92263 DOCUMENT OF THE WORLD BANK FOR OFFICIAL USE ONLY TECHNICAL ASSESSMENT ON A PROPOSED CREDIT IN THE AMOUNT SDR 65.9 MILLION (US$100.00 MILLION EQUIVALENT) TO THE REPUBLIC OF RWANDA FOR A PUBLIC SECTOR GOVERNANCE PROGRAM-FOR-RESULTS September 14, 2014 Macroeconomics and Fiscal Management, and Governance Global Practices Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. TABLE OF CONTENTS I. Program Description .................................................................................................................................. 4 A. Summary Description of the Government Program ........................................................................ 4 B. Definition of the Program Boundaries and the Rationale for It ....................................................... 6 II. Description and Assessment of Program Strategic Relevance and Technical Soundness ....................... 8 A. Strategic Relevance.......................................................................................................................... 8 B. Technical Soundness...................................................................................................................... 14 C. Institutional Arrangements............................................................................................................. 23 III. Description and Assessment of Program Expenditure Framework ...................................................... 24 A. Program Budget Structure and Classification ................................................................................ 27 B. Program’s Financial Sustainability and Funding Predictability..................................................... 28 C. Efficiency of Program Expenditure ............................................................................................... 29 IV. Description and Assessment of Program Results Framework and M&E ............................................. 29 A. Program’s Results Framework ....................................................................................................... 29 B. Assessment of Program Implementing Agencies’ M&E System .................................................. 31 V. Disbursement Linked Indicators ............................................................................................................ 31 A. Disbursement Linked Indicators .................................................................................................... 31 B. Verification Protocol ...................................................................................................................... 35 VI. Program Economic Evaluation ............................................................................................................. 35 A. Rationale for Public Provision and/or Financing ........................................................................... 35 B. Economic Impact of the Program .................................................................................................. 36 C. World Bank Value Added.............................................................................................................. 39 VII. Inputs to the Program Action Plan ...................................................................................................... 40 VIII. Technical Risk Rating ........................................................................................................................ 41 IX. Inputs to the Program Implementation Support Plan ............................................................................ 41 2 TABLES, FIGURES AND ANNEXES Table 1: Government PFM Programs and Subprograms .............................................................................. 4 Table 2: Government Strategic Objectives and Strategies/Outputs on Statistics.......................................... 5 Table 3: Boundaries of the Program ............................................................................................................. 7 Table 4: Expenditures, Revenues, and Foreign Grants in Rwanda and Neighboring Countries, FY2012/13 ....................................................................................................................................................... 11 Table 5: Roles of Government Ministries and Agencies in PFM Reforms ................................................ 13 Table 6: Summary Table on Credibility of PFM SSP and NSDS 2............................................................ 14 Table 7: Comparing forward estimates with actual the following year for selected line Ministries, 2010/11 – 2014/15 ....................................................................................................................................... 16 Table 8: Program Expenditure Framework ................................................................................................. 26 Table 9: Comparison between Budget and Actual Execution of the PFM Program (Rwf billion) ............. 28 Table 10: Disbursement-Linked Indicators in the Program ........................................................................ 32 Table 11: PFM Functions and Development Objectives ............................................................................ 36 Figure 1: Measures of Governance in Rwanda, 1996–2012 ......................................................................... 9 Figure 2: Measures of Governance in Rwanda and Selected Country Groups, 2012 ................................... 9 Figure 3: Rwanda’s PEFA Performance, 2007 and 2010 ........................................................................... 10 Figure 4: PEFA Performance of Rwanda and Neighboring Countries ....................................................... 10 Figure 5: Quality of Budgetary and Financial Management in Rwanda, 2013........................................... 10 Figure 6: PFM Cycle and Government Programs Supported by the Program ............................................ 12 Figure 7: PEFA Performance between 2007 and 2010 ............................................................................... 15 Figure 8: Funds Flow of the Program Expenditures ................................................................................... 25 Figure 9: Hierarchical Structure of the Chart of Accounts ......................................................................... 27 Figure 10: Gross Fixed Capital Formation as % of GDP............................................................................ 37 Annex 1: The Government PFM Program .................................................................................................. 43 Annex 2: The Government Statistics Program (NSDS 2) ........................................................................... 61 Annex 3: Credibility of the Government Programs .................................................................................... 63 Annex 4: Rwanda’s 2007 and 2010 PEFA ................................................................................................. 65 Annex 5: 2010 PEFA Assessment at the District Level ............................................................................. 68 Annex 6: Revenue Mobilization ................................................................................................................. 69 Annex 7: Matching Table for PFM SSP and the Chart of Account ............................................................ 81 Annex 8: Results Framework...................................................................................................................... 82 Annex 9: DLI Matrix: Descriptions of DLIs ............................................................................................ 101 Annex 10: DLI Matrix: Financing Table .................................................................................................. 103 Annex 11: DLI Verification Protocol ....................................................................................................... 104 Annex 12: Program Action Plan ............................................................................................................... 109 Annex 13: World Bank Support to PFM Reforms in Rwanda................................................................. 111 Annex 14: List of Reporting Entities on PDO Indicator 2 and DLI 4 ...................................................... 112 3 I. Program Description A. Summary Description of the Government Program a. PFM 1. Building on progress made in the PFMRS in 2008–12, the Government crafted the PFM SSP 2013–18. It consists of 7 programs and 23 subprograms (table 1Error! Reference source not found.), each based on analyses of challenges. Each program identifies expected outcomes (see annex table 1-8), as well as specific actions and outcome indicators; the accompanying PFM sector implementation plan provides indicative costings. Emerging priorities identified in the PFM SSP are (a) increased resource mobilization; (b) scaling up of the implementation of IFMIS; (c) strengthening PFM systems at the subnational level; and (d) enhancing training, professionalization, and capacity building across all PFM disciplines. Table 1: Government PFM Programs and Subprograms Program Subprogram 1 Economic planning and 1.1 National development planning budgeting 1.2 Economic policy formulation 1.3 Public investment programming 1.4 Policy-based budgeting 2 Resource mobilization 2.1 Tax policy 2.2 Tax administration 2.3 External finance 3 Budget execution, internal 3.1 Budget execution control, accounting, and reporting 3.2 Treasury management 3.3 Internal audit 3.4 Accounting and reporting 3.5 Public procurement 3.6 Fiscal risk management in public enterprises 4 External oversight and 4.1 External audit accountability 4.2 Legislative oversight 5 Electronic service delivery and 5.1 Integrated Financial Management System (IFMIS) IFMIS 5.2 Integrated Personnel and Payroll System (IPPIS) 6 Fiscal decentralization 6.1 Resource mobilization by decentralized entities 6.2 Facilitation of fiscal transfers 6.3 Strengthening of PFM systems and capacity at subnational level 7 PFM sector coordination and 7.1 Sector coordination and management management 7.2 Coordination of human resource training and capacity building 7.3 Monitoring and evaluation Source: MINECOFIN. 2. The PFM SSP identifies key challenges and proposes solutions in each program that are translated into a foundation for defining sector priorities and outcomes through FY2017/18 (see annex table 1.8). Improving coherence between national strategies, the Medium Term Expenditure Framework (MTEF), and the annual budget process has been identified as an area for improvement under the first program, on economic planning and budgeting. In the second program, on resource mobilization, key challenges are inadequate resource mobilization, resulting in aid dependency at the national level and lack of discretionary revenues at the 4 subnational level. 1 Across the PFM sector, particularly under program 7, on PFM sector and coordination, capacity and skill shortages are identified as key bottlenecks. Capacity and skill shortages are more pronounced at the subnational level, especially on core PFM areas such as accounting, auditing, budgeting, and reporting. b. Statistics 3. The overarching objectives of NSDS 2 are to produce relevant, reliable, and timely statistics to monitor the progress of EDPRS 2 and to strengthen the NSS . Six strategic objectives and 19 strategies/outputs are structured to achieve the overarching objectives (table 2Error! Reference source not found.). NSDS 2 supports the changing requirements in terms of the nature and periodicity of data as Rwanda approaches middle-income status, which it aims to achieve by 2020. The expected outcome of NSDS 2 is a strengthened and well-coordinated NSS that is able to constantly monitor development outcomes and spur effective decision making and public accountability. Table 2: Government Strategic Objectives and Strategies/Outputs on Statistics Strategic objective Strategies/outputs SO1: Strengthen civil registration system, 1.1: Strengthened vital statistics administrative records, surveys, censuses, and 1.2: Strengthened administrative records other sources of data 1.3: Strengthened surveys, censuses and other sources of data 1.4: Strengthened processes concerning data capture and production SO2: Improve quality and dissemination of 2.1: Improved quality of statistical data statistics and public statistical literacy 2.2: Improved dissemination of statistics and public statistical literacy SO3: Improve statistical advocacy and 3.1: Policy and decision makers engaged in setting the statistical integrate use of statistics in decision making agenda 3.2: Strengthened engagements with data users SO4: Develop capacities within the NSS 4.1: Strengthened human resource management in NISR 4.2: Human resources development within NSS 4.3: Strengthened IT infrastructure for NISR and NSS 4.4: Strengthened Physical assets of NISR 4.5: Strengthened knowledge management within NSS 4.6: Efficient implementation of NSDS 2 SO5: Consolidate coordination within the 5.1: Improved coordination of statistical concepts and methods NSS 5.2: Strengthened coordination of statistical activities SO6: Improve resources mobilization and 6.1: Effective resource mobilization for activities in the NSS build strategic partnerships 6.2: Efficient resource management 6.3: Strategic partnerships built Source: NISR. 4. NISR made significant progress in the quality, timeliness, and dissemination of data, mainly in the social and demographic domain, under the first NSDS (2009 –14). It implemented the main social surveys and the 2012 Population and Housing Census according to a timetable. In addition, solid progress was made on data access and dissemination through the creation of a National Data Archive (NADA), in which survey microdata can be readily downloaded for further analysis, and the establishment of an Open Data Portal, which has greatly 1 The fiscal and financial decentralization program in the Governance and Decentralization SSP has also identified revenue mobilization challenges at the local level. 5 improved citizens’ access to statistical information. Under NSDS 1, Rwanda moved up 20 places on the World Bank’s Statistical Capacity ranking, from 73rd (of 149 countries with valid data) at the end of 2008 to 53rd at the end of 2013.2 Within sub-Saharan Africa, Rwanda ranked 6th in 2013 (fifth excluding South Africa), up from 10th in 2008. 5. NSDS 2 needs to address important gaps, related in particular to the dearth of economic statistics (data on agriculture, businesses, and labor market activity) and the low capacity of the NSS. In addition, efforts to improve the frequency and quality of certain types of statistics need to be accompanied by improved access to data by users of statistics. The bank’s open data readiness assessment (prepared for the Government of Rwanda in July 2013) concluded that improving data dissemination by expanding NISR’s ongoing Open Data agenda would result in better and more use of data. 6. NISR was established in 2005 as the coordinating agency of the NSS, including all agencies and ministries that provide statistical information to the public for planning and decision making. It is governed by a board of directors, which determines its priorities and approves the action plan of the NSS. Since 2007 the Government and a multidonor basket fund development partners including the European Union, the European Union, and the Bank have funded NISR. All plans and activities of NISR need to be approved by its steering committee, which is chaired by the Government’s Chief Economist and includes representatives from the Government, civil society and academia, and development partners. The steering committee meets every quarter. The Bank is an active member of the steering committee. B. Definition of the Program Boundaries and the Rationale for It 7. The Program supports a subset of the Government’s own programs, articulated in the PFM SSP and NSDS 2. The Program will support selected programs, subprograms and strategic areas essential to achieve the Program Development Objective (table 3). The boundaries of the Program were defined based on strategic relevance, government demand, and the support of other development partners. 8. All program and subprograms in the PFM SSP as well as the strategic objectives of NSDS 2 are interrelated and constitute an important element of the PFM cycle (figure 6Error! Reference source not found.). The Program covers almost all programs and subprograms of these strategies. However, some subprograms were excluded, based on the Bank’s comparative advantage or the involvement of other development partners and the lead government agencies managing them. For example, the Ministry of Public Service and Labor (MIFOTRA) has been effectively managing Subprogram 5-2 (on IPPIS).3 NISR will be able to cover SO5 of NSDS 2 (on consolidating coordination within NSS) and SO 6 (on improving resource mobilization and building strategic partnerships with support from the statistics basket fund). 9. MINECOFIN, RRA, RPPA, OAG, and NISR are the implementing agencies of the Program. Table 3 summarizes their roles. 2 See http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/EXTWBDEBTSTA/0,,contentMDK:222842 70~menuPK:9248396~pagePK:64168445~piPK:64168309~theSitePK:3561370,00.html, accessed in February 2014. 3 The Bank is supporting IPPIS in the Eighth Poverty Reduction Support Financing (PRSF-8, P122247). 6 10. There are no high-risk activities in the Program that are or need to be excluded. 7 Table 3: Boundaries of the Program Government Programs World Bank PforR Of which supported Main Implementing Ministries and Strategy Program, Sub-Program / Strategic Areas by the Agencies Program PFM 1. Economic Planning and Budgeting SSP (1) National Development Planning ☒ MINECOFIN (Planning Dept.) (2) Economic Policy Formulation ☒ MINECOFIN (Chief Economist) (3) Public Investment Programming ☒ MINECOFIN (Planning Dept.) (4) Policy Based Budgeting ☒ MINECOFIN (Budget Dept.) 2. Resource Mobilization (1) Tax Policy Formulation ☒ MINECOFIN (Chief Economist) (2) Tax Administration ☒ RRA (3) External Finance ☒ MINECOFIN (Planning Dept.) 3. Budget Execution, Internal Control, Accounting & Reporting (1) Budget Execution ☒ MINECOFIN (Accountant General) (2) Treasury Management ☒ MINECOFIN (Accountant General) MINECOFIN (Chief Internal (3) Internal Audit ☒ Auditor) (4) Accounting & Reporting ☒ MINECOFIN (Accountant General) (5) Public Procurement ☒ RPPA (6) Fiscal Risk Management in Public Enterprises ☒ MINECOFIN (Accountant General) 4. External Oversight and Accountability (1) External Audit ☒ OAG (2) Legislative Oversight ☐ 5. Electronic Service Delivery and IFMIS (1) IFMIS ☒ (2) Integrated Personnel & Payroll Systems (IPPS) ☐ MINECOFIN (Accountant General) 6. Fiscal Decentralization (1) Resource Mobilisation by Local Administrative Entities ☒ RRA (2) Facilitation of Fiscal Transfers ☒ MINECOFIN (Budget Dept.) (3) Strengthening PFM Systems and Capacity at subsidiary MINECOFIN (Budget, Accountant ☒ Level General) 7. Coordination of PFM Sector Activities Management (1) PFM Coordination and Management ☒ MINECOFIN (SPIU) (2) Coordination of HR Training & Capacity Building ☒ MINECOFIN (SPIU) (3) Monitoring & Evaluation ☒ MINECOFIN (SPIU) NSDS 2 1. Strengthen civil registration system, administrative ☒ NISR records, surveys and other sources of data. 2. Improve quality and dissemination of statistics and public ☒ NISR statistical literacy. 3. Improve statistical advocacy and integrate use of statistics ☒ NISR in decision making. 4. Develop capacity within NSS. ☒ NISR 5. Consolidate coordination within NSS. ☐ 6. Improve resource mobilization and build strategic ☐ partnerships 8 II. Description and Assessment of Program Strategic Relevance and Technical Soundness A. Strategic Relevance 11. Rwanda has made remarkable progress in rebuilding core public sector institutions since the 1994 genocide. Its leadership has demonstrated strong commitment and resilience despite a difficult environment. It has made significant progress in achieving peaceful political settlement and national security, with dividends to citizens in terms of increased access to services and poverty reduction. The Government has established its legitimacy and authority and maintained the rule of law. Rwanda has very robust anticorruption laws and oversight institutions for controlling corruption, and its leadership is committed to the fight against corruption. The Government’s efforts have been so effective that Rwanda has remained a low corruption country. 12. These achievements are extraordinary, but Rwanda still faces significant capacity weaknesses and shortages in core skills and competencies needed to meet its ambitious development objectives under EDPRS 2. The Government believes that it must implement ambitious public sector reforms to deliver results. It radically restructured the administration early on in the recovery phase in 1998–99, through a downsizing that dismissed more than 6,000 unqualified civil servants and removed more than 6,500 ghost workers from the payroll. To eliminate the incentive to supplement income through petty corruption and moonlighting, it then raised salaries for the much smaller number of staff by 40 percent. In 2012 the Government supported these civil service reforms by implementing the pay and retention policy, 4 following the prime minister’s order to establish a performance appraisal and promotion process for public servants in 2010.5 Introduction of an Integrated Personnel and Payroll System (IPPIS) in 2010 has also supported implementation of the civil service reforms. 6 Beginning in 2000, in tandem with significant fiscal, political, and administrative decentralization reforms, central government ministries have been unbundled to create flatter and smaller structures and bring service delivery closer to the grassroots, in order to improve performance and accountability. 13. Public sector reforms have improved governance. Rwanda’s performance significantly improved in all six dimensions of the Worldwide Governance Indicators (WGI) between 1996 and 2012 (figure 1Error! Reference source not found.).7 It rose from the 20th percentile rank on control of corruption in 1996 to the 27th percentile in 2005 and the 73rd percentile in 2012. Government effectiveness rose from the 11th percentile in 1996 to the 53rd percentile in 2012. For some dimensions, Rwanda’s rankings are now close to the average for middle-income countries (figure 2Error! Reference source not found.). Three dimensions—government effectiveness, regulatory quality, and rule of law—are almost at the middle-income country averages, and the ranking for control of corruption is much higher than the middle-income 4 See http://www.mifotra.gov.rw/fileadmin/templates/downloads/IMPLIMENTATION.pdf. 5 See http://www.mifotra.gov.rw/fileadmin/user_upload/Prime_Minister_s_orders/ITEKA_RYA_MINISITIRI_W_INTE BE_RIKORESHWA_MU_ISUZUMABUSHOBOZI_N_IZAMURWA_MU_NTERA_RY_ABAKOZI_BA_LETA. pdf. 6 The World Bank supported the IPPIS through the Eighth Poverty Reduction Support Financing in 2011. 7 See http://info.worldbank.org/governance/wgi/index.aspx#home. 9 country average. In contrast, the percentile rank on voice and accountability is lower than other country groups (including Sub-Saharan Africa). Figure 1: Measures of Governance in Rwanda, Figure 2: Measures of Governance in Rwanda 1996–2012 and Selected Country Groups, 2012 (percentile rank) 80 Rwanda SSA Voice and Accountability 70 Low-Income Lower- Middle 60 Upper-Middle Rule of Law 50 40 Regulatory Quality 30 20 Political Stability 10 1996 - Government Effectiveness 2005 2012 Control of Corruption - 20 40 60 80 Source: Worldwide Governance Indicators. Source: Worldwide Governance Indicators. 14. Among the range of actions needed to improve accountability, better PFM is particularly central. The literature confirms a positive relationship between PFM and accountability. Effective PFM systems can help strengthen democratic influence, oversight, and accountability in the decision-making processes related to the state budget. It can greatly enhance transparency, by making well-structured information available on the ways in which public resources have been used and the results that have been achieved, significantly strengthening the accountability process in parliament and public audit institutions.8 15. The Government regards PFM systems and processes as key to the effective and efficient functioning of the public sector, because they underpin the performance of all sectors and different levels of government.9 The Government has defined the main objective of PFM reforms as “to ensure efficient, effective, and accountable use of public resources as a basis for economic development and poverty eradication through improved service delivery”. It first embarked on comprehensive PFM reforms in 2008, with the comprehensive Public Financial Management Reform Strategy (PFMRS) for 2008–12. Building on progress under the PFMRS, in 2013 it formulated the PFM Sector Strategic Plan (SSP) 2013–18. 16. Rwanda has made significant progress in PFM reforms. The Public Expenditure and Financial Accountability (PEFA) report documents this improvement at the national level. Scores in all but one category improved between 2007 and 2010 (figure 3Error! Reference source not found.). Other assessments, such as an independent evaluation of the PFMRS, also show improvement. At the subnational level, the 2010 PEFA report assessed four districts. It 8 Sida (2007) Public Finance Management in Development Co-operation: A Handbook for Sida Staff. 9 For example, EDPRS 2 states that “Rwanda’s public finance management system is the platform for the efficient management of the nation’s resources. Its reporting, audit and oversight functions are essential elements in providing effective Accountable Governance” (Para 6.27). 10 found the nature and scope of external scrutiny of subnational governments to be satisfactory. Rwanda’s performance is as good as or better than that of neighboring countries in all categories except accounting, recording, and reporting (figure 4Error! Reference source not found.). Figure 3: Rwanda’s PEFA Performance, 2007 Figure 4: PEFA Performance of Rwanda and and 2010 Neighboring Countries External Scrutiny and Audit (PI: 26-28) Accounting, Recording and Reporting (PI: 22-25) Predictability and Control in Budget Execution (PI: 13-21) 2010 2007 Policy-Based Budgeting (PI: 11-12) Comprehensiveness and Transparency (PI: 5-10) Credibility of the Budget (PI: 1-4) D C B A Source: PEFA and World Bank staff calculations. Source: PEFA and World Bank staff calculations. Note: Data are from various years between 2010 and 2013. 17. Among 82 countries for which country Figure 5: Quality of Budgetary and Financial data on the Country Policy and Institutional Management in Rwanda, 2013 Assessment (CPIA) Indicator 13 (quality of budgetary and financial management rating) were available, Rwanda ranked 4th in 2013, with a score of 4.0. Its score exceeds the average score of middle-income countries (3.3) (figure 5). Among 73 countries for which data were available for 2005 and 2013, only a third improved their score; another third deteriorated, and the remaining third remained the same. Rwanda showed improvement—a remarkable Source: World Bank WDI. achievement given the absence of a functioning Note: Figure shows scores on Country Policy and PFM system immediately after the 1994 Institutional Assessment (CPIA) Indicator 13. genocide. 18. There is a need to consolidate the achievements made and to address other challenges. Effective PFM is very important in Rwanda, because the central government budget represents a large share of GDP (29 percent), a share similar to that in Kenya and Tanzania (table 4). Rwanda’s tax revenue to GDP ratio (14.2 percent) is slightly lower than the average for E ast African countries. The combination of high expenditures and low tax revenues has made Rwanda more aid dependent than its neighbors. 11 Table 4: Expenditures, Revenues, and Foreign Grants in Rwanda and Neighboring Countries, FY2012/13 Item Rwanda Ethiopia Kenya Tanzania Uganda Average Total expenditures (percent of GDP) 29.0 18.0 30.5 28.0 18.9 24.9 Tax revenues (percent of GDP) 14.2 11.4 19.2 16.0 12.6 14.7 Foreign grants (percent of total 27.3 11.1 1.9 12.8 8.9 12.4 expenditures) Source: IMF reports. 19. In addition to addressing these challenges, PFM systems in Rwanda have to keep up with the country’s rapid development as well as changes in technology. Nominal GDP almost tripled between 2006 and 2013, and the national budget almost doubled between FY2009/10 and FY2013/14. As part of decentralization, subnational governments were completely restructured in 2005. The availability of new technology offers an opportunity to enhance PFM systems and procedures. Advancing and implementing PFM reforms, including capacity building and institution strengthening, is an important component of Rwanda’s development agenda, as reflected in the importance given to this area in both the country’s medium-term plan and the Bank’s Country Partnership Strategy (CPS). 20. Statistics are critical for supporting Rwanda’s development agenda. They facilitate evidence-based policy making and support more efficient and effective use of public resources. A regular flow of good-quality, comparable data on Rwanda’s evolving social and economic conditions is fundamental for continuously improving the understanding of the country’s development challenges, informing the design of well-targeted interventions to address them, measuring their impact on national poverty and social goals, and using that information to calibrate policy design and further improve the allocation of scarce public resources. Statistics arguably play a foundational role in PFM, particularly by informing policy analysis and strategy formulation and supporting adjustments in planning and budgeting in light of information on the development results achieved through public sector programs. 21. Rwanda’s first National Strategy for Development of Statistics (NSDS 1), covering 2009–14, helped establish a foundation for the development of the statistics sector. Building on successful implementation of the NSDS 1, the Government formulated NSDS 2, which covers 2014–19. Recognizing the important roles of statistics in the PFM cycle, NSDS 2 seeks to improve statistical advocacy and integrate the use of statistics in decision making. 22. This Program for Results (PforR) operation (henceforth referred to as “the Program”) intersects with Government programs in many ways (figure 6Error! Reference source not found.). For example, the Government program on economic planning and budgeting (P1) and resource mobilization (P2) contribute to policy analysis, strategic formulation, and planning and budgeting elements of the PFM cycle. The government program on electronic service delivery and IFMIS (P5) cuts across all elements of the PFM cycle. The strategic objectives on strengthening civil registration system, administrative records, surveys, censuses, and other sources of data (Strategic Objective [SO] 1) and developing capacities within the National Statistical System (NSS) (SO4) contribute to creating good-quality and timely statistics that can inform policy and strategy formulation and evaluation. The programs to improve the quality and dissemination of statistics and public statistical literacy (SO3) and improve statistical advocacy and integrate the use of statistics in decision making (SO4) are also expected to contribute to improved policy analysis and planning/budgeting. 12 Figure 6: PFM Cycle and Government Programs Supported by the Program 23. The Government has made progress on gender issues in both PFM and statistics reforms. It introduced gender-responsive budgeting in five ministries in 2003, and fully operationalized it in 2008. Currently, all ministries and districts are required to submit gender budget statements and the gender distribution of employment during budget formulation. The National Institute of Statistics of Rwanda (NISR) started producing gender statistics in 2011; it currently covers both national and subnational levels. The Program will support government efforts to further enhance the mainstreaming of gender issues in both PFM and statistics programs. 24. Enhancing PFM will contribute to poverty reduction and shared prosperity. EDPRS 2 defines PFM as the platform for the efficient management of the nation’s resources to achieve the EDPRS 2 goal of accelerating private sector–led growth and further reducing poverty, including extreme poverty. This idea mirrors the Bank’s view that poverty reduction is not merely a question of spending more but also of using resources more effectively. Key to doing so is effective PFM systems.10 Further enhancing PFM will allow the government to better allocate its scarce financial resources to achieve national development goals. It will also enable the government to become more accountable to Rwanda citizens on how public expenditures are executed in accordance with development goals. 10 See “The Role of Public Financial Management for PRS Implementation,” on the World Bank website (http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTPRS/0,,contentMDK:21629917~m enuPK:384207~pagePK:148956~piPK:216618~theSitePK:384201~isCURL:Y,00.html). 13 25. Good-quality statistics are key for making more effective use of existing resources. NSDS 2 focuses on producing good-quality statistics relevant to poverty reduction and shared prosperity, such as household surveys, labor statistics, and agriculture survey. The systematic production and dissemination of economic and social statistics is fundamental for assessing the impact of expenditures on national poverty and social goals and informing adjustments in planning, budgeting, or both that improve the allocation of public funds. 26. The Ministry of Finance and Economic Planning (MINECOFIN) is leading PFM reforms. Several ministries and agencies are engaged in PFM as a foundational issue (table 5). MINECOFIN, the Rwanda Revenue Authority (RRA), the Rwanda Public Procurement Authority (RPPA), and the Office of the Auditor General (OAG) are the implementing agencies for this Program. Table 5: Roles of Government Ministries and Agencies in PFM Reforms Name Roles Program implementing agencies Ministry of Finance and  Lead ministry on PFM Economic Planning  Planning and budgeting, including gender-responsive budgeting (MINECOFIN)  Resource mobilization, especially tax policy  Budget execution, internal control, accounting, and reporting  Electronic service delivery and IFMIS  Fiscal decentralization, including subnational PFM  PFM sector coordination and management, including capacity building Office of Auditor General (OAG) External oversight Rwanda Public Procurement Public procurement Agency (RPPA) Rwanda Revenue Authority Tax administration (RRA) Other agencies Ministry of Local Government Working with MINECOFIN on PFM reforms at the subnational level (MINALOC) Ministry of Public Service and Integrated Personnel and Payroll System (IPPIS) Labor (MIFOTRA) Parliament (especially the Public External oversight Accounts Committee) Rwanda Governance Board Working with MINECOFIN on PFM reforms at the subnational level 27. Progress and key issues on PFM reforms have been discussed under the PFM Coordination Forum, which the Bank co-chairs. The Forum includes relevant ministries and agencies as well as key development partners supporting PFM reforms, including the Bank; the Government of Belgium; the Department for International Development (DFID); the European Union (EU); the International Monetary Fund (IMF); and Kreditanstalt für Wiederaufbau (KfW), the German development bank. 28. NISR is leading the statistics agenda. It plays a coordination role in the NSS and is the implementing agency of the Program. NSS stakeholders include other data producers (for example, line ministries) and users. The Statistics Steering Committee is made up of government stakeholders and development partners (the European Union, DFID, and the Bank). It functions as a discussion forum for key statistics issues. Although there is currently no formal institutional mechanism to discuss PFM and statistics reforms jointly, preparation of the Program has stimulated coordination between the two areas. 14 B. Technical Soundness 29. Technical soundness of the Program has been confirmed based on following criteria11: (i) credibility of both PFM SSP and NSDS 2; (ii) adequacy of the Program activities to reach the Program’s objectives against international experience and good practice. a. Credibility of the Government Programs 30. Ensuring credibility of the overall government strategies on PFM and statistics is essential to conduct of programs under the strategies. Therefore, assessments of the credibility of the strategies are conducted based on 7 features of a credible reform program including (i) government-led (ownership); (ii) realistic and achievable; (iii) comprehensiveness; (iv) relevance and sustainability; (v) development of local capacity; (vi) demand for change and (vii) inclusion of performance indicators12. 31. Both PFM SSP and NSDS 2 are assessed as credible to be supported by the Program. The assessment tables (table 6 and annex 3) show that both PFM SSP and NSDS 2 fully or mostly meet the seven features. For example, both strategies were formulated under strong ownership of the government with strong alignment with EDPRS 2. Table 6: Summary Table on Credibility of PFM SSP and NSDS 2 Features of a Credible PFM SSP NSDS 2 Reform Program 1. Government-led – Fully met: MINECOFIN is the lead Fully met: NSDS 2 was developed by enabling full political ministry of the PFM sector. Within the NISR in close collaboration and ownership and leading government, a PFM Reform Steering consultation with all relevant stakeholders to effective Committee, comprising representatives of and is fully aligned with EDPRS 2. harmonization and the implementing agencies and donor intervention. development partners oversees the implementation of PFM SSP. 2. Realistic and Mostly met: Human resource capability Fully met: While ambitious, NSDS 2 achievable – based challenges may affect the pace of the targets and objectives are attainable given primarily on available reforms the strong implementation capacity of local capacity and set NISR. within an appropriate timeframe. 3. Comprehensive Fully met: PFM SSP is a comprehensive Fully met: NSDS 2 is a comprehensive framework which is framework and attempts to sequence the plan with clear targets and milestones. To effectively sequenced activities in the various reform pillars but the extent possible, the main activities are institutional strengthening and human sequenced to not overburden the capacity development could be better organization at a single point in time. articulated. 4. Relevant and Fully met: The reform measures are Mostly met: NSDS 2 is relevant and sustainable – adapted designed to maintain the positive trajectory adapted to the country context and presents to country context, of the PFM reforms and tackle the a clear and realistic roadmap towards the targeted to meet key remaining challenges that pose risk to the objectives of the plan. However, reliance fiduciary risks and efficient and effective use of public funds. on external TA is expected to remain high avoiding over-reliance in a short run in specific relevant statistical 11 Section 3 in Chapter 1 of Program-for-Results Financing Interim Guidance Notes for Staff (World Bank, Draft in 2012) 12 The assessments are conducted based on “How to Note: Managing Fiduciary Risk in DFID bilateral aid programs” (DFID 2008:19). 15 Features of a Credible PFM SSP NSDS 2 Reform Program on external TA. areas that require technical capacity in methodologies until NISR builds its own capacity 5. Developing local Mostly met: Terms of reference for the Fully met: NISR has developed a five- capacity various TAs have skills transfer element. year capacity building plan that will be However, in the area of accounting, despite implemented during NSDS 2. the establishment of ICPAR, the GoR still continues to fund its employees to take international examination. 6. Build demand for Fully met: Good positive trajectory of Fully met: During NSDS 1, NISR has change - promoting a PFM reforms. PFM-SSP is conceived as built a reputation for timely delivery of sustainable track record one of foundational issues in the EDPRS 2. high-quality statistics. The perceived of improvement based strong performance of NISR has greatly on previous success increased government demand for data on an ever increasing range of topics. 7. Include specific Fully met: PFM SSP and accompanying Mostly met: NSDS 2 includes a performance action plans have identified clear comprehensive logical framework with indicators objectives/outcomes with some milestones output and outcome indicators at each of to ascertain progress towards the the six strategic objectives it aims to achievement of the long-term reform accomplish. objectives. Source: World Bank Staff Assessment b. Adequacy of the Program Activities 32. Adequacy of the Program Activities: The government programs and sub-programs to be supported by the Program are key aspects of the PFM cycle described in figure 6Error! Reference source not found.. Therefore, the Program activities are adequate to achieve the PDO of the Program. PFM SSP 33. PFM SSP has been formulated Figure 7: PEFA Performance between 2007 and 2010 building on lessons learned from PFMRS and other assessments such External Scrutiny and Audit (PI: 26-28) as 2007 and 2010 PEFA 13 . At the national level, the improvement is Accounting, Recording and Reporting (PI: 22-25) evidenced in the Public Expenditure and Predictability and Control in Budget Financial Accountability (PEFA) Execution (PI: 13-21) 2010 assessment. The comparison between 2007 Policy-Based Budgeting (PI: 11-12) 2007 and 2010 shows improved scores in all but one category (figure 7 and Comprehensiveness and Transparency (PI: 5-10) annex 4). At the subnational level, the 2010 PEFA assessed four districts found Credibility of the Budget (PI: 1-4) a satisfactory nature and scope of the D C B A external scrutiny of subnational Source: World Bank Staff governments (annex 5). Analyses in 13 The Government plans to conduct PEFA assessments at the national and sub-national (for selected districts) to be completed in the second half of 2014. 16 PEFAs have been under an internationally recognized framework and methodology 14 , and development partners (including the World Bank) provided inputs in formulating the PFM SSP. Therefore, programs and sub-programs under the PFM are considered to hold technical soundness. Detailed descriptions of programs are as follows. 34. Program 1 Economic Planning and Budgeting: On national development planning (Sub-Program 1.1), national development planning process has been defined through the implementation framework for the EDPRS 215. Accompanying sector strategic plans (SSPs), other strategies such as the NSDS 2 and district development plans (DDPs) function as implementation tools for the EDPRS 2. While the mechanism have been operationalized, it is essential to strengthen capacity at both central and subnational governments. On public investment programming (Sub-Program 1.3), public investment management (PIM) plays an essential role in planning and budgeting. Development budget accounts for about 45% of the total in the 2013/14 revised budget, and also pubic investment has a medium/long term implication through future operational and maintenance costs. The government policy on PIM is defined in the National Public Investment Policy in 2009. Despite the policy, its implementation and application of the policy was weak until recently. For example, the public investment committee had not been operationalized until 2013. While public investments have future recurrent budget implications through operation and maintenance costs, these were not taken into consideration in formulating the MTEF. On policy-based budgeting (Sub-Program 1.4), the MTEF introduced in 2002 has been fully incorporated into the budget cycle at the both national and subnational levels. Despite the progress, the multi-year fiscal management framework and procedures are not yet effective. The MTEF is merely indicative rather than binding. For example, budget figures in the second year (t+1) under the MTEF prepared for year (t) are not well referred from the annual budget of the following year. The gap between the budget and MTEF for selected sectors is described in table 7. There are a lack of fully costed sector strategies, an insufficient incorporation of information on aid, and a weak link between sector strategies and budget, which result in limited relevance and use of the MTEF by stakeholders. Investment planning and its budgetary impact are not fully captured in current medium-term fiscal framework. Table 7: Comparing forward estimates with actual the following year for selected line Ministries, 2010/11 – 2014/15 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Agriculture 2010-11 Budget 64.8 77.7 81.1 2011-12 Budget 67.1 74,7 86,3 2012-13 Budget 79,1 108, 8 120.1 2013-14 Budget 82.7 107.6 110.1 2014/15 Budget 72.0 79.5 90.7 Education 2010-11 Budget 155.1 180.2 274.7 2011-12 Budget 95.0 100.2 104.5 2012-13 Budget 119.3 133.2 144.9 2013-14 Budget 149.1 186.6 217.3 2014-15 Budget 172.2 192.9 216.9 Health 2010-11 Budget 97.5 114.0 114.9 2011-12 Budget 109.5 111.4 99.2 14 https://www.pefa.org/en/content/pefa-framework 15 Chapter 7 includes implementation and monitoring and evaluation. 17 2012-13 Budget 142.7 151.1 101.5 2013-14 Budget 127.0 134.6 139.2 2014-15 Budget Infrastructu re 2010-11 Budget 241.6 241.3 254.5 2011-12 Budget 210.4 191.5 196.8 2012-13 Budget 288.1 339.4 299.4 2013-14 Budget 402.1 429.1 463.2 2014/15 Budget 376.5 488.7 478.6 Source: IMF calculations based on data in Budget Framework Paper, various years 35. Program 2 Resource Mobilization 16 : Increasing domestic revenues to expand fiscal space is one of the most important policy priorities in Rwanda. The tax revenue to GDP ratio increased from 12.0% in FY2009/10 to 14.2% in FY2012/13. Significant progress has been made in tax policy, tax administration and tax systems in the past few years. In the previous fiscal year alone, the government introduced various tax policy and administrative measures such as an introduction of a new VAT law in Dec 2012, an introduction of a new tax system for SMEs in Sep 2012 and an introduction of electronic billing machines (EBM). Despite the progress, the tax revenue to GDP ratio is one of the lowest in Sub-Saharan Africa whose average rate is 18%. Domestic revenue mobilization is the most important subject of the IMF’s new Policy Support Instrument (PSI) starting in 2014, and the government showed its strong commitment to this subject in the accompanying Memorandum of Economic and Financial Policies17. In order to operationalize the commitment, the MINECOFIN has developed the Medium-Term Tax Reforms Plan 2013-16 which identifies tax policies and administrative measures aimed at broadening the tax base, including reducing exemptions; improving taxpayers’ compliance; further strengthening tax administration, including e-filing; and strengthening risk management18. In order to improve transparency, the government plans to publish tax expenditures to be incorporated into the national budget to further transparency19. 36. Program 3 Budget Execution, Accounting and Reporting: On budget execution (Sub- Program 3.1), significant variation between the budget and execution means that public resources are not spent as expected to achieve national objectives. As one of elements in reducing the variation, a close link between the budget and planning is required (refer to Program 1 on Economic Planning and Budget). On improving availability of budget information to the citizen, at the national level a citizen guide to the national budget has been published on MINECOFIN website 20 . On treasury management (Sub-Program 3.2), A Treasury Single Account (TSA) concept is in place. Rwanda Revenue Authority (RRA) uses commercial banks as collection agents with a requirement to transfer collections to the central bank within 3 days and payments by MDAs are made from the central bank TSA and a Sub District Entities Accounting & Reporting System (SEAS) has been piloted to facilitate accounting, execution and reporting by the sub district entities. The Auditor General’s report notes that delayed banking of revenue 16 Detailed analyses on revenue mobilizations are described in annex 6. 17 http://www.imf.org/external/pubs/ft/scr/2013/cr13372.pdf 18 The government received technical assistance from the IMF in March 2014 to review the current tax policies in the agriculture and the mining sector and to advise on improving tax collections from those sectors. 19 “In FY2014/15, the emphasis will be on broadening the base for VAT through a revision of the schedules for exemptions and zero-ratings; and preparing a review of tax expenditures to be submitted jointly with the budget” (p.13 of the IMF’s 7th review). 20 http://www.minecofin.gov.rw/uploads/media/The_National_Budget_-_a_Citizen_s_Guide_2013-2014_01.pdf 18 collections are still persistent in many public entities, especially districts. Transfers to districts are processed directly by the Treasury to improve cash management. However sub district entities (sectors, pharmacies, schools etc.) receive transfers as grants, which are expensed at the point of issue. Consequently, the actual expenditures are not captured by the Government’s accounting system, although they are reported separately and provided as summary annexed on the respective Districts’ financial reports. There are challenges in tracking some transfers to and through the districts which should net off on consolidation due to mishandled accounting entries by some districts. A detailed assessment will evaluate whether adequate and timely funds are available to finance program implementation. On internal audit (Sub-Program 3.3), initiatives are in the pipeline to address the internal audit structure with a view to enhancing effectiveness and efficiency of internal audit functions. On audit committees21, in July 2012, MINECOFIN published a model Audit Committee Charter and followed by a Handbook in 2012 that provides broad guidelines that can be used in by the Audit Committees in Ministries, Districts, Agencies and Government Businesses. All 30 District Councils have Audit Committees since 2011 and submit reports to Council (83% by December 2013). In the central government, 14 out of 21 MDAs have established Internal Audit Committees but very few have held meetings. With only 2 internal auditors per district of about 200 subsidiary entities, capacity is seriously constrained. Internal audit reports cite control weaknesses, poor records management and non-compliance with procurement rules. On internal control, a number of issues cut across both central and subnational levels. The government has developed a financial management manual as the guideline that lays out the requirements of an internal control system, and it is used at both the national and subnational levels. There are some weaknesses within the internal control systems that cut across reporting entities such as the inaccurate and incomplete financial statements, non- compliance to procurement rules and regulations, over expenditures, irregular expenditures, mis- posting of financial records when posting to IFMIS etc. 37. Program 4 External Oversight and Accountability: Timely and quality external audit is also an integral part of improving transparency and accountability. The Office of Auditor General has been playing a key role in external audit. Its new organizational structure was approved in 2012, and the new law on OAG was enacted in late 2013 22. The scope and coverage by external audits has been improved in recent few years with the increase in coverage from 60% in 2007 to 79% in 201323. Despite the increase in the coverage, only 32% of the 139 audit reports obtained an unqualified (clean) audit opinion, while the remaining 68% obtained qualified audit opinion. None of 30 districts and Kigali City obtained unqualified audit opinion, although three districts (Kamonyi, Ruhango and Gakenke) improved their performance by receiving “except for” opinions. Factors affecting the high qualified audit are, among other things, failure to implement some prior year audit recommendation, omitting balances of non- budget agencies from financial statements of in districts, and non-compliance with existing law and regulations. Furthermore, the capacity of the relevant Parliamentary Committees and District Councils is still inadequate to exercise effective external oversight on the use of public 21 Decentralized Service Delivery Development Policy Operation in 2013 (P145114) supports 25 districts Audit Committee reports of 2012. 22 Law N° 79/2013 of 11/9/2013 determining the mission, organization and functioning of the Office of the Auditor General of State finances 23 Report of the Auditor General of State Finance for the Year ended 30 June 2013 (http://www.oag.gov.rw/IMG/pdf/Annual_Report_2013.pdf) 19 finances. To address these challenges, the PFM SSP aims to (i) Ensure full compliance with government rules on procurement; (ii) Introduce more modern audit techniques to improve internal audit standards, and (iii) Address the weaknesses of the current Internal Audit structure. 38. Program 5 Electronic Service Delivery and IFMIS: The capability and performance of the IFMIS is critical to the Government’s ability to deliver improvements in every aspect of the PFM cycle, including improving the timeliness and quality of financial reports, improving the availability of information required by managers for decision making purposes, and ensuring transparency and accountability for the use of public resources. The SmartFMS system is a custom developed financial management information system that supports budget preparation, expenditure management and financial reporting. It began operating in 2010 and has been implemented at 275 sites, including all of the line Ministries, all 30 districts and Kigali City, and various other government funded bodies. The Government plans to add to the functionality of the Smart FMIS software, fixed assets management and management of external funding sources. The Smart FMIS upgrade will also build interfaces to the Central Bank, the Rwanda Revenue Authority and numerous other bodies. In addition, it is planned to integrate the IFMIS system with an e-Procurement system. The current plan is to fully develop the system upgrade by June 2015 and then to roll it out across government between 2015 and 2018. 39. Program 6 Fiscal Decentralization: On resource mobilization by decentralized entities (Sub-Program 6.1), strengthening revenue mobilization at the subnational levels is a core objective of the government. Considerable efforts have been undertaken to mobilize local revenues including a strengthened legal framework 24 . Nevertheless, the utilization of local governments’ revenue sources is sub-optimal and uneven across districts, which in addition to fiscal sustainability raises issues on unequal treatment of tax payers. In FY2013/14 budget of the districts, the share of own revenues in the total ranged between 4 and 49% (on average 17%), and the remainder was financed by transfers from the central government. Increase in local revenues will reduce the dependence of subnational governments on transfers from the central government and consequently strengthen the fiscal space for central government budgets and it will also imply an increase in share of discretion of districts budgets. In order to strengthen revenue mobilization at the subnational level, the government commissioned the Local Government Revenue Potential Study 25 . Among other things, the study finds weak revenue administration capacity at the subnational level. Consequently, in combination with devolution of three tax sources to the districts, the government has decided to transfer local revenue collection responsibilities from districts to the RRA. On facilitation of fiscal transfers (Sub- Program 6.2), in the area of revision of expenditure responsibilities MINECOFIN in collaboration with Rwanda Governance Board (RGB) developed a draft Prime Minister Order to guide the line ministries in the implementation of sectoral decentralization. Furthermore, legal and regulatory framework was assessed to determine the status quo in terms of expenditure responsibilities. A draft revised block grant formula was developed to improve allocation 24 Law Establishing the Sources of Revenue and Property of Decentralized Entities and Governing their Management in 2011 followed by the Ministerial Order determining the modalities for the implementation of Law Establishing the Sources of Revenue and Property of Decentralized Entities and Governing their Management in 2012 and the Presidential Order establishing the List of Fees and Other Charges Levied by Decentralized Entities and Applicable Thresholds in 2012. 25 Local Government Revenue Potential in Rwanda (2013) pointed out among other things the lack of district capacity to collect taxes. 20 efficiency to districts considering their fiscal capacity. Every year MINECOFIN issues the earmarked transfer guidelines. These earmarked transfer guidelines are designed to guide the decentralized entities in the implementation of earmarked transfers from the central government. The specific purpose of these earmarked transfers guidelines is to provide terms under which the earmarked funds are allocated, transferred, spent and accounted for between the parties involved. The format of submission of the earmarked transfer guidelines was modified to gather for the Budget System Improvement Programme (BSIP) and to operationalize performance based budgeting and funding approach. On strengthening PFM systems and capacity at subnational level (Sub-Program 6.3), at the subnational level, timely and transparent financial information at the subnational level is a key ingredient for improving effective and efficient use of public resources not only at the subnational level but also at the national level (about 80% of district budgets are financed by the transfer from the central government). However, financial information below the district level (i.e., sub-district, cell, hospital and school) is in practice non- existent. In order to address the issue, the government developed a simplified accounting, and financial reporting application (SEAS) for the subnational entities below the district level, and commenced a pilot of the application in December 2013. As of April 2014, among 416 sub- districts, 88 had completed the pilot. An initial assessment of implementation experience indicated substantial success in five out of seven districts. Roll out to an additional 10 districts was due to be completed by June 2014. The initial evaluation identified problems of limited access to IT at sub-district offices and excess numbers of Bank accounts at sub-district level. Improving subnational PFM such as local revenue mobilization is one of key priorities in the government’s decentralization strategy, and the Bank has been supporting the efforts26. 40. Program 7 PFM Sector Coordination and Management: On coordination of HR training and capacity building (Sub-Program 7.1), Capacity constraints (organizational, institutional and human) are prevalent across the government programs to be supported by the PforR and skills levels will need to be raised significantly as part of the implementation of the Program. Currently, staffs who are recruited to financial management positions are required to have a bachelors degree in accounting or finance, but few have any type of professional qualification. None of the internal audit staff, for example, are professionally qualified auditors. The capacity of universities and post graduate training institutions appears to be a constraint on improving skills levels and delivering professionally qualified staff. The certification body for accountants in Rwanda (Institute of Certified Public Accountant of Rwanda (ICPAR)) has been established, but no institutions have yet been certified to provide professional training in accounting and audit. On monitoring and evaluation (Sub-Program 7.3), Progress of the PFM SSP has been regularly monitored through annual and quarterly progress reports on the PFM basket fund. PEFA assessments have been used to measure the overall progress of the PFM sector. Thus far, two assessments were conducted in 2007 and 2010, and the 2010 assessment includes subnational assessment of 4 districts. The next PEFA assessments at the national and subnational levels (including 8 districts) are scheduled to be completed in the second half of 2014. 26 Decentralized Service Delivery Development Policy Operation in 2013 (P145114) supports the Presidential Order establishing the List of Fees and Other Charges Levied by Decentralized Entities and Applicable Thresholds in 2012 to clarify district powers to impose a range of fees and charges and determine the rates, and the focus on local revenue mobilization in the proposed operation gives continuity with earlier Bank support. 21 NSDS 2 41. The NSDS 2 has been developed taking into account lessons learnt from NSDS 1. It consolidates the gains of NSDS 1, mainly related to social and demographic data production and dissemination, while addressing its shortcomings, mainly related to the dearth of economic statistics, low quality of administrative statistics, and capacity constraints within the NSS. The NSDS 2 is fully aligned with EDPRS 2 and seeks to provide data required for the monitoring and evaluation of EDPRS 2. 42. In line with the NSDS 2 priorities, the Program seeks to address data production, dissemination, and quality enhancement needs in several priority areas while promoting sustainability by strengthening statistical skills within the NSS. More specifically, the Program will support the development of agricultural statistics, business and labor market statistics and the upgrading and updating of the system of national accounts, improved data dissemination and statistical advocacy, and the development of skills within the NSS. 43. Program 1: Strengthen civil registration systems, administrative records, surveys and other sources of data. Under this Strategic Objective, the Program will support the development of agricultural, business and labor market statistics and the upgrading of the system of national accounts.  Agricultural Statistics: The process of agricultural planning, strategy, design, policy formulation and analysis, budget preparation, project implementation, appraisal, monitoring and evaluation requires a large volume of agricultural statistical information. To address these needs, the NISR will produce agricultural statistics through the detailed design and execution of comprehensive annual agriculture surveys. This process started in 2012/13 with the design and implementation of an experimental survey. The experimental survey introduced a novel best practice approach to agricultural surveying. This consists of the use of both area and list frames (so-called “mixed frames”) instead of traditional household frames. Area frames allow mapping land use and management practices using aerial satellite photos and demarcating land for agriculture in small pieces (segments) that are used as an exhaustive sample frame for subsequent segment-level sampling (for smallholders). The list frame involves listing large farmers and covering them all. The combination of area and list frames provides estimates that are very close to reality and are superior to the traditional use of household frames, which implicitly assumes each household has equal weight. The Program will support the roll-out of annual agricultural surveys, as of 2014/15, based on the lessons learnt from the experimental survey. The survey instrument will include several modules and sections that target land use (e.g. crops, grazing, forest, etc.); size of land holdings; livestock (e.g. total number of, products and byproducts, poultry, fish, beehives, etc.); seasonality and productivity of individual crops; farm management practices/inputs and irrigation systems; area and production of main and short rain seasons; crop forecasting and patterns, among other features. The agriculture survey will be mainstreamed in NISR’s statistical activities to provide a constant stream of data on the performance of the agricultural sector.  Business and Labor Statistics: Data on businesses and labor supply and demand will be generated through a three-step process whose frequency will be gradually enhanced to inform decision makers more effectively. First, a business establishment census will be carried out to serve as the basis for the downstream design and implementation of a detailed business 22 enterprise survey. This process will comprise of creating a comprehensive sampling frame for formal and informal business entities, and obtaining some basic information on these entities. Once this census—a key milestone for labor market statistical development—is completed, an integrated business enterprise survey will be designed and implemented in light of international good practices such as the WB BEEPS, which systematically captures data on enterprises in Europe and Central Asia to guide policy decisions on private sector development and labor market dynamics. The integrated business enterprise survey will be implemented in the second year to collect data on formal and informal businesses and assess supply and demand side factors for labor policy development and private investment promotion and priority setting. After the enterprise survey, and to complete the three-stage process, a labor force survey will be conducted to more clearly outline employment levels, unemployment, underemployment, wages, skills availability, and other important labor market statistics. Overall improvements in business and labor statistics are expected to improve and facilitate an enabling environment for business development, local and international investment promotion, revenue management, and long term plans for job creation and expansion of private sector participation in development.  National Accounts: Rwanda’s current system of national accounts is broadly in line with the United Nations System of National Accounts 1993 (SNA1993) standards and was rebased in 2014 with base year 2011 together with adopting Revision 4 of the International Standard Industrial Classification (ISIC) 27 . Under the Program, the National Accounts will be upgraded to the latest SNA2008 standard (which includes important changes related to the classification of economic activity, the recording of informal economic activities) and will be rebased again in 2016/17 with base year 2014. The rebasing in 2016/17 will benefit from better economic source data provided by updated agricultural and business statistics. An upgraded and updated system of national accounts will allow a closer monitoring of economic performance. 44. Program 2 Improve quality and dissemination of statistics and public statistical literacy, and, Improve statistical advocacy and integrate use of statistics in decision making: During NSDS 1, NISR has organized several high-profile and publicized events on the availability of statistics and their importance for decision-making. The most-known and most attended event is the annual interuniversity infographics competition, for which students from different higher-learning institutes submit thematic infographics based on a recent survey dataset in celebration of African Statistics Day. All submissions are rated by a jury, after which infographics are exhibited and prizes awarded to the winning submissions. The infographics competition gains in importance and visibility each single year and has raised awareness among students on the easy access and availability of quality data in Rwanda. NISR has also organized workshops in PhD departments throughout the country to highlight the availability of data and boost the use of national survey data by local PhD researchers. 45. Program 3 Improve statistical advocacy and integrate use of statistics in decision making: All statistical advocacy activities so far have been ad hoc. NSDS 2 aims to address this by developing and implementing an integrated advocacy strategy. The strategy will be geared both towards stimulating use of statistics by decision-makers and by researchers and civil 27 Only half of countries in Africa are in compliance with SNA1993 (Devarajan, 2013). 23 society. The technical soundness of the strategy will be examined once the strategy will have been developed by NISR (planned for the first year of the Program). 46. Program 4 Develop capacity within NSS: Under this Strategic Objective, the Program will support the establishment and operationalization of a statistical training center within the existing premises of NISR. With support from the Program, NISR will prepare a master plan for the set-up of the training center, including its design and construction arrangements. NISR already conducted a skills training needs analysis of government officials in NSS institutions and will develop courses (including e-learning modules) based on the results of the needs assessment. The NISR will utilize its senior officials and other experts in the NSS to provide courses and serve as trainers. For statistical skills of lesser complexity, NISR will organize training for trainers, who then can train officials within their respective organizations using the tools and infrastructure available in the training center. For more complex statistical trainings (sampling for instance), multimedia tools will be used to link to international experts so that they can offer courses. The center is expected to be established and made operational by the end of the project’s second stage. E-Learning and other outreach measures will also be used to offer courses to district statisticians and other NSS stakeholders. Various dissemination mechanisms will be used to raise awareness about the center while building a culture of evidence-based decision making in the public sector. Once fully operational, the center could offer courses at the EAC level to promote statistical literacy and expertise on a cost sharing basis. The use of modern tablet and mobile technologies and tools will be piloted to gauge their usefulness in improving timeliness and quality of data. C. Institutional Arrangements 47. On PFM, preparation of the Program was coordinated by the MINECOFIN SPIU, which will take the lead in implementing, monitoring, and reporting on the Program. Rwanda has taken a positive step following Cabinet resolution of February 11, 2011, regarding the formation of the SPIU28 across Line Ministries and Public Agencies, with overall objective of creating an effective institutional framework that will guide the process of designing and implementing projects that are earmarked to fast track realization of development targets envisaged in the various sector strategic plans. However, there are challenges of multiplicity of processes, procedures and information systems resulting from the requirements of individual donors. This in turn doubles the work load of the accountants, creates silos and does not encourage strengthening of country systems. It is therefore important for the efficiency of the SPIU to harmonize and have a single system applicable to all projects under the SPIU irrespective of the donor. While in the long-run, using country systems by development partners is expected to increase capacity to handle multiple tasks, in the short-run, the Bank through the Program Implementation Support Plan will work with the SPIU to ensure effective implementation of the Program. 48. NISR will lead the implementation of the statistical component under the proposed Program. NISR has solid program implementation capacity. NSDS 1 was implemented according to schedule, with all major surveys and censuses conducted according to a pre- determined timetable. An NSDS coordination team (NCT), consisting of procurement, financial management, M&E, and planning staff, is already in place and have been trained by World Bank 28 http://www.minecofin.gov.rw/index.php?id=58. 24 procurement and financial management specialists in the framework of the Bank’s investment project support to the previous NSDS 1. 49. Reporting arrangement. As the existing M&E framework does not cover all key information for effective implementation of the Program, the MINECOFIN SPIU will separately report the following information.  progress on DLIs and PAPs: twice a year, by February and August  progress on expenditures by programs and subprograms, as identified in the expenditure framework: twice a year, by February and August  audited financial statements of implementing agencies: annually29. 50. The Government and the Bank will discuss other reporting issues that arise during implementation. III. Description and Assessment of Program Expenditure Framework 51. Expenditure framework (table 8). Building on costing exercises of PFM SSP, NSDS 2 and MTEF, the total expenditure framework was formulated. Total expenditure for the Program is US$172 million, to be disbursed between FY2014/15 and FY2017/18. The PFM component accounts for 65 percent (US$113 million), and the statistics component accounts for 35 percent (US$59 million) of the Program. Almost all expenditure activities are less than US$5 million; exceptions include activities in e-procurement, IFMIS, and the fifth household survey (EICV 5). Formulation of the total expenditure framework built on costing exercises of the PFM SSP, NSDS 2, and the MTEF. With the support of US$100 million from the Program together with contributions from the government (US$41 million) and other development partners (US$30 million), the PFM and statistics programs will be fully funded. 52. Given the importance of addressing capacity constraints, the Government plans to conduct capacity-building activities amounting to US$37 million (22 percent of total expenditures) during the Program implementation period. According to the economic classification, 30 the Government plans to spend US$2 million (1 percent of the total) on compensation of employees in the MINECOFIN SPIU, US$122 million (71 percent of the total) on goods and services, and US$47 million (28 percent of the total) on fixed capital. Construction of the statistics training center is the Program’s only physical activity. It was addressed in the environmental and social systems assessment (ESSA) (see annex G). Other fixed capital activities include the purchase of software and related activities for e-procurement and the future IFMIS. Procurable items (total minus compensation of employees) account for 99 percent of total expenditures. Section IV of the Fiduciary Assessment analyzes the strengths and weaknesses of the procurement systems and practice. Weakness identified will be addressed through the Program (including through DLI and PAPs). 29 The audit shall cover all the implementing agencies (RRA, RPPA, OAG, NISR and MINECOFIN (with an annex to the MINECOFIN notes to the financial statements that will contain such information deemed classified expenditure which shall remain confidential to the government). The Terms of reference for the audit will be agreed upon with the Association. 30 Based on the IMF’s 2001 Government Finance Statistics Manual (https://www.imf.org/external/pubs/ft/gfs/manual/). 25 53. There are no high-risk activities in the Program which are or need to be excluded. 54. Funds flow of the Program expenditures. The proceeds of the Program will be part of the budget. They will be disbursed against the Treasury Single Account (TSA) and then allocated to the implementing agencies (figure 8). Execution of the budget follows relevant law and regulations.31 Figure 8: Funds Flow of the Program Expenditures Budget Entities Source of Funds Disbursement Transfer (Implementing Agencies) World Bank PforR MINECOFIN RRA Government Own Fund Treasury Single RPPA Account Designated Other Development Partners Account at OAG BNR (1) PFM Basket Fund Designated (2) Statistics Basket Fund Account at NISR BNR 31 Chapter IV (State Budget Execution) of the 2013 Organic Law on State Finance and Property defines budget execution. Practical guidelines for budget managers are included in Chapter 6 (Budget Execution) of the Simplified Public Financial Guidelines for Chief Budget Managers. 26 Table 8: Program Expenditure Framework (US$ millions) Government fiscal year Expenditure category Wage Goods Capacity and and Fixed Component/expenditure type 2014/15 2015/16 2016/17 2017/18a Total building salaries services capital PFM 38 33 24 19 113 31 2 71 40 P1 Economic planning and budgeting 3 3 2 2 10 2 0 9 1 P2 Resource mobilization 11 5 3 1 20 1 0 14 6 P3 Budget execution, internal control, accounting, 7 13 7 4 30 12 0 21 9 and reporting P4 External oversight and accountability 2 2 2 2 7 5 0 6 1 P5 Electronic service delivery and IFMIS 8 5 5 5 23 1 0 3 20 P6 Fiscal decentralization 4 4 4 3 15 6 0 13 2 P7 PFM sector coordination and management 2 2 2 3 8 4 2 6 0 Statistics 17 15 13 15 59 6 0 51 8 Strengthen civil registration system, administrative 9 4 8 9 30 0 0 30 0 records, surveys, and other sources of data Improve quality and dissemination of statistics and 0 0 0 0 1 0 0 1 0 public statistical literacy Improve statistical advocacy and integrate use of 0 0 0 0 0 0 0 0 0 statistics in decision making Develop capacity within NSS 7 10 5 6 28 6 0 20 8 Total (PFM + Statistics) 54 47 37 34 172 38 2 122 48 Sources of funding Government 14 3 2 23 41 n.a. n.a. n.a. n.a. World Bank PforR 30 35 32 3 100 n.a. n.a. n.a. n.a. Other development partners 10 103 3 8 30 n.a. n.a. n.a. n.a. Total 54 47 37 34 172 n.a. n.a. n.a. n.a. Share of PforR in total (percent) 56 74 87 9 58 n.a. n.a. n.a. n.a. Source: MINECOFIN. Note: n.a. = Not applicable. a. Extrapolated based on ratio of FY2017/18 to FY2016/17. 27 A. Program Budget Structure and Classification 55. The budget classification system is comprehensive and consistent with international standards. The budget is prepared in compliance with the IMF’s Government Finance Statistics Manual (IMF-GFSM 2001) 32 . The Chart of Accounts is also comprehensive to allow for preparation of full set of financial statements in accordance with the International Public Sector Accounting Standards (IPSAS) (figure 9). Budget programs and sub-programs have been mapped to the Classification of Functions of Government (COFOG) standards 33. The Financial statements accounting policies note that the financial statements are prepared on a “modified cash basis” whilst the budget is prepared on cash basis. For further improvement, the Chart of Accounts will be updated to accommodate new changes in the public sector accounting and reduce various accounting posting errors (the first year DLI in DLI 4). 56. The expenditure program is based on the approved MTEF covering FY2014/15- 2016/17, but two challenges remain 34 . The MTEF includes information on program, sub- program, project/output and activity. However, it is not classified based on SSPs or other sector strategies under the EDPRS 2. Therefore, in order to translate the information in the MTEF into the PFM SSP and NSDS 2, the government has manually reclassified the MTEF (Annex 7). Also, while the MTEF covers until FY2016/17, the Program aims to provide financing resources until FY2017/18. Therefore, based on the assessments provided by MINECOFIN, expenditures in FY2017/18 are obtained by extrapolating the growth rate in the previous fiscal year. Figure 9: Hierarchical Structure of the Chart of Accounts Source: MINECOFIN 32 Article 33 of the OBL dealing with “format of revenue budget appropriation” requires that “the revenues of Central Government or decentralized entities shall adhere to internationally accepted standards of classification of revenues”. http://www.minecofin.gov.rw/uploads/media/Official_Gazette_no_Special_of_05_11_2013_06.pdf 33 OBL Article 34 “Expenditure estimates of each public entity shall be organized in a programmatic, economic and functional classification, in line with international accepted classification standards of expenditures ”. 34 The MTEF is currently the best medium-term expenditure plan of the government. Some weaknesses of the MTEF will be addressed through the Program. 28 57. The budget classification, in theory, allows the tracking of expenditures according to the five segments. However, in practice, the tracking of expenditures by programs is challenging. For example, wages and salaries are not included in programs or sub-programs but are consolidated under ministries and agencies. In addition, budget presentation does not clearly show how specific SSP pillars link to EDPRS 2 at the implementing agency level. Furthermore, the summary financial information in the audit report does not provide detailed actual expenditure in the same format as the approved budget to allow direct comparison of budget out- turns vis-à-vis original policy intent. Therefore, until the program structure described in the following paragraph is operationalized, the Program will rely on the matching table in annex 7. 58. The Program supports government efforts in improving the program structure. The IMF has been supporting this area through its technical assistance of the budget system improvement programme, and the Program support the implementation of it. DLI 1 includes design and pilot of a draft consolidated programme template to assist FY2015/16 budget preparation and monitoring and evaluation processes in identified pilot MDAs. B. Program’s Financial Sustainability and Funding Predictability 59. Program’s financial sustainability and funding predictability are considered to be appropriate. According to the latest IMF/Bank Joint Debt Sustainability Analysis (DSA), Rwanda’s risk of debt distress rating has improved from moderate to low in the latest DSA in response to a broadened export base. The total public debt outstanding at the end of 2012 stood at 26% of GDP and the DSA shows that Rwanda’s external debt remains below the indicative thresholds under all scenarios examined. The DSA further acknowledges that the authorities have made progress on enhancing their debt management capacity. A major development was the preparation and presentation by the authorities of their own DSA in October 201235. 60. The execution ability measured by the deviation between the budget and actual needs to be improved. The execution rates of the PFM program in the past two years are on average 80 percent (table 9). On the contrary, the rates of the statistics program were 88 percent in FY2011/12 and 94 percent in FY2012/13. By directly supporting the PFM sector, the Program itself is expected to address execution capacity of the government. Table 9: Comparison between Budget and Actual Execution of the PFM Program (Rwf billion) FY2011/12 FY2012/13 (Jul 11-Jun 12) (Jul 12-13) Budget Actual B/A Budget Actual B/A (A) (B) (A) (B) Program 1 Economic Planning and Budgeting: 2,316 2,038 88% 3,658 3,766 103% Program 2 Resource Mobilization: 4,040 3,368 83% 4,267 4,110 96% Program 3 Budget Execution, Internal Control, 25,251 18,674 74% 22,785 16,945 74% Accounting & Reporting: Program 4 External Oversight and Accountability: 4,146 4,059 98% 3,614 2,496 69% Program 5 Electronic Service Delivery & IFMIS: 7,486 5,933 79% 8,876 6,677 75% Program 6 Fiscal Decentralization: 2,283 2,150 94% 1,161 1,139 98% Program 7 PFM Sector Coordination and Management: 6,588 5,888 89% 5,593 3,938 70% Total 52,110 42,111 81% 49,954 39,071 78% Source: MINECOFIN 35 A structural benchmark in the current PSI (IMF Country Report no. 13/77). 29 61. The expenditure framework does not include non-discretionary items such as wages and salaries for two reasons. First, the budget classification does not allow capturing wages and salaries by the specific programs. Second, the government considers that wages and salaries should be financed by their own revenues 36 . In order to address these issues, the Program supports improving the program structure through the first year DLI under DLI 1on improvement of multi-year fiscal management framework. 62. There is good track record of predictability of donor financing. On PFM, developing partners participating in the PFM basket fund (UK, Germany and EU) have good track record of channeling financial resources in the past several years. The new Memorandum of Understanding (MoU) covering FY2014/15 and FY2017/18 has been signed. C. Efficiency of Program Expenditure 63. Institutional Arrangements and Expenditure Execution Incentive Mechanism. Rwanda has a very good track record of results-based development management. For example, Rwanda was one of two countries whose national development strategy was rated “A” in the 2010 Paris Declaration survey among 77 countries surveyed 37. The results-based aspect was strengthened further in EDPRS 2 38 and SSPs. Results-based management has also been operationalized at the ministerial, agency, units, and staff levels, which has created strong incentive mechanism to achieve results. IV. Description and Assessment of Program Results Framework and M&E A. Program’s Results Framework 64. The Program Development Objective (PDO) of this Program is enhancing Public Financial Management and statistics systems to improve transparency and accountability in the use of public funds, revenue mobilization and the quality and accessibility of development data for decision making. The Program aims to achieve the following results:  Increased efficiency in national and subnational revenue collection;  Improved national and subnational transparency and accountability in the use of public funds; and  Improved use of development data for decision-making. 65. In order to achieve the results and the PDO, Program’s results framework has been formulated based on government’s own results frameworks such as the result frameworks of PFM SSP and NSDS 2, and PFM SSP sector implementation plan. Furthermore, Program’s results framework supplemented additional information in the MTEF and other items deemed important. 36 Except for salaries and wages for the staff in the SPIU of MINECOFIN, which are included in sub-program 7.1. 37 http://effectivecooperation.org/files/resources/2011%20Report%20on%20Monitoring%20the%20Paris%20Declarati on%20ENGLISH.pdf 38 Joint Staff Advisory Note 30 66. The results framework for the Program (Annex 8) represents a consistent results chain to achieve the PDO): The results framework has three key results areas which form integral parts of the PFM cycle such as (i) increased efficiency in national and subnational revenue collection; (ii) improved national and subnational transparency and accountability in the use of public funds; and (iii) improved use of development data for decision-making. Each results area is reflected in disbursement linked indicators (DLIs), program action plans (PAPs) and program implementation support plan. 67. Results Area 1, Enhanced National and Subnational Revenue Collection: The main indicator of the results area is the tax to GDP ratio with Subindicator 1-(1) on “Hours per year for paying tax”; Subindicator 1-(2) on “the number of districts using automated revenue collection system” and Subindicator 1-(3) on “proportion of active small and micro taxpayers filing tax declarations using e-tax Internet portal. The targeted outcomes in this results area will be achieved by DLI 2 centralization of subnational revenue collections, PAPs under PFM SSP program 2 on resource mobilization, activities supported by the Program under PFM SSP Program 2 on resource mobilization and sub-program 6.1 on resource mobilization by decentralized entities. 68. Results Area 2, Improved National and Subnational Transparency and Accountability in the Use of Public Funds: The main indicator of the results area is “percent of entities submitting monthly statements by the due date and make them publically available” accompanied by Subindicator 2-(1) on “proportion of MDAs receiving unqualified audit opinions”; Subindicator 2-(2) on “percent of subdistricts using a simplified accounting and financial reporting application.” And Subindicator 2-(3) on gap between annual budget and second-year MTEF formulated previous year. The targeted outcomes in this results area will be achieved by DLI 3 on e-procurement, DLI 4 on percent of MDAs receiving unqualified audit opinion, DLI 5 on percent of subdistricts using a simplified accounting and financial reporting application. Relevant PAPs and government activities under PFM SSP P3 (budget execution, accounting and reporting), P4 (audit and legislative oversight), P5 (electronic service delivery and IFMIS), P6 (fiscal decentralization) will also contribute to this results area. 69. Results Area 3, Improved Use of Public Data for Decision Making: The main indicator of the results area is “the share of MDAs for official statistics using both (a) Analysis of current developments for short-term decision making and (b) Analysis of trends for longer- term policy formulation”39 accompanied with Subindicator 3-(1) on “Annual national agricultural survey conducted and disseminated” and Subindicator 3-(2) on “Annual labor market statistics collected and disseminated.” In addition, inputs/activities, outputs and intermediate outcomes in Strategic Objective 1 (Strengthen civil registration system, administrative records, surveys and censuses and other sources of data), Strategic Objective 2 (Improve quality and dissemination of statistics and public statistical literacy), Strategic Objective 3 (Improve statistical advocacy and integrate use of statistics in decision making); and Strategic Objective 4 (Develop capacities within NSS) under the NSDS 2 will help achieve the outcome targets. 39 Questions 4.1.1 and 4.1.2 of User Satisfaction Survey 31 B. Assessment of Program Implementing Agencies’ M&E System 70. Building on already established M&E frameworks in the government’s PFM and statistics programs, the MINECOFIN SPIU will take a coordination role in the Program M&E. The SPIU is the main interface in preparing and implementing the Program. It will keep coordination roles in implementation and M&E. The SPIU has a track record of managing externally funded projects and program including the PFM Basket Fund. 71. On PFM, the Program will draw on the existing M&E framework of the PFM SSP. The SSP includes a section on Monitoring and Evaluation Plan describing how progress of the PFM SSP will be monitored. The section also includes several monitoring tools such as Joint Sector Review of the sector, PEFA and midterm/end of terms reviews. The SPIU has made progress on M&E of the PFM SSP. In the first year of the implementation of the SSP (FY2013/14), the SPIU consolidated three quarterly progress reports and one annual report for FY2012/13 with inputs from other units of MINECOFIN and other agencies (for example, RRA, RPPA and OAG), which are the implementing agencies of the Program. 72. On statistics, the Program will draw on the existing M&E framework of NSDS 2 to monitor progress toward milestones. NSDS 2 includes a comprehensive logical framework with output and outcome indicators at each of the six strategic objectives it aims to accomplish. The results framework for the Program is a subset of the NSDS 2 logical framework. During NSDS 2, NISR will report on progress through quarterly, six-monthly, and annual progress reports. In addition, an independent consultant will be sourced to carry out annual, midterm, and final reviews of the progress on NSDS 2. An independent user satisfaction survey will be conducted every two years to gauge use of and satisfaction with data produced and disseminated by the NSS among a wide variety of stakeholders (government, local and international organizations, research institutes, civil society, and so forth) to measure PDO Indicator 3. V. Disbursement Linked Indicators A. Disbursement Linked Indicators 73. Building on the results framework, the DLIs were selected to represent one or both of the following criteria: (a) DLIs signal and monitor a milestone along the results chain without which the PDO cannot be achieved and (b) DLIs signal incentives for rewarding performance (Outputs, outcomes) to encourage the practice of managing for results (table 10). 40 Given the link between the DLIs and Program results areas (see the summary results framework in Annex C), attaining the DLIs will contribute to the Bank’s twin goals through the above- mentioned links with the three Program results areas. 74. The DLIs are combinations of outputs and intermediate outcomes; almost all of them meet the two criteria above. For example, an increase in the proportion of MDAs receiving unqualified audit opinions directly contributes to the second results area of improved national and subnational transparency and accountability in the use of public funds. The first- and second- 40 See paragraphs 4–6 in Chapter 3 (on Disbursement-Linked Indicators and disbursement arrangements) of the Interim Guidance Note. 32 year DLIs focus on increases in proportions; the third-year DLI focuses on an intermediate outcome, the percentage increase in unqualified audit reports. Table 10: Disbursement-Linked Indicators in the Program Milestone to Incentives for Component/DLI Type a achieve PDO performance PFM DLI 1: Number of pilot ministries submitting Output, intermediate Yes Yes investment plan in which feasibility studies are outcome conducted for new projects exceeding US$1 million have, per instructions in budget call circular DLI 2: Number of districts using automated local Output Yes Yes government revenue management system DLI 3: Implementation of e-procurement Output, intermediate Yes Yes outcome DLI 4: Percent of MDAs receiving unqualified audit Output, intermediate Yes Yes opinion outcome DLI 5: Percent of sub-districts using simplified Output, intermediate Yes Yes accounting and financial reporting application outcome DLI 6: Number of Government Sponsored PFM Output Yes Yes staff with at least foundation-level professional finance qualifications Statistics DLI 7: Increased production of economic statistics Output Yes Yes and dissemination in time for strategic planning and decision making DLI 8: Extension of Open Data initiative to Output, intermediate Yes Yes progressively include more surveys and outcome administrative sources of data a. Types include outputs, outcomes, process indicators, financing indicators, and key actions. 75. DLI 1 (Improved public investment): The DLI focuses on public investment management. In Rwanda where the share of capital expenditures accounts for 45% of the total budget, improving public investment management is critical. In this regard, the DLI is “Number of pilot ministries submitting investment plan in which feasibility studies are conducted for new projects exceeding US$1 million have, per instructions in budget call circular”. The baseline is zero and DLI targets are 1 pilot ministry in year 1; 3 in year 2 and 5 in year 3. A proposed revision of the national investment policy is expected to contribute to improving public investment management. 76. DLI 2 (Centralization of subnational revenue collection): Building on the study on local government revenue potential in late 2013, the government decided to enhance local revenue-administrative capacity by facilitating collaboration between the RRA and districts. The collaboration covers the installation of new automated revenue systems and procedures, together with staff on-boarding, training and other forms of capacity building. A pilot project on the new automated revenue systems funded by the African Development Bank will be carried out in three districts in Kigali. Also, the government has formulated a specific action plan to follow up on the government’s decision to delegate the tax collection function to RRA on behalf of the districts. Phase 1 includes RRA support to all districts in collecting tax revenues of three tax sources, using existing systems and in collaboration with staff at the districts. Phase 2, planned to be launched in January 2015, is intended to have RRA taking over all functions on revenue 33 mobilization, including taxes and fees collection, tax audit, enforcement, objections and appeals against assessed taxes. This new mandate for RRA requires a review of the existing legal framework in the second half of 2014. The Program supports the automated revenue systems and key output in the action plan. The DLI is the number of districts using automated local government revenue management system. DLI targets are 3 districts in year 1, 6 in year 6 and 11 in year 3. 77. DLI 3 (E-Procurement implemented): Under the Medium-Term Strategic Plan on Public Procurement for 2012/13-2014/1541, the introduction of E-Procurement is identified as one of the key activities for transparent and efficient public procurement systems. With the assistance of the World Bank, the Government has carried out the feasibility study. The study also recommends that the e-Procurement system be developed along a close integration with other existing systems such as IFMIS and the Business registry at Rwanda Development Board (RDB). Linking the e-Procurement system with other systems will help exchange data and cross- check compliance with procurement rules. The DLI in the first year is an approval of technical proposal, financial proposal and roadmap by the minister of MINECOFIN. The second year DLI is functioning of IFMIS and E-Procurement interface protocols. These DLIs are expected to enable pilot government entities to start using e-Tendering and application of IFMIS and E- Procurement interface protocols. This is the third year DLI. 78. DLI 4 (Proportion of Ministries, Districts and Agencies (MDAs) receiving unqualified audit opinion): Increasing the proportion of MDAs 42 is critical to enhance transparency and accountability. For FY2012/13, 45 of 139 MDAs (32 percent) received unqualified audit opinions. Government efforts supporting this area include update PFM pocket booklet43 disseminated to Chief Budget Managers and training conducted in the first year. This booklet will contribute to improved compliance of government officials with government rules, as the booklet will summarize the whole PFM cycle information and references to the legal regulations governing the PFM Cycle. This helps the any staff from the top management to the lower accountant to be easily guided by the pocket note and know where to read/refer further. To address some weakness of the current internal audit structure (e.g., staffing), the government plans to issue a Ministerial Order on a revised internal audit structure. Key milestones to address challenges on internal audit are operationalizing automation of internal audit through Electronic Working Papers (EWP) and, training of records management and procurement 44 training conducted and a study on Risk profile of budgeting entities. Furthermore, capacity development as well as quality staff is key to achieving this DLI. DLI 6 on the number of Government sponsored PFM staff with at least foundation-level professional finance qualifications will contribute to this area. The first year target is 37 percent to be increased to 42 percent in year 2 and 47 percent in year 3. 41 http://www.rppa.gov.rw/uploads/media/RPPA_STRATEGIC_PLAN.pdf 42 MDAs include ministries, other central government agencies, boards, government projects, government business enterprises, provinces and districts (including city of Kigali). 43 http://www.minecofin.gov.rw/fileadmin/documents/MINICOFIN-PFM-Guidelines-July-2011.pdf 44 Procurement officers, Tender Committee members, members of Independent Review Panels, bidders, prosecutors, Auditors, CBMs 34 79. DLI 5 (% of Subsidiary entities using a simplified accounting and financial reporting application): The Program plans to support the operationalization of the simplified accounting system at the sub-district level with DLIs of the share of the sub-districts using the simplified accounting and financial reporting application at 30% in the first year, 60% in the second year and 80% in the third year. In recognition of capacity constraints at the subnational level, milestone in the first year is a provision of training for end-users and system administrators. The second year milestone is posting of consolidated quarterly budget performance reports (revenue and expenditure) by District Executive Committee on a notice board in a conspicuous place on the premises of the Council followed by posting of quarterly budget performance reports (revenue and expenditure) disaggregated by sectors and place on notice board in a conspicuous place in each sector in the third year. 80. DLI 6 (number of Government sponsored PFM staff with at least foundation-level professional finance qualifications): The technical and fiduciary assessments point of that enhancing capacity is key for successful PFM reform. As of September 2014, 294 staff or 27% of the total government staff working on financial management has at least foundation-level qualification. Also, there is no tuition providers accredited to provide professional accountancy training in Rwanda. Building on the current situation, the first year DLI is 350 government staff acquires at least foundation level qualification to be increased to 400 staff in year 2 and 450 in year 3. To address, the government plans that two Rwandan educational institutions accredited to provide professional training under ICPAR, ACCA, and AAT. 81. DLI 7 (Increased production of economic statistics): The first year DLI is the implementation of a best-practice National Agriculture Survey (NAS) and the release of the results by May 2015. The NAS will build on lessons learnt from the experimental agricultural survey which was piloted in 2013. The second year DLI is the implementation of the Integrated Business Enterprise Survey (IBES) and the release of the results by May 2016. The IBES will be based on the sample frame of the Establishment Census, which will be implemented in the first year of the Program concurrently with the NAS. The third year DLI is the rebasing of national accounts with base year updated to 2014, with the rebased and updated GDP figures released by end-of-April 2017. The updating of the system of national accounts will include new economic source data provided by the NAS and the IBES, among others. 82. DLI 8 (Open data): The first year DLI is the release on NADA, by June 2015, of the micro-data of the experimental agricultural survey (2012/13) and at least 5 percent of the data of the 2012 Population and Housing Census45. The second year DLI is the release on NADA, by June 2016, of micro-data of the EICV4 poverty survey. The third year DLI consists of the release on NADA, by June 2017, of data from the fifth Demographic and Health Survey and the extension of open data to the administrative records of at least one of the main line Ministries (the Ministry of Health or the Ministry of Education, which already have Management Information Systems in place). This needs to be achieved by June 2017. This will mark an important milestone in extending the open data initiative across government. 83. In light of the fact that each DLI constitutes an important part of the PFM cycle and interlinks between the DLIs, the disbursement amounts are almost equally distributed across the DLIs. 45 For reasons of confidentiality and anonymity, census data do not get released in full. 35 B. Verification Protocol 84. On disbursement arrangements, DLI targets are given in an indicative annual time frame (Annex D in the PAD). Confirmation that an indicator has been achieved/completed will be based on the agreed verification protocols. Once an indicator is achieved/completed, the Government can make a disbursement request up to twice a year. In order to implement activities to achieve DLIs, the Government has requested that 25 percent of Program proceeds be paid as an advance. In addition, if the Government achieves the first-year DLI 3 on E- Procurement before the signing of the legal agreement, the Bank will disburse an additional 5 percent of the Program proceeds as prior results.46 (See Annex Table D-1.) 85. For selected DLIs, the Bank will apply for scalability for disbursement. For example, for the DLI 6 (government PFM staff working in financial management with at least foundation- level professional finance qualification), actual disbursement will be calculated based on the ratio between the gap between the actual number and baseline and the gap between the target and baseline. 86. In order to conduct the verification protocol, the MINECOFIN SPIU will be responsible for gathering all data, information, and evidence of completion of the DLIs from the implementing agencies, which it will deliver to the Bank and an independent body, such as OAG, for verification.47 The Bank or the OAG, or both will conduct onsite visits. The financial resources required for verification have been included in the expenditure framework. 48 Verification is thus fully funded. The contents and quality of verification will have to be satisfactory to IDA. VI. Program Economic Evaluation A. Rationale for Public Provision and/or Financing 87. Public provision in PFM and statistics has a strong rationale. PFM is core public goods underlining all government activities. Each element of the PFM cycle (figure 6) has been managed by the central and subnational governments. As improving the PFM is expected to create spillover effects to the rest of the economy, the public provision is justifiable. On statistics, the process of planning, policy-making, and monitoring and evaluation of government policies require a wide variety of development statistics, which only public investment can provide. While the private sector can and does collect specific statistics, they are unlikely to invest in a complete statistical system. Left to the market there would likely be significant underinvestment in statistics, hereby foregoing the benefits of better statistics. In addition, statistics are a public good. Once produced, statistics can be used by different levels of government, citizens, and businesses to facilitate evidence-based decisions in their spheres of interest. Public provision in statistics thus creates positive externalities. 46 Paragraph 14-16 of BP 9.00 – Program-for-Results Financing 47 If OAG takes the verification role, it will not conduct verification of DLIs that they are in charge for data collection and provision. In this case, the Bank will hire an external consultant. 48 In case the OAG will have to hire a consultant, based on the past experience, US$70 thousands (annual) are included in the expenditure framework. 36 B. Economic Impact of the Program 88. Improving the whole PFM cycle through the PFM and Statistics Programs are likely to gain efficiencies of the whole government expenditures. EDPRS 2 expects that the public sector will play a catalytic role in promoting private sector-led development. Focusing on the whole PFM cycle will enhance the public sector’s role. Also, in Rwanda where the share of government expenditures in the economy (30%) is relatively higher than other developing countries, economic impacts of improved PFM system (including statistics) would be significant. 89. A literature supports positive relationship between PFM and development objectives (table 11). However, the extent of the contribution of PFM to development objective differs.49  Macroeconomic Stability: The ability of PFM systems to provide relevant information on status of, and risk to, debt and deficits is its most significant contribution.  Efficient Allocation of Resources: PFM systems which focus on providing relevant information on available resources, and a timely budget preparation process that involves all stakeholders, can contribute to the right allocation. However, ‘efficient’ allocation can only be done in light of a pre-existing, politically determined expenditure strategy that chooses between various public spending priorities.  Service Delivery: The link between PFM functions and service delivery is less clear. Regular payment of staff salaries is likely to be important to all public service delivery, but beyond this the relevant prioritization of PFM functions to contribute to service delivery will depend on the nature of the sector being considered.  State Building: The relationship between PFM functions and state-building is particularly complex, given that each of the three other development objectives are themselves theorized to contribute, to a greater or lesser extent, to an effective state. Table 11: PFM Functions and Development Objectives Development Priority PFM functions identified as contributing to development objective Objective Macroeconomic  Timely and reliable fiscal and financial information stability  A basic understanding the overall debt position of the government  An awareness of key risks to the fiscal position of the government Efficient  Timely and reliable fiscal and financial information allocation of  A well-structured budget preparation process resources Service delivery  Regular payments of salaries and wages to staff engaged in delivering basic services  Beyond salaries, the PFM functions to be prioritized will depend on the nature of the priority public service sectors chosen State-building  Basic budgeting in the sense of expenditure control and execution ability  Regular and timely payment of public-sector salaries  Understanding of the current structure of the revenue base and options for expansion in the future Source: ODI (2013) 49 ODI (2013) “Linking PFM Dimensions to Development Priorities” (Working Paper 380) 37 Application to Rwanda’s Context 90. Good track record of PFM improvement in Rwanda: An international comparison using CPIA Indicator 13 (quality of budgetary and financial management rating) in 2013 shows that Rwanda’s score (4.0) ranks 4th among 82 countries. Also, Rwanda’s score exceeds the average score of middle income countries (3.3) (figure 6). Furthermore, among 73 countries where the comparison between 2005 and 2013 is possible, only one third of the countries improved the score (another one third deteriorated, and the remaining one third remained the same). Rwanda is one of the countries having experienced the improvement. Rwanda’s progress is remarkable given the fact that there seem to be no functioning PFM systems after the 1994 genocide. This proves that Rwanda has effectively improved PFM in the past two decades. 91. Macroeconomic stability: One of the most important structural problems is high aid dependency. In FY2014/15 budget, foreign grants accounts for 36% of the total revenues. The importance of PFM, especially domestic resource mobilization, is evident in the 2012 aid decline. In the first half of FY2012 (July-Dec 2012), budget support turned out to be less than the original budget by 3% of GDP (US$230 million). The aid decline is the main cause of the growth deceleration from 8.8% in 2012 to 4.7% in 2013. If 2013 growth was the same as the one in 2012, GDP values (2011 constant prices) would have been higher by US$242 million. Domestic resource mobilization (Program 2 of PFM SSP) supported by the Program is expected to reduce high aid dependency, which will lead to enhance macroeconomic stability. 92. Rwanda is on the right track to improve the PFM functions contributing to macroeconomic stability in table 11. Government programs 3 (budget execution, internal control, accounting and reporting) and 5 (electronic service delivery and IFMIS) to be supported by the Program are expected to improve ‘timely and reliable fiscal and financial information’. Sub-program 3.6 (fiscal risk management in public enterprises) is expected to reduce risks associated with public enterprises through improved corporate governance and risk management. Debt management (sub-program 1.2) has been improved in recent years. This is evident in improved CPIA indicator 3 on debt policy and management. The rating improved from 3.5 in 2012 to 4.0 in 2013. 93. Efficient allocation of resources: Given Figure 10: Gross Fixed Capital Formation low domestic resource mobilization and as % of GDP resulting high aid dependency, efficient allocation of resources, as rightly described as the main goal of PFM SSP, is essential for Rwanda. Among the PFM functions in the table a well-structured budget preparation process is underway through government program 1 (economic planning and budgeting). The program includes improved coherence between strategies/planning and budgeting, and the government has made some progress in this regard during the formulation of FY2014/15 budget. Source: World Development Indicators 94. On efficient allocation of resources, improving public investment management is especially important for Rwanda. In FY2014/15 budget, development budget accounts for 45% 38 of the total. The share of public investment in the economy is higher than neighboring countries (figure 10). An IMF paper 50 argues that “while the literature suggests that a scaling-up of investment in low-income countries is vital, the link with development outcomes depends critically on the quality and efficiency of public investment”. The study produced composite score from four aspects (strategic guidance and project appraisal, project selection and budgeting, project implementation and project evaluation and audit) of 71 countries (40 low- income, and 31 middle-income countries) for the period between 2007 and 2010. Rwanda ranked 12th among 71 countries and 4th in low-income countries. Among the four aspects, scores of project selection and budgeting, and project evaluation and audit had lower scores than others. The Program, for example, supports the government in carrying out annual post-evaluation report for the closed projects. Thus, it is expected that public investment management will be more efficient and effective. Cost-Benefit Consideration 95. Returns to investment in PFM and statistics are likely to be high. Improving PFM is expected to bring effective and efficient allocations of public resources 51. In the PFM cycle, the planning and budgeting element is key in bring national development priorities and allocation of nation’s resources together. Planning and budgeting element includes public investment management. In FY2014/15 budget, the government plans to spend US$1.1 billion for development budget, which accounts for 45% of the total budget. 96. Public procurement plays a critical role in effective public expenditure management. In Rwanda with annual procurement amount of about US$0.8 billion, introducing e-Procurement would offer a huge potential for increased efficiency in addition to transparency and compliance. According to a feasibility study commissioned by the Bank, “Using a very conservative 1% of cost savings (including time’, lower transaction costs, paper, travel and other) we estimate e-GP, will save the country $8 million a year. The actual savings, based on other known cases with carefully planned implementations of e-GP, should be significantly higher with a quick return on investment” 52 . The amount is almost equivalent to the planned expenditure to design and implement e-procurement. The cost saving impact of e-procurement is to be observed at least in the medium-term suggests that supporting e-procurement is well justified. 97. The future IFMIS constitutes one of the largest spending items in the expenditure framework (US$16 million out of US$171 million or about 9% of the total). According to an internal World Bank note53, the difficulties in measuring the benefits of Financial Management Information System (FMIS) vary a great deal among projects in various regions and a comprehensive quantification of costs and benefits is generally not possible for large scale PFM projects. At the same time, in all completed projects, client countries have reported 50 IMF (2010) “Investing in Public Investment: An Index of Public Investment Efficiency” (IMF Working Paper WP/11/37) 51 ODI (2013) “Linking PFM Dimensions to Development Priorities” (Working Paper 3 80), for example, analyzed a relationship between PFM and development objectives such as macroeconomic stability, efficient allocation of resources, service delivery and state building. The paper finds that positive relationship with macroeconomic stability and efficient allocation of resources, however relationships with service delivery and state building are less clear and complex. 52 Crown Agents (2013) “Feasibility Study: To conduct an e-GP Assessment for Rwanda’s Public Procurement Authority” 53 Internal Informal Note “Measuring the Potential Impact of FMIS on PFM improvements in IDA Countries” 39 improvements, including in revenue collection, cash forecasting, debt management, reduction of payment processing times, greater reliability and transparency in public accounts, better procurement and payroll management, tracking of assets, and the publication of more accurate and timely reports on budget execution performance, in addition to improved operational efficiency and reduced recurrent costs for the ICT infrastructure. 98. In the case of Rwanda, the main cost items on the future IFMIS are software acquisition / development (US$4 million) and implementation (US$8 million). The government has decided that the future IFMIS will build on the current IFMIS, and therefore it is likely that the costs will be much smaller than acquiring a new system. In the future IFMIS, the government plans to supplement new modules such as asset management, inventory management, procurement interface, and project management. Also, the future IFMIS will have interface with other systems such as e-procurement and donor assistance database. Establishing interface with other systems is expected to potentially increase benefits of the future IFMIS. The government plans to roll-out the future IFMIS between FY2015 and FY2017. If the same savings ratio of 0.5% was applied to the entire budget for Rwanda (about US$3 billion a year) the annual saving would be US$15 million. As the future IFMIS builds on the current IFMIS, the cost saving impact would be lower due to possible diminishing rate of return. Nevertheless, even if a very conservative assumption (0.1% saving ratio) is applied, the annual saving would be US$3 million and it would take 5 years to reach the breakeven point. 99. On statistics, most arguments for investment in statistics argue that good statistics bring tangible benefits in the form of improved policy and better development results and reduce waste due to misallocation of resources. A concrete application of the value of statistics is its use in targeting of social programs: having good statistics to guide targeting leads to large effectiveness gains and significantly reduces misallocation of resources 54. This is particularly important in Rwanda where a large body of social benefits (health insurance, cash transfers, participation in public works) are provided by the Government based on a household’s social and economic status. Quality statistics are also important to the financial system, as according to a recent IMF study, they tend to reduce the cost of borrowing from private capital markets. The study indicates that countries that subscribe to the IMF Special Data Dissemination Standard (SDDS) and participate in the General Data Dissemination System (GDDS) initiatives registered a positive impact on their sovereign borrowing in private capital markets—that is, they experienced a reduction in the launch spreads of sovereign borrowing by 0.2 to 0.5 percentage points. These positive impacts or discounts are also evident when launch yields are analyzed in sovereign bond issues.55 C. World Bank Value Added 100. The Bank has a comparative advantage in supporting PFM and statistics, and it has been engaged in public sector reforms in Rwanda for almost two decades. In the late 1990s and early 2000s, the Bank helped Rwanda build capacity in the public sector through trust- funded activities such as Institutional Strengthening Initiatives for the Legal Advancement of 54 Elbers, C., Fujii, T., Lanjouw, P., Yin, W. and Ozler, B. (2004). “Poverty Alleviation through Geographic Targeting: How Much Does Disaggregation Help?” World Bank Policy research Working Papers Nr. 3419. 55 Cady, John, and Anthony Pellechio, 2006, Sovereign Borrowing Cost and the IMF‘s Data Standards Initiatives, IMF Working Paper, WP/06/78. 40 Women (TF050066) and Public Procurement Management Project (TF063056). The Multi Donor Trust Fund for Rwanda Public Financial Management (TF070485) was implemented in the second half of the 2000s. More recently, the Bank provided support to these areas through the Poverty Reduction Support Financing (PRSF) series and the Statistics for Results project (P124129). The Bank also implemented the Quality of Decentralized Service Delivery support Development Policy Operation (DPO) (P145114), which included national and subnational PFM. The Bank has also been one of the leading development partners in PFM and statistics, co- chairing the PFM Coordination Forum and serving as a core member of the Statistics Steering Committee. Consolidating the Bank’s engagements into the Program is likely to achieve results. 101. The Program builds especially on the Bank’s 2013 Quality of Decentralized Service Delivery budget support operation. The development objective of the DPO is to support the Government in clarifying “institutional roles and responsibilities for decentralized service delivery” and enhancing “public transparency, fiduciary accountability, and local government capacity for improved access to quality services.” It focuses on national/subnational PFM issues, including capacity building at the subnational level. During the dialogue on the DPO, the Bank’s shareholders requested that the Bank remain engaged in (a) gender mainstreaming; (b) the quality of data; (c) budget execution, reporting, and auditing; (d) revenue mobilization at the subnational level; (e) capacity building; and (f) donor coordination. The Program responds to this request. 102. In addition to linking with past Bank operations, the Program is expected to complement other ongoing and planned Bank operations. As PFM cuts across all sectors, enhancing PFM at the national and subnational levels benefits other Bank operations. For example, the Program will augment the fiduciary aspects of a planned development operation. Improved PFM, especially at the subnational level, will contribute to implementation of the Transformation of Agriculture Sector Program Phase 3 PforR (P148927). Improved quality and availability of statistics will benefit results frameworks of all Bank operations. 103. On statistics, global knowledge and expertise is the value-added and comparative advantage of World Bank participation. The World Bank’s international experiences would be leveraged for the benefit of NISR, to design and implement economic statistics and build the statistical skills of NSS officials. The Program will support the design and roll-out of specific types of economic surveys in which the World Bank has demonstrated comparative advantages. Through the Living Standards Measurement Study-Integrated Surveys on Agriculture (LSMS/ISA) program, the World Bank is at the forefront of designing and testing improvements in agricultural data collection. The Bank’s wide expertise in this field can be tapped to improve the quality of agricultural data that will be collected under the Program. In a similar fashion, the World Bank’s Labor Markets team has a long-standing expertise in the design and implementation of enterprise and labor force surveys around the world, which can be exploited to produce high-quality labor statistics in Rwanda. VII. Inputs to the Program Action Plan 104. The selections of the Program Actions Plans (PAPs) of the Program are based on the Program’s results framework (Annex 8) building on this technical assessment as well as the fiduciary assessment given the fact that the main subject of the Program (i.e., PFM at the national and subnational levels) and fiduciary aspects are closely linked. 41 105. The PAPs for the Program are grouped into three types: (i) Changes to the technical dimensions of the Program and to the formal rules and procedures governing the organization and management of the systems used to implement the Program; (ii) Actions to enhance the capacity and performance of the agencies involved; and (iii) Risk-mitigating measures to increase the potential for the Program to achieve its results and to address fiduciary, social, and environmental concerns56. Detailed PAPs are described in (Annex 12). VIII. Technical Risk Rating 106. The overall technical risk rating of the Program is substantial. On PFM, the technical risk rating is substantial. The main risks include (i) need for coordination among government leadership such as collective agreement on e-Procurement model; (ii) human resource capacity challenges in implementing the wide ranging reform program; and (iii) The districts’ credibility vis-à-vis citizens may be weakened, due to a move to centralized revenue collection systems. These technical risks can be mitigated through (i) the preparation of the Program has contributed to improve coordination among key government agencies leading PFM, and the implementation of the Program is expected to further consolidate the coordination; (ii) having in place Chief Finance Officers (CFO) and Internal Auditors who are at least Accounting Technicians depending on the budget size and risk environment together with knowledgeable and experienced Budget Officers and Procurement Officers would improve the quality of the PFM functions; (iii) Local governments scheme of service for Chief Finance Officers, Procurement Officers, Planners and Budget Officers established; and (iv) technical assistance to strengthen the districts’ role and capacity on revenue management, including tax payer compliance, will mitigate the risk 107. On statistics, the technical risk rating is moderate. During NSDS-1, NISR has showcased its implementation capacity and its technical capability to conduct complex statistical undertakings such as the Population and Housing Census. Several new surveys will be introduced during NSDS-2 while the frequency of existing surveys will be increased. This means that NISR will need to manage an increased number of often simultaneously running surveys while also addressing the need to improve the quality of administrative statistics. The successful accomplishment of NSDS-2 and of the Program will require a significant number of new staff, both in the core technical fields and in the support services. Delays in hiring additional staff could cause delays in Program implementation, negatively affecting progress and attainment of results measured against the DLIs. IX. Inputs to the Program Implementation Support Plan 108. The implementation support plan is based on the Interim Guidance Note on the Technical Assessment 57 , adapted to the design and risk profile of the Program in Rwanda. While the borrower is responsible for the Program’s overall implementation, the Bank and the borrower have agreed that the Bank would offer support to implementation in the areas of (i) Reviewing implementation progress and achievement of Program results and DLIs; (ii) Helping the client to 56 Paragraph 11 of Attachment 1.2 under the Interim Guidance Note on Technical Assessment 57 Section VII of the Interim Guidance Note on the Technical Assessment 42 resolve implementation issues and to carry out institutional capacity building; (iii) Monitoring the performance of Program systems, including the implementation of the PAP; and (iv) Monitoring changes in Program risks as well as compliance with the provisions of legal covenants. Details of the Program Implementation Support Plan are described in annex 14. 43 Annex 1: The Government PFM Program58 Program 1: Economic Planning and Budgeting 1. Outcomes: Program 1 has six expected outcomes: (a) stronger links between the budget allocation and strategic planning processes, leading to a sharper focus on the Government’s policy priorities; 59 (b) significant improvement in the preparation of the MTEF, so that it becomes an effective planning tool; (c) inclusion of funding from donor partners in budget documentation; (d) changes to ministerial budgets so that they reflect sector priorities; (e) stronger risk management in the budget planning area; and (f) maintenance of government debt at sustainable levels. 2. Subprograms: Program 1 is divided into four subprograms, each of which has specific outputs and priority actions (annex table 1-1). Annex Table 1-1: Outputs of Program 1 (Economic Planning and Budgeting), by Subprogram Subprogram Output 1.1 National development 1: Strategic planning in line with EDPRS 2 priorities strengthened planning 1.2 Economic policy 1: Macroeconomic framework improved formulation 2: Debt management practices improved 3: Capacity in revenue forecasting, tax policy, and negotiation skills built 1.3 Public investment 1: Public investment programming strengthened programming 1.4 Policy-based budgeting 1: Realism of MTEF projections improved 2: Reporting on externally financed projects improved 3: Effectiveness of gender budget statements enhanced 3. Priority actions and outputs: In order to strengthen strategic planning in line with EDPRS 2 priorities (Output 1 under Subprogram 1.1), the Government plans to conduct capacity-building activities for planners at both the central and district levels and to reinforce data-collection systems through electronic M&E system. Recognizing that economic policy formulation (Subprogram 1.2) is a foundation for development planning, the Government aims to improve the macroeconomic framework (Output 1), debt management (Output 2), and revenue forecasting (Output 3) through capacity-building activities, including through the use of a technical advisor on the macroeconomic and fiscal framework. On public investment management (Subprogram 1.3), the policy framework, formulated in 2009, is outdated. To strengthen public investment management, the Government will revise the public investment policy to incorporate public-private partnership (PPP). Together with public investment management, policy-based budgeting (Subprogram 1.4) is a key component of the program. To improve the realism of the MTEF (Output 1), the Government plans to conduct an analysis and implement reforms, with support from the IMF. Improvement in reporting on externally financed projects (Output 2) is essential to improve the MTEF. The Government has implemented gender budgeting and plans to enhance it (Output 3) by training planning and budget officers. 4. Rationales, Challenges, and Progress to Date: The rationales, challenges, and progress to date of each subprogram are summarized for each subprogram. 58 These programs and sub-programs are formulated based on analyses of challenges and proposed solutions, and each program has expected outcomes (Annex table 1-1). 59 In the PFM SSP, the Government describes this outcome as “increased emphasis on performance -based budgeting to enforce accountability and facilitate prioritization.” 44  Subprogram 1.1: National Development Planning. The national development planning process is defined by the implementation framework for EDPRS 2 (annex figure 1-1). 60 Accompanying the SSPs, other strategies, such as NSDS 2 and district development plans, function as implementation tools for EDPRS 2. The SSPs and other strategies are reviewed in backward-looking Joint Sector Reviews conducted few months after the end of the fiscal year. These reviews are updated in forward-looking Joint Sector Reviews produced a few months before the beginning of each fiscal year. The mechanism has been operationalized, but capacity at both the central and subnational levels needs to be strengthened. It is also essential to establish a clear link between the SSPs and district development plans and to establish the budget (see Subprogram 1.4, on policy-based budgeting). Annex figure 1-1: National Development Planning Process EDPRS, SSPs, DDPs JSRs, JADF, APR, Identify AAPs, performance reports Priorities NIP Evaluate Plan MTEF Sector matrices, Budget Monotor Execution Budget (and adjust) Reports, Imihigo and Annual budget, AAP progress Implement financing reports negotiations Coordinate, communicate Source: MINECOFIN (Planning Guidelines under the 2nd Budget Call Circular).  Subprogram 1.2: Economic Policy Formulation. Economic policy formulation is the foundation for PFM, as governments allocate financial resources based on their economic policy. The macroeconomic unit of MINECOFIN has improved the macroeconomic policy framework, debt management, and domestic revenue mobilization policies (related to Subprogram 2.1, on tax policy) through the IMF’s Policy Support Instrument (PSI). For example, the medium-term macroeconomic framework is described in the budget framework paper. 61 Debt management and macroeconomic policies are well coordinated. An annual borrowing plan for government financing informs the medium-term debt management strategy. The annual borrowing plan forms part of the budget framework paper. Domestic revenue mobilization is a core theme for the new IMF PSI, which commenced in 2014. MINECOFIN has formulated a medium-term tax reform plan for 2013–16, which will be regularly updated with support from the IMF (for more details, see the discussion of Program 2, on Resource Mobilization). 60 Chapter 7 includes implementation and M&E. 61 http://www.minecofin.gov.rw/fileadmin/General/2014-17-BFP.pdf 45  Subprogram 1.3: Public Investment Programming. Public investment programming plays an essential role in planning and budgeting. Rwanda’s development budget accounts for about 45 percent of the FY2014/15 budget. Public investment also has medium-to long-term implications, through future operational and maintenance costs. The policy on public investment management is defined in the National Public Investment Policy of 2009, but implementation and application of the policy was weak until recently. For example, the Public Investment Committee, which has decision-making authority over the public investment program (that is, the development budget), was not operationalized until the formulation of the FY2014/15 budget. Public investment projects were discussed without feasibility studies. Future budget implications were not taken into consideration in formulating the MTEF. Although leveraging the private sector is a key principle of EDPRS 2, the National Public Investment Policy does not cover PPP. To address these issues, the Government made some reforms in preparing the FY2014/15 budget operationalizing the Public Investment Committee, for example.62 New investment project proposals now need to be accompanied by project profile documents, three-year investment plans, and feasibility studies. The Government also plans to revise the National Investment Policy (covering both public investment and PPP).  Subprogram 1.4: Policy-Based Budgeting. A multiyear perspective is expected to improve fiscal management by (a) improving control over the aggregate fiscal position, (b) allocating expenditure across sectors and policy priorities more effectively, and (b) using public resources more effectively and efficiently. These benefits are especially important for Rwanda, which is aiming to reduce its aid dependency. The MTEF introduced in 2002 has been fully incorporated into the budget cycle at both the national and subnational levels. Despite progress, however, the multiyear fiscal management framework and procedures are not yet effective. Fully costed sector strategies are not in place, and the link between sector strategies and budget is weak, resulting in limited use of the MTEF by stakeholders. Investment planning and its budgetary impact are not fully captured in the current MTEF. Tighter integration of taxation and expenditure formulation is needed, so that tax expenditure decisions are included in the budget cycle. Although the budget framework paper plays a critical role in linking planning and budgeting, in practice budgeting and planning are separate processes. Additional challenges include the need to include external sources in the budget, link the budget and policy priorities, cost sector strategies and programs, and improve the availability of key statistics (for example, labor statistics) to measure performance. Because of these limitations, Rwanda’s performance on multiyear fiscal management is relatively weak, and the last two PEFA assessments improvements identified no improvements.63 In 2001 the Government initiated gender-responsive budgeting. In 2003 it piloted it in five ministries; it fully operationalized the practice in the FY2010/11 62 Details are found in the first and second planning budgeting call circulars for the 2014/15 fiscal year (October 2013 and February 2014). 63 Rwanda’s score on the 2010 “PEFA PI-12 on Multi-Year Perspective in Fiscal Planning, Expenditure Policy and Budgeting” was C+, unchanged from 2007. The assessment states that “the failure of the MTEF (see PI-12) to deliver its true objective of linking policy targets with actual budget allocations and thus ensure at the same time a strategic allocation of resources and fiscal sustainability, is also especially costly in Rwanda, given the vast amount of capacity invested in the multiyear planning process, which is very extensive and involves a large variety of activities throughout the budget preparation cycle, across all sectors” (pp. 27–28). 46 budget.64The first evaluation, conducted in FY2013/14, identified key areas for improvement, including high staff turnover of budget and planning officers and the lack of gender statistics. The Program will support a gender-responsive budgeting training program for planning and budgeting officers. NISR has started producing national and subnational gender statistics. To strengthen the M&E of gender-responsive budgeting implementation, the 2013 Organic Budget Law includes a clause requesting an annual activity report on plans for gender balance (part of the PAPs).65 Annex figure 1-2 displays the planning and budgeting process. Annex figure 1-2: Planning and Budgeting Process Source: MINECOFIN (Planning Guidelines under the 2nd Budget Call Circular). Program 2: Resource Mobilization 5. Outcomes: Program 2 has five expected outcomes: (a) significantly higher domestic revenue collection; (b) transparent, simple, and understandable tax policies and efficient tax collection; (c) greater Government capacity to access international markets to raise additional finance; (d) exploration of nontraditional sources of finance; and (e) increased use of country systems in the management of external aid. 6. Subprograms: Program 2 is divided into three subprograms, each of which has specific outputs and priority actions (annex table 1-2). 64 The guidelines for preparation of budget estimates for FY2014/15 and the MTEF for FY2014/15 –FY2016/17 include annex 22, on “Instructions for the Preparation of the Gender Budget Statement.” 65 Article 68 of No.12/2013/OL of 12/09/2013 on Organic Law on State Finance and Property. 47 Annex Table 1-2: Outputs of Program 2 (Resources Mobilization), by Subprogram Subprogram Output 2.1 Tax policy 1: Tax reform strategy developed 2: Investment code revised 3: Agreements on avoidance of double taxation revised and new ones initiated 4: Law on mining enacted 5: Single customs territory negotiated 6: Debt management strategy updated 2.2 Tax administration 1: Tax revenue mobilization maximized 2: Service delivery to external and internal customers improved 2.3 External finance 1: External resources mobilization strategy produced and implemented 2: Coordination of development partners enhanced 3: Development assistance database upgraded 7. Priority Actions and Outputs: Outputs under Subprogram 2.1 focus on developing a new strategy (for example, Output 1, on new tax reform strategy) and reforming regulatory frameworks (for example, Output 2, on revising the investment code and outputs 4 on the revised mining law). Domestic revenue mobilization is expected to be achieved not only by reforming the regulatory framework but by improving applications of the framework (Subprogram 2.2., on tax administration). Therefore, Output 1, on maximizing tax revenue mobilization, includes priority actions such as e-tax filing and payment and implementation of electronic billing machines. Although reducing aid dependency is an important medium-term goal, achieving the development objectives in EDPRS 2 depends on external finance at least in the short term (Subprogram 2.3). In order to improve the use of aid, this subprogram aims to formulate an external resource mobilization strategy (Output 1); better coordinate development partners (Output 2), through organizing forums; and upgrade the development assistance database (Output 3). 8. Rationales, Challenges, and Progress to Date: The rationales, challenges, and progress to date of each subprogram are summarized for each subprogram.  Subprograms 2.1 and 2.2: Tax Policy and Tax Administration. Increasing domestic revenues to expand fiscal space is one of the most important policy priorities in Rwanda. Tax revenue as a share of GDP increased from 12.0 percent in FY2009/10 to 14.2 percent in FY2012/13. Significant progress was also made in tax policy, tax administration, and tax systems in the past few years. The Government introduced various tax policy and administrative measures, including a new VAT law (introduced in December 2012), a new tax system for small and medium-size enterprises (introduced in September 2012), and electronic billing machines. Despite progress, the tax revenue to GDP ratio is one of the lowest in Sub-Saharan Africa, where the average rate is above 18 percent. 66 Domestic revenue mobilization is the most important subject of the IMF’s new Policy Support Instrument, which began in 2014. The government showed its strong commitment to revenue mobilization in the accompanying Memorandum of Economic and Financial Policies.67 To operationalize the commitment, MINECOFIN developed the Medium-Term Tax Reforms Plan 2013–16, which identifies tax policies and administrative measures aimed at (a) broadening tax bases (including by reducing exemptions and improving compliance), (b) further strengthening tax administration (including e-filing), and (c) strengthening risk 66 According to the IMF’s Regional Economic Outlook (October 2013), the average ratio was 26.6 percent in 2012. 67 http://www.imf.org/external/pubs/ft/scr/2013/cr13372.pdf. 48 management. To improve transparency, the Government plans to publish tax expenditures to be incorporated into the national budget.68 Improving subnational PFM, such as local revenue mobilization, is a key priority of the Government’s decentralization strategy. The Bank has been supporting these efforts.69  Subprogram 2.3: External Finance. The External Finance Unit (EFU) serves as the main interface between the Government and development partners on all issues of external support. It is responsible for coordinating aid to Rwanda so that it best supports the Government’s socioeconomic policy objectives. The EFU plays a leading role in the strategic cooperation framework for donors, mobilization of external resources, management of development partnerships, appraisal of financing agreements/projects agreements, assessment of the quality and effectiveness of aid, and overall review of the country cooperation portfolio. It is the central interface on information on aid flows. A key challenge is aid data for macroeconomic forecasting model and the MTEF. Staff capacity is a concern. Achievements made may be difficult to sustain unless it increases. Program 3: Budget Execution, Accounting, and Reporting 9. Outcomes: Program 3 has seven outcomes: (a) budgets that reflect sectoral and ministerial priorities and budget execution that reflects the budget plan, (b) higher-quality and more timely in-year budget monitoring reports, (c) higher-quality and more useful financial reports produced for public consumption, (d) better cash flow management procedures, (e) full compliance with government rules on procurement, (f) a stronger internal audit structure, and (g) more modern audit techniques to improve internal audit standards. 10. Subprograms: Program 3 is divided into six subprograms, each of which has specific outputs and priority actions (annex table 1-3). Annex Table 1-3: Outputs of Program 3 (Budget Execution, Accounting, and Reporting), by Subprogram Subprogram Output 3.1 Budget execution 1: Sectoral performance of the budget improved 2: Public awareness of the budget improved 3.2 Treasury 1: Cash management enhanced management 2: Timely processing of payment from Treasury achieved 3: Timely and accurate production of Treasury reports achieved 4: Recording and reporting of public debt and guarantees enhanced 5: Capacity in Treasury management operations and the debt management and financial management system (DMFAS) developed 3.3 Internal audit 1: Internal audit structure enhanced 2: Internal audit coverage and quality of internal audit function improved 3: Internal audit skills improved 4: Follow-up of audit recommendations improved 68 “In FY2014/15, the emphasis will be on broadening the base for VAT through a revision of the schedules for exemptions and zero-ratings; and preparing a review of tax expenditures to be submi tted jointly with the budget” (p. 13 of the IMF’s seventh review). 69 The Decentralized Service Delivery Development Policy Operation 2013 (P145114) (2013) supports the 2012 presidential order establishing the List of Fees and Other Charges Levied by Decentralized Entities and Applicable Thresholds. It clarifies district powers to impose a range of fees and charges and determine rates. The focus on local revenue mobilization in the proposed operation gives continuity to earlier Bank support. 49 Subprogram Output 3.4 Accounting and 1: Monthly financial statements by budget agencies prepared and submitted to public reporting account unit 2: Annual financial statements at budget agency level and consolidation level prepared 3: Legal and regulatory framework for financial reporting strengthened 4: Fixed asset register for government established 5: Capacity for accounting cadre built and strengthened 3.5 Public procurement 1: Monthly and annual procurement reports submitted by procuring entities 2: Legal and regulatory framework for public procurement reviewed and updated 3: Capacity of procurement cadre reinforced 4: Rwanda Institute of Procurement established 3.6 Fiscal risk 1: Corporate governance and risk management in public enterprises improved management in public 2: Capacity of management and boards of government business enterprises built enterprises 11. Priority Actions and Outputs: Subprogram 3.1, on budget execution, aims to improve the sectoral performance of the budget (Output 1) by developing a strategy and guidelines to minimize the risks of variation from the budget as well as improve public awareness of the budget (Output 2) by making simplified budget information available to citizens. Subprogram 3.2, on Treasury management, attempts to further improve cash management (Output 1), timely payment processing (Output 2), timely Treasury and debt report production (Outputs 3 and 4), and capacity development on debt management (Output 5). Internal audit function has much room for improvement; Subprogram 3.3 aims to address key issues of internal audit structure (Output 1), coverage and quality (Output 2), capacity (Output 3), and implementation of audit recommendations (Output 4), mainly through capacity-building activities. Subprogram 3.4, on accounting and reporting, focuses on refining process and procedures (for example, updating financial reporting templates to improve monthly financial statement [Output 1]); the legal framework (for example, revision of the Organic Budget Law to strengthen legal and regulatory framework [Output 3]); and capacity building (for example, providing training for all cadres of accounting officers [Output 5]). Subprogram 3.5, on public procurement, focus on refining the processing, legal, and regulatory framework and building capacity to achieve/improve monthly procurement reporting (Output 1). To improve PFM of a broader public sector, Subprogram 3.6 focuses on management of public enterprises. Activities under this subprogram include publishing policy guidelines and a simplified booklet on financial management as well as providing training for directors general and board members) of public enterprises. 12. Rationales, Challenges, and Progress to Date: The rationales, challenges, and progress to date of each subprogram are summarized for each subprogram.  Subprogram 3.1: Budget Execution. Variation between budgeted and actual spending means that public resources are not spent as planned to achieve national objectives. To reduce the variation, a tighter link is required between the budget and planning (see Program 1, on economic planning and budget) as well as between the budget and cash flow. Significant improvements have been made in linking planning and budgeting recently. MINECOFIN drew up a report on alignment with EDPRS 2 and national budget programs to harmonize planning priorities with expenditure priorities. A costing guidance for the MTEF has been drafted. The objective of the guideline is to enhance efficient and effective resource utilization and reduce variations between budgeted and actual spending. A draft execution report guideline and template were developed, with the objective of integrating performance 50 and budgeting reporting. At the national level, a citizen guide to the national budget is now available on the MINECOFIN website.70At the subnational level, although some initiatives have been taken (for example, the Joint Action Development Forum), citizen participation in the budget formulation process remains challenging.71 Districts have started producing annual local government budget books, which increase fiscal and financial transparency and citizen engagement at the local level.  Subprogram 3.2: Treasury Management. A Treasury Single Account (TSA) concept is in place. The RRA uses commercial banks as collection agents, requiring them to transfer collections to the central bank within three days. Payments by MDAs are made from the central bank TSA. The Auditor General’s report notes that delayed banking of revenue collections is still persistent in many public entities, especially districts. For example, banking of cash collections totaling Rwf 380 million was late, with delays ranging from a few days to almost a year (330 days in the Gicumbi District). Transfers to districts are processed directly by the Treasury to improve cash management. However, subdistrict entities (sectors, pharmacies, schools) receive transfers as grants, which are expensed at the point of issue in the district’s books. Consequently, the Government’s accounting system does not capture actual expenditures by nonbudget agencies. There are challenges in tracking transfers to and through the districts.  Subprogram 3.3: Internal Audit. Effective internal audit is essential for improved transparency and accountability. The 2010 PEFA assessment gave PI-(21) (on effectiveness of internal audit) a C rating. The key constraint is that the existing structure of internal audit inhibits the attraction of people with the right capacities. Initiatives are in the pipeline to address the internal audit structure, with a view to addressing staff turnover and retention. In July 2012 MINECOFIN published a model audit committee charter, followed by a handbook that provides broad guidelines that can be used by audit committees in MDAs and government businesses. All 30 district councils have had audit committees since 2011; by December 2013, 83 percent of them were submitting reports to councils. The status of the implementation of audit recommendations is being monitored quarterly; improvement in implementation has been observed at both the central and subnational levels. During the first quarter of 2014, 75 percent of audit recommendations were implemented at the central level, and 67 percent were implemented at the subnational level. A new chief internal auditor was appointed in March 2014. Seventeen of 21 MDAs have established internal audit committees, but very few have held meetings.72 With only 2 internal auditors per district of about 200 subsidiary entities, capacity is tightly constrained. Internal audit reports cite control weaknesses, poor records management, and noncompliance with procurement rules. On internal control, a number of issues cut across both central and subnational levels. The Government has developed a financial management manual, which lays out the requirements of an internal control system. It is used at both the national and subnational levels. The team noted weaknesses within the internal control systems that cut across reporting entities, such 70 http://www.minecofin.gov.rw/uploads/media/The_National_Budget_-_a_Citizen_s_Guide_2013-2014_01.pdf. 71 According to the 2012 Citizen Report Card, 38 percent of citizens participated in the budget formulation process in 2011. 72 The Government recently established the Audit Committees of the national police, the Ministry of Internal Security (MININTER), and the National Women’s Council established. Other institutions have been reminded to create audit committees and are looking for suitable candidates. 51 as inaccurate and incomplete financial statements, noncompliance with procurement rules and regulations on expenditures, irregular expenditures, and inaccurate posting of financial records to IFMIS. Various interventions are being implemented to strengthen the systems.  Subprogram 3.4: Accounting and Reporting. The quality and timeliness of financial reporting is essential to improve transparency and accountability at both the national and subnational levels. Progress has been made, especially at the national level. At the national level, in-year budget reports are prepared quarterly, with reasonably accurate data broken down to at least the program or functional level. Reconciliation of banking and fiscal records is comprehensive and timely. The roll-out of IFMIS has contributed to progress. However, several challenges remain. A consolidated government statement is prepared annually within three months of the end of the fiscal year, but essential information is missing, giving rise to a disclaimer audit opinion on the consolidated government statement. At the subnational level, in-year financial reporting is nonexistent, and the quality of the annual report remains weak.  Subprogram 3.5, Public Procurement: Public procurement in Rwanda is about US$0.8 billion a year. It plays a critical role in effective public expenditure management. Introducing e-procurement could increase efficiency in addition to transparency and compliance. 73 E- procurement would be a timely addition to the progress achieved so far in public procurement, which includes establishment of the Rwanda Public Procurement Agency (RPPA) and enactment of the Law on Public Procurement. The public procurement function was fully decentralized in February 2011. Accordingly, the RPPA focuses on control and monitoring of the decentralized procurement functions. Despite progress, especially in setting up procurement systems, challenges remain. 74 The filing system is poor; nontransparent, noncompetitive methods are used; and monthly procurement reports are not submitted on time.  Subprogram 3.6: Fiscal Risk Management in Public Enterprises. Public enterprises play significant roles in Rwanda. As of July 2014, there were 12 public enterprises across 5 sectors (finance and services, transportation, infrastructure, mining, and agriculture).The Government has significant investment in public enterprises (RF 700 billion [US$1 billion] in mid-2014). Efficient management of these enterprises is therefore essential for the PFM sector. Management of public enterprises by the government in general and MINECOFIN in particular is described in Policy Guidelines on Management of Business Portfolio. 75 The guidelines define the roles of portfolio line ministries and provide guidance on boards, financial management, reporting, risk management, and financial returns to the government/dividend policy. In order to strengthen the legal framework for managing public 73 The PFM SSP was formulated in July 2013. E-procurement is not thus included. However, the Government has been developing e-procurement as an essential part of PFM reforms. 74 RPPA conducted procurement audits of 57 entities (including 13 districts). It identified areas for improvement in the RPPA Annual Activity Report 2012–13 (http://www.rppa.gov.rw/fileadmin/files/docs/RPPA_Activity_Report/RPPA percent20Annual percent20Activity percent20Report percent202012-2013.pdf). 75 The guidelines were validated in September 2010 and updated with the new Law on State Finance and Property in February 2014. 52 enterprises, the Government is drafting a law on public enterprises. MINECOFIN has been taking the lead in capacity building of boards of public enterprises. Program 4: External Oversight and Accountability 13. Outcomes: Program 4 has two expected outcomes; (a) greater scope and coverage of external audits and (b) achievement of the highest standards of external audit, through a professionally qualified staff at OAG using modern audit techniques and facilities. 14. Subprograms: Program 4 has two subprograms, with specific outputs and priority actions (annex table 1-4). However, the Program covers only Subprogram 4.1. Annex Table 1-4: Outputs of Program 4 (External Oversight and Accountability), by Subprogram Subprogram Output 4.1 External audit 1: Independence of the OAG enhanced 2: Institutional capacity strengthened, in line with the OAG mandate 3: Professional audit capacity built and strengthened 4: OAG’s capacity to engage stakeholders strengthened 5: Coordination, implementation, and monitoring enhanced 4.2 Legislative Oversight 1: Secretariat established 2: Capacity for the secretariat and committee members built 3: Improved follow up of budget execution and implementation of resolutions 15. Priority Actions and Outputs: Program 4 consists of external audit by the Office of Auditor General (OAG) (Subprogram 4.1) and legislative oversight by Parliament (Subprogram 4.2). To improve the scope and coverage of high-quality external audit, the Government aims to ensure independence of the OAG (Output 1) through operationalization of the new public audit law and capacity building of stakeholders (Outputs 2, 3, and 4). As external audit involves multiple ministries and agencies, coordinating external audit is essential (Output 5). Similarly, sub-program 4.2 focuses on capacity building of the secretariat and committee members (Output 2) followed by establishing the secretariat (Output 1). 16. Rationales, Challenges, and Progress to Date: The rationales, challenges, and progress to date of Subprogram 4.1 and 4.2 are summarized below.  Subprogram 4.1: External Audit. Timely and quality external audit is an integral part of improving transparency and accountability. OAG has been playing a key role in external audit. Its new organizational structure was approved in 2012, and a new law on OAG was enacted in late 2013.76 The scope and coverage of external audits has been widened in recent few years, with coverage increasing from 60 percent in 2007 to 79 percent for the fiscal year ending June 2013.77 Despite the increase in coverage, only 32 percent of the 139 audit reports obtained an unqualified (clean) audit opinion; the remaining 68 percent received qualified audit opinions. None of the 30 districts or Kigali City obtained an unqualified audit opinion, although 3 districts (Kamonyi, Ruhango, and Gakenke) improved their status from an adverse to an “except for” opinion. Factors affecting the high proportion of qualified audits include the failure to implement some prior year audit recommendations, the omission of 76 Law N° 79/2013 of 11/9/2013 determining the mission, organization, and functioning of the Office of the Auditor General of state finances. 77 Report of the Auditor General of State Finances for the year Ended 30 June 2012 (http://www.oag.gov.rw/IMG/pdf/Annual_Report_2013.pdf). 53 balances of nonbudget agencies from financial statements in districts, and noncompliance with existing law and regulations. The capacity of the relevant parliamentary committees and district councils is still inadequate to exercise effective external oversight over the use of public finances. To address these challenges, the PFM SSP aims to (a) ensure full compliance with government rules on procurement, (b) introduce more modern audit techniques to improve internal audit standards, and (c) address the weaknesses of the current internal audit structure.  Sub-Program 4.2 Legislative Oversight: In steps to support the role of Parliament in enhancing oversight and accountability for public spending, the Parliament formed the Public Accounts Committee (PAC) in April 2011. The PAC seeks to strengthen accountability between different parts of government and between the state and its citizens. Still in its infancy, PAC is developing its oversight functions. PAC has been working closely with OAG to understand external audit work and how PAC could participate in making audit work more effective and ensure that the Executive implements the PAC recommendations. The PAC has a secretariat, which it shares with other committees of Parliament. To execute their duties effectively, PAC would need a strong Secretariat with the relevant skills to provide the committee with required technical support. The PAC would need to conduct a training needs assessment to establish the kind of support they need from their secretariat and the best model to deliver it effectively. The PAC may also need to prepare their own strategic plan on accountability during their term in office. As part of capacity building initiative of this newly formed parliamentary committee, the PAC may need to pay visit to other PACs in neighboring countries to learn how their colleagues conduct their oversight roles. After the study tours, the PAC could prepare their own working modality, to fit their environment and political set up. Program 5: Electronic Service Delivery and IFMIS 17. Outcomes: Program 5 has three expected outcomes: (a) the roll-out of the current version of SmartFMS to the remaining entities, (b) determine the long-term IFMIS requirements for the Government, and (c) implement IFMIS that will meet the Government’s needs into the 2020s. 18. Subprograms: Program 5 has one subprogram, with specific outputs and priority actions (annex table 1-5). Annex Table 1-5: Outputs of Program 5 (Electronic Service Delivery and IFMIS), by Subprogram Subprogram Output 5.1 Integrated Financial 1: Current IFMIS core modules implemented in all budget agencies and Management System (IFMIS) projects 2: Full-fledged IFMIS with appropriate interfaces with identified subsidiary systems of government designed and implemented 5.2 Integrated Personnel and Payroll 1: A fully Integrated personnel and payroll system to support human System (IPPIS) resources management in public sector and strengthen payroll processing and controls 19. Priority Actions and Outputs: Subprogram 5.1 aims to stabilize the current IFMIS (Output 5.1) and ensure a seamless transition by the future IFMIS (Output 5.2). Priority actions include system enhancement, maintenance, and support, as well as roll-out to budget entities not yet connected to IFMIS. Priority actions under Subprogram 5.2 are processes to develop the future system such as functional and technical design, software development and training for the new system. IPPIS has been operationalized since 2009, and priority actions under this sub- 54 program focuses on enhancement and maintenance of the current system, and rolling out to additional government entities. 20. Rationales, Challenges, and Progress to Date: The rationales, challenges, and progress to date of each subprogram are summarized for each subprogram.  Subprogram 5.1: IFMIS. The capability and performance of IFMIS is critical to the Government’s ability to deliver improvements in every aspect of the PFM cycle, including the timeliness and quality of financial reports, the availability of information required by managers for decision-making purposes, and transparency in and accountability for the use of public resources. The SmartFMS system is a custom-developed financial management information system that supports budget preparation, expenditure management, and financial reporting. It began operating in 2010 and has been implemented at 262 sites, including all line ministries, all 30 districts and Kigali City, and various other government-funded bodies. Limited expansion of the system is planned. A number of government bodies with specialized functions will continue to run on separate systems.  Sub-Program 5.2 IPPIS: MIFOTRA takes the lead in this sub-program. With a key objective of delivery of an integrated HR/payroll solution that provides the tools to enable the MDAs to better manage personnel budgets and to respond to evolving HR and organization requirement to support the objectives of the government, the IPPIS has been operationalized since 2009. The IPPIS has been rolled out in four phases between 2009 and 2012. The number of entities rolled-out with the IPPIS increased from 25 in August 2009 to 124 in July 2012. During the period, the number of civil servants paid through the IPPIS increased from 1,700 to 87,000. In the future priorities will be provided for stability of the IPPIS and training for IPPIS users. Program 6: Fiscal Decentralization 21. Outcomes: Program 6 has five expected outcomes: (a) strengthened PFM systems at subnational service delivery units, (b) increased revenue collections at the subnational level and the accounting for of all revenues, (c) a more equitable and realistic distribution of central government funds at the subnational level, (d) stronger budget planning capacity at the subnational level, and (e) the long-term aim of enabling senior managers at the subnational level to assume responsibility for making devolved financial decisions. 22. Subprograms: Program 6 is divided into three subprograms, each of which has specific outputs and priority actions (annex table 1-6). Annex Table 1-6: Outputs of Program 6 (Fiscal Decentralization), by Subprogram Subprogram Output 6.1 Resource mobilization by 1: Decentralized entities’ revenue collection and administration performance decentralized entities enhanced 2: Access to decentralized entities’ borrowing and investment for finan cing local capital infrastructures and in getting dividends from investments in companies improved 6.2 Facilitation of fiscal transfers 1: Clarified and cost (output-based) assignment of functions between tiers of government and within sectors to enhance upward and downward accountability implemented 2: Comprehensiveness and transparency of intergovernmental fiscal relations improved 6.3 Strengthening of PFM systems 1: Participation of decentralized entities in budget preparation, setting of and capacity at subnational level policy priorities, and development of a bottom-up approach to preparation of the budget submissions by decentralized entities improved 55 Subprogram Output 2: Predictability and control local administrative entities’ budget execution enhanced 3: Accountability of subsidiary entities improved, through development and implementation of simplified accounting and financial reporting system 4: Accounting and reporting of decentralized entities improved 5: PFM systems and capacities at decentralized and subsidiary entities improved 6: PFM capacity at decentralized entities improved 23. Priority Actions and Outputs: Subprogram 6.1 (resource mobilization by decentralized entities) aims to achieve two outputs: (a) enhanced revenue collection and administration performance of decentralized entities (Output 1) and (b) improved access to decentralized entities’ borrowing and investment for financing local capital infrastructures and getting dividends from investments in companies (Output 2). Priority actions for Output 1 include implementation of a study on local government revenue potential and automated revenue collection systems. Subprogram 6.2 (facilitation of fiscal transfers) focuses on enhancing accountability through clarification of functional assignment (Output 1) and improvement of transparency of intergovernmental fiscal relations (Output 2). The Government aims to produce these outputs through a series of assessments and reviews (of the current functional allocation and review of intergovernmental fiscal transfers, for example). Subprogram 6.3 (strengthening subnational PFM systems and capacity) aims to improve key aspects of PFM, such as budget execution, accounting, and reporting, and to develop capacity through reviews of existing systems, implementation of a simplified accounting systems, and capacity development activities. 24. Rationales, Challenges, and Progress to Date: The rationales, challenges, and progress to date of each subprogram are summarized for each subprogram.  Subprogram 6.1: Resource Mobilization by Decentralized Entities. Strengthening revenue mobilization at the subnational levels is a core objective of the Government. Considerable efforts have been made to mobilize local revenues, including through a strengthened legal framework.78 Nevertheless, the utilization of local governments’ revenue sources is suboptimal and uneven across districts, which in addition to weakening fiscal sustainability raises issues of unequal treatment of taxpayers. In the FY2013/14 budget, the share of own revenues in the total ranged from 4 percent to 49 percent (on average 17 percent); transfers from the central government financed the remainder. Increasing local revenues would reduce the dependence of subnational governments on transfers from the central government, strengthen the fiscal space for central government budgets, and increase the discretionary share of districts’ budgets. To strengthen revenue mobilization at the subnational level, the Government commissioned the Local Government Revenue Potential Study, which found weak tax administration capacity at the subnational level. In combination with devolution of three tax sources to the districts, the Government has decided to transfer collection responsibilities for local revenues (business license, property, and rental income taxes) from districts to the RRA. 78 Law Establishing the Sources of Revenue and Property of Decentralized Entities and Governing their Management in 2011 followed by the Presidential Order establishing the List of Fees and Other Charges Levied by Decentralized Entities and Applicable Thresholds in 2012. 56  Subprogram 6.2: Facilitation of Fiscal Transfers. MINECOFIN, in collaboration with the Rwanda Governance Board, developed a draft Prime Minister Order to guide line ministries in implementing sectoral decentralization. 79 The legal and regulatory framework was assessed to determine the status quo in terms of expenditure responsibilities. A draft of the revised block grant formula is being developed to improve allocation efficiency to districts taking their fiscal capacity into account. Every year MINECOFIN issues guidelines on the earmarked transfers that provide the terms under which the earmarked funds are allocated, transferred, spent, and accounted for by the parties involved. The format of submission of the earmarked transfer guidelines was modified under the Budget System Improvement Program.  Subprogram 6.3: Strengthening PFM Systems and Capacity at the Subnational Level . Timely and transparent financial information at the subnational level is key to improving the effective and efficient use of public resources not only at the subnational level but also at the national level (about 80 percent of district budgets are financed by transfers from the central government). Financial information below the district level (subdistrict, cell, hospital, school) is nonexistent. To address the issue, the Government developed a simplified accounting and financial reporting application (SEAS) for subnational entities below the district level. It launched a pilot of the application in December 2013. As of April 2014, 88 of 416 subdistricts had completed the pilot. Program 7: PFM Sector Coordination and Management 25. Outcomes: Program 7 has seven expected outcomes: (a) strengthened PFM management and coordination mechanisms; (b) effective M&E of the PFM SSP; (c) a communications process that informs all stakeholders on progress in implementing the SSP and reform strategy; (d) increases in the number and quality of staff with professional qualifications, including through ongoing financial support for the Institute of Certified Public Accountant of Rwanda (ICPAR); (e) improvements in the capacity of all staff working within PFM areas; (f) effective incentive schemes where it is considered desirable to improve capacity; and (g) training in PFM systems and procedures of all relevant staff. 26. Subprograms: Program 7 is divided into three subprograms, each of which has specific outputs and priority actions (annex table 1-7). Annex Table 1-7: Outputs of Program 7 (PFM Sector Coordination and Management), by Subprogram Subprogram Output 7.1 Sector coordination and 1: SPIU well-functioning and strengthened management 2: Coordination of PFM development partners and stakeholders improved 3: Visibility of PFM sector improved 7.2 Coordination of human resource 1: PFM consolidated sector capacity-building plan developed and validated training and capacity building 2: Internship and secondment program established 3: Partnerships with education institutions and professional bodies established and strengthened 7.3 Monitoring and evaluation 1: M&E framework for sector elaborated and operationalized 2: Detailed PFM SSP implementation plan formulated 79 Given the fact that most of the district budget is centrally financed (own revenues are less than 20 percent), the current administrative decentralization is considered “deconcentration,” which implies the outsourcing of central government functions to local or regional offices. 57 27. Priority Actions and Outputs: The three outputs of Subprogram 7.1 are expected to be achieved through capacity building of the SPIU and facilitation of the sector working group. Capacity building and training are included in all programs under the PFM SSP. Subprogram 7.2 coordinates training and capacity building in the sector by, for example, developing a consolidated capacity development plan (Output 1) and partnering with other institutions and bodies. Subprogram 7.3 includes priority actions to operationalize M&E, including Joint Sector Reviews and PEFA assessments. 28. Rationales, Challenges, and Progress to Date: The rationales, challenges, and progress to date of each subprogram are summarized for each subprogram.  Subprogram 7.1: Sector Coordination and Management. This subprogram supports various functions of the SPIU in MINECOFIN, the main coordination unit implementing the PFM SSP, including sector coordination (for example, facilitation of the PFM COORDINATION FORUM) and capacity building.  Subprogram 7.2: Coordination of Human Resources Training and Capacity Building . Capacity constraints (organizational, institutional, and human) are prevalent across the programs to be supported by the PforR. Skills levels will need to be raised significantly as part of the implementation of the Program. Staff recruited for financial management positions are required to have a bachelor’s degree in accounting or finance, but few have any professional qualifications. None of the internal audit staff, for example, are professionally qualified auditors. The capacity of universities and postgraduate training institutions appears to be a constraint on improving skills levels and delivering professionally qualified staff. The certification body for accountants in Rwanda (ICPAR) has been established, but no institutions have yet been certified to provide professional training in accounting or auditing.  Subprogram 7.3: Monitoring and Evaluation. Progress of the PFM SSP has been regularly monitored through annual and quarterly progress reports on the PFM Basket Fund. PEFA assessments have been used to measure the overall progress of the PFM sector. Assessments were conducted in 2007 and 2010; the 2010 assessment included assessment of four districts. The next PEFA assessments at the national and subnational levels (including eight districts) are scheduled to be completed in the second half of 2014. 58 Annex Table 1-8: Summary Table of the Government PFM Program Program Sub-Program Identified Challenges Proposed Solution Expected Outcome 1 Economic 1.1 National Weaknesses in economic The processes and structures to  Increased emphasis on Performance Based Planning and Development planning and budgeting still support implementation of budgeting to support fiscal Budgeting Budgeting Planning persist: Long term budget MTEF, Program and  Significant improvement in the preparation of 1.2 Economic planning including MTEF, performance based budgeting MTEF, so it becomes an effective planning tool Policy Formulation Program and Performance are in place. What remains is  Ensure that funding from Donor Partners is fully budgeting has been identified as training and capacity building included in the Budget documentation 1.3 Public an area requiring improvement to institutionalise these  Ensure that Budgets at ministerial level do reflect Investment in order to increase the impact concepts in the planning and the sector priorities Programming of public expenditures on budgeting processes,  Strengthen risk management in the budget planning 1.4 Policy-based economic development and particularly in linking sector area Budgeting poverty reduction. strategies to budgets and  Maintaining government debt at sustainable levels. costing of Programs. 2 Resource 2.1 Tax Policy Erratic external resources Special emphasis will be on  Increase significantly the level of domestic revenues mobilization and Inadequate domestic increasing domestic resources, collected 2.2 Tax resources: Despite the both by initiating new tax  Ensure that tax policies are transparent, simple and significant progress made in policies that broaden the tax understandable, and taxes can be collected Administration resource mobilisation, Rwanda base and implementing efficiently still remains highly dependent administrative reforms to  Ensure that GoR has the capacity to access 2.3 External Finance on external aid. increase taxpayer compliance international markets to raise additional finance.  Exploring alternative non-traditional sources of finance  Increased use of country systems in management of external aid 3 Budget 3.1 Budget Budget Execution, The strategy is to strengthen the  Ensure that Budgets reflect sector and ministerial Execution, Execution Accounting and Reporting: internal audit function and priorities, and that Budget execution reflects the Internal 3.2 Treasury Weaknesses in expenditure oversight by RPPA to seal the Budget Plan. Control, Management management, compliance with gaps in compliance with laid  Improve the quality and timeliness of “in year” Accounting & 3.3 Internal Audit procurement procedures and down procedures and budget monitoring reports Reporting 3.4 Accounting & contract management remain a procurement rules and  Improve the quality and usefulness of financial Reporting challenge, as evidenced by regulations. The legal and report produced for public consumption findings and recommendations regulatory framework will also  Improve cash flow management procedures. 3.5 Public in OAG reports. The be strengthened to address  Ensure full compliance with government rules on Procurement effectiveness of the Internal identified weaknesses. procurement 3.6 Fiscal Risk Audit functions is also  Address the weaknesses of the current Internal Management in considered inadequate. Audit structure public enterprises  Introduce more modern audit techniques to improve internal audit standards 59 Program Sub-Program Identified Challenges Proposed Solution Expected Outcome 4 External 4.1 External Audit Audit and Legislative The services provided will  Increase the scope and coverage of external audits Oversight and 4.2 Legislative Oversight: The scope and continue to be developed with  Deliver the highest standards of external audit, Accountability Oversight coverage by external audits is particular emphasis on the through a professionally qualified staff at OAG still limited. The capacity of the introduction of modern audit using modern audit techniques and facilities relevant Parliamentary techniques and building the  Provide support to the Parliamentary Committees on Committees and District capacity of the District Councils Budget and Public Accounts to enable them to take Councils is still inadequate to to exercise fiduciary oversight. on an increasing scrutiny in the allocation and use of exercise effective external public finances. oversight on the use of public finances. 5 Electronic 5.1 Integrated Challenges in implementation Implementation of IFMIS is in  Roll out the current version of SmartFMS to the Service Financial of IFMIS: In the past two progress, with efforts to roll out remaining entities Delivery & Management years, MINECOFIN has made IFMIS to more institutions and  Determine the long term IFMIS requirements for the IFMIS System (IFMIS) significant progress in to expose more users to IFMIS GoR 5.2 Integrated implementation of IFMIS. environment. At the same time,  Implement IFMIS systems that will meet GoR needs Personnel and However, a fully-fledged an initiative has been started to into the 2020’s Payroll System IFMIS has not been realised, determine the long term IFMIS  Achieve full integration with other key IT systems (IPPIS) and this will remain a major requirements of the GoR. such as revenues, IPPS Payroll & HR area of focus as IFMIS is  Ensure that GoR staff are fully trained in the central to PFM. operation & use of these IT systems  Completion of IPPS systems through development of HR modules and payroll upgrades 6 Fiscal 6.1 Resource Local Government Budgets Key issues that will have to be  Strengthening PFM systems at sub national service Decentralization Mobilization by have increased significantly addressed in the long run are: delivery units Decentralized over the past years, however (i) ensuring effective tax  Increase revenues collections at SN level and ensure Entities while overall financial administration by the Local all revenues accounted for 6.2 Facilitation of resources are still not at the Governments, and (ii)  More equitable and realistic distribution of central fiscal transfers level to cover all needs of local increasing budget and revenue government funds at SN level 6.3 Strengthening governments, the share of the base in Local Governments,  Strengthen the budget planning capacity at the SN PFM systems and budget that local governments (iii) improving financial level capacity at Sub- have discretionary control over management for non-budget  A long term aim of enabling senior managers at SN National level (from own revenues and from agencies, planning and level to assume responsibility for making devolved central government transfers) is budgeting in Local financial decisions still small Government. Weak PFM systems at The next phase of reforms will Subnational (SN) level: specifically focus on Strengthening PFM systems at strengthening the PFM systems 60 Program Sub-Program Identified Challenges Proposed Solution Expected Outcome the sub-national service at the service delivery level delivery level (sectors, health units. Already, MINECOFIN facilities, schools etc.) has not has formulated the legal and received the necessary attention regulatory framework to guide in the past. PFM systems at SN level. 7 PFM Sector 7.1 Sector Inadequate human resource Staff training and capacity  Strengthen PFM management and coordination Coordination Coordination & capacity across all PFM building in all PFM disciplines mechanisms and Management disciplines: Developing the IT is a major sector priority. In the  Ensure effective Monitoring & Evaluation of the Management 7.2 Coordination of systems can be regarded as a past 5 years, basic capacity has PFM SSP HR Training & Step 1. Step 2 is the been developed through a mix  Establish communications process which informs all Capacity Building development of skilled staff to of short term hands on training. stakeholders on progress in implementation of the maximise the use of the IT During the next phase, these SSP and Reform Strategy. systems, and increase their efforts will be consolidated  Increasing the numbers and quality of staff with overall PFM knowledge and while at the same time seeking professional qualifications. This will include an skills. ways to institutionalise the ongoing level of financial support for ICPAR. training and capacity building.  Improve the capacity of all staff working within the Coordination and Lessons learnt from PFM areas 7.3 Monitoring & management of PFM implementation of the first  Ensure that there are effective incentive schemes in Evaluation reforms: phase of PFM reforms will be operation, where is considered desirable to improve PFM Sector includes a diverse applied in the formulation and capacity range of stakeholders and implementation of the next  To ensure that all staff have been properly trained in implementation partners. strategy. In particular, the PFM systems and procedures Various challenges were Sector Working Group and encountered in the Technical Teams will be implementation of the Reform strengthened. The newly Program from a coordination created Single Project and management perspective. Implementation Unit (SPIU) at MINECOFIN will coordinate the implementation of the PFM SSP. Source: PFM SSP with updated information 61 Annex 2: The Government Statistics Program (NSDS 2) 1. Strategic objective 1 (Strengthen civil registration systems, administrative records, surveys and other sources of data) focuses on the design and progressive roll-out of priority economic surveys related to agriculture, private sector activity, and the labor market. Despite the importance of agriculture in employment (70 percent of households depend on agriculture) and poverty reduction, agricultural statistics are scarce and infrequent, constraining agricultural policy-making. This strategic objective aims to address this gap by supporting the design and roll-out of an annual best-practice agricultural survey. Support to business and labor force surveys is highly strategic given Rwanda’s demographic developments: both in absolute and relative terms, working-age population will grow rapidly over the coming decade, opening up the opportunity of a demographic dividend80. Taking advantage of this demographic opportunity will require substantial job creation to accommodate the growing labor force. The formulation of effective employment policies is however hampered by lack of data. The increased availability of economic source data will also feed into the system of national accounts, which will be upgraded and rebased more frequently. 2. On strategic objective 2 (Improve quality and dissemination of statistics and public statistical literacy), the consolidation and expansion of NISR’s Open Data initiative is one of the key areas. During NSDS 1, NISR made solid progress on data dissemination through the establishment of a National Data Archive (NADA), where micro-data from surveys and censuses can be easily downloaded by everyone free of charge. This flagship initiative has greatly facilitated access to data: the 2012 User Satisfaction Survey showed that accessibility of official statistics has greatly improved since the start of NSDS 1 in 2009. While making more and more data easily accessible (“open”) will not by itself increase the use of data for decision -making, it is a necessary condition for achieving this goal. 3. On strategic objective 3 (Improve statistical advocacy and integrate use of statistics in decision making), this strategic objective mainly consist of awareness raising and outreach activities to highlight the easy access to statistical data and to emphasize the importance of data for better decision-making. Greater and easier accessibility of data must be accompanied by measures to promote the use of data for purposes of decision-making and policy-formulation. Though data in Rwanda is widely available and easily accessible, the actual use of data is hampered by the lack of awareness on this among policy-makers, researchers, and civil society. 4. On strategic objective 4 (Develop capacity within NSS), use of statistics for decision- making is also constrained by the low level of statistical skills within the NSS. The final review of NSDS-1 identified important statistical capacity gaps within the NSS, resulting from a limited number of trained statisticians and the absence of appropriate training infrastructure. The low capacity within the NSS constraints not only the demand-side of statistics (its use in decision- making), but also the supply-side: quality of statistics produced by line Ministries, the so-called administrative statistics, is highly variable. Development of skills within the NSS through the design, construction and operationalization of a statistical training center within NISR is one of the key activities. Once operational, the training center will offer hand-on courses in operational statistics and promote a culture of evidence-based decision-making among public sector officials within the NSS. 80 Fifth Rwanda Economic Update, World Bank (2014) 62 5. On strategic objective 5 (Consolidate coordination within NSS), the law on the organization of statistical activities in Rwanda 81 designates NISR as the coordinator of NSS. Under this strategic objective, NISR aims to achieve (i) improved coordination of statistical concepts and methods, and (ii) strengthened coordination of statistics activities. The first aim is expected to be achieved through updating the standard classifications and instruction manuals, as well as conducting regular dialogues with data producers and users. 6. On strategic objective 6 (Improve resource mobilization and build strategic partnerships), investments in statistics are essential “to enhance capacity for statistics to monitor progress, evaluate impact, ensure sound, results-focused public sector management, and highlight strategic issues for policy decisions"82. Lack of sufficient financial resources would risk successful implementation of NSDS 2. In this regard, NISR aims (i) to mobilize resources sufficient to activities NSS through holding consultation with partners; (ii) to manage resources efficiently through adhering to best practices of financial management and maintaining appropriate financial planning and reporting; and (iii) building strategic partnerships. 81 Law No.45/2013 of 16/06/2013 82 Fourth High-Level Forum on Aid Effectiveness, Busan, Korea, 2011 63 Annex 3: Credibility of the Government Programs PFM SSP Features of a Credible Assessment Reform Program 1. Government-led – Fully met: MINECOFIN is the lead ministry of the PFM sector. Within enabling full political the government, a PFM Reform Steering Committee, comprising ownership and leading to representatives of the implementing agencies and development partners effective harmonization and oversees the implementation of the PFM Sector Strategic Plan. The donor intervention. SWG functions as a discussion forum on strategic issues between the government and development partners, and details at the program and sub-program levels are handled by a Technical Working Groups (TWGs). 2. Realistic and achievable – Mostly met: Human resource capability challenges may affect the pace based primarily on available of the reforms which require good conceptual understanding, sequencing local capacity and set within and proper change management for the reform objectives to be an appropriate timeframe. achievable within the set timeframes. 3. Comprehensive Fully met: PFM SSP is a comprehensive framework and attempts to framework which is sequence the activities in the various reform pillars but institutional effectively sequenced strengthening and human capacity development could be better articulated. 4. Relevant and sustainable Fully met: The reform measures are designed to maintain the positive – adapted to country context, trajectory of the PFM reforms and tackle the remaining challenges that targeted to meet key fiduciary pose risk to the efficient and effective use of public funds. However, for risks and avoiding over- sustainability, clear exit strategy needs to be formulated to enable reliance on external TA. MINECOFIN to assume full responsibility for the SmartFMS. 5. Developing local capacity Mostly met: Terms of reference for the various TAs have skills transfer element. However, in the area of accounting, despite the establishment of ICPAR that has a professional examination that meets international standards, the GoR still continues to fund its employees to take international examination. 6. Build demand for change Fully met: Good positive trajectory of PFM reforms. PFM-SSP is - promoting a sustainable conceived as one of foundational issues in the EDPRS 2. track record of improvement based on previous success 7. Include specific Fully met: PFM SSP and accompanying action plans have identified performance indicators clear objectives/outcomes with some milestones to ascertain progress towards the achievement of the long-term reform objectives. Source: World Bank Assessment 64 NSDS 2 Features of a Credible Assessment Reform Program 1. Government-led – Fully met: NSDS 2 was developed by NISR in close collaboration and enabling full political consultation with all relevant stakeholders and is fully aligned with EDPRS ownership and leading to 2. All government institutions within the NSS (line ministries, agencies and effective harmonization and district administrations) contributed to the elaboration of NSDS-2, and all donor intervention. members of the SWG, including development partners, were consulted throughout the process. Like NSDS 1, NSDS 2 will be governed by a steering committee, chaired by the government. 2. Realistic and achievable Fully met: While ambitious, NSDS 2 targets and objectives are attainable – based primarily on given the strong implementation capacity of NISR. To successfully available local capacity and implement the NSDS 2, NISR will however need to substantially grow in set within an appropriate size. Successful implementation of NSDS 2 will crucially hinge on the timeframe. extent to which sufficient and sufficiently-qualified staff can be recruited and integrated into the organization. 3. Comprehensive Fully met: NSDS-2 is a comprehensive plan with clear targets and framework which is milestones. To the extent possible, the main activities are sequenced to not effectively sequenced overburden the organization at a single point in time. 4. Relevant and Mostly met: NSDS-2 is relevant and adapted to the country context and sustainable – adapted to presents a clear and realistic roadmap towards the objectives of the plan. country context, targeted to Reliance on external TA can however be expected to remain in areas that meet key fiduciary risks and need capacity than what is available, especially in adapting new avoiding over-reliance on methodologies, relatively high over the short to medium run, due to the lack external TA. of qualified statisticians and subject-matter expertise within the NSS. NSDS- 2 aims however to reduce reliance on external TA by scaling of capacity building efforts for NSS statisticians. 5. Developing local Fully met: NISR has developed a five-year capacity building plan that will capacity be implemented during NSDS 2. In addition, each ToR for international TA contains an important capacity building element to build skills of local staff. NISR is also looking into the possibility to establish a statistical training center within its premises. 6. Build demand for Fully met: During NSDS 1 period, NISR has built a reputation for timely change - promoting a delivery of high-quality statistics. The perceived strong performance of NISR sustainable track record of has greatly increased government demand for data on an ever increasing improvement based on range of topics. Through NSDS 2, NISR is gearing up to meet the increased previous success demand for quality data. 7. Include specific Mostly met: NSDS 2 includes a comprehensive logical framework with performance indicators output and outcome indicators at each of the six strategic objectives it aims to accomplish. Due to the nature of statistical activities though, most indicators are output-based (production of priority data and statistics). Source: World Bank Assessment 65 Annex 4: Rwanda’s 2007 and 2010 PEFA 1. Overall, the PEFA assessment for found a marked improvement in external audit (PI-26) and legislative scrutiny of audit reports (PI-28). Weak PFM performance remains concentrated in three areas, first in regard to the multi-year perspective in fiscal planning, expenditure policy and budgeting (PI-12) and composition of expenditure out-turn compared to original approved budget (PI-2), second in regard to quality and timeliness of reporting of in-year budget reports (PI-24) and annual financial statements (PI-25); and, finally, in regard to effectiveness of internal audit (PI-21). 2. When comparing the 2007 and 2010 ratings it should be noted the previous PEFA may have under-scored or over-scored some of the ratings for indicators or individual dimensions. Thus a simple comparison of the overall scores between two assessments at different times, not detailed by dimension, and with no analysis of change, can suggest deterioration, improvement or stagnation of indicators, which is in fact not the case. In the case of Rwanda there was real progress despite the appearance of stagnation, if an indicator was over-scored by the previous assessment, as the PEFA team found to be the case for PI-11. Similarly, in the case of PI-21 and PI-25 there is the appearance of deterioration as indicators or dimensions were highly over- scored in the PEFA 2007. Also, there was progress for PI-18 but less so than indicated by a simple comparison of the overall scores, as the indicator was over-scored by the previous assessment. 3. The CG assessment found that the areas of PFM performance that were already at a very satisfactory level of performance (A) in 2006 and have remained such are: PI-3 Aggregate revenue out-turn compared to original approved budget (A); PI-5 Classification of the budget (A); PI-13 Transparency of taxpayer obligations and liabilities (A). 4. The areas of PFM performance that have improved and achieved a very satisfactory (A) or acceptable (B) level of performance are: PI-1 Aggregate expenditure out-turn compared to original approved budget (A); PI-4 Stock and monitoring of expenditure payment arrears (B); PI- 6 Comprehensiveness of information included in budget documentation (A); PI-8 Transparency of inter-governmental fiscal relations (A); PI-10 Public access to key fiscal information (A); PI- 11 Orderliness and participation in the annual budget process (B+); PI-14 Effectiveness of measures for taxpayer registration and tax assessment (A); PI-16 Predictability in the availability of funds for commitment of expenditures (B+); PI-17 Recording and management of cash balances, debt and guarantees (B); PI-18 Effectiveness of payroll controls (B+); PI-19 Competition, value for money and controls in procurement (A); PI-20 Effectiveness of internal controls for non-salary expenditure (B+); PI-22 Timeliness and regularity of accounts reconciliation (B); PI-26 Scope, nature and follow-up of external audit (B+); PI-28 Legislative scrutiny of external audit reports (B); D-1 Predictability of Direct Budget Support (A). 5. The areas of PFM performance that are showing some improvement, yet remain weak, are: PI-2 Composition of expenditure out-turn compared to original approved budget (D); PI-7 Extent of unreported government operations (D+); PI-9 Oversight of aggregate fiscal risk from other public sector entities (C); PI-21 Effectiveness of internal audit (C); PI-25 Quality and timeliness of annual financial statements (D+); D-2 Financial information provided by donors for budgeting and reporting on project and program aid (D+). 6. The areas of PFM performance that are not showing much improvement and remain weak are: PI-12 Multi-year perspective in fiscal planning, expenditure policy and budgeting (C+); PI-15 Effectiveness in collection of tax payments (D+); PI-23 Availability of information 66 on resources received by service delivery units (D); PI-24 Quality and timeliness of in-year budget reports (D+); PI-27 Legislative scrutiny of the annual budget law (C+); D-3 Proportion of aid that is managed by use of national procedures (D). 7. Ratings that have remained unchanged since the 2007 PEFA, and are difficult to justify are: PI-7 (ii), PI-23, and D-3 at D; PI-15 and PI-24 at D+; PI-12 and PI-27 at C+. For PI-7 (ii), more information on donor assistance than what is included in fiscal reports is available within MINECOFIN, for PI-15, effectiveness in collection of tax payments, unchanged at D+ since the 2007 PEFA, despite Domestic Revenue Generation being a component of the Government PFMRS under Pillar 1, Economic Management and Budget; for PI-24, as in-year budget reporting did take place in 2007 and 2008; and in-year reporting just ceased. 8. Regarding the others, it can be noted that: D-3, proportion of aid that is managed by use of national procedures, shows that donors are not sufficiently relying on country systems for the channeling of donor assistance, and have not increased their reliance since 2006, despite the constant and coordinated presence of donor support in Rwanda, an overall improvement in PFM processes, and the general objective under the Paris Deceleration and the Accra Agenda to increasingly rely on national systems; The failure of improvements in the availability of information on resources received by service delivery units (PI-23) is surprising especially give the fiscal decentralization process underway, and the stated objectives of the National Decentralization Policy. Regarding legislative scrutiny of the annual budget law (PI-27), the indicator rating cannot improve as long as the current situation, of no limit in place for the size of supplementary budgets, reflected under dimension (iv), continues. The failure of the MTEF (see PI-12) to deliver its true objective of linking policy targets with actual budget allocations and thus ensure at the same time a strategic allocation of resources and fiscal sustainability, is also costly in Rwanda, given the vast amount of capacity invested in the multi-year planning process, which is very extensive and involves a large variety of activities throughout the budget preparation cycle, across all sectors. Regarding the implementation of IFMIS/SmartGov, which is part of the official PFM Government Reform Program, under Pillar 2, component 3, it has fallen behind schedule. Its delay is at the root of the fact that the quality of financial statements (PI-25 (i)) has not improved as much as its potential, as it is hampered by the continued coexistence of two different systems, SagePastel and SmartGov. Overall, not enough effect has trickled to PFM systems in the area of accounting, recording and reporting despite it being one of the main reform pillars. 67 Annex Table 4-1: PEFA 2010 Rwanda Scores 68 Annex 5: 2010 PEFA Assessment at the District Level 1. The PEFA 2010 SN Assessment found a satisfactory nature and scope of the external scrutiny of SN governments (see SN PI-26, rated at A for nature and scope and B overall). The OAG in fact audits all SN governments on a yearly basis and issues the results of the audit as part of the Annual Report presented to Parliament, under Volume III. Also in parallel with CG, and also probably as a result of an acceptable level of external oversight, including on the implementation of audit recommendations, the SN Assessment found that controls on both salary and non-salary expenditure are at an acceptable/satisfactory level, with PI-18 and PI-20 both rated at B+. At the SN level, the core dimension transparency and comprehensiveness was assessed only on the basis of two indicators (PI-8 and PI-10), one of which was found not applicable (PI-8). On the basis of PI-10 only, which assesses public access to key fiscal information, transparency at the SN level is satisfactory (A). The core dimension accounting and reporting, assessed at the SN level on the basis of the availability of funds for commitment expenditures (PI-22) and in-year budget reporting (PI-24), shows acceptable to good results (B+), and a more positive status of processes than for CG. 2. By indicator, the SN Assessment found that the areas that are at a good or acceptable level of performance are: PI-2 Composition of expenditure out-turn compared to original approved budget (B,B,A,B); HLG-1 Predictability of transfers from higher levels of Government (B+, B+, B+, A), PI-10 Public access to key fiscal information (A); PI-16 Predictability in the availability of funds for commitment of expenditures (B+); PI-18 Effectiveness of payroll controls (B+); PI-20 Effectiveness of internal controls for non-salary expenditure (B+); PI-22 Timeliness and regularity of accounts reconciliation (B+); PI-24 Quality and timeliness of in-year budget reports (B+); PI-26 Scope, nature and follow-up of external audit (B+). 3. The following areas were found to be weak: PI-1 Aggregate expenditure out-turn compared to original approved budget (D,B,D,D); PI-11 Orderliness and participation in the annual budget process (D+). Annex Table 5-1: Sub-National (SN) Indicator Overview (PEFA 2010) 69 Annex 6: Revenue Mobilization Government Program 1. The government’s strategy to improve revenue mobilization through a broad set of initiatives is prioritized in PFM SSP and other strategies83. For example, in its Strategic Plan 2013/14–2015/16, the Rwanda Revenue Authority (RRA) identifies the efforts to “maximize revenue mobilization” as the overarching direction for the plan period, supported by enhancements and specific initiatives to improve RRA performance on the areas: (i) enhance service deliver to meet customer needs; (ii) ensure maximum compliance with tax legislation; and (iii) further strengthen the capacity of the organization. 2. The reform program on tax policy and administration consists of a broad array of initiatives, spanning from a comprehensive review of loopholes and foregone tax revenues under current tax codes, to initiatives to strengthen and improve all tax administrative areas, from registration and filing compliance, over tax payer services and education, returns processing and payment, arrears collection, audit and investigations to improvements on tax appeals. The major elements of the reform program and recent years’ accomplishments are illustrated in annex table 6-1). Annex Table 6-1: Recent Reform Steps and Areas Still Under Consideration TAX POLICY REVENUE ADMINISTRATION - Changing excise on petroleum products from ad- - Integrating domestic tax administration on the basis of key valorem to specific—2010/2011. tax administration functions. - Removing VAT on petroleum products— - Adopting taxpayer segmentation approaches by establishing 2010/2011. the large taxpayer office (LTO) and the small and medium - Reducing specific excise on petrol from 283 Rwf/L taxpayer office (SMTO). to183 Rwf/L and on diesel from 250 Rwf/L to150 - Implementing systems and procedures based on self- Rwf/L—2011/2012. assessment. - Increasing excise duty on airtime of mobile phones - Enacting new tax laws, including a law on tax procedures. from 5 to 8 percent—2011/2012. - Automating tax and customs operations. - Increasing import duty on construction materials of - Setting up a national training institute. large investment projects. - Facilitating trade by granting a blue channel status to - Revising PIT for micro enterprises by introducing a importers with compliant records. scheduler tax on turnover below 12 million— - Streamlining the appeals process and setting up special September 2012. commercial courts to handle tax matters. - Reducing turnover tax for small enterprises from 4 - Implementing the East African Community Customs Union to 3 percent and raising the ceiling for this regime protocol—July 1, 2009. from 20 to 50million—September 2012. - Transferring the collection of social security contribution and - Introducing gaming law with a 15 percent tax on net the medical insurance benefit contributions to the RRA— winnings and a 13 percent tax on the net revenue of 2010. the company - September 2012. - Integrating tax and business registration processes at the - Introducing royalties on minerals, with rates of 4 Rwanda Development Board. percent on base metals, up to 6 percent for precious - Implementing basic risk management approaches. metals and diamonds - September 2013. - Improving taxpayer service delivery by providing a number - Changing prescription period to keep transaction of on-line services, including electronic filing and payment records from 10 to 5 years - January 2013. systems, mobile declaration, electronic single window, call Draft laws/under discussion center, official website, etc. - Changing prescription period to keep transaction - Implementing quarterly filing and payment requirements in records from 10 to 5 years. respect of small businesses. - Revising investment code to close loopholes and Draft laws/under discussion create a sector focus. - Amending the VAT law, introducing electronic fiscal devices - Modifying the law on special economic zones to (EFDs) 83 PFM SSP, Governance and Decentralization SSP, RRA Strategic Plan 2013/14-2015/16 70 TAX POLICY REVENUE ADMINISTRATION offer incentive package. - Amending the VAT law, introducing the VAT withholding system Source: RRA 3. In addition to the current tax policy and administration reform plan, the government has prepared a draft catalogue of medium-term tax reform proposals, to eventually reinforce efforts to ensure revenue mobilization targets. In connection with this plan, in April 2014, the IMF provided technical assistance on domestic revenue mobilization. The results of the technical assistance described in the first review under the PSI includes84: - Revise legislation on taxation of property (Dec 2014); - Prepare legislative proposal for new tax regime for agriculture (Dec 2014); - Prepare legislative proposal for new tax regime for mining (Dec 2014); - Streamlining incentives and exemptions based on the draft investment code approved by Cabinet in March 2014; - Tax expenditure assessment; - Enforcement of tax payer compliance (e.g., use of electronic billing machines); and - Amending the VAT laws to reduce exemption. PforR Program 4. The PforR covers three critical areas towards ensuring revenue mobilization. The Government has established tax revenue mobilization targets on public sector for the period FY2013/14–2016/17. With a baseline on 2013/14 at Rwf 782.5 billion, the targets on revenue mobilization are set at Rwf 906.8 billion in 2014/15, Rwf 1,111.2 billion in 2015/16 and Rwf 1,291.1 billion in 2016/1785. The targets represent a nominal increase in revenues of 64% in 2016/17, as compared to 2013/14. 5. In consultation with the Government, the World Bank team has identified three critical areas towards achieving these ambitious targets, as follows: (1) Broadening the tax base, in particular by registration of new tax payers on national and subnational tax sources; by improved registration of new tax payers, as part of the centralization of collection of the district’s revenues; and by a comprehensive assessment and action plan on broadening the VAT tax base (broader base coverage and reduction in exemptions). (2) Continued modernization of tax administration, in particular by increasing the uptake of eTax services. The usage of electronic tax filing and payments will be expanded and eTax systems will be upgraded, by developing and integrating various modules on tax audit, tax account- and refund management, and enforcement planning. (3) Improving compliance: Enhancing management of arrears and non-compliance procedures, in particular by a VAT gap analysis, to identify compliance issues and ways to addressing these. Improved up take in use of EBM by tax payers would also contribute, as would a risk- 84 Box 2 includes Fund recommendations on taxing the agriculture and mining sectors and property; Para 14 under Memorandum of Economic and Financial Policies-Update includes structural measures; and table 2 includes structural benchmarks on revenue mobilization (http://www.imf.org/external/pubs/ft/scr/2014/cr14185.pdf) 85 For further details in revenue forecasts by tax sources, please refer to Annex Table 6-4. 71 based management strategy to oversee and improve compliance on VAT and on other tax sources. Program Assessment: Strategic Relevance and Technical Soundness 6. EDPRS 2 theme on “Economic Transformation for Rapid Growth” is supported by the improved revenue mobilization for public sector activities and finance. Ensuring fiscal space is critical to achieve the country’s aspiration to reduce aid dependency in the medium-term. The PFM SSP relates to this objective, by “promoting mobilization of resources and prioritization of expenditures for maximum impact on economic growth and poverty reduction.” 7. While there was progress over recent years, the tax to GDP ratio in Rwanda remains relatively low. The tax to GDP ratio in FY2012/13 stood at 14.2%, with the Sub-Saharan African (SSA) Countries average at 18%. Government efforts over recent years have resulted in an increase of 1 percentage point in GDP, up from 13.2% in FY2010/11, with the major increase being observed in Direct taxes which went up from 39% to 43% of total tax revenue, while the proportion of indirect taxes, in particular excise taxes, reduced over the period. The proportion of revenues collected from VAT, which is the single most important tax source, was unchanged over the period, but with the revenue forecasts on VAT suggesting an increased share in FY2013/14, with 32.9% of the overall tax revenues in FY2013/14, as compared to 30.6% in FY2012/13 (annex table 6-2). Annex Table 6-2: Total Tax Revenues, by Tax Types. 2010/11 – 2013/14 2010/ 2011 2011 / 2012 2012/2013 2013 / 2014 Total tax revenues (In bln Rw f) 460.6 556.0 651.9 775.4 - in % of GDP 13.2% 13.6% 14.2% 15.2% Share in percent of total Tax Revenue Direct taxes 39.1% 41.1% 43.3% 40.4% Companies 11.4% 9.8% 10.9% 10.4% -Of w hich Large companies 5.7% 5.3% 6.2% 5.7% - Of w hichSmall enterprises 5.4% 4.4% 4.6% 4.7% Individuals 24.5% 25.6% 26.8% 25.2% of w hich PAYE 24.4% 25.4% 26.7% 25.0% Others (WHT 15%) 2.7% 5.2% 5.2% 4.4% Property taxes 0.4% 0.5% 0.4% 0.4% Taxes on goods and services 54.5% 51.9% 49.3% 51.8% Excise taxes 18.6% 16.4% 14.3% 14.5% Beer 5.7% 5.6% 5.2% 5.2% Wines & Liquors 0.2% 0.4% 0.4% 0.5% Petrol 9.1% 6.5% 5.2% 5.0% Cigarettes 0.9% 0.7% 0.6% 0.7% Limonade 1.4% 1.5% 1.4% 1.4% Vehicles 0.3% 0.5% 0.3% 0.4% Pow dered milk 0.0% 0.0% 0.0% 0.0% Air time 1.0% 1.3% 1.2% 1.2% VAT 30.5% 30.9% 30.6% 32.9% of w hich: on imports 11.4% 12.4% 11.6% 14.1% Taxes on international trade 6.5% 7.0% 7.4% 7.8% Nominal GDP in billion Rwf (Fiscal Year) 3,483.7 4,080.9 4,605.9 5,111.7 Source: RRA and National Institute of Statistics Rwanda 72 2010/ 2011 2011 / 2012 2012/2013 2013 / 2014 Total tax revenues (In bln Rw f) 460.6 556.0 651.9 775.4 - in % of GDP 13.2% 13.6% 14.2% 15.2% Share in percent of total Tax Revenue Direct taxes 39.1% 41.1% 43.3% 40.4% Companies 11.4% 9.8% 10.9% 10.4% -Of w hich Large companies 5.7% 5.3% 6.2% 5.7% - Of w hichSmall enterprises 5.4% 4.4% 4.6% 4.7% Individuals 24.5% 25.6% 26.8% 25.2% of w hich PAYE 24.4% 25.4% 26.7% 25.0% Others (WHT 15%) 2.7% 5.2% 5.2% 4.4% Property taxes 0.4% 0.5% 0.4% 0.4% Taxes on goods and services 54.5% 51.9% 49.3% 51.8% Excise taxes 18.6% 16.4% 14.3% 14.5% Beer 5.7% 5.6% 5.2% 5.2% Wines & Liquors 0.2% 0.4% 0.4% 0.5% Petrol 9.1% 6.5% 5.2% 5.0% Cigarettes 0.9% 0.7% 0.6% 0.7% Limonade 1.4% 1.5% 1.4% 1.4% Vehicles 0.3% 0.5% 0.3% 0.4% Pow dered milk 0.0% 0.0% 0.0% 0.0% Air time 1.0% 1.3% 1.2% 1.2% VAT 30.5% 30.9% 30.6% 32.9% of w hich: on imports 11.4% 12.4% 11.6% 14.1% Taxes on international trade 6.5% 7.0% 7.4% 7.8% Nominal GDP in billion Rwf (Fiscal Year) 3,483.7 4,080.9 4,605.9 5,111.7 Source: RRA and National Institute of Statistics Rwanda 8. Compared to other countries in East Africa and SSA, some margin for tax-to-GDP improvements in Rwanda seems to be prevalent. Rwanda’s tax to GDP ratio is on an average 2 percentage points behind East African peers, and 5-6 percentage points behind Kenya and Malawi (annex table 6-3). The ‘gap’ to peer countries is approximately the same on direct taxes as on indirect taxes. It is worth noting that the revenue profile in Kenya and Malawi, the countries with the highest tax-to-GDP ratio, is pretty even across direct and indirect taxes, while Rwanda, Uganda and also Tanzania is seeing indirect taxes take a higher share of the overall tax revenues. Annex Table 6-3: Tax Revenue for Selected SSA Countries in 2011-12 Rwanda Ethiopia Malawi Tanzania Uganda Kenya Simple Average (In billions of LCU) Tax Revenue 557 86 661 181 5,904 5,983 - Direct Tax 229 29 305 82 2,519 2,112 - Indirect Taxes 329 57 355 99 3,385 3,870 - Domestic indirect tax 283 23 298 82 2,861 3,367 - Trade tax 46 34 58 18 524 503 - GDP 4,126 680 3,281 962 39,336 49,794 - (In percent of GDP, unless otherwise indicated) Tax Revenue 13.5 12.6 20.1 18.8 15 12 15.7 Direct Tax 5.5 4.2 9.3 8.5 6.4 4.2 6.5 Indirect Tax 8 8.4 10.8 10.3 8.6 7.8 9.2 Direct tax, % Tax Revenue 41 33.7 46.2 45.2 42.7 35.3 40.6 VAT and other indirect tax 50.7 27.2 45.1 45.1 48.5 56.3 44.4 revenue, % Tax Revenue Trade tax, % Tax Revenue 8.2 39.2 8.7 9.7 8.9 8.4 15.0 Sources: IMF: Ethiopia, Rwanda, and Uganda 2013 Article IV; Kenya and Malawi 2012 Article IV; and Tanzania 2011 Article IV reports 73 9. In the short to medium-term, the tax-to-GDP may potentially be improved by 4-5% points, according to a recent IMF study. Estimations of tax revenue gap across countries usually require a high degree of contextualization, to ensure that structural determinants are taken into account in the comparison. In a recent Article IV consultation on Uganda, the IMF estimated the tax gap in East African countries, by relating tax-to-GDP to structural variables, such as the proportion of rural population, and the share of manufacturing in the GDP. The results of the estimation appear in Annex figure 6-186. While the interpretation of such model results always should be made cautiously, the Rwandan’ governments revenue targets for the next few years match or even exceed the requirements to close the tax revenue gap, as indicated below. 10. The government’s targets on tax revenue collections FY2013/14 to 2016/17 are witness to the high priority the government allocates to this area. The government’s targets on tax revenues/GDP ratio are provided in the Budget Framework Paper87. The government aims at increasing tax revenue collections as follows: Tax revenue collections, which will reach 15.3 percent of GDP in 2013/14, are projected to rise to 15.8% of GDP in 2014/15, 17.2% of GDP in 2015/16 and 17.7% of GDP in 2016/17. The improved tax revenue to GDP will compensate partly for a projected reduction in aid grants (down by 50% over the four years’ period), and for a reduction in domestic financing to cover balance. Over four years, the tax to GDP will be improved by 1.9 percentage-points, which, as mentioned above, in nominal terms represents an expansion of about 64 percent in total tax revenues for the period. The projections in total tax revenues by tax types are provided in annex table 6-4. 86 Please note that the level of tax-to-GDP ratios in annex table 6-3 calculations are based on more recent data than the ones in annex figure 6-1. 87 Budget Framework Paper 2014/15 – 2016/17 (April 2014, p 26) 74 Annex Table 6-4: Medium Term Estimates for Resources and Outlays. 2014/15 – 2016/17. Source: BFP 2014/15 – 2016/17. April 2014 11. In addition, the improvements in subnational tax revenues, resulting from the centralization of local government taxes, are not included in the target of the medium-term tax-to-GDP ratio88. The centralization of revenue collection is estimated to yield a cumulative 2.3% of GDP between FY2014/15 and FY2016/17 (0.5% in FY2014, 0.9% in FY2015 and 0.9% in FY2016). In summary, the combined efforts on national and subnational revenue mobilization may imply an estimated 20% of tax-to-GDP in FY2016/17 12. The RRA has a strong performance record in revenue mobilization, with the annual performance rates above targets. In annex table 6-5, the actual tax revenue collections in FY2012/13 exceeded performance targets by 1.7%, and over two years, the revenue collection showed an overall increase of more than 17%. Strong performance was seen across tax types, although performance on indirect taxes (including VAT) was less prominent than on direct taxes. Annex Table 6-5: Revenue performance against targets for 2012/13 compared with 2011/12 (billion Rwf) Tax type Target Actual Variance Performance Actual % Change 2012/13 2012/13 rate 2011/12 btw FY12 and 13 Total revenue 653.4 663.7 10.3 101.6% 569.6 16.5% Non-tax revenue 12.2 11.8 -0.4 96.7% 13.6 -13.2% Total tax revenue 641.2 651.9 10.7 101.7% 556.0 17.2% * Direct taxes 260.0 282.0 22.0 108.5% 228.5 23.4% * Taxes on Goods & Services 334.0 321.7 -12.3 96.3% 288.8 11.4% * Taxes on Int’l Trade 47.2 48.2 1.0 102.1% 38.7 24.5% Source: RRA 88 The tax revenue targets for FY2014/15 – 2016/17 include a figure for Local government taxes (under Direct taxes). 75 13. In terms of the relevance and technical soundness of the specific areas under this Program, the following assessment is provided on each area: 1) Increase tax registration and tax bases – national and subnational tax collection  Taxpayer registration has been increased significantly over recent years. Annex table 6-6 provides development from 2010/11 to 2011/12, by segments. Annex Table 6-6: Tax Payer Registration 2010/11– 2011/12. Tax Payer registration 2010/11 2011/12 Number of active taxpayers (Total) 64,260 90,485 Number of active taxpayers (PIT) 41,576 54,084 Number of active taxpayers (CIT) 12,262 19,850 Number of active taxpayers (PAYE) 13,576 17,478 Number of active taxpayers (VAT) 6,818 8,885 Number of active taxpayers (Excise) 30 34 Source: IMF, Enhancing Revenue Mobilization through Tax Policy and Administration Reform, December 2012, p 15.  RRA is undertaking efforts to further increase registration of tax payers. The efforts include (i) continuous taxpayer sensitization in collaboration with PSF and Local government. RRA will further take advantage of the database to be developed through a registration exercise for the three local government taxes to do registration; and (ii) increase in number of field visits for particular types of businesses. This helps RRA get feedback on various services and to identify the unregistered taxpayers; and RRA also identifies the relevant topics for taxpayer education.  Furthermore, tax payer registration is a core initial step of the reform plans on improving revenue collection of sub central governments. While the potential yield from the business license tax, the property tax and the rental income tax as recently devolved to decentralized entities is significant, collections over recent years have been minimal (tax revenue out of total revenue in the districts stood at 8% in 2011), owing primarily to efficiency issues in the tax collection but also to incomplete and inaccurate supporting systems, such as land management and cadastre information. In addition to enhanced local revenue collection, the centralization of tax collection is expected to provide RRA with important information on tax payers in the districts, (in particularly local businesses), currently unknown to the agency, and a revenue yield improvement on national tax sources, such as CIT, may eventually follow.  The RRA has established a two-staged plan on how to improve revenue collection at the districts. In the first stage, covering the period March–December 2014, RRA is collecting revenues on the three devolved tax sources (trading license tax, rental income tax and property tax) in all districts. In some districts, RRA has taken over the management of district’s tax administration staff, while in others, RRA is assisting the districts own staff in improving revenue collection. In the second phase, starting January 2015, RRA will fully take over all functions in revenue mobilization at the district’s level, in charge of all administrative processes related to the collection of tax and non-tax revenues. In preparation for the second phase, during the 2nd half of 2014, the RRA will complete a database on all tax payers at the district level, by tax type, acquire revenue software and IT equipment to support the tasks, and recruit and deploy staff, including establish a separate unit on ‘subnational revenues’, to be headed by a Deputy Commissioner. This new and widely enhanced mandate for RRA on subnational revenues requires amendment of legislation, which will be presented to Parliament in due time. In parallel to the administrative re-organization and strengthening of 76 the subnational revenue collection, the government is also working on improving the policy framework and administration on property taxation and rental income taxation. Any policy change is likely to be contemplated in 2016 at the earliest (i.e.,at least one full year after RRA has fully taken over the administration of local government taxes).  As appears from annex table 6-7, improvement in tax revenue in 2011/12 due to new registered tax payers amounted to Rwf 3.9 billion representing an important part of total tax revenue. As appears, the yield increase from PAYE and VAT explains the major part of the revenue increase. Annex Table 6-7: New registered taxpayers during July 2011-June 2012 and the amount of tax paid Number of new Amount of tax Tax type registered taxpayers paid PAYE 12,152 2,822,998,138 VAT 1,110 723,359,861 PIT 4,334 112,770,787 CIT 517 57,373,239 Excise 14 4,335,019 Withholding tax on public supplies (3%) 238 80,614,369 Withholding tax on service fees, management fees, dividend. 173 57,473,639 Total 18,538 3,858,925,052 Source: RRA 2) Developments in arrears call for strengthened tax administrative systems and procedures, all the way from filing over collection of arrears and tax audit.  As illustrated in annex table 6-8 on the profile of tax arrears, arrears went up by 21% in FY2012/13 from the previous year. In terms of structure of arrears, short-term arrears were reduced by almost 40%, while arrears of 3-12 months of age went up by some 60%. The increase in medium-term arrears, from 3-12 months of age, represents 1.4% of the total tax revenues in 2012/13 The stock of +12 months old arrears increased by Rwf 10.4 billion, representing an additional 1.6% of total tax revenues. The size of arrears, including recent year’s increase, calls for intensified compliance efforts. A great part of +one year overdue arrears will not result in any recovered tax revenue and should preferably be written off89. However, at this point in time, no explicit policy on old arrears has been established by RRA. In the context of this operation, the RRA is encouraged to prioritize the management of arrears, including establish an action plan on collectable tax arrears, with performance metrics, targets and reporting attached. Metrics could include “Total value of arrears attached”; “total number of collection cases closed”; total number of taxpayers in arrears as contacted” and “average annual arrears collection per staff per year”. Annex Table 6-8: Tax arrears by age and by tax segment as at June 2013 (Rwf millions) TOTAL FY TOTAL FY % Age LTO SMTO CSD 2012/13 2011/12 change Less than 3 months overdue 3,687 2,925 470 7,083 11,718 -39.6% Between 3 and 6 months overdue 2,114 4,262 275 6,652 4,316 54.1% Between 6 and 12 months overdue 13,982 2,551 455 16,989 10,305 64.9% More than 12 months overdue 22,922 31,279 294 54,496 44,043 23.7% TOTAL 42,706 41,018 1,495 85,220 70,383 21.1% Source: RRA, May 2014 89 IMF “Enhancing Revenue Mobilization through Tax Policy and Revenue Administration Reform”, TA report, December 2012 77  The importance and relevance of initiatives to further improve tax administrative procedures, including further introduction of e-tax solutions, is stressed by this development in arrears. The scale-up of eTax systems and their interconnectedness include further development of modules on audit, tax account and refund administration, enforcement, and objections and appeals. Such integrated single tax account window on all tax payers, independent of size, and tax obligations will allow RRA to establish a holistic strategy on any non-compliance or arrears issues, enabling timely enforcement actions and broad compliance efforts, including risk-based audit strategies. The focus will be on increasing the take-up rate of e-filing covers in particular micro and small-sized tax payers, where the rate still is rather low90. Current status on e-filing and –payments systems is provided in annex box 6-1. Annex Box 6-1: E-tax filing and payment systems The implementation of the e-filing system started in November 2011. As of March 2014, 32,722 taxpayers filed their tax returns electronically. This includes all large and medium sized taxpayers and 53% of small active taxpayers. This compares to the numbers of tax payers in June 2012, where 1,016 VAT, PAYE, Excise, Income tax Quarterly Prepayment and Withholding tax returns for 551 taxpayers were submitted online. Active taxpayers are defined – an administrative definition for RRA use -- as those taxpayers that have filed at least one tax return in the last 6 months for VAT and PAYE, and in the last 3 years for PIT/CIT. E-payment systems were launched in April 2012 with one of the commercial banks (BCR) using mobile banking, internet banking and site to site electronic tax payment mechanism. Bank of Kigali joined in July 2012, and As of April 2014, 10 banks are using the e-payment platform. Training on the system is provided to Government institutions and different taxpayers and sensitization campaigns using different media are continuously being conducted.  The Rwandan authorities have come a long way in recent years to ensure tax returns filing on time, including support by e-tax opportunities. On average, in 2011/12 about 75-77% of tax returns were filed, either on time or with delays. The variances by tax segments are large, with small and medium term tax payers filing less frequently than large taxpayers (see annex table 6-9). Compliance issues on filing have impact on tax arrears, which usually are expensive to recover, and which requires the elaboration of a risk-based tax audit strategy and plan. Annex Table 6-9: Tax filings by major client segments in 2011/2012 Small taxpayers Medium sized taxpayers 90 E-filing rate is already at 100% of all Large and Medium sized taxpayers. 78 Large tax payers Source: RRA, 2012 Activity report 3) An apparent need for further strengthening VAT compliance and eventually, a broadening of the tax base on VAT  As indicated above, the VAT is the single most important tax source, and, as expressed by the government 91 , there seems to be a potential for additional revenue on areas of base broadening; reductions in exemptions and zero-rated items and improved compliance efforts, supported by the e-based “tax payers’ integrated account” solution.  As a means of identifying and interpreting the space for VAT revenue improvements, various aspects of VAT design and performance in Rwanda, and in East African peer countries, is summarized in annex table 6-10. In terms of design, the VAT rate of 18% in Rwanda is currently considered adequate by the government, and as appears, two other countries in the region have established the rate at 18%, and with the remainder three countries at 15-16%. The VAT threshold amount as another design parameter may eventually need further review as part of the planned VAT analysis. Countries like Kenya and Malawi have a higher threshold, which may be an element behind a much better performance (compliance rate) than in Rwanda. Similarly, countries such as Ethiopia and Uganda have lower threshold value than Rwanda, and with overall performance rates at a lower level or at par with Rwanda. The performance of a VAT tax scheme is expressed by the two metrics – VAT Productivity and VAT Gross Compliance Rate. The findings in annex table 6-10 are meant as an initial illustration of areas to further look into, as the VAT revenue improvement work moves forward. It appears from annex table 6-10, that the countries seem to fall into two clusters – relatively high performing countries as Kenya and Malawi with gross compliance rates between 45-65% 92 and VAT productivity rates between 0.4–0.5%. Rwanda, together with Uganda, and Ethiopia, demonstrate somewhat lower VAT productivity and with the gross compliance rates between 15-26%. The specific explanations behind this lower level of VAT buoyancy will require further review and analysis, which the government plans to undertake (see right below), but some explanation may be found in a combination of (i) potentially too few economic sectors are included in the VAT tax base ; (ii) too many broad and/or specific exemptions, which, in addition to erosion of the tax base, may create compliance issues and/or 91 “VAT collections stood at 29.9% of total tax revenue in 2011/2012, which is still low. International benchmark is that a VAT should generate around 35% of total revenues” RRA, Activity Report on 2011/12, p 10. 92 A compliance rate of 65% is a relatively high rate, as compared to other LIC/MIC countries. The average of VAT compliance in the ECA region is 66% (Tax at a Glance for ECA countries, September 2013). An IMF report mentions that Indonesia in 2010 provided a productivity rate of 50-60. “Revenue Mobilization in Developing Countries”, Cottarelli et al, IMF, 2011, 9. See also Castro et al, p 9.To reach a VAT productivity of 100% would require that the entire consumption base is taxed, no exemptions to the base, and full compliance of all tax payers. 79 take up too much administrative staff time and efforts; and (iii) compliance issues, including tax evasion efforts by specific sectors or sub-sectors. Annex Table 6-10: Design and Performance of VAT for SSA Countries, 2012/13 VAT Collection, % VAT VAT Gross VAT Rate GDP Productivity Compliance Rate VAT Threshold Rwanda 18.0 4.1 0.2 25.7 33,882 Ethiopia 15.0 1.9 0.1 15.6 29,766 Kenya 16.0 5.7 0.4 45.7 57,193 Malawi 16.5 8.1 0.5 65.9 38,772 Tanzania 18.0 5.3 0.3 44.2 25,595 Uganda 18.0 3.5 0.2 26.2 20,074 Source: USAID, Collecting Taxes Database. VAT Rate= It is the general rate at which most goods and services are taxed under the value added tax. Most countries have a variety of reduced rates for certain basic goods, such as basic food stuffs. VAT collection= It is the level of net VAT collections as a percent of GDP. VAT productivity= VAT receipts as % of GDP divided by the standard VAT rate. VAT gross compliance rate= It is a measure of how well the VAT produces revenue for the government. It is more refined than VATPROD, since it takes into account the fact that VAT is mostly only applied to final consumption by households and individuals. The VAT gross compliance ratio is actual VAT collections divided by potential VAT collections, expressed as a percentage. VAT Threshold= It indicates the amount of annual turnover, or supply/import of goods and services, above which taxpayers must file regular VAT returns. It is expressed in current US Dollars ($).  The government – MINECOFIN and RRA – have outlined a number of initiatives to support improved revenue mobilization under VAT:  A comprehensive analysis and assessment of the VAT tax gap issue: size, composition and eventual drivers. IMF will provide TA to support the analysis. The outcome of the analysis will be an informed VAT compliance strategy as well as indications of areas for tax policy improvements, by base broadening.  Review of the VAT tax code to reduce exemptions, including to further streamline the remaining exemptions  Further improvement of tax procedures and systems, including eTax to maximize compliance and manage arrears. This includes to expand the usage of electronic billing machines (EBM); ensure strict compliance with EBM requirements; and to more closely and rapidly follow-up and to take immediate actions on filing, payments and arrears, by tax type and client segments. In the BFP from April 201493 the government indicates that the implementation of EBM recently has been slow to take up amongst tax payers, which underlines the importance of the efforts under this operation. 93 Budget Framework Paper 2014/15 – 2016/17,April 2014, p 14 80 Institutional Capacity 14. In line with international good practice, a number of important tax administrative features may be highlighted 94 . The RRA is guaranteed a certain level of autonomy, since organized as a ‘semi-autonomous body’ outside MINECOFIN. RRA Board of Directors set the organization, staffing, including strategic staffing, and salary structure of the revenue authority, within the approved budget. 15. The RRA integrates the collection of direct and indirect taxes, together with additional tasks of non-tax revenue nature. Modern tax management principles are applied, including a clear vision for the agency, medium-term strategy, which is cascaded to operational business line targets and reporting. The revenue departments are organized by tax payer segments, but unfortunately and out of touch with international practice, the tax payer services functions are run by a centralized department, and hence not integrated with the revenue department’s client profiles. The introduction of IT- and eTax solutions have been comprehensive, and applied with increase in revenue yield as a result. Since 2007, Performance Management contracts have been in place for quite a period now where the RRA Board Chairman commits to performance targets for the organization on an annual basis. 16. These aspects of tax administration in Rwanda have contributed solidly to the track performance record as indicated in earlier section, with strong increases in revenue mobilization in recent years. 17. It is at the same time clear though that recent changes in the tax regime, tax system and the significant uptake in registration of tax payers put pressure on compliance and audit function. The tax management tasks are quite demanding, balancing compliance roles and tasks related to existing tax payers, including collection of arrears, and the integration of new segments of tax payers, and new functions related to these segments. In more specific terms, as highlighted in an assessment report from a development partner in March 2014, the RRA faces  the capacity constraints related to absence of coherent medium-term IT strategy;  staff retention issues, with high proportion of technical/auditor staff having left for the private sector  insufficiently detailed business planning, including costing, on core areas, in particular on new business lines such as the centralization of revenue collection at the districts; and  fragmented and apparently insufficient funding of core business. 18. In addition to these areas, a need to build internal tax policy and –analysis functions at the MINECOFIN and RRA is present. This includes tax lawyers, and tax economists, and analysts to prepare tax gap analysis on all tax types, including tax modelling and forecasting on revenues and tax expenditures, and capacity to review tax policy implications of legislation on sector areas. 94 OECD, Forum of Tax Administration, Comparative Information series, 2013 report; IMF, Revenue Mobilization in Developing Countries, 2011; USAID, Detailed Guidelines for Improved Tax Administrations in Latin America and the Caribbean, August 2013 81 Annex 7: Matching Table for PFM SSP and the Chart of Account Budget Inst./Programme/Sub Programme (Chart of PFM SSP Programme/Sub Programme Account) Code Description Code Description P1 Economic Planning and Budgeting SP 1.1 National Development Planning 120701 National Development Coordination and Monitoring - MINECOFIN SP 1.2 Economic Policy Formulation 120703 Macro-Economic Policy - Minecofin SP 1.3 Public Investment Programming 120705 Public Investment - Minecofin SP 1.4 Policy-based Budgeting 120901 National Budget Management - Minecofin P2 Resource Mobilization SP 2.1 Tax Policy (Macro) 120703 Macro-Economic Policy - Minecofin SP 2.2 Tax Administration (RRA) 1203 Rwanda Revenue Authority (RRA) SP 2.3 External Finance (EFU) 120801 Resource Mobilization - Minecofin P3 Budget Execution, Internal Control, Accounting & Reporting SP 3.1 Budget Execution 120901 National Budget Management - Minecofin SP 3.2 Treasury Management 120902 Treasury Management - Minecofin SP 3.3 Internal Audit 120904 Internal Audit of Public Institutions - Minecofin SP 3.4 Accounting & Reporting 120903 Public Accounts Management - Minecofin SP 3.5 Public Procurement 1204 Rwanda Public Procurement Authority (RPPA) SP 3.6 Fiscal Risk Management in PEs 120905 Government Portfolio Management - Minecofin P4 External Oversight and Accountability SP 4.1 External Audit 0301 Office of the Auditor General (OAG) SP 4.2 Legislative Oversight 030901 Government Oversight - Chamber of Deputies P5 Electronic Service Delivery & IFMIS SP 5.1 Integrated Financial Management System 120903 Public Accounts Management - Minecofin (IFMIS) P6 Fiscal Decentralisation SP 6.1 Resource Mobilization by Decentralized 120901 National Budget Management - Minecofin Entities SP 6.2 Facilitation of fiscal transfers 120901 National Budget Management - Minecofin SP 6.3 Strengthening PFM systems and capacity at 120901 National Budget Management - Minecofin Sub-National level P7 PFM Sector Coordination and Management SP 7.1 Sector Coordination & Management 120901 National Budget Management - Minecofin SP 7.2 Coordination of PFM Training & Capacity 120901 National Budget Management - Minecofin Building SP 7.3 Monitoring & Evaluation 120901 National Budget Management - Minecofin Source: MINECOFIN 82 Annex 8: Results Framework Annex Table 8-1: Summary Results Framework: Relationships between PDO, Results Framework, DLIs and PAPs Government programs (PFM SSP, NSDS 2) World Bank PforR Program Government program supported by Selected results PDO Program results DLI PAP PforR program PFM Enhancing P1: Economic planning and Improved multiyear fiscal PFM and Results Area 2: Improved national DLI 1 (public investment P1-(1) through (3) budgeting management statistics and subnational transparency and management) systems to accountability in use of public funds P2: Resource mobilization Enhanced national and improve Results Area 1: Enhanced national DLI 2 (centralization of P2-(1) through (3) subnational revenue collection transparency and subnational revenue collection local tax collection) and (including Government Subprogram accountability P6-(1) on local revenues) in the use of P3: Budget execution, accounting, Strengthened accounting and public funds, Results Area 2: Improved national DLI 3 (e-procurement) P3-(1) through (5) and reporting financial reporting at national revenue and subnational transparency and and subnational level mobilization accountability in use of public funds P4: Audit and legislative oversight Strengthened and independent and the DLI 4 (MDAs receiving external oversight and quality and unqualified opinion) accountability accessibility P5: Electronic service delivery and Strengthened financial of DLI 5 (subsidiary entities P5-(1) through (2) IFMIS information system development using simplified accounting data for and reporting application) P6: Fiscal decentralization Strengthened PFM at subnational decision DLI 2, DLI 3, DLI 4, DLI 5 P6-(1) and (2) level making and DLI 6 P7: PFM sector coordination and Improved staff capacity of PFM Results Areas 1 and 2 DLI 6 (capacity P7-(1) through (2) management sector development) Statistics SO1: Strengthen civil registration Improved production of statistics Results Area 3: Improved use of DLI 7 (increased production system, administrative records, public data for decision making of economic statistics) surveys and censuses and other sources of data SO2: Improve quality and Improved quality and availability DLI 7 dissemination of statistics and of statistics public statistical literacy SO3: Improve statistical advocacy Improved use of statistics for DLI 8 (open data) and integrate use of statistics in decision making decision making SO4: Develop capacities within Improved staff capacity across n.a. SO4-(1) NSS NSS Note: P = program. SO = strategic objective. n.a. = Not applicable. Annex I provides details on the PAPs. Annex Table 8-2: Results Indicators Responsibility Data source/ Core Unit of Baseline Target value for data DLI Item Frequency methodology measure (2012/13) collection 2014/15 2015/16 2016/17 PDO-level results indicator PDO Indicator 1: Enhanced national and Percent 14.2 15.8 (higher 17.1 percent 17.4 (higher Annual RRA; MINECOFIN subnational revenue collection, measured of GDP if IMF PSI (higher if IMF if IMF PSI calculated by tax to GDP ratio target is PSI target is target is based on IMF revised) revised) revised) Government Finance Statistics standard PDO Indicator 2: Improved national and Percent 40 50 65 80 Annual MINECOFIN MINECOFIN subnational transparency and accountability in use of public funds, measured by percent of entities submitting monthly financial statements by due date and made publically available PDO Indicator 3: Share of MDAs using Percent 68 71 None 75 Every two NISR / User NISR official statistics for both analysis of current to three satisfaction developments for short-term decision years survey making and analysis of trends for longer- term policy formulation Results area Results Area 1: Enhanced national and subnational revenue collection Intermediate Results Indicator 1: Hours per ☒ Hours 113 (2014 110 105 100 Annual World Bank, World Bank year spent paying taxes Doing based on Business Doing Survey) Business definition Intermediate Results Indicator 2: Increased ☒ Number 0 3 6 11 Annual RRA data RRA tax collection, measured by number of districts using automated revenue collection system Intermediate Results Indicator 3: Proportion Percent 69.3 80 83 87 Annual RRA data RRA of active small and micro taxpayers filing (June tax declarations using e-tax Internet portal 2014) Results Area 2: Improved national and subnational transparency and accountability in the use of public funds 84 Intermediate Results Indicator 1: Proportion Percent 32 37 42 47 Annual OAG OAG of MDAs receiving unqualified audit ☒ opinions Intermediate Results Indicator 2: Proportion Percent 0 30 60 80 Annual MINECOFIN MINECOFIN of subdistricts using simplified accounting ☒ and financial reporting application Intermediate Results Indicator 3: Gap ☒ Percent 20 17 percent 14 percent 11 percent Annual Law MINECOFIN between annual budget and second-year (FY2014/1 (FY2015/16 (FY2016/17 (FY2017/18 determining MTEF formulated previous year 5 budget) budget) budget) budget) state finance <10 percent in various (FY2018/19 fiscal years; budget) calculation based on the law Results Area 3: Improved use of public data for decision making Intermediate Results Indicator 1: Annual ☒ n.a. Experimen Full national Full national Full national Annual NISR NISR national agricultural survey conducted and tal agricultural agricultural agricultural disseminated agricultura survey survey survey l survey conducted conducted conducted, conducted based on incorporating report in 2013 lessons lessons learned produced, based on learned from from previous and data experimen 2013 round and uploaded on tal best- experimental report produced open data practice agricultural and portal by methodolo survey and disseminated June 2017 gy report by June 2016 combining produced and area-based disseminated and listing by June 2015 sampling frames Intermediate Results Indicator 2: Annual ☒ n.a. No Establishmen Integrated First national Annual NISR NISR labor market statistics collected and comprehe t census business labor force disseminated nsive and conducted enterprise survey systematic and database survey conducted labor produced and conducted and and report statistics disseminated report produced produced and by June 2015 and disseminated disseminated by June 2017 by June 2016 Note: n.a. Not applicable 85 Annex Table 8-3: Detailed Results Framework by Program 1. PFM Component (1) P1. Economic Planning and Budgeting Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator 1.1 National EDPRS 2 and - Strengthen capacity of planners at both central and - # of planners trained - Strengthened Improved Development SSPs district level - Planning and M&E planning capacity national Planning formulated and - Development and implementation of planning and policy and manual - Research and development (120702) operationalized M&E policy and manual - Electronic M&E policy evaluation planning in FY13 - Develop Electronic M&E system system (FY15) strengthened capacity - Conduct research and evaluation in priority areas - EDPRS 2 progress - Improved quality linked to EDPRS 2 thematic and sector priorities report (amount, - Develop Communication of development - EDPRS evaluation frequency) at programs with focus on EDPRS2 by thematic and national and - Reinforce data collection systems from below sector priorities subnational levels district to national level - EDPRS 2 implementation progress monitored 1.2 Economic N/A - Technical Advisers on Macro economic and fiscal - Medium-term - Improved capacity Improved Policy frameworks macroeconomic in the selected economic Formulation - Acquire macroeconomic projection software (E- framework updated sectors policy (120703) views, Matlab and Stata) and train staff - Officials from - Quality of formulation - Capacity building in: MINAGRI and macroeconomic capacity. o Agriculture growth forecasting: adopt a model MINECOFIN framework or a methodology of forecasting agriculture trained in agriculture improved growth (by season) (MINAGRI (Ministry of growth forecasting Agriculture) and MINECOFIN); (thus for 4 trained) o Mining sector growth forecasting: adopt a - Officials from model or a methodology of forecasting mining MINIRENA, BNR sector growth(MINERENA (Ministry of and MINECOFIN Natural Resources) , BNR (the Central Bank) trained in mining and MINECOFIN); sector growth o PSF (private sector): conduct field visits to forecasting (thus far private companies together with PSF on 4 trained) specific issues that will enable the business - Four field visits are environment if resolved and to collect conducted per year information and to be used for economic forecasting) 86 Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator 1.3 Public National - Develop a Strategic Investment Plan - Revised national - Pilot ministries - Improved Investment Investment - Updating software for the Rwanda conversion investment policy submit investment alignment Programming Policy factors - Strategic investment plans between (120705) formulated in - Acquire a specialized software for risk analysis plan - Improved capacity national 2009; - Carry out Annual training to 50 staff from local - Availability of the - Application of the investment Investment and central government on CBA, CEA and CUA Rwanda conversion Rwanda and EDPRS 2 Committee - Carry out Annual post-evaluation report for closed factors conversion factors operationalized projects - Staff trained into investment in 2013 - Operation and maintenance (O&M) costs for plans. investment projects 1.4 Policy- MTEF - Conduct research study to determine reasons for - MTEF study Realism of MTEF - SSP Indicator based operationalized current MTEF deviations (for FY 2014/15 research - Strategy to address projections 1 and the third Budgeting in 2002 on realistic MTEF ceilings will be conducted the MTEF deviation improved year DLI 1: (12090103) through forward estimates methodology; for FY Deviation 2015/16 research on strengthening outer MTEF between years as indicative ceilings for the preparation of MTEF the following year’s budget) projections - Developing a strategy to address identified reasons and annual for deviation/challenges (the strategy will be budget informed by the above mentioned research and allocations will be undertaken in FY 2015/16) (%) - Assess 2013/14 Capacity building on developing - Third year medium-term expenditure projections (NBD staff DLI 1 & MDAs) 87 (2) P2. Resource Mobilization Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator 2.1 Tax Policy IMF TA on - Revenue forecasting and Tax Policy Impact Assessments - Revised tax policy - Capacity in SSP Indicator 2 (12070304) tax policy; to develop and adopt a model of revenue Analysis and - Revised revenue and PDO Draft tax forecasting investment code forecasting, tax Indicator 1: policy - Training in negotiation skills to train 7 tax policy experts - Modified law on policy and Taxes as a produced in how to negotiate a double taxation avoidance special economic negotiation percent of GDP in 2014 agreement with a third country zones skills built - Design tax regimes in specialized sectors especially - Amended VAT - Implementation extractive sector (mining, gas and oil): to conduct studies law of the revised to inform and recommend new tax policies to be tax policy introduced. - Revise investment code - Modify the law on special economic zones - Amend the VAT law 2.2 Tax RRA - Taxation of multinational companies - Revenue - Improved Internal SSP Indicator 2 Administration medium- - Introduce and implement the Revenue forecasting model forecasting model capacity revenue and PDO (1203) term - Collection of local taxes - Enhanced e-tax mobilization Indicator 1: strategy - Implement additional modules for e-tax filing and filing and payment maximized Taxes as a payment system percent of GDP - Enhancing the implementation electronic single window - Succession plan system to all Government Agencies - Staff retention - Rehabilitation of Customs Borders (One Stop Border Post strategy - OSBP) - Human resources - Implement the Electronic Cargo Tracking System development - Implement the single customs territory strategy - Implementation of the Authorized Economic Operators - Studies on tax base - Implementation of the Gold Card Scheme and tax gap - Establish and operationalize the risk management system - Simplified tax in domestic taxes systems and - Implement the electronic tax devices availability of - Implement the Automated Monitoring and Evaluation legal procedures - Automation of performance Management - Communication - Relocation of RRA Training Institute strategy - Introduction of the E-learning platform - # staff trained for - Develop and implement the succession plan specialized tax - Develop and implement the staff retention strategy areas - Develop a comprehensive Human Resources - Availability of ICT Development Strategy equipment 88 Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator - Conduct studies to identify potential areas to widen the tax base and estimate the tax gap on MTEF basis - Increase surveillance, investigation and intelligence functions to reduce fraudulent activities and smuggling - Simplify tax systems and legal procedures - Develop and implement a comprehensive communication strategy to enhance taxpayers’ education and sensitization - Build capacity in specialized tax areas - Provide ICT equipment to support RRA function 2.3 External - Conducting Development Partner Consultation Group - External Resource - Issuance of - External Finance (DPCG) Mobilization sovereign bonds resources - Produce aid effectiveness reports (DPAF and ODA Strategy produced mobilized to reports) and implemented support - Formulation of external resources mobilization strategy - DPCG conducted development - Continue to mobilize grants and concessional loans from - Aid effectiveness projects traditional donors report - Identify and meet new potential development partners - Identify and tapping in new sources of financing from the existing development partners (including PPPs) - Issuance of sovereign bonds on international financial markets - Review of the strategy 89 (3) P3. Budget Execution, Internal Control, Accounting & Reporting Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator 3.1 Budget - Implement a GRB training program for planning and - Staff trained - Reporting on Execution budgeting officers in collaboration with SFB - Annual evaluation externally (12090104, - Undertake annual evaluations of Gender Budget of gender budget financed projects 12090105) Statements statement improved - Implement the GRB communication strategy - Simplified budget - Improved Public - The budget information simplified for the public to information awareness of the understand and be able to monitor budget outputs - Availability of the budget - Make the budget information accessible and usable by budget the public - Budget Citizen Guide published annually 3.2 Treasury - Payments orders verified after registration - Enhanced recording - Timely processing Improved Management - Upgrading the DMFAS and reporting of of payment from cash (120902) - Interface of DMFAS with SmartFMS public debt and treasury management - Training on DMFAS guarantees - Capacity in - Attending short term courses and workshops and - Staff trained treasury study tours management operations and DMFAS built 3.3 Internal - Disseminate code of ethics for internal auditors and - Code of ethics for - Compliance of Improved Audit train district audit committees annually internal auditors Internal Auditors internal audit (120904) - Produce audit report annually - Annual audit report and code of ethics coverage and - Review of internal audit structure and implementation - Review report on ensured quality of of revised structure internal audit - Internal audit internal audit - Co- sourcing and outsourcing audit of critical IT structure structure enhanced function system, IFMIS, IPPS environments - Review report on - Improved internal - Internal audit automation quality assurance audit skills - External Quality Assurance review (FY15/16) - Staff trained on - CIA, CISA and CFE professional training internal audit and - Training on internal audit and risk management risk management - International, regional and local conferences and - Workshop held on secondment Audit Committee - TA capacity building - Results of pilot - Audit Committee Training Workshop internal audit automation (FY14/15) 90 Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator 3.4 Accounting - Updated Financial Reporting Templates (FRTs) - Monthly financial - Fixed asset SSP & Reporting - Monitoring monthly financial reporting by budget statements by register for Indicator 3 (1209301, 02, agencies and quality assurance budget agencies government and the third 03, 04, 05) - Automation of PAU quality review process through prepared and established year DLI 6: electronic files such as TEAM MATE and annual submitted to PAU - Capacity for the Proportion of license renewal fee - Annual financial accounting cadre MDAs - Consolidation of annual financial statements and statements at built and receiving submission to OAG within statutory deadline budget agency level strengthened unqualified - Update the annual consolidation report in compliance and consolidation audit opinion with IPSAS level prepared - Supporting and monitoring MDAs to submit annual - Updated FRTs financial reports within statutory deadlines - Updated annual - Technical Assistance for reviewing and quality consolidation report assuring (QA) the consolidated financial statements per IPSAS and preparation of management letter to encourage - Revised OBL continuous improvement - Updated CoA - Finalize the revision of the OBL and publish and - Revised financial disseminate policies and - Update the Chart of Accounts and publish it procedures - Finalize the revision of the Financial Policies and - IPSAS roadmap Procedures and publish and disseminate - Electronic filing - Developing a roadmap for IPSAS compliance and TA library on implementation of the roadmap - Government - Establish an electronic filling library for filling accounting policy financial statement submitted to PAU by MDAs and for fixed assets hosting of the chart of accounts - # of staff trained - Establishing the government accounting policy for - Professional fixed assets Certificates on - Training and dissemination of government accounting IPSAS and IFRS policy on fixed assets - TA for capacity building of PAU team - Conduct Professional Accountancy Certification courses - Professional Certificates on IPSAS and IFRS - Continuous Professional Development and other Professional attachments 91 Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator 3.5 Public - Revise and disseminate procurement guidelines (Dec - Procurement - Design and - Effective SSP Procurement 2014) regulations revised Implementation and Indicator 4: (1204) - Draft, revise and disseminate standard bidding and adopted of e-Government efficient Proportion of documents (Dec 2014) - Standard framework Procurement procureme the value of - Train procurement officers (300), TC members (750), agreement System nt procurement Members of Independent review panels (124), developed and - Cost tendered Bidders (1000), prosecutors (50), Auditors (100), approved (Dec saving competitively CBMs (100) (Dec 2016) 2015) from - Undertake certified procurement courses- - Public procurement improved - Establish the operating structures of Rwanda officials and other procureme Association of Procurement Professionals (Dec 2015) stakeholders trained nt - Seek international accreditation from International - Rwanda Association (including Federation of Purchasing and Supply Management of Procurement e- (IFPSM) Professionals procureme - Business Process Re-engineering/ISP (Mar 2015) established nt - Construction of e-GP subsystem (Dec 2015) - International - Development Installation and configuration of SW accreditation from and H/W (Mar 2016) IFPSM - Network & Security Equipment, 1 Data Center Interior & Facility and System S/W (Jun 2016) - Training & knowledge Transfer (Dec 14- Jun 16) - Others (Detail Design, Supervision Technical support for local project management team etc.) (Mar 2015) 3.6 Fiscal Risk - Procure a software that will facilitate the GPMU to - Simplified booklet - Improved Management in analyze financial statements of GBEs and training of on financial corporate public GPMU staff on its utilization management governance and enterprises - Develop and publish a simplified booklet on financial - Staff participated in risk management (12090501, 02) management to guide board members in GBEs and the study tours in public government representatives in private enterprises - # of staff trained enterprises - Study tour for GPMU to benchmark with best - Law on public - Capacity of practices countries enterprise management and - Training of Director Generals, board members and boards of GBEs government representatives in private enterprises built where GoR has invested - Training of heads of finance and internal auditors in Public Enterprises - Drafting a law on public enterprise 92 (4) P4. External Oversight and Accountability Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator 4.1 External OAG strategic - Operationalize the Public Audit Law - Institutional review - Independence of - Increased - SSP Audit plan 2011/12- - Conduct an Institutional review (Oct 2014) - Automated and the OAG coverage of Indicator (0301, 2304) 15/16 - Implement the findings and recommendations of the standardized audit enhanced external 4: % of institutional review process - Institutional audit approved - Enhance IT infrastructure - # of staff trained capacity budget - Automate and standardize Audit Processes and build - Professional training Strengthened in audited by capacity unit established based line with the OAG OAG - Training on professional courses and other capacity in the Quality mandate - Third year building measures Assurance - Professional audit DLI 6 - Implement staff retention policy Department capacity built and - Establish and strengthen a Professional Training - Annual audits of strengthened Unit OAG sub-fund - OAG's capacity to - Contract strategically and outsource some audits and - Mid-term review of engage build capacity for audits the strategic plan stakeholders - Enhance communication with stakeholders - Final review of the effectively - Build and strengthen relations with PAC and strategic plan strengthened District Councils - Enhanced - Strategic Advisor and a dedicated financial officer coordination, for the OAG Sub-Fund Implementation - Conduct annual audits for the OAG Sub-Fund and monitoring of - Facilitate Peer Reviews the OAG Sub - Conduct Mid Term review of the Strategic Plan Fund - Conduct a final evaluation of the Strategic Plan - Secure technical assistance to assist each of the districts in implementing audit recommendations - Undertake trainings, workshops and study tours 4.2 Legislative - Purchase of computers and other office equipment - Availability of Matters related to Oversight - Recruit Technical Assistance to support the computers etc Parliamentary (030901) Secretariat - # of people committees are - Study tours by Committee and Secretariat staff participated in the resolved - Follow up on budget execution study tours - Follow up on the implementation of resolutions adopted by the Plenary Assembly during the analysis of the report of the Auditor General of State Finances 93 (5) P5. Electronic Service Delivery & IFMIS Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator 5.1 Integrated IFMIS - Conduct Quality Assurance [QA] reviews - Review report on QA - Current IFMIS Improved Financial operationalized - System enhancements, Maintenance and Support - Operationalization of Core modules effectiveness Management in 275 sites - Further rollout of the system to the remaining additional 171 sites implemented in and efficiency System budget entities (171 sites) - Functional and all budget of PFM (IFMIS) - Hosting of IFMIS solution with RDB Data center technical design agencies and (12090306, - IFMIS Project Management for current & Future document projects 07) IFMIS and system for the subsidiary entities - Staff trained - Design and - Functional & Technical Design document Implementation developed of a fully- - Software acquisition/development fledged IFMIS - IFMIS implementation system with - Core Team Training appropriate - IFMIS Support interfaces with - End user training identified subsidiary systems of government - Enhanced staff capacity 5.2 Integrated IPPIS - An independent evaluation of the implementation - Evaluation report - Improved SSP Indicator Personnel and operationalized to assess whether it has met planned functionalities - Increase in the payroll 7: Number of Payroll since 2009 - Enhancing and Maintenance of IPPIS number of entities management qualifying System - Rolling out IPPIS to additional entities connected to IPPIS public entities (IPPIS) - Training of IPPIS users - Staff trained using IPPIS - Hosting of IPPIS solution with RDB Data center modules and functionalities 94 (6) P6. Fiscal Decentralization Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator 6.1 Resource LGRPS - Implement the recommendations and road map of - Availability of - Improved access - Enhanced Local tax, Mobilization completed in the Local Government Revenue Potential Study automatized revenue to decentralized decentralized fees and by Nov 2013 (LGRPS) collection software entities' entities’ charges Decentralized - Identify, acquire and use the automatized software - Feasibility study of borrowing and revenue as % of Entities for revenue collection and management capacity of investment for collection and GDP (12090106, 07) - Upgrade the communication infrastructure and decentralized entities financing local administration acquire ICT equipment - Procedural guidelines capital performance - Institutional strengthening, including capacity to access borrowing infrastructures building for best practices in tax administration, to and investment and in getting enable local revenue office to improve its dividends from procedures and skills investments in - Conduct a feasibility study of the capacity of companies decentralized entities to access borrowing and - Operationalized investment automated - Develop procedural guidelines to access borrowing revenue as well as investment and conduct capacity building collection of local administrative entities on the same software - Identify and acquire a software and logistics to manage the debt for the decentralized entities - Introduce market creditworthiness of decentralized entities 6.2 Facilitation - Undertake a status quo assessment of the - Clarified and cost - Improved of fiscal assignment of functions between the different tiers (output based) comprehensivene transfers of the government and within sectors assignment of ss and (12090108,09) - Develop and validate a new framework of functions functions between the transparency of between the different tiers of the government and different tiers of the intergovernmenta within sectors considering the asymmetric government and within l fiscal relations attribution of functions sectors to enhance - Produce Output based cost of the new framework upwards and of functions and validate the same downwards - Develop the legislative framework for accountability intergovernmental fiscal transfers - Assessment of the - Develop institutional mechanism for improved assignment of intergovernmental fiscal relations and cooperation functions between the - Review the intergovernmental fiscal transfers different tiers of the formulae and mechanisms (LABSF, earmarked government and within 95 Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator transfers and capital grant) sectors - Prime Minister Order to guide the line ministries in - A new framework of the implementation of sectoral decentralization functions between the - Revise the block grant allocation formula different tiers of the government - Review report on the intergovernmental fiscal transfer - Prime minster order on sectoral decentralization - Revised block grant allocation formula 6.3 SEAS being - Review and develop decentralized entities finance, - Review report of - Improved - Improved SSP Strengthening piloted since policy and regulatory framework decentralized entities participation of accountability Indicator 8 PFM systems December - Revise decentralized entities’ planning and budget finance, policy and decentralized of subsidiary and DLI 7: and capacity at 2013 calendar regulatory framework entities in budget entities % of Sub-National - Develop practical tools and guidelines for planning - Tool and guidelines preparation, in through the Subsidiary level and budgeting alignment for planning and setting of policy development entities (120901010, - Undertake capacity building initiatives in planning budgeting alignment priorities, and & using a 11, 12, 13, 14, and budgeting for decentralized entities ‘officials - # of staff trained develop a implementatio simplified 15, 21) - Conduct an assessment of the current banks - Assessment of the bottom-up n of a accounting accounts balances, debt and arrears levels of current banks accounts approach to the simplified and decentralized entities balances, debt and preparation of accounting & financial - Introduce debt arrears management policy, arrears levels of the budget financial reporting guidelines for decentralized entities and control decentralized entities submissions by reporting application measures - # of local IT and FM decentralized system - Capacity building of decentralized entities' officials support staff entities - Improved PFM on banks accounts, debt and arrears management - Consolidated reporting - Enhanced systems and - Recruitment of more Local IT & Financial procedures predictability and capacities at Management Support Staff - Consolidation control in budget decentralized - Conduct end user training procedures execution of and subsidiary - Core Team Training - Interface between local entities levels - Develop consolidated reporting procedures IFMIS and SEAS administrative - Improved PFM - Capacity building of local administrative entities’ - Subnational PEFA entities capacities' at staff in reporting procedures - Establishment of PFM - Improved decentralized - Modify IFMIS application to integrate narrative training institutions accounting and entities' level and financial reporting dimensions - Updated PFM M&E reporting of 96 Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator - Develop consolidation procedures framework decentralized - Capacity building of sector and decentralized entities entities’ staff in PFM and consolidation procedures - Improved - Develop interface of the easy-to-use accounting and accounting and financial reporting system of subsidiary entities reporting of with IFMIS decentralized - Capacity building of users in IFMIS interface entities application - System aligned - Undertake PEFA subnational to have a benchmark between IFMIS to assess PFM capacities reforms at decentralized and SEAS level - Implement PEFA subnational recommendations - Promote partnerships with Education Institutions and professional bodies - Supporting setting up and operationalization of professional bodies and other specialized PFM training institutions - Establish a dedicated Education Financing Scheme for high performing students in PFM professional disciplines 97 (7) P7. PFM Sector Coordination and Management Intermediate Outcome / Outcome Sub-Program Baseline Input / Activity Output Outcome Results Indicator 7.1 Sector PFM SSP has - Remuneration for SPIU Staff - SPIU staff trained - Well-functioning - Improved Coordination been - Coordination and project monitoring - PFM SWG meetings and strengthened coordination & operationalized - Operational costs for SPIU held SPIU of the PFM Management - Training and capacity building of SPIU staff - Improved sector (12091016, - Short-term PFM Technical Assistance coordination of 17, 18) - Facilitation of SSC, TWGs and other stakeholder PFM meetings and workshops Development - Facilitation of the bi-annual PFM Sector Working Partners and Group (SWG) meetings Stakeholders - Sector communication strategy developed - Improved - Number of IEC publications/articles disseminated visibility of the - Out sourcing communication expertise PFM sector 7.2 - Develop a PFM sector capacity building plan - PFM consolidated - Improved Coordination - Conduct a mid-term review of PFM sector capacity Sector Capacity capacity of of HR building plans and update the CB Plan building plan the PFM Training & - M&E of the training and capacity building Plan developed and sector Capacity - Internship programme for University and College validated Building Graduates - Internship and (120901019, - Serving officers seconded to peer Governments and secondment Program 20) Institutions acquire practical skills in PFM areas established - Mid-term review of PFM sector capacity building plan 7.3 Monitoring Quarterly - Update the PFM M&E framework - Updated PFM M&E - Improved & Evaluation reports, annual - Preparation of quarterly and annual financial and framework PFM sector (120901022) report have activity reports on PFM SSP implementation - Quarterly and annual M&E been produced; - Carry out bi-annual (forward looking & backward financial and activity JSRs have looking) JSR reports on PFM SSP been produced - Conduct midterm review of PFM SSP - JSR - Mid-term review of SSP 98 2. Statistics Component (1) Strategic Objective 1: Strengthen civil registration system, administrative records, surveys & censuses and other sources of data Outcome / Outcome Strategies Baseline Activities Outputs Intermediate Outcome Results Indicator 1.1: Strengthened - Enhancing tools, building capacity for Vital statistics produced vital staff and establishing coordination routinely statistics mechanisms within NSS 1.2: Strengthened - Improve business registries - Improved business Availability of statistics on administrative - Strengthen information systems in registries registered businesses and records Education, Health, Justice, Infrastructure, - Strengthened information statistics from management - Youth and Labor sectors system information systems - Maintain the Gender statistics framework - Data warehouse of available for sector policy - Develop data warehouse of macro- macroeconomic statistics and management, and for economic statistics EDPRS2 monitoring 1.3: Strengthened - Conduct NISR survey program including: - EICV and DHS surveys Up-to-date statistics and surveys, EICV and DHS surveys every three years, - Annual labor force reports available from censuses and other - annual Labor Force surveys (starting from surveys major surveys, rebased sources of data 2016/2017), three-yearly - Establishment Census, national accounts and price - Establishment Census, annual Integrated annual Integrated indices, and all other key Business Enterprise Survey, Seasonal Business Enterprise statistics available in a National Agriculture Probability Survey, Survey, Seasonal National timely fashion and fit for Inter-Census population survey (2017/18) Agriculture Probability purpose - Maintain and develop other statistical Survey, Inter-Census systems, including: Consumer Prices, population survey Producer Prices, National Accounts, - Consumer Prices, Balance of Payments surveys Producer Prices, National - Rebase GDP from supply-use tables for Accounts, Balance of 2014 and 2017 Payments surveys - Rebase Price Statistics - Rebased GDP and price - Develop data across NSS, including a statistics database of Ubudehe and, e.g. CPAF survey 1.4: Strengthened - Use mobile devices for data collection, - Reduced time lag between IT systems effective in processes reinforce data storage and use GIS for data collection and disaster recovery situation concerning data capture and production dissemination of data and reports produced based capture and on GIS production 99 (2) Strategic Objective 2: Improve quality and dissemination of statistics and public statistical literacy Outcome / Outcome Strategies Baseline Activities Outputs Intermediate Outcome Results Indicator 2.1: Improved - Metadata handbook produced and used across - Metadata handbook Better quality data quality of statistical NSS - Statistical audit report available across the data - Data Quality Assessment Framework applied NSS and regular statistical audits - International Merchandise Trade System adopted for trade statistics 2.2: Improved - Use of mass media and open data channels - Number of datasets More accessible dissemination of - Disseminate survey results and other official available on National statistics disseminated statistics and public statistics in appropriate forms Open Data Archive widely and reported statistical literacy - Strengthen the One Stop Center at NISR in the media. Public awareness and understanding improved (3) Strategic Objective 3: Improve Statistical Advocacy and Integrate Use of Statistics In Decision Making Intermediate Outcome / Outcome Strategies Baseline Activities Outputs Outcome Results Indicator 3.1: Policy and - Advocacy strategy implemented - High level forums Decision-makers decision makers - NISR participating in international and participated by NISR better informed engaged national high level forums and supportive of in setting the the needs for statistical agenda statistics and their use, and supportive of implementation of NSDS2 3.2: Strengthened - Regular user-producer dialogues through - Training and outreach Stakeholders in engagements with events and workshops (e.g. African Statistical sessions for students and NSS engaged and data Day, statistical competitions, etc.) journalists supportive of users statistical activities, including using more statistics and better use of statistics 100 (4) Strategic Objective 4: Develop Capacities within NSS Outcome / Outcome Strategies Baseline Activities Outputs Intermediate Outcome Results Indicator 4.1: Strengthened Improve NISR organizational structure and - New organizational More efficient human resource development strategy, and develop performance structure and effective management in systems - Development strategy NISR with full NISR - Performance systems complement of skilled staff 4.2: Human - Skills development and training - Staff trained Staff capacity resources built across development NSS within NSS 4.3: Strengthened IT - Build and renew hardware and software, and - Renewed hardware and Efficient and effective infrastructure for develop IT systems software IT systems in place NISR and NSS supported by appropriate hardware and software 4.4: Strengthened - Revamp NISR’s fleet of vehicles - Operational fleet of Physical assets of - Refurbish NISR’s office building vehicles and refurbished NISR - Construct and equip a training center, offices with a functional including a library training room and library 4.5: Strengthened - Strengthen information management system - Staff trained NSS staff engaged in knowledge for learning and sharing knowledge learning and sharing management within - Organize regular learning sessions for NSS knowledge supported NSS staff by Knowledge management system 4.6: Efficient - Operational logistics and utilities NSDS2 - NSDS 2 reviews Sufficient resources - Effective Results of implementation of reviews and evaluation - User satisfaction survey available to support implementati user NSDS2 - User satisfaction survey every two years NSDS2 on of NSDS satisfaction implementation, 2 which is continuously - Increased evaluated. Extent of user user satisfaction is satisfaction known and tested regularly 101 Annex 9: DLI Matrix: Descriptions of DLIs Total Indicative timeline for DLI achievement financing Percent Disbursement-Linked allocated to of total DLI baseline Indicator DLI in year 1 DLI in year 2 DLI in year 3 DLI financing (US$ millions) DLI 1: Number of pilot 0 1 3 5 ministries submitting investment plan in which feasibility studies are conducted for new projects exceeding US$1 million have, per instructions in budget call circular Allocated amount 12.5 12.5 n.a. 5.0 4.5 3.0 DLI 2: Number of districts 0 3 6 11 using automated local government revenue management system Allocated amount 12.5 12.5 n.a. 5.0 4.0 3.5 DLI 3: Implementation of No e-procurement Approval of (i) technical Functioning of IFMIS and Use of e-Tendering and e-procurement system implemented proposal and financial E-Procurement interface application of IFMIS and proposals and (ii) roadmap protocols E-procurement interface for e-procurement system protocols for 5 pilot budget by the Minister of entities MINECOFIN Allocated amount 12.5 12.5 n.a. 5.0 3.5 4.0 DLI 4: Percent of MDAs receiving unqualified audit 32 (FY2012/13) 37 42 47 opinion Allocated amount 13.0 13.0 n.a. 5.0 4.0 4.0 DLI 5: Percent of sub- 21 percent (as of 30 60 80 districts using simplified April 2014) accounting and financial reporting application Allocated amount 12.5 12.5 n.a. 5.0 4.0 3.5 DLI 6: Number of 294 (as of Sep 2014: 350 400 450 Government sponsored full professional (20), 102 Total Indicative timeline for DLI achievement financing Percent Disbursement-Linked allocated to of total DLI baseline Indicator DLI in year 1 DLI in year 2 DLI in year 3 DLI financing (US$ millions) PFM staff with at least intermediate level foundation-level (182), and foundation professional finance level (92) qualifications Allocated amount 12.5 12.5 n.a. 5.0 4.0 3.5 DLI 7: Increased Last comprehensive Full national agricultural Integrated business GDP estimates rebased production of economic agricultural survey survey conducted based on enterprise survey conducted with base year updated to statistics and dissemination dates from 2008 lessons learned from and report produced and 2014, and results in time for strategic (experimental experimental survey and disseminated disseminated planning and decision agricultural survey report produced and making was conducted in disseminated 2013); no systematic program of business or labor statistics, GDP with base year 2011. Allocated amount 12.5 12.5 n.a. 5.0 4.5 3.0 DLI 8: Open Data initiative National Data Microdata of experimental Microdata of EICV4 Microdata of 2014/15 extended to progressively Archive (NADA), agricultural survey poverty survey (2013/14) Demographic and Health include more surveys and from which survey (2012/13) and at least 5 released on NADA Survey released on NADA administrative sources of microdata can be percent of data of the by June 2017; data downloaded by population and housing Open Data initiative anyone free of census (2012) released on extended to administrative charge, established in NADA data collected by one of 2010; no access to main data-producing line administrative data ministries (Ministry of produced by line Health or Ministry of ministries Education) Allocated amount 12.0 12.0 n.a. 5.0 3.5 3.5 Total financing allocated 100 100 n.a. 40 32 28 103 Annex 10: DLI Matrix: Financing Table Allocated Amount Share in total DLI in Year 1 DLI in Year 2 DLI in Year 3 (US$ million) PFM Component 75.5 75.5% 30 24 21.5 DLI 1: Improved public investment management 12.5 12.5% 5.0* 4.5 3.0 DLI 2: Centralization of subnational revenue collections 12.5 12.5% 5.0* 4.0 3.5 DLI 3: E-Procurement implemented 12.5 12.5% 5.0** 3.5 4.0 DLI 4: Unqualified audit 13.0 13.0% 5.0* 4.0 4.0 DLI 5: % of Subsidiary entities using a simplified accounting 12.5 12.5% 5.0* 4.0 3.5 and financial reporting application DLI 6: Capacity Building 12.5 12.5% 5.0 4.0 3.5 Statistics Component 24.5 24.5% 10.0 8.0 6.5 DLI 7: Increased production of economic statistics and 12.5 12.5% 5.0 4.5 3.0 dissemination in time for strategic planning and decision-making DLI 8: Open Data initiative extended to progressively include 12.0 12.0% 5.0* 3.5 3.5 more surveys and administrative sources of data Grand Total 100 100.0% 40.0 32.0 28.0 Note: (*) for advance, (**) for prior results 104 Annex 11: DLI Verification Protocol Protocol to evaluate achievement of DLI and data/result verification Definition/description of Data Verification Number DLI achievement Scalability source/agency entity Procedure 1 Number of pilot Budget call circular for Yes MINECOFIN OAG MINECOFIN counts number of pilot ministries submitting FY2014/15 budget requests ministries satisfying the DLI criteria investment plan in feasibility study (including and sends official letter (including which feasibility studies both technical and financial) detailed list of new projects) to OAG are conducted for new for new projects exceeding and the Bank. projects exceeding US$1 million. US$1 million have, per instructions in budget call circular 2 Number of districts Using is defined as Yes RRA OAG RRA will report to MINECOFIN on using automated local functioning of the registration the progress of roll-out of the government revenue and filing module of the system. MINECOFIN will submit management system system the report to the Bank and OAG. OAG will conduct onsite visits of various collection centers 3.1 Approval of (i) In order to construct an e- No RPPA OAG MINECOFIN will submit a copy of technical proposal and procurement system, RPPA the technical proposal, the financial financial proposals and will formulate a roadmap proposal and the roadmap for e- (ii) roadmap for e- (including timeframe till Procurement implementation from procurement system by operationalization). As the the selected provider together with the Minister of first step to implement the an official copy of the approval by MINECOFIN roadmap, a project team will the Minister of MINECOFIN to be established. OAG and the Bank. 3.2 Functioning of IFMIS The interface protocols will No RPPA OAG MINECOFIN will produce a report and E-Procurement provide the functionality of on the test results which demonstrate interface protocols blocking the budget release the interface protocols are for a contract which was not functioning as designed. The report published in the e- will be submitted to the Bank and Procurement system in OAG. OAG will conduct on-site accordance with the check of selected pilot budget legislation. This can be entities. achieved through the IFMIS system which would run a cross-check in the e- Procurement system to verify 105 Protocol to evaluate achievement of DLI and data/result verification Definition/description of Data Verification Number DLI achievement Scalability source/agency entity Procedure the required advertising of the contract prior to releasing the budget for this contract. If the contract was not advertised in the e-Procurement system, the IFMIS system would block the processing of the payment request. To this end, in year 2, project management teams of IFMIS and E-Procurement will jointly design the interface protocols to be approved by the chair (Accountant General) of the Project Management Team. Afterwards, IFMIS and E- Procurement teams will customize their software. To make sure that the internet protocols functions as designed, the teams conduct test-runs. 3.3 Use of e-Tendering and Selected pilot entities will use Yes RPPA OAG OAG will check e-procurement application of IFMIS the e-Procurement system for system used by the pilot entities and E-procurement e-Tendering including the whether bidding procedure including interface protocols for 5 distribution of electronic the distribution of electronic bidding pilot budget entities bidding documents and the documents and the submission of submission of electronic bids electronic bids is done by using the e-procurement system. 4 Percent of MDAs Percent of MDAs including Yes OAG External OAG will submit a list of audit receiving unqualified other central government consultant results, and an external consultant audit opinion agencies, boards, government will conduct onsite visit OAG for business enterprises, sample checking. ministries, districts and city of Kigali, provinces and government projects receiving 106 Protocol to evaluate achievement of DLI and data/result verification Definition/description of Data Verification Number DLI achievement Scalability source/agency entity Procedure unqualified audit opinion. 5 Percent of sub-districts Using is defined as Yes MINECOFIN OAG MINECOFIN will produce a report using simplified processing, accounting describing status of accounting and financial transactions, reconcile operationalization of SEAS in each reporting application accounts and generate both sector approved by the Accountant monthly and financial General. The report will be statements submitted to OAG and the Bank. OAG and the Bank will conduct onsite visit. 6 Number of Government PFM staff includes (i) Yes MINECOFIN OAG MINECOFIN prepares for the list of sponsored PFM staff external auditors, (ii) internal staff profile (the same format as table with at least foundation- auditors; (iii) accountants; (iv) 12 of the fiduciary assessment) and level professional directors of administration submit to the Bank and OAG. OAG finance qualifications and finance; and (v) will verify it. directors/director generals/heads of institutions in both the central and subnational governments. Foundational level professional finance qualification is 3 papers of the professional stream of ACCA and foundation level 1 of CPA Rwanda or Kenya; the IPSAS/IFRS certificate offered by CIPFA and other organizations recognized by IFAC on top of the Foundational level 1 of CPA and Knowledge level of ACCA 7.1 Full national NISR completes fieldwork for No NISR OAG Upon launch/publication of the agricultural survey national agricultural survey, survey report, NISR, through conducted based on completes data entry and MINECOFIN SPIU, will address an lessons learned from analysis, and produces and official letter to OAG and the Bank experimental survey and publishes survey report by attesting the publication of the report produced and end of May 2015. agricultural survey report on NISR’s 107 Protocol to evaluate achievement of DLI and data/result verification Definition/description of Data Verification Number DLI achievement Scalability source/agency entity Procedure disseminated website. 7.2 Integrated business NISR completes fieldwork for No NISR OAG Upon launch/publication of the enterprise survey the integrated business survey report, NISR, through conducted and report enterprise survey, completes MINECOFIN SPIU, will address an produced and data entry and analysis, and official letter to OAG and the Bank disseminated produces and publishes attesting the publication of the survey report on its website agricultural survey report on NISR’s by end of May 2016. website. 7.3 GDP estimates rebased NISR updates base year of No NISR OAG Upon launch/publication of the with base year updated national accounts from 2011 survey report, NISR, through to 2014, and results to 2014 and publishes new MINECOFIN SPIU, will address an disseminated GDP data by end of April official letter to OAG and the Bank 2017 (tentative timeline). attesting the publication of the agricultural survey report on NISR’s website. 8.1 Microdata of NISR publishes anonymized No NISR OAG Upon publication of the micro-data experimental microdata from 2013 of both surveys on NADA, NISR, agricultural survey agricultural survey on its through MINECOFIN SPIU, will (2012/13) and at least 5 website (through NADA) by address an official letter to OAG and percent of data of the June 2015 and uploads at least the Bank attesting (i) the publication population and housing 5 percent (data on at least of the micro-data of the 2013 census (2012) released 121,245 households – 5 Agricultural Survey on NADA, and on NADA percent of the total of (ii) the publication of at least 5 2,424,898 households percent of the micro-data of the 2012 enumerated during the Population and Housing Census census).of anonymized (data on at least 121,245 households) microdata from 2012 on NADA. OAG will verify if the population and housing data is effectively available and census to its website (through ready for downloading and whether NADA) by June 2015 (to at least 5 percent of the census data protect confidentiality of is available (data on at least 121,245 respondents and following households). international best practice, only a sample of census data can be made available for public use). 8.2 Microdata of EICV4 NISR publishes anonymized No NISR OAG Upon publication of the micro-data 108 Protocol to evaluate achievement of DLI and data/result verification Definition/description of Data Verification Number DLI achievement Scalability source/agency entity Procedure poverty survey microdata from 2013/14 of the EICV4 on NADA, NISR, (2013/14) released on EICV4 poverty survey on its through MINECOFIN SPIU, will NADA website (through NADA) by address an official letter to OAG and end of June 2016. the Bank attesting the publication of the micro-data of the EICV4 on NADA. OAG will verify if the data is effectively available and ready for downloading. 8.3 Open Data initiative NISR extends Open Data Yes NISR OAG Upon making the non-confidential extended to agenda to administrative data data of the Management Information administrative data collected by a main data- System of the selected Ministry collected by one of producing line ministry (the publicly accessible, NISR, through main data-producing Ministry of Health or MINECOFIN SPIU, will address an line ministries (Ministry Ministry of Education). official letter to OAG and the Bank of Health or Ministry of Administrative data collected attesting the expansion of the open Education) through management data initiative to the administrative information system of data produced by the selected selected ministry for at least Ministry. OAG will verify if the data five development indicators is effectively available and ready for must be freely accessed and downloading. downloaded by public through ministry’ website by June 2017. 109 Annex 12: Program Action Plan Criteri DLI Covenant Component/action aa b b Due date Responsible party Completion measurement 1. PFM P1. Economic planning and budgeting P1-(1) Planning and M&E policy and manual / 1 ☐ ☐ June 15 Planning Publication on MINECOFIN website results-based management policy Department of MINECOFIN P1-(2) Revised national investment policy 1 ☐ ☐ June 15 Planning Publication on MINECOFIN website Department MINECOFIN P1-(3) A draft consolidated program template to 1 ☐ ☐ June 15 Budget Department MINECOFIN will share program assist FY2015/16 budget preparation and monitoring of MINECOFIN template with the Bank. and evaluation processes in identified pilot MDA P2. Resource mobilization P2-(1) Submission of Amended tax code on VAT 1 ☐ ☐ June 15 RRA Publication on RRA website exemptions to cabinet P2-(2) Staff retention strategy 2 ☐ ☐ June 15 RRA RRA will share the strategy with the Bank. P2-(3) Action plan to improve VAT revenues 2, 3 ☐ ☐ June 16 RRA Official letter from MINECOFIN P3. Budget execution, accounting, and reporting P3-(1) IPSAS roadmap which includes Government 1 ☐ ☐ June 16 Accountant General Official letter from MINECOFIN accounting policy for fixed assets) Office of MINECOFIN P3-(2) Revised and adopted procurement regulations 1 ☐ ☐ June 15 RPPA Publication on RPPA website P3-(3) Submission of annual activity report on how 1, 2 ☐ ☐ June 15 Budget department Official letter from MINECOFIN plans for gender balance have been implemented (as of MINECOFIN accompanied by annual activity stipulated in Article 68 of the 2013 Organic Budget report Law) P3-(4) Creation of an internal audit cadre 3 ☐ ☐ June 15 OGCIA, Official letter from MINECOFIN MINECOFIN P3-(5) Dissemination of Financial Policies and 1 Jun 16 Accountant Submit the updated financial policies Procedures General, and procedures to the Bank and MINECOFIN disseminate it publicly. P5. Electronic service delivery and IFMIS P5-(1) Roll out of current version of SmartFMS to 3 ☐ ☐ Jul 15 Accountant General Official letter from MINECOFIN remaining entities Office of MINECOFIN 110 P5-(2) Development of skills transfer policy from 2 ☐ ☐ June 17 Accountant General Official letter from MINECOFIN IFMIS vendors to staff Office of MINECOFIN P6. Fiscal decentralization P6-(1) Development of consolidated reporting 1 ☐ ☐ Sep 15 Accountant General Official letter from MINECOFIN procedures Office of with supporting materials MINECOFIN P6-(2) Placement of key staff with suggested profile 3 ☐ ☐ June 17 Accountant General Official letter from MINECOFIN for SEAS d Office of including names, roles, and MINECOFIN compliance with Annex 7. P7. PFM sector coordination and management P7-(1) PFM learning and development strategy 2, 3 ☐ ☐ June 15 Accountant General Official letter from MINECOFIN developed Office, MINECOFIN 2 Rwandan educational institutions accredited to 2, 3 ☐ ☐ Jun 16 Accountant General MINECOFIN prepares evidence that provide professional training under ICPAR, ACCA, Office, a Rwandan education institution is AAT MINECOFIN accredited 2. Statistics SO4: Development of capacities within NSS SO4-(1) Human resources strategy 2 ☐ ☐ Dec 14 NISR NISR will share the strategy. Notes: a. The PforR guidance includes three criteria: (1) changes to the technical dimensions of the Program and to the formal rules and procedures governing the organization and management of the systems used to implement the Program; (2) actions to enhance the capacity and performance of the agencies involved; and (3) risk mitigating measures to increase the potential for the Program to achieve its results and to address fiduciary, social, and environmental concerns. b. This column should indicate the reference, if any, to a Program DLI, legal covenant, or both, as appropriate. c. This column should indicate the agreed upon basis for determining whether the action has been satisfactorily completed. d. Please see Annex 7 of the Fiduciary Assessment. 111 Annex 13: World Bank Support to PFM Reforms in Rwanda 2008 2009 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 Gov’t 2008-12 Public Financial Management Reform Strategy (PFMRS) PFM SSP 2013/14 to 2017/18 Second PRSF series Third PRSF series Quality of Decentralized Public Sector Governance Services Delivery DPO PforR  ENHANCED PUBLIC FINANCIAL  STRENGTHENING PUBLIC FINANCIAL MANAGEMENT MANAGEMENT SYSTEM - (PRSF-8) Development and  ENHANCED LOCAL - (PRSG-4) Application of a software program (Budget Master) - Improving Multi-year Fiscal integration of a Medium-Term GOVERNMENT FISCAL in each of the Districts designed to assist in the management of Management Expenditure Framework into the AUTONOMY AND District Budgets FIDUCIARY - Enhanced national and budgeting process across all - (PRSG-5) Complete development of Public Books software sectors to improve medium-term ACCOUNTABILITY subnational revenue - (PRSG-6) Payroll Module (subsystem) of the integrated macroeconomic and fiscal - The Recipient has reviewed 25 collection personnel payment information system installed in central projections district Audit Committee - Modernization of budget government ministries - (PRSF-8) Adoption of a reports of 2012 and issued planning and execution - (PRSG-7) Completion of the piloting of the IFMIS in central regulatory framework for the communication to the districts - Strengthening accounting government and integrate it with the IPPS. establishment of internal Audit on the main areas for follow up  STRENGTHENING CAPACITY AND TRANSPARENCY OF and financial reporting at the Committees in public entities and  STRENGTHENED POLICY national and subnational PROCUREMENT SYSTEM DPO at Local Government level to FRAMEWORK FOR - (PRSG-4) Regulations, Standards and Bidding Documents DECENTRALIZATION levels oversee the auditing of public World Bank Group adopted and available on NTB website finances - The Recipient has published in - Enhanced efforts by national - (PRSG-5) Publish the independent review (appeal) panel report  IMPROVED PUBLIC the Official Gazette the and subnational authorities (2008) ACCOUNTABILITY Presidential Order establishing to meet audit standards - (PRSG-6) At least 80% of all procurement agencies submit a - (PRSF-8) Integration of the list of fees and other - Better statistics for policy procurement plan that in consistency with their allocated appropriate Human Resources charges levied by decentralized making and public finance budget, to MINECOFIN, and RPPA publishes at least 60 % of and payroll subsystems into the entities and the applicable such plans on its website management. IPPIS to improve payroll accuracy thresholds - (PRSG-7) Cabinet approval of the bill to amend the and transparency in the  CAPACITY DEVELOPMENT Procurement Law to increase efficiency and transparency of management of public finances FOR QUALITY SERVICE public procurement - (PRSF-9) Deployment of an DELIVERY AT THE LOCAL  STRENGTHENING FISCAL DECENTRALIZATION IPPIS in all the Recipient’s LEVEL - (PRSG-4) District Budget Execution Reports for January to ministries and agencies and - The Recipient has adopted 28 June 2007 published on Government website, together with development of an action plan for District capacity building plans evaluation of Imihigo performance contracts its roll-out in the Districts approved by the District Councils  IDF GRANT FOR CAPACITY BUILDING IN ECONOMIC AND FINANCIAL ANALYSIS - Strengthening economic and financial analysis of project at central and decentralized levels; Audit Others TECHNICAL ASSISTANCE {Co-chairing the PFM Sector Working Group} PUBLIC EXPENDITURE REVIEWS 112 Annex 14: List of Reporting Entities on PDO Indicator 2 Annex Table 14-1: Central Government Entities Ref Code Full name of the Ministry or Agency 1 100 PRESIREP 2 102 NSS- GENERAL SECRETARIAT 3 103 National Unity & Reconciliation Commission (NURC) 4 103 NSS- EXTERNAL 5 104 NSS- INTERNAL SECURITY 6 105 NSS-IMMIGRATION & EMIGRATION 7 106 Office of the Ombudsman 8 108 Rwanda Development Board (RDB) 9 200 SENETE 10 300 CHAMBER OF DEPUTIES 11 301 Office 0f the Auditor General 12 302 PUBLIC SERVICE COMMISSION 13 303 National Commission for Human Rights 14 400 Office of the Prime Minister 15 405 National Commission for Children 16 407 Office of the Government Spoke Persons 17 500 Supreme Court 18 600 Ministry of Defense 19 601 RWANDA MILITARY HOSPITAL 20 700 Ministry of Internal Security 21 701 Rwanda National Police 22 702 Rwanda Correctional Service 23 800 Ministry of Foreign Affairs and Cooperation 24 801 EMBASSY OF RWANDA- ADDIS ABABA 25 802 RWANDAN EMBASSY IN BEIJING 26 803 Embassy of Berlin 27 804 Embassy of Rwanda- Brussels 28 805 RWANDA EMBASSY - BUJUMBURA 29 806 Nairobi EMBASSY 30 807 EMBASSY OF RWANDA- GENEVA 31 808 Rwanda High Commission Kampala 32 809 Embassy of Rwanda - Khartoum 33 810 Rwanda High Commission in London 34 811 RWANDAN EMBASSY IN HAGUE 35 813 RWANDA HIGH COMMISSION - New Delhi 36 814 Permanent Mission to UN-New York 37 815 Embassy of Rwanda - Pretoria 38 816 Embassy of Rwanda- Sweden 39 817 Embassy of Rwanda in Washington 40 818 Embassy of Rwanda in Tokyo 41 819 RWANDAN EMBASSY IN PARIS 42 820 EMBASSY OF RWANDA- OTTAWA 43 821 Embassy of Rwanda in Seoul 44 822 Embassy of Rwanda - Singapore 45 823 Embassy of Rwanda-Dar es salaam 46 823 KINSHASHA 47 823 MIGEPROF 48 825 Embassy of Abuja 113 Ref Code Full name of the Ministry or Agency 49 826 Embassy of Dakar 50 827 Embassy of Russia 51 827 Embassy of Rwanda -Turkey 52 900 MINAGRI 53 901 Rwanda Agricultural Board 54 902 National Agriculture Export Board (NAEB) 55 1000 Ministry of Trade and Industry 56 1000 Rwanda Bureau of Standards 57 1002 Rwanda Cooperative Agency 58 1200 MINECOFIN 59 1202 National Institute of Statistics of Rwanda 60 1203 Rwanda Revenue Authority (RRA) 61 1204 Rwanda Public Procurement Authority 62 1207 Capital Market Authority (CMA) 63 1208 PUBLIC SECTOR CAPACITY BUILDING SECRETARIAT (PSCBS) 64 1300 Ministry of Justice 65 1302 Institute of Legal Practice Development (ILPD) 66 1303 National Law Reform Commission (NLRC) 67 1400 MINISTRY OF EDUCATION 68 1401 NATIONAL COMMISSION FOR UNESCO 69 1402 NATIONAL COUNCIL FOR HIGHER EDUCATION 70 1403 IRST 71 1404 NATIONAL UNIVERSITY OF RWANDA 72 1405 KIGALI INSTITUTE OF TECHNOLOGY 73 1406 KIE 74 1407 Higher Institute of Agriculture and Animal 75 1408 School of Finance and Banking 76 1409 RUKARA COLLEGE OF EDUCATION 77 1410 Kavumu College of Education 78 1411 Umutara Polytechnic 79 1412 GISHALI INTEGRATED POLYTECHNIC 80 1412 INTEGRATED POLYTECHNIC REGIONAL CENTER KIGALI 81 1412 IPRC EAST 82 1412 IPRC NORTH 83 1412 IPRC SOUTH 84 1412 IPRC WEST 85 1412 Kavumu Vocational Training Centre 86 1412 WORK FORCE DEVELOPMENT AUTHORITY 87 1413 RWANDA EDUCATION BOARD 88 1415 Kigali Health Institute NO 89 1500 Ministry of Sports and Culture (MINISPOC) 90 1501 National Commission for the Fight against Genocide 91 1502 Rwanda National Museums 92 1503 Chancellery for Heroes, National Orders and Decorations of Honour 93 1505 Rwanda Academy of Language and Culture 94 1600 Ministry of Health 95 1601 Kigali University Teaching Hospital (CHUK 96 1602 Butare University Teaching Hospital (CHUB) 97 1603 NDERA HOSPITAL 98 1604 Kacyiru Police Hospital 114 Ref Code Full name of the Ministry or Agency 99 1605 RWANDA BIOMEDICAL CENTER 100 1700 National Public Prosecution Authority 101 1800 MININFRA 102 1801 Road Maintenance Fund (RMF) 103 1802 Rwanda Transport Development Agency (RTDA) 104 1803 Energy Water and Sanitation Authority(EWSA) 105 1804 Rwanda Housing Authority 106 1805 RWANDA METEOROLOGICAL AGENCY (RMA) 107 1900 Ministry of Youth and ICT(MYICT) 108 1902 Rwanda National Youth Council 109 2000 Ministry of Public Service and Labor 110 2001 Rwanda Institute of Administration and Management (RIAM) 111 2100 Ministry of East African Community (MINEAC) 112 2200 Ministry Of Natural Resources 113 2201 Rwanda Environment Management Authority (REMA) 114 2202 Rwanda Natural Resources Authority 115 2203 Rwanda Environment & Climate Change Fund (FONERWA) 116 2300 Ministry of Local Government 117 2301 NATIONAL ELECTORAL COMMISSION 118 2303 FARG 119 2304 Rwanda Governance Board 120 2305 RWANDA LOCAL DEVELOPMENT SUPPORT FUND 121 2306 NATIONAL COMMISSION FOR DEMOBILISATION AND REINTEGRATION 122 2307 EASTERN PROVINCE 123 2308 Southern Province 124 2309 Western Province 125 2310 Northern Province 126 2312 National Forum for Political Organization (PPF) 127 2313 National ID Agency 128 2314 National Council of Persons with Disability 129 2315 Rwanda Broadcasting Agency 130 2316 Media High Council (MHC) 131 2317 ITORERO 132 2500 Ministry of Disaster Management and Refugee Affairs 133 2601 National Women Council 115 Annex Table 15-2: Development Projects Name of the Name of the Project Parent Ministry 1 MIDIMAR Disaster Management project (SPIU Midimar) MIDIMAR 2 Midimar Assistance Aux Refugies Project MIDIMAR 3 Public Sector Umbrella in the Fight Against AIDS (USPLS) MIFOTRA 4 MIDA Great Lakes Programme MINAFFET 5 Support Project to the Strategic Plan for Agriculture Transformation (PAPSTA) MINAGRI 6 Bugesera Rural Infrastructure Support Project (PAIRB) MINAGRI 7 Land Husbandry Water Harvesting & Hillside Irrigation (LWH) Project MINAGRI 8 Water Sanitation and Hygiene Promotion Project (WASH) MINAGRI 9 The Cash and Exports Crops Development (PDCRE) MINAGRI 10 PASNVA/CICA MINAGRI 11 National Sericulture Center MINAGRI 12 Post-Harvest Handling and Storage Task Force MINAGRI 13 Rural Sector Support Project (RSSP III) MINAGRI 14 National Domestic Biogaz Project MINAGRI 15 Inland Lakes Integrated and Management Support Project (PAIGELAC) MINAGRI 16 APEL MINAGRI 17 Task force for Irrigation and Mechanization MINAGRI 18 SPATII MINAGRI 19 Kirehe Community- Based Watershed Management Project MINAGRI 20 Preparation Advance for Rwanda Feeder Roads Development project MINAGRI 21 PROJET DAPPUI AU DEVELOPMENT AGRICOLE DE BUGESERA (PADAB) MINAGRI 22 PAFOR MINALOC 23 National Capacity Building for Disaster Risk Reduction Programme MINALOC 24 AGI MINALOC 25 JADF MINALOC 26 SPIU MINALOC MINALOC 27 SUPPORT PROJECT FOR RWANDA DEVELOPMENT INITIATIVE MINALOC 28 PADEBL MINALOC 29 PAFP MINALOC 30 LEAST DEVELOPED COUNTRIES FUND (LDCF) MINALOC 31 GELD MINECOFIN 32 Support to the EDF National Authorizing Office MINECOFIN 33 Public Finance Management Reform-Basket Fund MINECOFIN 34 Gender Responsive Budgeting Programme MINECOFIN 35 Aid Coordination, Harmonization and Alignment Project MINECOFIN 36 Building Inclusive Financial Sector in Rwanda MINECOFIN 37 Strengthening Evidence-Based Policy, Planning, Analysis and Monitoring and Evaluation Project MINECOFIN 38 IDF Grant for capacity Building in Economic and Financial Analysis to Support Rwanda Investment Program MINECOFIN 39 SPIU-MINECOFIN MINECOFIN 40 SKILLS DEVELOPMENT IN SCIENCE AND TECHNOLOGY MINEDUC 41 EDUCATION III MINEDUC 42 SKILLS DEVELOPMENT PROJECT MINEDUC 43 Urban Forum Project (UNHABITAT) MINENFRA 44 SPIU/ REMA MINERANA 45 Climate Change Project MINERANA 46 Poverty Environment Initiative (PEI) OK MINEREMA 47 Lake Victoria Environment Management Project Phase IV OK MINEREMA 48 Decentralization Environment Management Phase (DEMP II) MINEREMA 116 Name of the Name of the Project Parent Ministry 49 PAREF 2 BE MINERENA 50 Nation Biodiversity Strategic Action Plan for Rwanda (NBSAP) MINERENA 51 Ozone project MINERENA 52 Support to Participation Forest Management Project-PAREF NL2 MINERENA 53 Rainwater Harvesting Promotion Program Project MINERENA 54 Rwanda Environment Management Authority(SWAP) MINERENA 55 Biosafety Support Framework (NBF) MINERENA 56 ACP/REMA MINERENA 57 PCPs MINERENA 58 Afforestation Support Program (PAREF) MINERENA 59 Competitiveness and Enterprise Development Project (CEDP) MINICOM 60 SPIU MINICOM MINICOM 61 Enhanced Integrated Framework (EIF) MINICOM 62 Support to Small and Medium Enterprises (SMEs) Development MINICOM 63 Governance for Competitiveness (G4C TAP) MINICOM 64 Rural Small and Micro enterprises Promotion Project (PPPMER II) MINICOM 65 Rwanda Investment Climate Project MINICOM 66 Program for Drinking Water and Sanitation in the Southern Province (PEPAPS) MININFRA 67 LAKE VICTORIA ENVIRONMENT MANAGEMENT PROJECT PHASE TWO (LVEMPII) MININFRA 68 ACCES TO ELECTRICITY FOR THE RURAL POPULATION BY UTILIZATION OF REWABLE ENERGY (EPRER) PROJECT MININFRA 69 ROAD INFRASTRUCTURE MININFRA 70 NATIONAL RURAL WATER SUPPLY AND SANITATION PROGRAM (PNEAR) MININFRA 71 AMENAGEMENT et ASPHALTAGE de la ROUTE MAYANGE- NEMBA MININFRA 72 THREE HYDROELECTRIQUE POWER PLANTS REHABILITATION PROJECT( R3CHE) MININFRA 73 INCREASE RURAL ENERGY ACCESS IN RWANDA THROUGH PUBLIC PRIVATE PARTNERSHIPS ( IREARPPP) PROJECT MININFRA 74 Rwanda Electricity Access Programme_Dutch Funds MININFRA 75 Bugesera Project (UN-HABITAT) MININFRA 76 Rubavu Project (UN-HABITAT) MININFRA 77 Urban Solid Waste Management MININFRA 78 Interconnection of Electrical Grids of Nile Equatorial lakes Countries Project MININFRA 79 AQUPO PROJECT MININFRA 80 RURAL WATER SUPPLY AND SANITATION PROJECT MININFRA 81 Water and Sanitation Fund (FEA) MININFRA 82 Isaka -Kigali Railway Project I MININFRA 83 Isaka -Kigali Railway Project II MININFRA 84 Rehabilitation de la Route Gitarama - Ngororero MININFRA 85 Transport Sector Development Project -PDST MININFRA 86 Water for African Cities EVA II MININFRA 87 East Africa Trade and Transport Facilitation - EATTFP MININFRA 88 Rwanda Road Infrastructure Support Programme-RRISP MININFRA 89 NGORORERO-MUKAMIRA ROAD PROJECT MININFRA 90 MULTINATIONAL BUJUMBURA-GISENYI(Nyamitanga-Ruhwa-Ntendezi- Mwityazo) MININFRA 91 BUTARE-KITABI-NTENDEZI ROAD PROJECT MININFRA 92 Electricity Access Scale-up and Sector-wide approach development project ( EASSDP) MININFRA 93 Sustainable Energy Development project MININFRA 117 Name of the Name of the Project Parent Ministry 94 Electricity Access roll out Programme (EARP)-AFD Financing MININFRA 95 Kitabi-Crete-Congo Nil Project. MININFRA 96 Mugina-Mabanda-Nyanza Lake & Rubavu Gisiza MININFRA 97 Institution Support to RTDA Program Estimate NO: 1 MININFRA 98 Technical Support Program of the republic of Rwanda on Climate and Hydrology (TSPCHR) MINIRENA 99 Integrated Management of Critical Ecosystems Project (IMCE) MINIRENA 100 Appui Institutionnel au MINISANTE PHASE IV MINISANTE 101 Strengthening Public Health in Karongi and Rutsiro MINISANTE 102 E - HEALTH Project MINISANTE 103 CDC CoAgs Management MINISANTE 104 POPs Project MINISANTE 105 SIDA SUPPORT MINISANTE 106 Health Sector Capacity Building project (CDPF) MINISANTE 107 Global Alliance for Vaccines and Immunization (GAVI) MINISANTE 108 East Africa Public Health Laboratory Networking Project MINISANTE 109 Rwanda National Tuberculosis Control Strategic Plan MINISANTE 110 Scaling up access to HIV/AIDS services with focus on prevention in Rwanda SSF- HIV MINISANTE 111 Global Fund Rwanda Malaria Grants Consolidated MINISANTE 112 MOH SPIU/12+ Programme203639 MINISANTE 113 MOH MALARIA ELIMINATION PROGRAMM FOR RUHUHA MINISANTE 114 Multisectoral AIDS Project (MAP) MINISANTE 115 Joint Youth Programme MYICT 116 Single Stream Funding (SSF) HIV/VCT MYICT 117 AEIN/African Environment Information Network MYICT 118 INCLUSSIVE PERTICIPATION IN GOVERNMENT PROGRAM SENATE 119 SUPPORT TO PARLIAMENT SENATE 120 PROGRAM 4 INSTITUTIONAL DEVELOPMENT FOR MINAGRI MINAGRI 118 Annex Table 15-3: Local Government Ref Code Full name of the Ministry or Agency 1 4000 NGOMA DISTRICT 2 4100 BUGESERA DISTRICT 3 4200 GATSIBO DISTRICT 4 4300 KAYONZA DISTRICT 5 4400 KIREHE DISTRICT 6 4500 NYAGATARE DISTRICT 7 4600 RWAMAGANA DISTRICT 8 4700 HUYE DISTRICT 9 4800 NYAMAGABE DISTRICT 10 4900 GISAGARA DISTRICT 11 5000 MUHANGA DISTRICT 12 5100 KAMONYI DISTRICT 13 5200 NYANZA DISTRICT 14 5300 NYARUGURU DISTRICT 15 5400 RUSIZI DISTRICT 16 5500 NYABIHU DISTRICT 17 5600 RUBAVU DISTRICT 18 5700 KARONGI DISTRICT 19 5800 NGORORERO DISTRICT 20 5900 NYAMASHEKE DISTRICT 21 6000 RUTSIRO DISTRICT 22 6100 BURERA DISTRICT 23 6200 GICUMBI DISTRICT 24 6300 MUSANZE DISTRICT 25 6400 RULINDO DISTRICT 26 6500 GAKENKE DISTRICT 27 6600 RUHANGO DISTRICT 28 6700 NYARUGENGE DISTRICT 29 6800 KICUKIRO DISTRICT 30 6900 GASABO DISTRICT 31 7000 CITY OF KIGALI 119