OFFICIAL DOCUMENTS Amendment No. 3 to the Administration Agreement between the European Commission and the International Bank for Reconstruction and Development concerning the Parallel EC - World Bank Partnership Program for Europe and Central Asia Programmatic Single-Donor Trust Fund (No. TFO72780) EU Program for the Reform of Public Administration and Finances (EURoPAF) (Donor Reference No. 385-741) 1. Reference is made to the Administration Agreement ("Agreement"), dated May 25, 2017, and last amended on February 25, 2019, between the European Commission ("Donor") and the International Bank for Reconstruction and Development ("Bank") concerning the Parallel EC - World Bank Partnership Program for Europe and Central Asia Programmatic Single-Donor Trust Fund (EU Program for the Reform of Public Administration and Finances in Ukraine) (TF072780) ("Trust Fund"). 2. The Donor and the Bank has agreed to amend the Agreement in respect of the provisions as follows: (a) Section 5.1 of Annex 2 to the Agreement is deleted and replaced with the following: "5.1. It is expected that the funds deposited in the Trust Fund will be fully disbursed by the Bank by June 30, 2023 (the "End Disbursement Date"). The Bank shall only disburse funds deposited in the Trust Fund for the purposes of this Administration Agreement (other than returns to Donors) after such date to the extent such date is changed in accordance with amendments made to the Administration Agreements of all the Donors. Following the End Disbursement Date, the Bank shall return any remaining balance of the Trust Fund to each Donor in the Holding Currency in the manner specified in its respective Administration Agreement on a pro rata basis with regard to the total funds deposited in the Trust Fund by such Donor relative to the total funds deposited in the Trust Fund by all Donors, all calculated as Holding Currency amounts." (b) Section 2 of Annex I of the Agreement is modified to read as per the terms set forth in the Annex 1 to this amendment. (c) Annex 4 of the Agreement "Indicative Results Indicators" for the activities set forth in Section 2 of Annex 1 to the Administration Agreement is replaced by the Annex 2 attached to this amendment. 3. All other terms of the Administration Agreement shall remain the same. 4. The Bank shall disclose this Amendment in accordance with the Bank's Policy on Access to Information. By entering into this Amendment, the Donor consents to such disclosure. 5. The Donor and the Bank each represents, by confirming its agreement below, that it is authorized to enter into this Amendment and act in accordance with these terms and conditions. The Donor and the Bank are requested to sign and date this Amendment, and upon possession by the Bank of this fully signed Amendment, this Amendment shall become effective as of the date of the last signature. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By: _ _ _ _ _ _ _ _ _ _ _ Name: Arup Banerji Title: Country Director Date: 3/; -/ 2UZ The EUROPEAN UNION, represented by the EUROPEAN COMMISSION By: Name: tefan Schleuning Title: Head of Cooperation Date: :[7JA 0201C 2 ANNEX 1 2. Activities The activities to be financed by the Trust Fund are: As part of the EC- World Bank Partnership Program for Europe and CentralAsia Programmatic Single- Donor Trust Fund - EU Programme for the Reform of Public Administration and Finances (EURoPAF), the European Commission has expressed an interest in ensuring that the Bank provides support to Ukraine in the framework of the Trust Fund with the specific objective to increase capacity of Ukraine in effective and transparent management of its resources as per below the description. 2.1 Bank-executed activities, for which the Bank has implementation responsibility: Part A: Strengthening Human Resource Management in Public Administration Institutions Support to the design and implementation of a human resource management information system in public administration institutions and public employee payroll (hereafter - HRMIS/Payroll system). The activities under this part include, inter alia: (i) Carrying out a set of activities to analyze information needs for personnel management and oversight function related to implementation of the civil service law, existing human resource management (HRM) practices to be automated through a Human Resources Management Information System (HRMIS) and payroll calculation system, information and communication technology infrastructure, capacities to operate management information systems, good international practices and lessons learnt in automation of ERM function in public administration institutions. The summary of these analyses and recommendations will be part of an options paper to be shared with the National Civil Service Agency (NCSA) to support the development of an HRMIS concept. (ii) Support the transfer of knowledge and lessons learnt from practitioners with experience of HRMIS/Payroll system implementation in other countries through information sharing and teleconferences with Civil Service agencies and other relevant institutions in other countries. (iii) Provision of technical advice on the development of an HRMIS/Payroll system concept document. (iv) Provision of technical guidance to NCSA in developing a procurement strategy, preparation and review of procurement documents (including process) based on the adopted HRMIS/Payroll system concept document, and provision of relevant training, as required. (v) Advisory support for HRMIS/Payroll design (including advice on setting up a standard non- proprietary project management methodology for large IT projects, developing detailed functional requirements and technical specifications for HRMIS/Payroll system and IT infrastructure), system rollout and implementation, assessment of progress (including monitoring of actual cost of the HRMIS/Payroll system implementation) and emerging challenges. 3 Part B: Support to PFM Strategy Implementation Provision of targeted support to implementation of the Ukraine's Public Financial Management Reform Strategy for 2017-2020 (PFM Reform Strategy). This will involve strengthening tax policy capacity and revenue forecasting, implementing spending reviews to improve expenditure efficiency, and advice on further gradual transition of the national accounting system to a system compliant with IPSAS standards. In the area of automation of the PFM processes, the Trust Fund will support the development of an Information and Communication Technology (ICT) strategy for PFM and will address some immediate needs for stabilization of the current ICT infrastructure. The activities under this part include, inter alia: (i) Support tax policy capacity of Ministry of Finance (MOF) through: (a) developing a guidance note on tax expenditure and tax gap estimation and provide relevant training to the MOF staff based on the guidelines developed; (b) providing support to analysis and recommendations on tax treaties' policy and its implementation; (c) analysing current approach to, and institutional arrangements for, revenue forecasting and drafting a report suggesting improvements including the specification of information requirements; and (d) providing hands-on support to revenue forecasting during the first year of implementation of recommendations. This activity will enable knowledge transfer and skill development of concerned staff, as well as fine-tuning of the processes of information generation and timely exchange. (ii) Support to improving the efficiency of public expenditure through developing a Spending Review report, in an expenditure area agreed with MOF. The report will cover expenditure aspects and will formulate recommendations for efficiency improvements. (iii) Support to strengthen public sector accounting system through preparing an analytical report with recommendations on implementation of IPSAS-compliant accounting standards. (iv) Carry out an analysis of ICT needs and contribute to an ICT strategy to support PFM functions of the government. (v) Support in the Comprehensive PFM Assessment in Ukraine through: (a) developing assessment reports based on the Public Expenditure and Financial Accountability (PEFA) tool and more specifically one on a national level and two on a sub-national level; (b) delivering a training on the PEFA methodology for the MOF staff, other relevant authorities and subnational governments which will be involved in the assessment; (c) organizing three round tables for the dissemination of the mentioned reports. Part C: Program Management and Administration Activities Program management and administration activities for the Trust Fund, including but not limited to, supporting any program governance arrangements and Trust Fund related meetings; planning and executing work plans and budgets; managing communications and conducting outreach; disseminating lessons learned; reporting on progress; and monitoring and evaluating the program. 2.2 Recipient-executed activities, for which one or more Recipients (as defined in Annex 2) have implementation responsibility: 4 Part A: Strengthening Human Resource Management in Public Administration Institutions (i) Support the preparation of a software application concept design to specify functional requirements of the system, its architecture, expected system output, interface between the HRMIS/Payroll system with information systems in the MOF and other national registers. (ii) Carrying out analysis to select and implement cost-effective solutions for hosting, operating and maintaining the HRMIS/Payroll system. (iii) Support the development of procurement documents for HRMIS/Payroll system. (iv) Development (or adaptation, involving customization and parametrization), testing and implementation of HRMIS/Payroll software application across the targeted users, carrying out training of would-be users and data migration of basic personnel records, final testing, approval and acceptance of the system. (v) Support NCSA to roll out HIRMIS/Payroll system in line with its rollout schedule to be adopted by the Government. NCSA will establish a dedicated team of human resources, payroll and information technology specialists. The support will include development of skills and competencies and will organize training and professional development of such a team. To facilitate the system rollout to central government entities, the Trust Fund will support NCSA and other relevant institutions to: (a) undertake stakeholder analysis to identify change management interventions; (b) develop normative and regulatory acts, including the alignment of personal data protection clauses in the current legislation; (c) develop manuals/instructions; (d) raise awareness of reforms through online platforms and other communication activities; (e) establish arrangements for monitoring and reporting on implementation of reforms; and (f) establish a support group and help desk to respond to user enquiries. (vi) Support training of trainers and delivery of pilot training of HRMIS/Payroll system users. Part B: Support to PFM Strategy Implementation (i) Support the implementation of the PFM Reform Strategy for 2017-2020 and identify future investments in ICT for PFM, through carrying out an ICT audit, including: (a) an inventory of all ICT applications, hardware and infrastructure; (b) an assessment of the ICT systems' maintenance and service arrangements; (c) an assessment of alignment of ICT capability with current and planned business requirements; and (d) assessment of data integrity and data protection arrangements. (ii) Support to carrying out: (a) an analysis of current IT solution for budget planning from functional and information technology aspects and recommendations on improvements; and (b) develop functional requirements for upgrading the current or developing a new budget planning module with web access of budget executing entities that would enable automated consolidation of budget submission and support medium-term budgeting. (iii) Support to upgrading current ICT equipment for business continuity at MOF. (iv) Strengthening ICT systems' capabilities to ensure timely information exchange needed for cash management and forecasting, provided that MOF has determined information flow requirements in collaboration with US Treasury technical assistance team. 5 In line with the description of the Activities under sections 2.1 and 2.2 of this Annex, the Bank shall endeavor to implement and cause the Recipient to implement the Activities, as the case may be, in accordance with the following tentative timetable, but not later than March 31, 2021, unless otherwise agreed in writing by the Bank and the Donor by an exchange of letters: 6 Tentative timetable of deliverables by Activities Name of Activity Deliverable Tentative timetable Bank-Executed Activities: August 1, 2016 - March 31, 2021 1. Support to development of a vision of Options Paper on HRMIS July 2017 HRMIS and implementation modalities implementation 2. Support to implementation of IRMIS, Technical, project March 2021 including Payroll system management and change management advice 3. Analysis of the tax expenditure through Analytical report on tax October 2018 exemptions and simplified tax regime expenditure and training 4. Analysis of public expenditure in public Report on Public Finance December 2018 administration, social sphere and Review - 2 agriculture 5. Support to revenue forecasting capacity Update revenue forecasting December 2018 development models for key taxes, deliver training to MOF 6. Support to implementation of (simplified) Provide advice to enable MOF June 2018 BEPS framework to amend the legal framework to achieve compliance with simplified BEPS framework 7. Support to ICT strategy for PFM cluster Inputs to the strategy, December of institutions including advice on scope, 2020 structure, sequence of ICT reforms 8. Support to Government Public Sector Baseline assessment, training January 2019 Accounting (PSA) Strategy 2018-2025 strategy and inputs to PSA Strategy 9. PEFA Assessment One national and two National level subnational PEFA Reports Assessment report - November 2019 Subnational level reports - December 2019 Recipient-executed Activities: implementation period August 28, 2017 - March 31, 2021 10. Implementation of HRMIS, including First phase of HIRMIS/Payroll March 2021 Payroll system system for core functions in central executive bodies implemented 11. Improvement of MOF's information Procurement of workstations December 2018 technology infrastructure and printers for MOF employees 12. Implementation of ICT audit for PFM ICT Audit Report delivered April 2019 area 13. Preparation for upgrading MOF's Budget Detailed technical December Management specifications for MOF's 2020 Budget Management Model prepared 14. Vision of the ICT system supporting PFM ICT strategy for MOF, SFS in Ukraine and Treasury system delivered December 2020 2 ANNEX 2 Indicative Results Framework Indicators EC - World Bank Partnership Program for Europe and Central Asia Programmatic Single-Donor Trust Fund EU Programme for the Reform of Public Administration and finances (EURoPAF) Expected Indicators Baselines Result goals Sources of data Assumptions Results Part 1. Automation ofPersonnel andPayroll information Impact Transparency of state Absence of real time Real time consolidated and HRMIS and Payroll HRMIS and Payroll personnel and consolidated and disaggregated information systems systems are procured, payroll data disaggregated state on state employees and implemented installed, rolled out to at personnel data and payroll for targeted through the Trust least 50% of the central payroll information central government Fund state administration and entities is available pilotterritorial units ofthe central entities ofthe state administration. Core personnel data is migrated into the new system Outcome(s) Coverage of state No central At least 50% of central Report by NCSA HRMIS/Payroll are administration information system entities of the state implemented and rolled out entities with a to inform policy administration and pilot unified decisions on territorial units of central HRMIS/Payroll management of state public administration in system personnel and at least 5 regions are using government wage new HRMIS/Payroll bill system for their personnel andpayroll calculation Output(s) 1. Options Paper No HRMIS/ Payroll BETF: HRMIS/Payroll System acceptance NCSA exercises effective on implementation system to process implemented to cover report and report by and efficient contract modalities. personnel and key functional NCSA on the roll- management; allocated payroll data for the requirements for out of the system resources for HRMIS and 2. HRMIS and Payroll state administration personnel and payroll Payroll implementation are system is operational administration adequate Part 2. Strengthening PFM Functions and Systems Impact Enhanced PFM NoICTVisionor Targeted improvements in Ministry of Finance ICT audit is conducted information Strategy for PFM revenue and expenditure and delivered management management; recommendation for ICT ICT Strategy for PFM Strategy defined Outcome(s) 1. Informed fiscal Gaps in fiscal policy Enhanced policy and Ministry of Finance Recommended measures policy management of tax on tax policy agreed by exemptions and tax MOF and key staff treaties trained 2. Enhanced A PFR conducted by Public Spending efficiency Spending Review Spending Review expenditure the WB; measures inthe agreed report by the WB recommendations efficiency The last area are defined adopted comprehensive assessment (PEFA) is Efficiency and outdated transparency of PFM One National level PFM Strategy system in Ukraine is PEFA Report and 2021- 2023 is measured two subnational level informed by the reports recommendations of PEFA reports 3. ICT Strategy No ICT strategy ICT strategy developed ICT Strategy ICT Audit performed exists published 4. MOF's ICT ICT critical status is Enhanced reliability of ICT Ministry of Finance Obsolete and outdated infrastructure documented in ICT equipment in MOF ICT equipment replaced report by EU expert 2 5. Government No roadmap for Accounting strategy Ministry of Finance BETF actions completed Accounting Strategy alignment with developed and approved and the MOF adopted an IPSAS accounting accounting strategy based on Bank's recommendations Output(s) 1. Informed fiscal Negative impact of Analytical reports on fiscal Ministry of Finance Taxpayer and tax treaty policy tax exemptions and policy; data is available unfavorable tax treaty conditions MOF staff trained reducerevenue 2. Enhanced Perceived Spending Review report; WB's Analytical MOF and WB agreed on expenditure expenditure Public Spending efficiency Report a specific area of efficiency inefficiency in the measures in the agreed area Spending Review public sector; are defined; new PFM Strategy is Weaknesses of the existing informed by the PFM system at the national PEFA reports MoF developed the PFM comprehensive and subnational levels are Strategy 2021-2023 assessment. defined 3. ICT Strategy PFM information An ICT Strategy informed Ministry of Finance ICT Audit completed management faces by the ICT Audit data security and integrity risks due to inefficient governance and inadequate maintenance of IT hardware and applications 3 4. MOF's ICT MOF's main server New IT equipment is Ministry of Finance The MOF will allocate infrastructure and workstations required to stabilize budget resources to outlived their performance ofcore partially replace obsolete lifespan and face MOF functions server equipment, and the risks of information TF will finance the loss replacement of critical equipment that is not covered by budget resources 5. Government MOF does not have Inputs to a strategy for Ministry of Finance MOF will develop and Accounting Strategy a strategy for alignment of National approve an accounting alignment Accounting System Strategy based on Bank's accounting standards with IPSAS recommendations with IPSAS 4