fraud Breakdown Program

Support the Customs Administration Reform implementation

Change Management for Revenues

Develop the Change Management Plan for the new tax control system

implementation

Develop the Change Management Plan for the Customs

Administration Reform implementation

Develop an Organizational Assessment Tool for DGII and DGA


The project will develop a road map to discuss the different tasks, in a chronological order, with

the directors of the DGII, DGA, DGT and the Tax Arrears Collection directorate. Special

attention will be provided to the definition of activities of the project and the MOF, the

milestones and the commitments, and additionally a conflict resolution mechanism will be

established with the Viceminister of Finance in order to avoid delays in the task implementation

and targets accomplishments.


25

Tax Policy

The COP and the Tax Administration Specialist (TAS) will market the proposed tax code

changes through a series of presentations to high government officials, including the MOF,

Presidential liaisons and other stakeholders to emphasize the need for change so the reform is

brought in front of the Salvadorian Congress as soon as possible. The Tax Administration

Specialist and consultants assigned to this area will develop and execute these presentations. If

the reform is passed by the Legislative Assembly, we will support the MOF in the

implementation of the approved tax reform. The TAS and consultants will initiate support of the

reforms by developing an Action Plan with MOF stakeholders. Consultants will be assigned to

Customs, Tax Collection, Tax Audit and contiguous and related processes to start building the

operations that will form part of the varied Tax Policy changes within the MOF.

At the same time, the Project will support the MOF to build a Fiscal Reform Unit at the DGII by

deploying a consultant with experience in this area. The Project will submit a draft design,

support its approval and begin its implementation after approval.

The MOF has expressed interest in a Simplified Tax System that will integrate the country’s

informal businesses, particularly micro and small business in El Salvador, so they can pay their

share of taxes based on a simplified system, which is not presently part of the Tax System. With

representatives of the MOF, the Project will provide support by designing a legal framework and

architecture to implement this system.

The tasks performed under the tax policy activity will be:

Support the MOF in the tax reform approval process.

Support the MOF in the implementation of the approved tax reform.

Support the MOF in the creation and establishment of a Fiscal Reform Unit within the

DGII.

Support the implementation of a Simplified Tax System for micro and small enterprises.

Tax Administration

The Project will support the strengthening of the DGII capacity to conduct investigations in a

way that respect the constitutional rights of taxpayers and address tax evasion practices while

improving significantly tax collection. The project experts will develop a platform of procedures

and training for auditors, especially in the large taxpayer section so they will have the ability to

detect fraud and tax evasion. This Data Mining software within the CSMS II will be strengthened

to improve case selection, incorporating protocols and procedures for the auditor’s guidance so

that timely and assertive results can be achieved.

The Project will support the improvement of the tax evasion crackdown to increase impact. Once

the programs are determined and case selection is completed, a pilot of two or three cases will be

performed in order to draft the protocol and procedures. The case will then be submitted to the

auditors and analysts with the associated data and the protocol that will include the standard level

of effort. The alarm system with the CSMS II will be activated in order to improve productivity.


26

The creation of a tax studies unit will be recommended and supported. The unit will be

responsible for the development of tax evasion studies and the economic map that will support

the Fiscal Map and the Institutional Coverage map the tax control programs design. Extensive

training and guidance will be provided to the unit.

The Transfer Pricing Unit will receive support from the Project. Advance training on transfer

pricing investigations and study tours will be provided. Additionally, the Transfer Pricing

databases necessary to facilitate and improve control will be provided to the DGII.

The stabilization of the e-filing system will be supported by the Project. Special attention will be

provided in the support to taxpayer on the smooth transition to the new system. Additionally, the

Project will start the support in the development of the new use cases of the new taxpayer current

account.

The process of the Tax Arrears Collection System in El Salvador currently requires the

involvement of three sections of the government, each located within different Directorates or

institutions. The tax administration (DGII) does not possess either the legal enforcement powers

or administrative authority to collect taxes and other debts as prescribed by the Salvadorian Tax

and Customs Codes. Apart from the lack of resources and the inability to hire because of the

financial policies now in place in government, they are facing the enormous challenge of rising

inventory of cases and a lack resources to monitor and execute their work appropriately.

The collection process starts with a liability that is born from the non-payment of taxes, fines or

debts from Customs’ transactions, or the audit of returns. Cases are sent from the tax

administration (DGII) to the newly created Tax Arrears Collection Directorate for the persuasive

stage of collections, where the taxpayer is notified of the liability and contacted to make a

demand for payment and ask that they come and pay. This Directorate was a suggestion

previously made by FPEMP, and this Project will be supporting its implementation, as described

below. Other payment alternatives are offered. If the taxpayer does not respond or refuses to

pay, the case is then transferred to the Salvadorian prosecutor’s office for enforcement through

seizure of assets or other types of enforcement.

The following activities are proposed for the first year in support of the Tax Arrears Collection

Directorate: first, conduct an assessment of the present collection processes in each of the

sections responsible for the collection of delinquent taxes to determine immediate improvement

opportunities to make the operation more effective. Start the immediate implementation of

enhancements based on the assessment. Second, conduct an analysis of the Customs and Tax

Codes to make a determination as to whether tax changes may be needed to improve the

collection process. This will include an analysis of the current proposed changes to the Tax

Code in relation to the collection process. Third, conduct an assessment of the delinquent tax

creation process both in Customs and Tax sections to propose changes, if needed. Fourth,

analyze the status of the “Cuenta Corriente” (Master File) in terms of accuracy and

appropriateness, and to ensure that it conforms to the tax code changes that are being proposed.

Consistent with the aforementioned activities for the Tax Arrears Collection Directorate, the IT

Specialist already developed the use of the case for the Tax Arrears Collection Module within

the CSMS II, which should be fully implemented by the second quarter of the first year. The

Project will provide training and support to MOF in-house programmers to maintain this module

and eventually release the module to the Directorate.


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The tasks performed under the tax administration activity will be:

Support the implementation of the Tax Evasion Crackdown Program.

Development of a model for tax control using data mining.

Support the development of a tax arrears collection system.

Support the strengthening of the DGII Transfer Pricing Unit.

Support the implementation of the Tax Arrears Collection Enforcement Directorate.

Development of the use case for the Tax Arrears Collection Module within the CSMS II.

Support the stabilization of the e-filing system.

Development of the use cases for the new SITEP.

Provide IT training for the DGT IT staff.

Customs Administration

A consultant with expertise in the area of customs will conduct an assessment of the current

customs’ code to determine their compatibility with regional and international trends.

Recommendations will be discussed with the MOF for proposed changes to the Customs’ Code

based on the aforementioned assessment. Based on these discussions, the customs’ consultant

will draft revised code regulations to be presented to the MOF. The consultant, the TAS, and

COP will coordinate presentations to high level officials of the MOF and the office of the

President of the Republic to discuss the proposed drafted changes in order to create impetus for

the passing of the project of law.

In sync with the aforementioned tasks, the Project will continue the development of the use cases

Customs Modules within the CSMS II and the Customs consultant will design and implement the

Customs Fraud Breakdown Program.

Subsequent to the Congressional approval of the changes to the customs code and regulations, if

applicable, the Project, with the involvement of customs’ officials, will design and develop a

framework for the implementation of the new regulations. This will include training for the

appropriate personnel.

The tasks performed under the customs administration activity will be:

Review and assessment of the current customs regulations.

Development of a Draft Custom Code Regulation.

Development of the use cases Customs Modules within the CSMS II.

Development of a Customs Fraud Breakdown Program.

Support the Customs Administration Reform implementation.

Change Management for Revenues





communications strategy. Each stakeholder, whether internal or external, will may have a unique


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need that we will have to address. We will develop a strategy and tools for analyzing the

organizational needs to implement the strategy.

The tasks performed under the change management for revenues activity will be:

Develop the Change Management Plan for the new tax control system implementation.

Develop the Change Management Plan for the Customs Administration Reform

implementation.

Develop an Organizational Assessment Tool for DGII and DGA.


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V. COMPONENT 4: TRANSPARENCY AND PUBLIC - PRIVATE DIALOGUE ON FISCAL POLICY STREGTHENED

The Domestic Resource Mobilization Program will take advantage of the advances made by the

previous USAID fiscal project in order to continue supporting initiatives on fiscal transparency

and public-private dialogue.

The fiscal transparency portal will be upgraded to a full open data system, should the Minister of

Finance approve the Project proposal. This will help the GOES improve its score in the Open

Budget index. Additionally, the entire public procurement information will be posted in the

transparency portal, once COMPRASAL II gets fully deployed.

The Public Procurement Advocate Office will receive full support to strengthen its capacity and

improve its work with civil society and private sector. The Project will help the office develop a

risk management system in order to priority the investigations and obtain better impact and

improve transparent public procurement.

Following the success of the White Paper on Fiscal Sustainability, the Project will continue

advocating on a public-private dialogue around the fiscal sustainability and the customs reform,

in order to guarantee consensus and proper solutions to the challenges faced by GOES. This task

will be performed in coordination with the International Donors Fiscal Committee.

The Project will develop the new SAFIM and will support the Municipal fiscal transparency

portal that will be uploading the data from the new SAFIM.



work plan period:



MOF Fiscal Transparency Portal improved

Sustainability Plan for the Municipal Fiscal Transparency Portal

developed

Public Procurement Ombudsman Office staff trained on citizen social

audits process for public procurement

At least two events to increase dialogue among GOES, municipalities,

civil society organization, the private sector and taxpayers carried out

Change Management Plan for the GOES expenditure and revenue

transparency developed

Change Management Plan for the public-private dialogue developed


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Transparency

Support the improvement of the MOF Fiscal Transparency Portal

Support the development of a sustainability plan for the Municipal

Fiscal Transparency Portal

Support the Public Procurement Ombudsman Office in the design and

implementation of citizen social audit to public procurement

Recommendations and implementation for a PPOO-Civil society

common agenda implementation to oversee public procurement

Public – Private Dialogue

Support the GOES in the achievement of a fiscal agreement between

the Government, political parties and private sector

MOF-Private Sector dialogue for the customs reform program

Change Management for Transparency and Public – Private Dialogue

Develop the Change Management Plan for the GOES expenditure and

revenue transparency

Develop the Change Management Plan for the public-private dialogue


The project will develop a road map to discuss the different tasks, in a chronological order, with

the directors of the UNAC, DPEF, DGT DGII and DGA. Special attention will be provided to

the definition of the key policy decisions that need full support from the Minister of Finance.

A strategy to work with the MOF and private sector on tasks such as fiscal sustainability, the

customs reform and the civil society audits will be developed in a concept paper and discussed

with the Minister in order to obtain his approval. Once approved, this will be share with the

donors group in order to coordinate efforts.

A working group with key municipalities will be organized to gain cooperation of a large

number of municipalities in the SAFIM and municipal fiscal transparency portal development

and implementation.

A comprehensive dissemination program directed to civil society on the role and

communications mechanisms with the PPOO will be developed and implemented.

Fiscal Transparency

The Fiscal transparency portal will undergo important changes once the ROB, SAFI II and

IPSAS are implemented. It is key that the MOF improves its fiscal transparency portal expanding

the open data model to the level of item, instead of only by expenditure line that is currently


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available in the portal. These changes will provide more transparency and better information to

civil society, the private sector, academic community and the general public. Additionally, in the

first year the Project will start supporting the migration of the portal from the SAFI I to the SAFI

II, as the portal currently takes the financial information from the SAFI I.

The Project will also recommend and support the creation of a transparency and accountability

office under the Viceministry of Finance. The office will be constantly working in the creation

and implementation of mechanisms to promote citizen participation, providing broader

information in an understandable format. The Project will work with the Public Procurement

Ombudsman Office, the Taxpayer Advocate and all MOF directorates to improve accountability.

Finally, the PPOO will receive technical support from the Project. Extensive training will be

provided and the Project will support the development of a risk management matrix system. The

taxpayer advocate office within the DGII will receive full support on training, technical tools and

models and standards of investigation and analysis.

The tasks performed under the transparency activity will be:

Support the improvement of the MOF Fiscal Transparency Portal.

Support the development of a sustainability plan for the Municipal Fiscal Transparency

Portal.

Support the Public Procurement Ombudsman in the design and implementation of citizen

social audit to public procurement.

Public-Private Dialogue

The Project will continue FPEMP’s work with the donors committee and the MOF in a public-

private sector agenda and the GOES-Political parties’ to support the fiscal stabilization of the

country.

The project will build upon the recommendations of the USAID-GIZ-AECID white paper,

expanding them to other fiscal and social related topics such as pro-poor and gender-sensitive

budgeting. During year one, the project will organize two events will the specific purpose of

increasing dialogue among GOES, municipalities, civil society organization, the private sector

and taxpayers.

Under the customs reform that the Project will support, a dialogue with the private sector will be

recommended and supported in order to improve the customs reforms and facilitate trade.

A strategic plan for the building of scenarios of for the PPOO-Civil Society working strategy to

oversee public procurement and facilitate transparency will be develop and implemented. The

necessary IT tools will be developed to achieve the expected results.

The following task will be performed under the public-private dialogue activity:

Support the GOES in the achievement of a fiscal agreement between the Government,

political parties and private sector.

Recommendations and support in the implementation of a MOF-Private Sector

commission for the customs reform program.


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Recommendations and implementation for a PPOO-Civil Society common agenda

implementation to oversee public procurement.

Change Management for Transparency and Public-Private Dialogue






need that Project’s will have to address. The Project will develop a strategy and tools for

analyzing the organizational needs to implement the strategy.

The tasks that will be performed under this activity are:

Develop the Change Management Plan for the GOES expenditure and revenue

transparency.

Develop the Change Management Plan for the public-private dialogue.

Develop the Change Management Plan for the public-private dialogue.


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VI. PROJECT START UP ACTIVITIES

An important component of the long-term success of the Domestic Resource Mobilization

Project is the establishment of a solid operation from the onset. Therefore, DAI will

implement a 4-month start-up plan that will take place from April 26, 2017 through August

2017. The start-up phase will consist of the following objectives:

1) Establish working relationship with USAID, including communications and

approval protocols, reporting, and roles

2) Establish a base of operations for the project

3) Mobilize and onboard approved key personnel

4) Establish DAI- and USAID-compliant project systems, policies and procedures

5) Recruit top priority project staff

6) Finalize subcontracts with Tech Change, Inc. and Data Mining International

7) Acquire necessary documentation for project operations.

In order to assist the project team with these start-up tasks, DAI will deploy a team of STTA

start-up personnel to El Salvador as well as provide support from the Home Office in order to

oversee and implement progress toward objectives and the large volume of activity to take

place during the 4-month start-up phase. This team will also support a smooth transition from

FPEMP. A summary of the start-up team roles and responsibilities can be found below.

Name, Title Summary of Start-Up Responsibilities Adrian Carroll Project

Manager

• Oversee start-up team and ensure mobilization plan is on track while based in DAI’s Home Office.

• Support operational tasks such as procurement, staff

recruitment and training, and establishment of compliant

systems.

• Support technical start-up tasks such as work planning, and

development of the Branding Implementation Plan (BIP) &

Marking Plan (MP) and the Environmental Mitigation and

Monitoring Plan (EMMP).

Noemi Danao-Schroeder, Project Director

• Oversee high level start-up activities from the Home Office. • Provide support and review of technical deliverables submitted to

USAID. Srdjan Popovic

Start-Up IT

Systems

Specialist

• Communicate with the start-up team regarding field office IT requirements

• Evaluate quotes for local IT procurement.

• Prepare equipment specifications lists and provide help to start-up

team in preparing the RFQ documents for local procurement of IT

equipment.


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Edward Crowley, Field Accounting System (FAS) Specialist

• Remote support from the Home Office to customize project’s FAS database, based on their specific needs and requirements regarding payroll, tax withholding and remittances to the local government, bank account and wire transfers and contract-specific requirements.

• Travel to El Salvador to conduct detailed training for project’s finance team on end-to-end FAS modules as well as implementation of finance policies and procedures.

Sofia Scott

Recruiter

• Identify and recruit qualified local candidates for open positions.

• Develop comprehensive recruitment tracking system.

• Prepare personnel approval requests to USAID.

Hannah

Peterson,

Project Associate

• Manage operational and administrative support for start-up phase recruitment, procurement, staff onboarding and financial operations

• Train staff on DAI systems and processes.

TASK 1: ESTABLISH WORKING RELATIONSHIP AND PROTOCOLS WITH USAID

As part of DAI’s standard process, the home office Project Director Noemi Danao-Schroeder,

Project Manager Adrian Carroll and Contracts Administrator Michelle Gibboney will hold an

entrance conference/phone call with the USAID COR and CO to establish DAI’s relationship

with USAID/El Salvador under this Project. This discussion will review USAID expectations for

the start-up phase, establish roles and responsibilities for DAI’s relationship with the COR and

CO and review the contract in detail. DAI will also seek to discuss USAID communications and

approvals protocols, including the means in which approvals should be requested.

TASK 2: ESTABLISH A BASE OF OPERATIONS FOR THE PROJECT

During the start-up phase, a key task will be to set up a base of operations that meet essential

requirements for five years of project activity. The project will be occupying the same office

space it had previously under FPEMP in the Ministry of Finance. However, due to a more robust

team under this current project, additional space will be necessary. The Ministry of Finance has

already allocated the additional office space to the project. Therefore, the Procurement Manager

and IT Systems Specialist will be leading the effort to procure office furniture and IT equipment

as well as set up internet access to ensure appropriate accommodations for project personnel.

TASK 3: MOBILIZE AND ONBOARD APPROVED KEY PERSONNEL

As part of the proposal, DAI proposed various key personnel, all of whom confirmed their

availability and all be mobilized by the middle of July 2017. Key personnel mobilized for the

project will include:

• Jose Luis Lopez, Revenue Administration Specialist

• Mario Gutierrez, Expenditure Management Specialist

• Lee Niederman, Public Sector Change Management Advisor

Onboarding and orientation for key personnel will include equipping them with project


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laptops, providing DAI’s ethics and compliance training, reviewing job descriptions and

expectations, and conducting initial technical planning and brainstorming discussions around

each of their respective areas of responsibility.

TASK 4: ESTABLISH DAI AND USAID COMPLIANT PROJECT SYSTEMS,

POLICIES, AND PROCEDURES

A key element of DAI project start-up is the customization and roll-out of key management

systems to support implementation. These include:

• Establish technical and administrative management information system (TAMIS).

During the start-up phase, DAI will customize our technical and administrative

management information system (TAMIS) specifically for the Domestic Resource

Mobilization Project. TAMIS, which is used for all DAI projects, is a web-based activity

and records management system that allows for comprehensive management of the

project work plan, activities, deliverables, staff, procurement, approvals, grants, etc. All

project staff will be required to use the TAMIS system and will be trained on its use.

• Customize Field Operations Manual (FOM). DAI develops a dedicated FOM for each

project, based on DAI’s internal policy and operations manual. This manual will be

customized to the needs of the Domestic Resource Mobilization Project and El Salvador

in the start-up phase, and staff trained on its contents.

• Establish Field Accounting System (FAS). Once the project bank account is open and

accounting staff onboarded, home office STTA will establish the FAS and train staff on

its use.

• Conduct Compliance and Ethics Training. Another key element of DAI’s systems is

our compliance and ethics training, which will be customized for the Domestic Resource

Mobilization Project and required of all staff during orientation. Compliance training

will include information on how to recognize and respond to cases of trafficking-in-

persons (TIP) and extortion. The Domestic Resource Mobilization Project will ensure

that all project staff, regardless of grade or function, participate in inclusion and

sensitivity training in line with the non-discrimination values promoted by the U.S.

Government related to race, color, religion, national origin, age, sex, gender identity,

sexual orientation, pregnancy, citizenship, familial status, disability status, and other

considerations.

TASK 5: RECRUIT TOP PRIORITY PROJECT STAFF

Since all FPEMP staff will continue in their respective roles under the Domestic Resource

Mobilization Project, recruitment will be prioritized for the new positions. These positions

include:

Budget Specialist

Tax Specialist

Training and Capacity Building Specialist

Communications Specialist

Accountant


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HR Assistant

Program Assistant

M&E Assistant

Executive Assistant

PPP, Transparency, and Civil Society Specialist

Database Administrator

IT Support Specialist.

To ensure that all personnel understand the Project and are versed in relevant DAI and

USAID policies and procedures, DAI will conduct comprehensive onboarding and training.

Training on use of DAI equipment, TAMIS, and HR procedures will occur as project staff

comes on board.

TASK 6: FINALIZE SUBCONTRACTS

Immediately following award, DAI’s Home Office will initiate the process of engaging the

Domestic Resource Mobilization Project subcontractors Tech Change, Inc. and Data Mining

International, including finalizing their scopes of work and negotiating their final

subcontracts.

TASK 7: ACQUIRE NECESSARY DOCUMENTATION FOR PROJECT

OPERATIONS

During the first weeks of implementation, DAI will need to get the following documentation in

order to correctly implement the Project for the next five years:

Obtain necessary documentation for operations in El Salvador. In order to continue

doing business in the country, DAI will need specific legal documents, Powers of Attorney

for the COP, national tax ID numbers, and a letter from USAID for VAT exoneration.

Open bank account. The process for opening a bank account in El Salvador has many

requirements, which necessitate the support of DAI’s home office, legal services in El

Salvador, and documentation from USAID that establishes the Domestic Resource

Mobilization Project as a USAID project.

Local labor agreements and benefits. Consult with local legal services to ensure the

project’s employment agreements and benefits for local staff comply with local law.

El Salvador Domestic Resource Mobilization Project

Documents

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