The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) REPORT NO.: RES35792 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF PUBLIC FINANCIAL MANAGEMENT AND REVENUE ADMINISTRATION REFORM PROGRAM APPROVED ON MARCH 1, 2016 TO MINISTRY OF FINANCE GOVERNANCE EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Rodrigo A. Chaves Senior Global Practice Director: Deborah L. Wetzel Practice Manager/Manager: Alma Kanani Task Team Leader: Arun Arya, Hari Purnomo The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) ABBREVIATIONS AND ACRONYMS APBN National State Budget Bappenas National Planning and Development Agency (Badan Perencanaan dan Pembangunan Nasional) CD Country Director CTO Center of Transformation Office DG Directorate General DIPA Government Budget Allotment Document (Daftar Isian Penggunaan Anggaran) EA Environmental Assessment EBS Oracle E-Business Suite GOI Government of Indonesia MCM Management Committee Meeting MOF Ministry of Finance Organta Organization and Business Process Bureau (Biro Organisasi dan Tata Laksana), Ministry of Finance P-APBN “Penyusunan APBN” or Formulation of National State Budget PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PFM MDTF Public Financial Management Multi Donors Trust Fund PIU Project Implementing Unit PSSU Project Support and Services Unit under the Seceretary General of Ministry of Finance PUSINTEK Center of Information and Technology (Pusat Informasi dan Teknologi), Ministry of Finance Rocankeu Planning and Finance Bureau, Ministry of Finance (Biro Perencanaan dan Keuangan) ROMADAN Asset Management and Procurement Bureau (Biro Manajemen BMN dan Pengadaan)1 Financial Application System for Spending Units (Sistem Aplikasi Keuangan Tingkat SAKTI Instansi) SPAN Government Financial Management Information System (Sistem Perbendaharaan dan Anggaran Negara) TA Technical Assistance TF Trust Fund 1“Romadon” is a new Bureau under the MOF Secretary General resulting from the merger of the Center for Electronic Procurement Service Unit (Pusat Layanan Pengadaan Secara Electronik/PLPSE) and the Equipment Bureau (Biro Perlengkapan) The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) BASIC DATA Product Information Project ID Financing Instrument P152551 Investment Project Financing Original EA Category Current EA Category Approval Date Current Closing Date 01-Mar-2016 27-Mar-2019 Organizations Borrower Responsible Agency Ministry of Finance (Indonesia),Directorate General of Ministry of Finance Taxes Financing (in USD Million) FIN_SUMM_PUB_TBL SUMMARY Total Project Cost 2.70 Total Financing 0.00 Financing Gap 0.00 DETAILS -NewFin3 Project Development Objective (PDO) Original PDO To improve the capacity of the Ministry of Finance to undertake more efficient, timely, and transparent public financial management OPS_TABLE_PDO_CURRENTPDO The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) Summary Status of Financing Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A1903 01-Mar-2016 21-Mar-2016 21-Mar-2016 27-Mar-2019 2.70 2.19 .51 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This restructuring paper seeks the Country Director’s approval to extend the closing date of the Public Financial Management and Revenue Administration Reform Program (P152551) from March 27, 2019 to February 24, 2020. The proposed change was endorsed by the Management Committee and do not imply new costs. 2. The main reasons for the extension are to: (i) ensure the delivery of reports on PFM Roadmap Development, which are critical to inform the government’s future PFM reform agenda; and (iii) complete the new activities endorsed by the MC Meeting in February 2019 as detailed in Annex 2. Project Status 3. This PASA and its respective trust fund (TF0A1903) became effective on March 21, 2016. However, it was not until the second quarter of 2017 that implementation gain traction due to delays in deploying the PIUs that were going to support the beneficiary Directorates in the Ministry of Finance and in Bappenas. In spite these delays, the program managed to complete most of the activities that were planned for 2017 and 2018. By September 2018, out of the 28 activities approved by the Management Committee, 13 were completed, 10 were still ongoing, and 5 were dropped. Annex 1 presents the status of the activities by December 31, 2018. 4. Thus far, the major outputs produced include: (i) Completion Report of Technical Assistance on Enhancement of EBS Database Management; (ii) more than 1,000 government staff trained in PFM systems related to planning, budgeting, budget execution and tax administration; (iii) reports from several trainings and benchmarking visits by DG of Taxes, DG Budget, Bappenas, DG of Treasury, Organta, CTO, and MOF Electronic Procurement-Unit as detailed in Annex III; and (iv) “Final Report on Data Center Operation Management Specialist Pusintek MOF” and “Vulnerability Assessment and Penetration Test of Information System”, which informed the findings and recommendations of Operations and Security Management Specialists. This recommendation has been accepted by PUSINTEK. The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) 5. Overall, the project performance is satisfactory and the project ratings on the progress towards achievement of the PDO and overall implementation progress (IP) are Satisfactory. The program has met three out of four PDO indicators by December 2018, and the progress against the fourth PDO indicator is 93 % (See Table 1). The only Intermediate Result indicator set for this Grant - percentage of major capacity building activities that are successfully completed as planned - has also made 75 % progress towards the target. Use and availability of Funds 6. As of February 09, 2019, the total allocation approved by PFM MDTF Management Committee to be financed by this grant is USD 2,615,627. Out of the total allocation, 54% has been disbursed (USD 1,416,663) and 33% has been committed for activities (USD 862,899). Based on the latest financial report, the project is estimated to incur expenditures amounting to 2,279,562 by the project current closing date of March 27, 2019 (84,42% of the current grant amount). Summary of the allocation by component is presented in Table II. There will be a balance of USD 420,437 from savings and unallocated fund that will be used in the period of extension. The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) Table I: Summary of Outcomes Indicators Baseline Target Actual Note PDO Indicator#1: Reduction in 2.00 0.50 0.50 Fully Achieved. the time lapsed of financial (30/11/2015) (30/08/2019) (31/01/2018) PEFA Assessment 2017 found that reporting on public the financial reporting on budget expenditures after the month realization is now produced every closing (Months) two weeks after the end of every month. PDO Indicator#2: Trained SPAN 40 100 100 Fully Achieved. users able to fully understand (30-Nov-2015) (31-Aug-2019) (31-Dec-2017) All SPAN Users at KPPN offices have the conceptual framework of been trained on the conceptual accrual accounting and use the framework of accrual accounting and system in producing accrual- use of the SPAN System based accounting reports (Percentage) PDO Indicator#3: Trained MOF 20.00 80.00 95.00 Fully Achieved. staff who pass minimum (30/11/2015) (30/08/2019) (31/12/2018) Almost all staff of Pusintek and requirements to manage Data Disaster Recovery Center at Center and Data Recovery Balikpapan have been provided Center under ICT integration training and they have passed agenda (Percentage) minimum requirements to manage data centers. PDO Indicator#4: Trained staff in 0 30 28 93 % achieved. forensic investigation unit that (30/11/2015) (30/08/2019) (31/12/2018) Rest will be achieved by June 2019. can use forensic methods and tools to investigate tax criminal cases (Number) Intermediate Outcome 0 100 75 75% Achieved. Indicator#1: Major capacity (30/11/2015) (30/08/2019) (31/12/2018) Capacity building activities focus on building activities are improving budget planning, cash successfully completed as management and tax administration planned (Percentage) for Bappenas, DG Budget, DG Treasury, MOF’s Electronic Procurement unit (LPSE), Organta and DG Tax. As of now, around 819 GOI staff have been trained from the abovementioned Echelon I units. The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) Table II: Allocation, Disbursement and Commitment by Priority (in USD) Approved Budget Disbursement Committed Priority Implementing Agencies To Dec. 31, 2018 To Mar 27, 2019 I DG Taxes 316,412 275,735 - Bappenas 145,000 91,549 42,857 DG Budget – MOF 263,400 221,559 - Bureau of Planning and Finance – MOF 150,000 - 100,000 DG Treasury 860,000 601,409 113,383 II PLPSE – MOF 64,000 55,826 - PSSU – MOF 575,375 407,417 94,777 Center of Information and Technology (PUSINTEK) – MOF 160,395 106,117 50,000 Bureau of Organization and Business Process (Organta) – MOF 33,925 26,189 - IV Central Transformation Office 47,120 15,067 32,053 Total 2,615,627 1,800,867 433,070 Rationale for Restructuring: 7. The proposed restructuring is justified for the following reasons: a. This grant has sufficient funds to complete the pending activities without the need of additional funding. b. The Government needs more time to validate the PFM Roadmap. There were some delays in procurement that affected the implementation timeline for the technical assistance on PFM Roadmap Development (Technical Assistance). Currently, the findings of the TA are being discussed with the relevant stakeholders and more time is needed for the ministerial validation of the recommendations, action plan and monitoring framework. c. The Government needs more time to implement newly approved activities. As of December 31, 2018, the program has an available balance of around US$ 460,062.53 as result of saving and unallocated funds. The savings are from activities that were completed in 2017-2018 with lower actual cost. The Project Implementing Units have proposed to the Project Secretariat to use this balance to finance new and critical activities in three of the four priority areas. In December 2018, the Government submitted a set of proposals from the five implementing Echelon I Units amounting to US$ 382,305. These proposals were approved by the donors and their implementation is pending revision of the budget document once the grant is extended. The details of these new activities are available in Annex 2. 8. The extension is also needed to continue maintaining the PSSU and the implementing agencies active and involved during the planning and preparation for the III Phase of PDM MDTF. If the Grant Agreement ends in March 27, 2019, the PSSU and PIUs will be dissolved by June 30, 2019. Once dissolved, it will be difficult to reactivate these units when PFM MDTF III is launched. Furthermore, the government staff currently involved with PFM MDTF II who have been trained on Project Management may no longer be available to support the next phase of PFM MDTF. There is a gap The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) of $77,757 between funds available and the value of approved proposals. The PSSU will allocate this fund balance to new activity proposals before June 2019, as per demands from different PIUs, and will utilize all funds before the new closing date. II. DESCRIPTION OF PROPOSED CHANGES 9. The closing date for the Public Financial Management and Revenue Administration Reform Program (P152551) will be extended from March 27, 2019 to February 24, 2020. 10. This extension is in line with Government’s projection for completing all planned activities. This request for extension has also been endorsed by the donors. There is no additional funding required and it will be a no-cost extension. The proposed extension of the closing date will help to enhance the impact of the overall PFM Reform Agenda of the government. The proposed 11-months extension will enable satisfactory completion of all activities. 11. During the extension period, the Project Management Office for this grant will continue to be under the office of MOF's Secretary General and will work closely with the Bank’s team to supervise the implementation during the extended period. PSSU will play critical role to ensure remaining activities will be fully implemented by February 24, 2020. I. SUMMARY OF CHANGES Changed Not Changed Loan Closing Date(s) ✔ Implementation Schedule ✔ Implementing Agency ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Change in Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline TF Status Closing Closing(s) Closing for Withdrawal Applications 30-Apr-2018, 27- TF-A1903 Effective 28-Feb-2018 24-Feb-2020 24-Jun-2020 Mar-2019 Note to Task Teams: End of system generated content, document is editable from here. The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) Annex I: Activities and Status as of December 31, 2018 (in USD) Allocation to Disbursed to Component / Approved Activities Status Dec 31, 2018 Dec 31, 2018 I2 Better oversight of PFM reform processes, leading to an adequate sequencing and 575,375.00 407,416.80 coordination of reform activities 1.1 Consultancy Services to Support the Development of a Road Map for the 120,000.00 40,121.90 On-going, first draft of Roadmap Implementation of PFM and Revenue Administration Reforms ready for consultation with stakeholders. Finishing March 2019 1.3 PFM MDTF Program Management Technical Assistance to PSSU (3 items: PMA, Bilingual Completed Secretary and Administrative Staff) 1.6 2nd PFM MDTF Program Management Technical Assistance to PSSU 455,375.00 367,294.90 Completed 1.7 3rd PFM MDTF Program Management Technical Assistance to PSSU On-going until March 2019 II More targeted allocation of public funds to development priorities 145,000.00 91,548.73 2.2 1st Support to Bappenas in Building Capacity to Conduct Spending Review Completed 2.3 2nd Support to Bappenas in Building Capacity to Conduct Spending Review 145,000.00 91,548.73 On-going, one experience sharing activity to be implemented in 2019 III Better links between budgetary spending and improvement of public services 413,400.00 221,558.90 3.3 In-country Training and Knowledge Sharing for Developing Capacity of DG Budget 106,000.00 81,331.54 Completed 3.7 In-country Training for Developing Capacity of DG Budget, Ministry of Finance to better 157,400.00 140,227.36 Completed links between budgetary spending and improvement in public services 3.5 Training, Consultancy, Advisory and Analytical Activities (AAA) for ROCANKEU, MOF 150,000.00 - Not yet implemented. IV Improved budget execution and reporting 860,000.00 601,409.37 4.2.a Consultancy to Enhance the Budget Preparation and EBS to Optimize the Effectiveness 325,000.00 111,937.99 Completed –2nd payment was of the SPAN Investment and Sustainability of the System made Jan 2019. (4.2.a and 4.2.b are part of one activity proposal and 4.2.b Xico Training in South Korea 25,000.00 21,317.55 Should be counted as one) 4.3 Consultancy for Developing a Data Warehouse to Optimize the Use of SPAN; Output: - Cancelled – activity covered in Application system with document (CANCELLED) another APBN funded activity 2 The number is for internal purpose only The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) Allocation to Disbursed to Component / Approved Activities Status Dec 31, 2018 Dec 31, 2018 4.4 Enhancement of MOF staff Capacity for Better Cash Management (Training) 150,000.00 134,348.67 Completed – had 5 in-country training sub-activities. 4.6 Support the SAKTI Roll-out and the Training of Selected Users 360,000.00 333,805.16 Completed in 2017 V Enhanced compliance and value-for-money in the use of public resources 64,000.00 55,826.46 5.4 Technical Assistance for Audit Report Analysis - - Cancelled-implemented using APBN 5.8 In-country Training and Capacity Development for the Staff of the Regional 64,000.00 55,826.46 Completed Procurement Service Unit (ULPD) VI Increased Fiscal Revenues through improved customs, tax and non-tax revenues 316,412.00 275,734.52 6.4 Training and Certification for Digital Forensic Investigator (Jakarta) 64,975.00 Completed 6.5 Capacity Building to Enhance Internal Investigation and Strategic Planning 147,382.00 Completed 6.6 Development of CRM Framework - Workshop with Neighboring Countries 27,935.00 Completed 275,734.52 6.7 CRM BENCHMARKING STUDY AT INLAND REVENUE AUTHORITY OF SINGAPORE (IRAS) 20,320.00 Completed 6.8 Benchmarking Study to IRS on Tax Intelligence Technique and Methodology, Standard 55,800.00 Completed Operating Procedure (SOP) and HR Management, United States VIII Strengthening/Transforming institutional capacity for PFM 241,440.00 147,372.60 8.1 Consultancy for Data Center Operations Management Specialist 55,000.00 53,003.53 Completed 8.2 Consultancy for Data Center Infrastructure Management Specialist 50,000.00 - Not yet implemented. Funds will be used to finance benchmarking visit on Digital Transformation 8.3 Consultancy for Security Specialist 55,395.00 53,113.01 Completed 8.4 Training & Coaching in Development of SOP & Business Process Mapping with RASCI 33,925.00 26,189.16 Completed (Responsible, Accountable, Support, Consulted, Informed) 8.6 In-country Training for ICT Governance and Management (CANCELLED) - - Cancelled-no longer a priority 8.9 Benchmarking Program in Support of Transformational Leadership, Human Capital 47,120.00 15,066.90 Completed Management and PPP Development Strategy Scheme Total 2,615,627.00 1800,867.37 Amount of the Grant 2,700,000.00 Unallocated TF 84,373.00 Savings/Uncommitted 381,689.53 1,800,867.37 Available for Allocation 2019 466,062.53 Note: Total Approved Activities = 26; Completed Activities = 18, On-going/preparation stage activities = 5; Cancelled Activities = 3 The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) Annex II: New RETF Activities through Virtual Approval of Management Committee (February 2019) Est. Cost Implementing Ref # Activity Title (in USD) Agency Timeline I.1 Benchmarking Study on Core Tax COTS Implementation 24,000 DG Taxes Jan - July 2019 in Finland (DGT) I.2 Advance Analysis of Windows Artefacts 21,420 DGT Feb – March 2019 I.3 Design Learning and Evaluating Training Program 3,520 DGT March 2019 Sub total 48,940 II.1 TA for the Development of the MOF Roadmap on 30,000 March – June Procurement Reform MOF -LPSE 2019 II.2.1 TA Budget Review 19,310 Bappenas April – November 2019 II.2.2 In-Country Training and Workshop for Supporting 4,283 Bappenas April – Budget Review November 2019 II.2.3 In-country field surveys 5,372 Bappenas April – November 2019 II.3 Capacity Building, TA and Knowledge Sharing for DG 69,400 DG Budget Budget 2019 II.4 Training for Developing Capacity of Directorate 60,000 DG Treasury Treasury Technology and Information System Staff in Operating and Managing Indonesia FMIS 2019 Sub total 188,365 IV.1 PSSU In Country Workshop on Project Management 20,500 PSSU 2019 IV.2 PFM MDTF Program Management TA to PSSU 125,000 PSSU Jan-Dec 2019 Sub total 145,000 Grand Total 382,305 The World Bank Public Financial Management and Revenue Administration Reform Program (P152551) Annex III: List of Government’s Capacity Building Activities Component and Capacity Building Activities Implementing Unit II More targeted allocation of public funds to development priorities i Benchmarking Visit on Spending Reviews to United Kingdom Dit. APP, Bappenas Better links between budgetary spending and improvement of III public services In-country Training and Knowledge Sharing for Developing Capacity i of DG Budget Dit. P.APBN - DG Budget In-country Training for Developing Capacity of DG Budget, Ministry of Finance to better links between budgetary spending and ii improvement in public services Dit. P.APBN - DG Budget IV Improved budget execution and reporting i Xico Training in South Korea Dit. SITP, DG Treasury Enhancement of MOF staff Capacity for Better Cash Management Dit. Cash Management, DG ii (Training) Treasury iii Support the SAKTI Roll-out and the Training of Selected Users Dit. SITP, DG Treasury Enhanced compliance and value-for-money in the use of public V resources In-country Training and Capacity Development for the Staff of the i Regional Procurement Service Unit (ULPD) MOF - LPSE Increased Fiscal Revenues through improved customs, tax and non- VI tax revenues i Training and Certification for Digital Forensic Investigator (Jakarta) DG Tax Capacity Building to Enhance Internal Investigation and Strategic ii Planning DG Tax Development of CRM Framework - Workshop with Neighboring iii Countries DG Tax CRM Benchmarking Study at Inland Revenue Authority Singapore iv (IRAS) DG Tax Benchmarking Study to IRS on Tax Intelligence Technique and Methodology, Standard Operating Procedure (SOP) and HR v Management, United States DG Tax VIII Strengthening/Transforming institutional capacity for PFM Training & Coaching in Development of SOP & Business Process Mapping with RASCI (Responsible, Accountable, Support, Consulted, i Informed) MOF - Organta Benchmarking Program in Support of Transformational Leadership, Human Capital Management and PPP Development Strategy ii Scheme MOF - CTO