1

Strengthening Public Financial Management (PFM) System Project (TF 010452)

Implementation Review and Support Mission

December 14-18, 2014

Aide Memoire

I. Introduction

1. A World Bank (WB) team1 led by Mr. Manoj Jain (Lead Financial Management Specialist)

was in Kathmandu, Nepal during December 14-18, 2014 to conduct an Implementation Review and

Support Mission of the Strengthening Public Financial Management (PFM) System Project and also

prepare an Additional Financing (in response to a Government of Nepal request letter dated June 10,

2014) for USD 3.5 million.

2. The team met with the Financial Comptroller General, senior officials of the Financial

Comptroller General’s Office (FCGO) and officials of the Public Expenditure and Financial

Accountability (PEFA) Secretariat. A list of the persons met is included in Annex 1.

3. The team expresses its appreciation for valuable inputs, courtesies and cooperation extended

by officials met during the review. A wrap up meeting was held on December 18, 2014 which was

chaired by the Financial Comptroller General. This Aide Memoire (AM) summarizes the agreements

reached as discussed during the mission. As agreed during the wrap-up meeting, this AM will be

classified as a public document as per the World Bank’s Access to Information Policy.

II. Key Project Data

III. Achievement of Project Development Objective

4. The Project Development Objective (PDO) is to improve expenditure control and enhance

government accountability and transparency by strengthening the treasury system, improving

financial reporting and building PFM capacity. The team assessed the relevance of the PDO and

confirmed that it still remains relevant. The Results Framework however needs to be slightly refined

to appropriately capture the outputs and results that are likely to be obtained under the components of

the project, and to appropriately reflect the revision in implementation strategy for certain activities

under the project. Revised Results Framework will be finalized by February 2015. The achievements

of PDO level results as at November 30, 2014 is shown below :

1 The team was led by Mr. Manoj Jain (Lead Financial Management Specialist and Task Team Leader) and comprised of Mr. Anand

Pardhy (IT consultant), Mr. Shambhu Uprety (Procurement Specialist), Mr. Yogesh Malla (Financial Management Specialist), Ms.

Pragya Shrestha (Operations Analyst) and Mr. Nagendra Nakarmi (FM Assistant).

Project Data Projects Performance Ratings

Approval Date : October 31, 2011 Summary Ratings

Achievement of PDO

Implementation Progress

Monitoring & Evaluation

Project Management

Procurement

Financial Management

Counterpart funding

Last Now

S S

S S

S S

S S

S S

S S

S S

Effectiveness Date: October 31, 2011

Closing Date: June 30, 2015

Grant Amount : USD 4,300,000

Amount Disbursed

(As of December 31, 2014)

USD 4,192,140 (97.5%)

including advance of

USD 1.33 MN

Ratings: HS=Highly Satisfactory; S=Satisfactory; MS = Moderately Satisfactory; MU = Moderately Unsatisfactory;

U=Unsatisfactory; HU=Highly Unsatisfactory

2

Indicators Unit of Measurement Baseline

Year 3

Target

End-of-Project

Target

Status as of November

30, 2014/ Comments

PDO Level Results Indicators*

Percentage of overall budget

executed through the DTCOs

where the TSA system has been

implemented

% 7 85 98

Nearly 100%. Target

was achieved a year in

advance

Budget Execution Reports and

Financial Statements produced

by the TSA system on a real

time basis

No of districts Nil 65 75

For all 75 districts.

Quality and Timeliness

being improved upon

further.

Preparation of consolidated

financial statements for PILOT

Ministries in accordance with

Part 1, Cash IPSAS ; No Nil 1 2

Both the pilots have

been completed in

August 2014 (end of

project target already

achieved) and results

being analyzed to

upscale under additional

financing2.

Numbers of research studies into

high priority PFM areas

completed and disseminated No Nil 4 5

Two Reports

completed. Another five

are proposed in this

fiscal year which will

be completed by April

2015

The detailed component wise targets for year 3 (FY2013/14), end-of-project targets and current status

as of November 2014 are set out in Annex 5.

5. Remarkable Achievements: Rollout of the Treasury Single Account (TSA) under the

component 1 continues to be hallmark of the project with rollout having been achieved across all 75

districts across Nepal leading to 100% coverage of the budget. Real time budgetary expenditures is

now available to all stakeholders through the website of the FCGO which is having tremendous

impact on the decision making behaviors of the line managers, and has helped improve the

transparency in public finances.

6. Successful implementation of TSA and its results are clearly evident in the entire PFM cycle

and upgrade in several of (draft) PEFA II ratings is a testimony to this effect. Monthly budget

executions reports (Ministry wise, Spending District wise, Economic Classification wise) have been

further strengthened and are available on a timely basis, and posted on FCGO’s website. Daily reports

on aggregate budget implementation are also made available on the website and visual media (LED

CTVs) located at strategic locations. Further plans are being made to enhance the usefulness of

reports and strengthening accountability by reaching out to other stakeholders including demand side

such as CSOs and media.

7. Following recommendations from an international expert, business process for commitment

recording has now been finalized, TSA software upgraded and implementation has been initiated.

Following recommendation of a task force comprising of officials from FCGO, Nepal Rastra Bank

(NRB) and commercial banks, business process in respect of Revenue Management Information

Systems (RMIS) has been configured, software enhancement completed and pilots undertaken in three

large revenue receiving districts (Kathmandu, Lalitpur and Bhaktapur). License for Oracle has been

acquired and put into effect. Accounting Standards Board (ASB) successfully drafted the Nepalese

Financial Reporting Standards (modeled on International Financial Reporting Standards) after an

extensive consultative process, and the Institute of Chartered Accountants of Nepal (ICAN) has now

pronounced these standards with a road map for implementation. Nepal Public Sector Accounting

Standards (NPSAS) pilots in line departments have been successfully completed (award received by

2 International Consortium for Government Financial Management (ICGFM) has certified these financial statements in December, 2014.

3

GoN in this respect from International Consortium of Government Financial Management) and a

senior policy level workshop conducted to chalk out a strategy for a way forward.

8. Substantial efforts continued to be made under the third component in reaching out to the

various stakeholders across the country to more remote districts, demand side stakeholders, line

departments and general public in increasing PFM awareness and building a solid foundation for

ensuing PFM reform processes. Research work has been initiated in five high priority areas which

will be completed by April 2015. After an extensive consultation amongst several stakeholders,

second Public Expenditure and Financial Accountability (PEFA) Assessment for Nepal has been

finalized and is undergoing a final quality assurance and PEFA check (final report likely to be issued

shortly). Although the procurement of consultants for accounting manual has been completed, the

report is delayed and likely to be ready by April 15, 2015.

9. Financial Management and Disbursement: In FY2013/14, the expenditures incurred under

this project were NPR 127.09 million (75.31% of the approved budget). For FY2014/15, the approved

budget is NPR 195.19 million. The Team noted that the budget for counterpart fund is found to be

sufficient. As of December 31, 2014, the Project has disbursed USD 4.19 million, which is about

97.5% of allocated funds. There are no pending audit reports or audit issues. The review team

reminded that the audit report for FY2013/14 is due on January 15, 2015. Based on its progress, the

FM Performance is retained as ‘Satisfactory’.

10. Procurement: The Bank team reviewed the implementation status of the procurement plan.

Almost all of the planned procurement activities are being implemented satisfactorily. With regard to

the preparation works for the proposed Additional Financing, it has been agreed with the PEFA team

that procurement plan will be submitted to the Bank by February 15, 2015 and this will be entered

into the online SEPA system (Online Procurement Management System) for which the Bank

procurement team will provide necessary training. Considering the overall procurement progress

achieved, procurement performance rating has been retained as “Satisfactory”.

11. In view of the remarkable progress observed, the Implementation Progress is retained as

“Satisfactory”. The PDO still remains fully achievable and therefore “Achievement of PDO” is also

retained as “Satisfactory”. More detailed component wise implementation progress and agreements

reached during the review is provided in Annex 2.

IV Proposal for Restructuring of Ongoing project

12. The government made a request to reallocate savings of USD 0.5 million from component 2

to component 1, refine the Results Framework and extend the closing date of ongoing project by two

years. For this, FCGO and PEFA Secretariat prepared a detailed activity wise plan for each

component which will require additional time. The team assessed the plan along with the need for

extension during the review; and agreed that the project will be restructured to extend the closing date

by one year

13. The team has reviewed a detailed line item wise activity based plan for both existing project

and proposed AF, and noted that several activities/procurements to be initiated are contiguous and

will require finance both from existing project and AF proceeds to be able to undertake the activity on

a seamless basis for achievement of the objectives.

14. This will allow several activities which are complimentary in nature between the original

project and the proposed additional financing to continue alongside and help achieve the PDO. The

extension will also allow the government to complete the original scope of project activities in a

satisfactory manner. The table below depicts that there is a need to reallocate USD 0.5 million from

component 2(b) to Component 1 which shall be undertaken along with the processing of the AF

request.

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Status of Project Cost as on December 18, 2014

Category Category

Description

Allocated

USD (A)

Disbursed

USD

Amt. yet to

be

documented

USD

Total as of

December 18,

2014 USD

Planned up

to extended

closing date

June 30,

2017 USD

Grand

Total

(Actual+

Planned

Exp.) USD

(B)

Balance

(A-B)

requiring

reallocation

1

Gd, CS, Trg

& Wksp, St

& OC under

Part 1

2,800,000 1,922,502 527,150 2,449,652 850,348 3,300,000 (500,000)

2

Gd, CS, Trg

& Wksp, St

& OC under

Part 2A

170,000 76,280 0.00 76,280 93,720 170,000 (0)

3

Gd, CS, Trg

& Wksp, St

& OC under

Part 2B

580,000 25,080 6,495 31,575 48,425 80,000 500,000

4

Gd, CS, Trg

& Wksp, St

& OC under

Part 3

750,000 172,591 130,530 303,121 446,879 750,000 0

Total 4,300,000 2,196,453 664,175 2,860,628 1,439,372 4,300,000 0.00

IV Proposal for Additional Financing

15. In addition to the request for extending the closing date and reallocation of categories in the

ongoing project, the government also submitted a request for additional financing for USD 3.5

million. The Project Development Objective (PDO) of AF would remain unchanged that is, “to

improve expenditure control and enhance government accountability and transparency by

strengthening the treasury system, improving financial reporting and building PFM capacity”.

16. The original scope under component one involved implementation of the Treasury Single

Account, roll-out of FMIS and further enhancement of the FMIS to support commitment accounting

and improved financial reporting - aimed at strengthened expenditure controls and enhanced

transparency. For practical reasons, an iterative and incremental implementation approach was

adopted to achieve the above objectives where the government agreed to implement reforms in small

increments by learning from the previous iteration. Using this approach, first emphasis was on

implementing expenditure Treasury Single Account which has successfully been rolled out in all 75

districts, centralizing the payments through DTCOs by closing more than 14,000 bank accounts and

eliminating idle cash balances.

17. However, this iteration did not involve full implementation of two major activities of the

original scope: revenue TSA and commitment controls. These activities are now being piloted and

will be fully implemented under the proposed funding through additional financing. The government

plans to complete these reforms through AF component 1 and consolidate the TSA rollout by making

appropriate investment in IT equipment, hardware, networking and associated peripherals to enhance

the sustainability of the TSA system.

18. Under component 2, NPSAS pilots have been successfully undertaken in two ministries and

now the government is planning for up-scaling this rollout across all ministries. For this consultancy

support and necessary training/capacity building activities will be required. A practical rollout plan

will need to be drawn up which will take into account learnings from the previous pilot. An updated

note along with a rollout plan in this regard will be prepared by FCGO and shared with the Bank by

January 15, 2015.

19. Under Component 3, several achievements have been made by the PEFA Secretariat as

described in para 8. There is a need to continue to undertake the outreach, awareness, communication,

5

training, research and capacity building activities to support PFM reform in Nepal. In addition, the

proposed AF under this component will also help support build national PFM training and capacity

building capabilities by partnering with a local academic pioneer institution (like Nepal

Administrative Staff College) and working on developing a PFM core curriculum for public sector

practitioners. A strategy note in this respect will be prepared by the PEFA Secretariat and shared with

the Bank by January 15, 2015.

20. Due to change, management challenges involved in successful accomplishment of these

activities, the government anticipates a slower progress compared to the earlier rapid implementation

of the expenditure TSA, and therefore, has requested a period up to June 30, 2017 for AF. Further

Details in respect of additional financing are provided in the Annex 4.

21. The Program Coordination Committee (PCC) meeting of the MDTF has already endorsed the

above request in September 2014 in recognition of remarkable achievements made under the ongoing

project and the need for further building upon the success. The team will proceed to prepare the

additional financing, restructure the ongoing project for revising the Results Framework, for

reallocating the category and for extending the closing date by one year. Following critical actions

have been agreed to be completed prior to the appraisal of the proposed additional financing:

By February 15, 2015, FCGO to submit to the Bank for review the revised cost

estimates (along with procurement plan); and

By March 15, 2015, FCGO will create senior level IT position (Deputy FCG level) and

initiate process for hiring additional identified consultant positions (detailed in attached

aide memoire).

V. Project Cost

22. Tentative Allocation of Project Costs along with AF and Reallocation of Categories: The

AF aims to support all components under the Project (although majority will be allocated towards

component 1) and the closing date for ongoing project will be extended up to June 30, 2016 to

undertake all activities as envisaged. The table below provides a comparison between original SPFM

financing for the project and the proposed financing after reallocation, extension of closing date and

processing of AF:

Original Components Original Costs

(US$ million)

MDTF

Proposed restructuring Total Updated Cost

(US$ million)

Revised Estimated

Costs after

reallocation(US$

million)

MDTF

Additional

Project

Costs

(AF US$

million)

MDTF

Component 1:

Implementation of TSA 2.80 3.30 3.00 6.30

Component 2: 0.17 0.17 0.00 0.17

Component 2 (b) 0.58 0.08 0.15 0.18

Component 3: 0.75 0.75 0.35 1.15

Total: 4.30 4.30 3.50 7.80

VI. Next mission

23. The next mission is tentatively planned for March 2015.

6

VII. Summary of Agreed Actions

Agreed Actions Date Responsible

Agency

COMPONENT 1 Additional Financing request: As agreed during the review further updates to finalize

the activities and their linkages with existing PDO and a possible results framework. This would include (i) a revised financing plan and an updated cost table; (iii) an updated

procurement plan; and (iv) a revised timetable for the implementation of the proposed

activities under AF.

February 15, 2015 FCGO

Commitment Recording: More data, will need to be captured at the spending entity level (like overall budget amount, total amount committed for items above NPR 500,000,

% utilization of commitments over a period, aging analysis etc) to help analyze the trends

of the commitments across spending units, and make them more useful to the line managers in terms of budget control and implementation.

January 15, 2015 FCGO

Analysis of variations in financial statements: FCGO will finalize the analysis of

variations (and reasons thereof) that the year-end financial statements (for year ended July 16, 2012 & 2013) undergo before they are finally rendered to OAG for audit.

January 31, 2015 FCGO

Undertake a review of remaining bank accounts and applicable rules/regulations: undertake a review on what can be done to rationalize these bank accounts (given the

rules and regulations) as some of the accounts may not be active and for the others a TSA concept could be put in practice, but this requires amendment in rules/regulations. It was

agreed that FCGO will undertake a review of this area (preferably using a consultant)

February 28, 2015 FCGO

Hiring of IT Staff and consultants :

Hire two engineers (1 hardware engineer and 1 software engineer) will be on-board by

December 31, 2014. Seek final approval from cabinet for proposal for additional staff in FCGO (1 IT Director,

1 hardware engineer and 1 software engineer). This is an appraisal condition for the

additional financing as detailed later.

December 31, 2014 February 15, 2015

FCGO

FCGO

Rollout of Revenue Management Information Systems :

Submit a rollout plan and a detailed implementation note after learning from current

pilots and share with the Bank

January 31, 2015 FCGO

Accounting Manual: Consultant to submit a draft and share with the World Bank Finalize the draft and seek internal approval for implementation

February 28, 2015

April 15, 2015 FCGO

SLA Contract : Expedite procurement – publish notice

And SLA contract will be awarded by February 28, 2015.

Dec 31, 2014

Feb 28, 2015

FCGO

FCGO

Asset Register – To be initiated as agreed (in excel sheet) and fully populated January 31, 2015 FCGO

COMPONENT 2

Complete the audit of the two pilots NPSAS based financial statements March 31, 2015 FCGO OAG

Complete the training of the two pilot departments and help them prepare the NPSAS

compliant financial statements of FY2013/14 that can be rendered to audit to

demonstrate efficacy of the process. January 31, 2015

Line Ministries/

FCGO/OAG

Complete the audit of the 2013/14 financial statements prepared by the two line departments

April 30, 2015 Line Ministries/ FCGO/OAG

Submit a revised NPSAS implementation note (for AF) including a rollout plan and in

accordance with the discussions during the mission January 15, 2015 FCGO

COMPONENT 3

Complete the research work for awarded studies and share with the Bank

4 studies

1 study

March 31, 2015

April 30, 2015

PEFA Secretariat

Develop a note on the scope of the work and shift in strategy in terms of putting more focus on research and analytical studies

January 31, 2015 PEFA Secretariat

RF / Strategy in respect of Additional financing component to justify the new

investment January 31, 2015 PEFA Secretariat

PFM Reform Action Plan Phase 2 draft as developed by GoN to be shared for further discussion and quality assurance

January 31, 2015 MoF and PEFA Secretariat

Additional agreed actions from technical review (annex 3)

Renewal of Service Subscription/Technical Support of 2 McAfee IPS2850 appliances. December 31, 2014 FCGO

Following items are to create baseline which may be used in building RF for proposed AF

IT Asset Register for FCGO and all districts along with identification of replacements January 31, 2015 FCGO

Power Stats for Solar Power Backup – An average load shedding/power failure time for three categories of districts December 31, 2014 FCGO

Responses to Questionnaire from DTCOs December 31, 2014 FCGO

Server Utilization/Performance data on a daily basis January 31, 2015 FCGO

Network Utilization / Performance Statistics on a daily basis January 31, 2015 FCGO

Annex 1

Page 1 of 1

List of Persons Met

Financial Comptroller General Office

1. Mr. Shankar Prasad Adhikari Financial Comptroller General

2. Mr. Jagdish Regmi Joint Financial Comptroller General/ PEFA Coordinator

3. Mr. Jaydev Shrestha Joint Financial Comptroller General

4. Mr. Ramesh P Siwakoti Deputy Financial Comptroller General

5. Mr. Thaneshwar Gautam Deputy Financial Comptroller General

6. Mr. Netra P Subedi Deputy Financial Comptroller General

7. Mr. Baburam Subedi Member Secretary (PEFA Secretariat)

8. Mr. Sukhdev Baskota Deputy Financial Comptroller General

9. Mr. Baburam Gyawali Deputy Financial Comptroller General

10. Mr. Ishwar P Kafle Deputy Financial Comptroller General

11. Ms. Anupama Karki Account Officer (PEFA Secretariat)

12. Mr. Tolendra Karki Account Officer (PEFA Secretariat)

13. Mr. Sanjay Manandhar IT Consultant

Accounting Standards Board

14. Mr. Lok Man Singh Maskey CEO

Annex 2

Page 1 of 6

Summary of Implementation Status

The implementation progress under each component is summarized below.

Component 1: Implementation of Treasury Single Account (TSA) System.

1. This component includes (a) implementation of a TSA system to enable real time budget

checks prior to authorizing payment on expenditure transactions across all District Treasury

Comptroller Offices (DTCOs) throughout the country and at the FCGO, and (b) further enhancement

of the modified financial management information system (FMIS) to include commitment accounting,

treasury/cash management, and financial reporting in accordance with International Public Sector

Accounting Standards (IPSAS) cash part I. The overall progress of the component is “satisfactory”.

2. Rollout of TSA: The component scope included rolling out and enhancing an existing TSA

system to ensure integrity of the budget during its execution and to strengthen treasury single account

through centralization of payments at 75 DTCOs. The new system has been rolled out to all 75

districts, completing the coverage of ex-ante budget execution control at all the districts, a year ahead

of the target date. The roll-out has also enabled the government to centralize the payment function at

the DTCOs and strengthen TSA by closing down about 14,000 accounts. In terms of coverage, TSA is

now able to cover almost 100% of budgeted revenue and expenditures3 of the GoN. The system is

able to support generation of consolidated cash flow statements for individual ministries as well as for

the government. This component has helped achieve first of the two major objectives.

3. Upgrading FMIS: The second objective which was planned to be achieved through up

gradation of FMIS to further strengthen the core treasury system is now proceeding satisfactorily.

This will include, amongst others, recording of commitments, cash forecasting reports, secure

automatic daily bank reconciliation, capturing of missing receipt information (e.g. customs, VAT,

etc.) and development of additional reports.

4. Commitment Recording: An international expert was hired through Bank executed trust

fund who helped (in collaboration with FCGO officials) developed a blue print for implementing the

commitment recording in the existing TSA system. Required software modifications in FMIS for

implementing the recommended blue print were thereafter developed in-house by the software

engineers of FCGO along with the development of the draft business process/reports and added to the

existing TSA system as a separate module. Implementation of this new utility has now been started

2014-15 with a threshold of NPR 500,000 (ie this module will capture all commitments above NPR

500,000) as a proof of concept. Early reports from 24 districts in this regard were shared with the

review team. More data, will need to be captured at the spending entity level (like overall budget

amount, total amount committed for items above NPR 500,000, % utilization of commitments over a

period, aging analysis etc) to help analyze the trends of the commitments across spending units, and

make them more useful to the line managers in terms of budget control and implementation during the

year. It was agreed that FCGO will collect this additional information and share it with World Bank

by January 15, 2015. This will help make any required adjustments in the business process and

reporting formats to allow for better informed decision making at the line department level. A detailed

business process is provided in Annex 5.

3 The expenditures include capital/donor funded projects. Payroll expenditures are recorded in the system on a summary voucher basis.

The system records debt related transactions on an ex-ante basis, along with devolution of budget central government incurred through District Development Committees (DDC) (4 ministries – Agriculture, Livestock, Health and Education). The un-conditional grants to

the local bodies and DDCs are recorded as expenditures at the time of transfer. These transactions contribute substantially towards

comprehensiveness of budget execution coverage within the system for better reporting and improved controls.

Annex 2

Page 2 of 6

5. Revenue management/Cash Management/Daily Bank Reconciliation: Earlier in the year,

a workshop was organized between FCGO, NRB and other stakeholders to brainstorm for enhancing

business processes in the area of cash management, remittances, bank reconciliations4 and overall

revenue management. A task force, in this regard, was formed comprising of officials from NRB,

FCGO and five commercial banks for brainstorming and developing a plan. This task force developed

a business process (an international expert hired under bank executed trust fund helped refine this

business process) and a software was configured accordingly by FCGO software engineers for testing.

Pilots in three districts (Kathmandu, Bhaktapur and Lalitpur) have been started with effect from the

beginning of this FY (2014-15) which amount to about 45% of the total revenue of the government.

An additional server will be required to be procured for this purpose, for which plans have been

prepared. Currently the reporting server, which was acquired earlier, is being used for the pilots. Pilots

faced significant issues in the beginning as several stakeholders (commercial banks, Nepal Rastra

bank, paying and collecting offices, FCGO etc.) were involved in this complicated work flow.

However FCGO officials have been successful in resolving many of these issues and the

implementation has now significantly improved. FCGO team shared recent daily bank reconciliations

for month of November for Kathmandu districts for three commercial banks. This is a significant

achievement considering that earlier these reconciliations use to take around 3-4 months on an

average. Lessons learnt from this pilot will be incorporated in the further rollout strategy of RMIS. It

is expected that this will be fully rolled out over the next two years with another 20+ districts with

effect from FY 2015/16. A roll out plan and an implementation note in this regard will be prepared

and shared with the Bank by January 31, 2015. Detailed business process is provided in Annex 6.

6. Upgrading Technology Infrastructure: In addition, the project scope also included upgrade

of the technology infrastructure to support a stable and responsive TSA system. In this regard, the

servers for the primary as well as the disaster recovery center have already been upgraded. All the 75

DTCOs are connected on-line to a central TSA server. Options for enhancing connectivity for the

balance districts (primarily remote/hill districts) will be explored under Additional financing.

7. IT Expertise: A team of IT experts/project funded consultants has been hired5 to provide

technical support and maintain the system. Recently these IT experts have started developing software

enhancements to existing FMIS (for commitment recording, and for enhancing cash/revenue

management), necessitating a need for hiring more professionals. It was therefore agreed that FCGO

will hire additionally 2 engineers. The review team was informed that this process is now quite

advanced and two engineers one hardware engineer and one software engineer) will be on-board by

December 31, 2014. Risk to ensuring sustainability of the IT/System with support primarily from

consultants is very high in FCGO. Therefore in the last review it was agreed to hire additional IT staff

in FCGO to help develop internal capabilities over the medium term. The team was informed that the

proposal for additional staff (1 IT Director, 1 hardware engineer and 1 software engineer) has been

approved by the Ministry of Finance. This will now need approval of the Cabinet which is expected

by February 15, 2015. This is an appraisal condition for the additional financing as detailed later.

8. Further rationalization of bank accounts: Through centralization of payments through the

TSA system, the government has also succeeded in consolidating its bank accounts by closing down

13,717 of its bank accounts. There are however still some operative bank accounts of the government

(1988 in total of which 445 are treasury managed accounts), which include accounts for current

expenditure, capital expenditure, revenue, retention money, special purpose and miscellaneous

accounts. Although with the TSA concept now fully implemented these accounts needs to be

incorporated into the TSA but there are several rules and requirements which mandate maintenance of

4 Though the respective bank branch faxes daily report to the DTCO and the respective bank HQ, the final bank reconciliation between

the bank and the FCGO takes place much later. Delayed reconciliation results in inaccurate reports in the TSA system, significant work at the end of the year to do the corrections and higher chances of erroneous/fraudulent transactions remaining undetected for

extended periods of time.

5 Numbers to be provided by FCGO.

Annex 2

Page 3 of 6

these bank accounts. There is a need to reform this area and undertake a review on what can be done

to rationalize these bank accounts. The team was also informed that some of these accounts may not

be active and for the others a TSA concept could be put in practice, but this requires amendment in

rules/regulations. It was agreed that FCGO will undertake a review of this area (preferably using a

consultant) and prepare a report for consideration at the policy level (by February 28, 2015).

9. Mapping for Financing Transactions: During the last review, it was agreed that FCGO will

operationalize the recording of all the financing transactions in the TSA system. Since the last mission

a manual has been developed for resolving the discrepancy between Government Finance Statistics

(GFS) recommended grouping/coding and current coding practices for financing transactions relating

borrowing, lending and investments. The review team was informed that this manual has been fully

put into practice by incorporating the provisions into the Chart of accounts (economic codes) and

guidance under the Financial Procedures Act.

10. Budget Execution Report (BER): The Team is pleased to learn of further progress made in

generating and disseminating Budget Execution Reports (BER). A daily budgetary status has been

made available which depicts aggregate revenue, expenditures and budgetary surplus/deficit with a

lag of a day. In addition following monthly reports are now available: (a) Ministry wise Economic

classification of the expenditures (b) Ministry wise budget, expenditures incurred and balance

available and (c) District wise budget expenditures. These reports are now being prepared in less than

three weeks after the month end and published on the web site

(www.fcgo.gov.np/publication/budgetexecutionreport). The Team recognizes this as a good

achievement in line with the Results Framework of the Project, and some more work can be done

going forward in order to improve the quality of the information. In the last review it was agreed that

FCGO will conduct an analysis of variations (and reasons thereof) that the year-end financial

statements (for year ended July 16, 2013) undergo before they are finally rendered to OAG for audit.

This review has been initiated and is likely to be completed and shared with the bank by January 31,,

2014. This will help establish the percentage of accuracy of these unaudited financial statements as

generated directly from the TSA system.

11. Accounting Manual: During the last review, it was agreed that the FCGO would hire a

consulting firm to develop the accounting manual after reviewing the existing acts and regulations and

identifying the inconsistencies in the current practices. A consultant has now been hired but the draft

manual is much delayed. The review team was informed that consultant will submit a draft by

February 28, 2015 and this will be finalized by April 15, 2015. Currently, the detailed accounting

procedures are scattered in financial regulations, acts, notifications, instruction memos and system

design documents.

12. Fiber connectivity: The review team was informed that 53 districts are now provided with

fiber connectivity. Remaining 22 DTCOs will continue to use ADSL technology to connect to the

main server till alternate options emerge in the market place. These 22 DTCOs contribute about 12%

of expenditures and about 1% of revenue.

13. Reporting access to Line ministries: The review team was informed that on-line access is

now made available to the Ministry of Education after an additional reporting server was installed in

May 2014. Plans are afoot to provide online access to other ministries.

14. Access to the Office of the Auditor General (OAG): The review team was informed that

following extensive deliberations since the last review, on-line read-only, transaction level access of

the TSA system is now made available to up to five concurrent users from the OAG. This is expected

to substantially facilitate the use of Computer Aided Audit Techniques (CAAT) by OAG and

undertake/plan audits on the basis of assessed risks. Impact in this regard is likely to be felt in the

audit of the financial statements for 2014/15 which are likely to begin in December 2014.

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15. Oracle license: An ICB was conducted to procure Oracle license from authorized vendor

which helped substantial costs as compared to earlier sole sourced quotation, and the contract was

awarded there after. Implementation has now been completed with full acquisition of license by the

FCGO’s office.

16. SLA Contract: The review team was informed that the SLA contract for critical servers and

UPSs in Data Center has not been awarded yet due to transfer of procurement team. This is a very

important action that needs to be taken immediately due to potential risk that IT equipment and

architecture in FCGO face due to the absence of this support. Any downtime of these equipments

would mean a halt to FCGO’s business. FCGO has assured that notice will be published by Dec 31,

2014 and SLA contract will be awarded by February 28, 2015.

Component 2: Strengthening accounting and reporting practices in public and private sector

17. Component 2(a): Private sector accounting and reporting: The Accounting Standards

Board (ASB) has formulated 40 NFRSs and the Institute of Chartered Accountants of Nepal (ICAN)

has pronounced them in September 2013. ASB has planned some activities such as preparation and

development of NFRS for SMEs, guidance notes for 15 NFRSs, training for trainers on NFRSs and

exposure visit. The MoU between PEFA Secretariat and ASB which was till July 16, 2014 has been

extended to December 31, 2014 at no extra costs. A current status of work completed up to 1st

trimester has been shared according to which almost all work has been completed. ASB has

completed most of the actions such as 15 guidance notes drafted, conducted trainer the trainer (TTT)

program for qualified Chartered Accountants, publication of NFRSs etc. It is in process of translating

42 NFRSs to local language and complete within December 31, 2014

18. Component 2(b): Public sector accounting and reporting: The NPSAS compliant

financial statements for FY2011/12 and FY2012/13 pilot on two ministries (MOPIT and MOWCS)

have been completed. NPSAS based financial reports have been certified by ICGFM in a

valedictory function held recently in Washington DC, USA. For this the FCGO (with support from

consultants) also organized a high level stakeholder (OAG, MoF, NPC, FCGO, Line departments and

others) workshop in July 2014 to review the results of the NPSAS pilots, specifically to review the

costs and benefits of applying NPSAS, and to reach consensus on a recommended roadmap for

improving public sector accounting and reporting in Nepal. It was also suggested that the two pilot

departments after having been trained will start taking steps towards preparing NPSAS compliant

financial statement of FY2013/14 in these two line ministries and have it audited (to be completed by

March 31, 2015) and certified by the Office of Auditor General. It was agreed that F/S for 2013-14

will be completed by January 31, 2015 and the subsequent audit will be completed by April 30, 2015.

This will complete the pilot and help establish credence in these financial statements. This will also

help the stakeholders take a call on future roadmap of the implementation of NPSAS across line

ministries; after analyzing the costs and benefits and the need to comply with GON adoption of

NPSAS.

Component 3: Supporting the capacity building of the PEFA Secretariat

19. The objective of this component is to strengthen institutional capability for initiating,

coordinating and sustaining reforms to improve PFM across GON through strengthening the capacity

of PEFA Secretariat. The review team acknowledges the efforts of the PEFA secretariat and the

FCGO team in accelerating the program as agreed in the program document. Since the last mission,

Mr. Jagdish Regmi has been designated as a new PEFA Coordinator.

20. Communications: The team discussed the dissemination of results achieved under this

component, such as the 9 newsletters and 3 journals that have been published till date. Around 500

copies of newsletters and 300 copies of journals are published and disseminated to every district, PIU,

DPIU, ministry and training institutes. These are also uploaded online on the website of the PEFA

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Secretariat for wider circulation. There has also been good press coverage on PEFA Secretariat lead

events such as the ten articles have been published in several newspapers on the training of

Journalists. Further to this, the PEFA Secretariat has funded a radio program dedicated to

disseminating information on PFM reform through interviews with various public sector experts on

PFM. This program is broadcast on the first and last Friday of every month through Radio Nepal. The

PEFA Secretariat has also been successful in conducting a total of 50 field visits for the purpose of

building awareness and enhancing technical knowledge on PFM.

21. The PEFA Secretariat already has a strong communication strategy. Therefore, a short-term

communication expert will be hired as and when required to refine the strategy. It has also been

agreed that the PEFA Secretariat will prepare a strategy on the scope of work under this component to

focus also conducting research. A brief outline was shared by the PEFA Secretariat, Nepal during the

review which will now be elaborated.

22. Research and Studies: One of the PEFA mandate is to perform research studies supporting

PFM reform activities. Following five studies have been agreed upon to be undertaken:

Study on Internal Audit System in Nepal;

Feasibility study on establishing a National Institute of PFM;

Impact of government investment in public enterprises in terms of loan and share

investment; and

Impact of implementation of TSA in public finance;

Pattern and implication of off-budget items in public financial accountability;

The Team was informed that contracts have been awarded to conduct the four research

studies. In regards to the study on “Pattern and implication of off-budget items in public financial

Accountability”, proposals have been received and these proposals are, presently, being evaluated. It

was agreed with the PEFA Secretariat that this study will be complete by April 2015, while the other

four research studies will be complete by March 2015.

23. PEFA Secretariat and its Autonomy. To follow on the previous review team’s discussion

regarding the PEFA status, autonomy and sustainability, the Team was advised that a separate

authorization has been provided to the PEFA Secretariat. Second PEFA Assessment. Under the

leadership of the GON, the second PEFA assessment is now complete. The decision review meeting

took place on December 16, 2014 and was chaired by the Country Manager of the World Bank. The

meeting brought together government officials especially from MOF, FCGO and PEFA Secretariat,

Nepal, MDTF DPs along with the PEFA team from the World Bank. A virtual review of the report

was done in December 5, 2014, based on which a response matrix was circulated comprising of the

comments of all the peer reviewers and development partners. The findings from this assessment will

be the base for developing the PFM reform strategy. It was agreed with the PEFA Secretariat that the

second phase PFM action plan will be finalized with a consultation of broader stakeholders. . An

international expert can also be hired to help finalize the action plan on the request of PEFA

Secretariat, Nepal. The team was informed that a preliminary draft has already been prepared by the

government. This strategy will also be shared with the development partners who can help enhance

quality and the strategy will then be discussed in a higher level PFM steering committee. This action

plan will build into the MDTF future work program and the GON’s PFM program.

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Implementation Arrangements

24. The membership to the National level PFM Steering Committee, chaired by the Finance

Secretary, has been expanded to include 14 members including a member secretary – two private

sector representatives have been added to the committee. This committee provides overall guidance to

the PEFA Secretariat. Given broader spectrum of the PFM, the Bank team suggested to include the

ICAN, Accounting Standards Board and the Auditing Standards Board in the Steering Committee.

The working level committee, chaired by the PEFA Coordinator/Joint Financial Comptroller General,

has also expanded to include 10 members including a member secretary. The leadership of the PEFA

Secretariat has recently changed. The Joint Financial Comptroller General Mr. Jagdish Regmi is the

new Coordinator of the PEFA Secretariat following the transfer of the former Coordinator Mr. Dilli

Ram Sharma. The working level committee is mandated to meet every two months, and the team

encourages this meeting to be held more regularly as opposed to the current practice of meeting on a

trimester basis. PEFA Secretariat is functioning as a central platform to (i) facilitate support to the

PFM Steering Committee chaired by the Finance Secretary which provides vision for PFM reform,

(ii) support the implementation of the PFM Strategy Phase I, (iii) support in undertaking research and

analysis, including in-depth research on PFM in high priority areas or sectors, and (iv) develop and

implement communications strategy to raise awareness of PFM. The review team suggested that the

continuity of leadership in the PEFA Secretariat is crucial to drive the PFM agenda forward, and steps

should be taken in this regard to ensure staff continuity.

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Technical Review of the Proposed Additional Financing

1. A detailed technical review of the proposal submitted for Additional Financing under SPFDM

project was undertaken during the review mission. The revised additional financing costing received

was discussed which included 18 activities under Component 1, 4 activities under Component 2 and

22 activities under Component 3. With review and discussion, a revised list with costs and other

details will be provided by December 31, 2014. In terms of principles, revisions will be required on

account of :

(i) Pruning down of Training and study tour related expenses as existing project is already

providing for these activities. Only exceptional cases with justification to be

considered.

(ii) Pruning of incremental operational costs as this is also provided from existing project.

(iii) NPSAS roll out to cost USD 150,000 instead of USD 100,000

(iv) AF to Component III to include capacity building for In-country PFM training and to be

cost accordingly. Other activities under component III to be determined according to

strategic priorities of PEFA Secretariat in terms of research, communication and reach

out for which a note (including results to be obtained) will be prepared and shared.

2. The overall up-gradation of IT landscape of FCGO across Nepal and its requirement under

additional financing is based on the three consultants' reports - Data Center, Networking and Solar

Power Backup. These reports were the basis of design and cost estimates in Additional Financing.

The consultants’ reports are detailed current assessment along with suggested solution and Bill of

Material (BOM) for up-gradation. These recommendations have been reviewed in the last mission

from a strategic and cost benefit perspective while including them in the proposal for AF.

Summary of Review and Assessment

3. The Additional Financing is broadly divided into following eight broad categories with

tentative costs as established by technical review in the last mission. The aggregate requirement for

component 1 is tentatively estimated at USD 3.00 MN. However these costs are now being revised as

per discussion above and will be finalized by December 31, 2014.

4. IT Organization Structure: IT infrastructure and its usage is fast becoming a lifeline for

FCG’s functions and therefore needs to be accorded highest priority. In this backdrop most important

one is building an IT Organization Structure of FCGO which is essential in sustaining and supporting

this project and moving forward in overall reform of PFM strategy and use of technology in effective

manner. This was stressed during last mission with an agreement that necessary steps have to be

initiated now to secure required positions before the appraisal of the AF request. There has been

movement by FCGO on this; the details are given in the main aide memoire.

5. IT and Office equipment’s: This has new procurement and replacement of obsolete

equipment. These include Desktops, Laptops, Printers, UPSs, Scanners, Photocopy and Fax machines.

WB team was told that the replacement numbers is based on old, obsolete, beyond repairs equipment,

though there is no written down policy on replacement. The estimated cost is $ 30,000 for FCGO and

$ 152,000 for DTCOs.

6. Data Center : The up gradation of Data Center include (a) Precision AC, Fire Detection

System, Electric Panel, Racks etc with an estimated cost of USD 168,000 and (b) Network devices,

Router, switches, Networking Monitoring System, Centralized Anti-Virus Software with an estimated

cost of USD 1,542,690. .

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7. Networking: Up-gradation of Network is a high priority to match the load associated with

TSA and RMIS upgrade. The current network system, switches, cabling are outdated, not efficient

and not as per recommended International Standards. Often, the limiting factor on performance is

network congestion or overloaded switches and routers. The cabling is CAT5 in the entire network

except for 2/-3 paying centers. The suggested CAT6 cabling which are more rigid; reduce noise and

are more flexible. Cat6 specifications provide significantly lower interference or near end crosstalk

(NEXT) in the transmission over CAT5. The result is less noise, fewer errors and higher data rates in

the transmission of the signal.

8. The up-gradation would also enable the entire network to control the functioning and move to

redundancy through remote control without manual intervention. This online monitoring would

enhance timely support from HQ and other regional centers. However there is no need to build a full

100% redundancy for routers at DTCOs and instead a 10% spares can be procured in case of

equipment failures. The estimated cost for active networking items (Routers, Switches) is $ 620,000

and for passive items (CAT6 and fiber cables, network panels, face plates, patch cords etc.) is $

251,000.

9. Solar Power Backup: Uninterrupted power supply is essential for any IT setup. With the

current situation of power in Nepal is not very good. There have been some districts where there is no

power for 7-8 hours. The solar power backup solution makes it ideal choice over other power backup

technologies. The financial figure under this line item is based on solar power consultant's report. In

last mission FCGO was told to rework on the models/capacity of equipment based on 50% load.

However FCGO has reworked costs based on 60% load.

10. RMIS Roll-out: The team was informed about the successful rollout of RMIS in three

districts of Kathmandu valley. During the rollout, the software was tweaked with the inputs from

concerned end users. The software is stable now. With the plan to rollout RMIS in all districts in next

two years, there is requirement of additional server for RMIS application. This will allow to create a

separate cluster for fail-safe operation. The data base server will remain same that of TSA. The team

has worked out a tentative cost of RMIS Roll-out at $ 143,000 which includes server cost.

11. CGAS Pilot Phase Implementation: This was discussed in this mission and it has been

confirmed that full implementation of CGAS is not under consideration. This will be initiated through

a separate project. The estimated cost for the pilot phase implementation is $ 30,000.

12. Support Services and Consultancies: Support services will be required for ensuring TSA

sustainability and to maintain high understanding, knowledge and operation of the TSA system by all

users. In addition AF will also fund consultancies for development of medium term strategy for

evolution towards full-fledged IFMIS/COTS solution, development of IT Strategy and conduct of

IT/Functional Audit. The revised cost for is estimated at $ 205,000. To be updated after receipt of

revised sheet.

13. Operating Costs: These are for supplies like, toners, fuel, maintenance contracts, repairs etc.

The estimate is $ 90,000. The team has asked FCGO not include this in AF but can be charged under

existing project cost since there will an extension of the existing project to the same date of AF.

PFM human Resource Development (details in the main aide memoire)

Assessment of IT Infrastructure and Actions Required

14. During the assessment and review the following observations were made:

(a) Unused / Under Utilization of one server

(b) Warranties of critical servers and UPS is over

(c) IT Asset Register

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15. PEFA coordinator informed that the transfer of the applications from old server to the RISC

server is was completed on November 15, 2014

16. WB team was informed that the SLA contract for critical servers and UPSs in Data Center has

not been awarded yet due transfer of procurement team. WB team alerted FCGO for not having SLA

in place for critical equipment. Any downtime of these equipments would mean a halt to FCGO’s

business. FCGO has assured that notice will be published by Dec 20, 2014 and SLA contract will be

awarded by February 15, 2015.

17. Team was also informed of non-renewal of service subscription/technical support of two

McAfee IPS2850 appliances. This is again critical as this is an appliance for any Intrusion Prevention.

If this is not renewed the software associated with the hardware stops working as informed by

McAfee. Thus FCGO’s server and Intranet security will be seriously compromised and becomes open

to vulnerable attacks. This should be done at the highest priority.

18. WB team also noticed that Asset Register has not been prepared. The importance of IT Asset

Register was highlighted in all the last missions with a specific emphasis in last mission. The Asset

Register is also required for WB team to assess the requirement of desktops, printers, laptops,

switches etc. under AF. FCGO doesn’t have any IT policy written down on replacement of IT

equipment. In the absence of Asset Register, it will be difficult to assess the replacement.

19. FCGO had provided responses to questionnaire from few DTCOs. More will be provided by Dec

31, 2014 which will help in analyzing support calls, network down time etc. which would help in RF.

20. IT Asset Register - The format was discussed and finalized with FCGO. The equipment to be

replaced should be identified, which should match with the breakdown of additional financing.

21. To establish baseline that will help measure the results achieved under the additional

financing following data needs to be gathered as discussed in detail during the mission :

a. Power Statistics – Under each category of districts, note power failure/load shedding

for every district and calculate average down time / no power in hours.

b. Responses to questionnaire – Based on responses, prepare an excel sheet giving no of

calls for HW and SW, FCGO response time and application response time.

c. Server Utilization – Take screen shot of utilization/performance parameters every day

during peak time of the day and save that in a word document.

d. Network Utilization – Save reports/screen shots of the PRTG network monitor, Record

various links’ utilization by clicking on the links. Store reports of SUBISU’s link status

report too.

Agreed Action Date Responsible

IT organization structure - re-structure, hiring of new consultants and hiring process of 3

new posts (1 Dy FCG – IT Director, 1 Software Engineer and 1 Hardware/Network engineer)

Cabinet Approval by

Feb 15, 2015 FCGO

Hiring of additional identified consultant positions (IT technicians for regional coverage

software/networking/hardware consultants for HQ) December 31, 2014 FCGO

Selection and award of Maintenance contract (SLA) for 3 servers, critical network equipment in Data Center and 2 UPSs and Diesel Generator at FCGO

February 15, 2015 FCGO

Renewal of Service Subscription/Technical Support of 2 McAfee IPS2850 appliances. December 31, 2014 FCGO

Following line items are to create baseline data which may be used in building RF and also to justify the investment.

IT Asset Register for FCGO and all districts along with identification of replacements January 31, 2015 FCGO

Power Stats for Solar Power Backup – An average load shedding/power failure time for

three categories of districts December 31, 2014 FCGO

Responses to Questionnaire from DTCOs December 31, 2014 FCGO

Server Utilization/Performance data on a daily basis January 31, 2015 FCGO

Network Utilization / Performance Statistics on a daily basis January 31, 2015 FCGO

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Proposal for Additional Financing

Background and Rationale for AF

1. The Project Development Objective (PDO) of AF would remain same that is, “to improve

expenditure control and enhance government accountability and transparency by

strengthening the treasury system, improving financial reporting and building PFM

capacity”.

Component 1: Implementation of Treasury Single Account (TSA) System (USD 3.00 million)

2. The original scope under component one involved: (i) implementation of the Treasury Single

Account for efficient cash management; (ii) roll-out of FMIS (Financial Management Information

System) for enhanced budget compliance during expenditure execution and payment process; (iii)

further enhancement of the FMIS to support commitment accounting and improved financial

reporting - aimed at strengthened expenditure controls and enhanced transparency. These were

considered to be the foundational elements to provide a basic platform before beginning an ambitious

journey of PFM reforms in Nepal.

3. For practical reasons, an iterative and incremental implementation approach was adopted to

achieve the above objectives. Under this approach, the government agreed to implement reforms in

small increments through iterative process, learning from the previous iteration and building onwards

incrementally through subsequent iterations. Using this approach, first emphasis was on implementing

expenditure Treasury Single Account, supported by FMIS roll-out in a phased manner across Nepal.

In this regards, expenditure payments of ministries at Kathmandu and the 75 districts were centralized

at the treasury offices, and processed through the FMIS, enabling the government close down more

than 13000 expenditure bank accounts of these ministries, thus eliminating idle cash balances in these

accounts. This comprised achieving 100% target during 2013, one year ahead of time. In addition,

FMIS was rolled-out to all the districts treasury offices to ensure budget compliance during the

expenditure payment processing at these offices. However, this iteration did not involve

implementation of two major activities of the original scope: revenue TSA and commitment controls.

4. Currently, DTCO receives expenditure account statements from the respective bank and

subsequently carries out expenditure account bank reconciliation almost on a daily basis. However,

the situation with revenue reporting is not the same. The banks do not report revenue collections to

the DTCOs in a timely manner, which leads to inaccurate information on government’s aggregate

cash position in the TSA. In addition, the foreign loans and grants receipts are not being captured in

the FMIS, due to inadequately defined procedures and lack of system functionality. This has further

contributed to inaccurate aggregate TSA cash position of the government in the FMIS.

5. Besides, the commitment controls is not being practiced currently. The line ministries issue

purchase-orders and contracts to the suppliers, without recording them in the system as commitments.

Due to this, the government does not have information on its aggregate commitments that could allow

appropriate cash planning to ensure commitments are paid in a timely manner to avoid any build-up

of potential payment arrears.

6. To overcome the above limitations, the government plans to implement the next iteration of

reforms in these two areas. This involves enhancing FMIS and rolling-out two additional modules

across the 75 districts: commitment management and revenue management- RMIS (Revenue

Management Information System). The development and roll-out of these modules will be preceded

by revisions in relevant policies and procedures.

7. The government plans to complete these reforms through AF and consolidate the TSA rollout

by making appropriate investment in IT equipment, hardware, networking and associated peripherals.

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due to the massive change management challenges involved in successful accomplishment of these

activities, the government anticipates a slower progress compared to the earlier rapid implementation

of the expenditure TSA, and therefore, has requested, in addition, an extension in project completion

date by two years- June 30, 2017.

8. Besides system roll-out mentioned above, the second area, and towards which major proceeds

of the AF will flow, relates to the upgrade of the IT infrastructure to enhance sustainability of the

systems. Key areas in this regards include networking equipment, power back-up equipment and IT

devices, including desktops, printers, etc.

9. Again the IT infrastructure upgrade has been carried out through an iterative approach. When

the project was initiated, the government had already developed and implemented the FMIS system in

the initial few districts. It was envisaged that the project will finance, among others, the IT equipment

for the central data center at the MOF and the district offices, including retroactive financing of

equipment at the already implemented districts. However, due to the limited availability of funds

under the project, the activities were prioritized. The key priority was given to the rapid roll-out of the

TSA at the 75 districts. The IT infrastructure in the above mentioned three key areas were expected to

be strengthened later with a perspective that sustaining investment will be made after achieving the

rollout, which required a huge behavioral change (withdrawal of cheque writing powers of line

departments and its spending units) and was anticipated to take much larger time. The networking

equipment acquired by government out of its own funds was often of low capacity and has now

become obsolete, as it has not been upgraded during the last four years. This was done partly to save

funds for the more prioritize activity of the TSA roll-out. Now that the system usage has increased

over the last year, there is a need to upgrade this equipment for higher availability, better monitoring

and performance management through centralized monitoring infrastructure. Similarly, the worsening

power outages necessitated acquisition of power back up equipment for only the large districts,

leaving many other districts without appropriate power back-ups when power outage has ranged from

8-16 hours. The data center, hosting high end servers, needs to be upgraded for better monitoring of

the data center environment suitable for these servers

10. WB team has reviewed and has done on-site evaluation of IT infrastructure upgrades

requested under proposed AF. These have been based on the three consultants ‘reports. The

consultants- networking consultant, power engineer and data center expert- were hired to make a

realistic assessment of the equipment requirements and submitted their reports earlier this year. Based

on these recommendations, the government in the next phase under AF plans to enhance and upgrade

its IT infrastructure and power-back-up arrangements more comprehensively and has requested to

fund these activities through AF6. The sustainability of current IT infrastructure at FCGO is a major

challenge with old/outdated, end-of-life/support for hardware and software. Aging or end-of-life

equipment poses difficulties/disruptions in maintaining smooth operation and also leads to enhanced

costs for maintenance. With the funding so far, results have been positive and the project needs to be

taken to next level. Also, the additional financing will ensure enough room for projected growth, more

applications and data for next three to four years and will also include maintenance.

11. The major portion of the hardware upgrade is in the areas of network Infrastructure and power

backup. Both these are vital areas in terms of maintaining continuity of operation to run day-to-day

business of FCGO and DTCOs. The availability and uptime of IT is important to maintain the

efficiency of FCGO and DTCOs. Given the scenario of not having IT staff at all the districts, day-to-

day support and maintenance remains a challenge. Delayed IT support leads to business delays. This

situation will improve to quite an extent, using centrally managed technologies e.g. managed devices

with centrally managed software for network and security. The upgrades on the network side will also

give better bandwidth which

6 The additional financing under component 1 lists 78% funding for IT Hardware and software and 22% for Consultancies for

Training/Support/Capacity Building.

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would improve application performance. This would lead to higher level of efficiency of FCGO and

DTCO’s staff. A detailed technical assessment of AF proposal (under component 1) is provided at

Annex 2.

Component 2: Strengthening accounting and reporting practices in public sector (USD 150,000)

12. Under component 2, NPSAS pilots have been successfully undertaken in two ministries and

now GoN is planning on up-scaling this rollout across all ministries. For this consultancy support and

necessary training/capacity building activities will be required to be undertaken. A practical rollout

plan will need to drawn up which will take into account learnings from the previous pilot. An updated

note along with a rollout plan in this regard will be prepared by FCGO and shared with the bank by

January, 15, 2015 for consideration under the AF.

Component 3: Supporting the capacity building of the PEFA Secretariat (USD 350,000)

13. Under Component 3 several achievements have been made by the PEFA Secretariat as

enunciated earlier. There is a need to continue to undertake the outreach, awareness, communication,

training, research and capacity building activities to support PFM reform in Nepal. In addition the AF

under this component will also help support build national PFM training and capacity building

capabilities by partnering with a local academic pioneer institution (like Nepal Administrative Staff

College) and working on developing a PFM core curriculum for public sector practitioners. A

strategy note in this respect will be prepared by PEFA Secretariat and shared with the Bank by

January 15, 2015.

14. Building country capacity for PFM Training Programs: Discussions revolved around

conducting accreditation courses on PFM In-country to address the huge demand that exists for these

courses and skill gaps as are evident in the undertaking of the PFM Reform program across GoN. The

objective of such a program would be to collaborate with both academic (Nepal Administrative Staff

College) and international professional institute (such as CIPFA, CIMA etc.) in order to enhance

knowledge on PFM among public officials. This pilot will later on develop into a full-fledged PFM

training project. For this purpose, the team also visited a prospective academic training institute. To

begin with, a training needs assessment will be included as part of the Feasibility study on

establishing a National Institute of PFM either on a standalone basis or as a department/wing under an

existing institution. This will help assess the need for short term and long term courses. In addition,

these courses will also provide a PFM certification/diploma. Alongside conducting this assessment,

the PEFA Secretariat will identify the national requirements to design the curriculum. The

international professional institute will provide trainers along with course materials while the national

academic institute will provide classrooms, academic infrastructure and also incorporate elements of

these classes to regular courses. The additional financing will fund faculty and the initial fees for the

selected long term courses. It was agreed that GoN will further research on prospective partners to

collaborate with. The implementation modality will be decided upon further discussions with the

prospective partner. Tentative cost estimate for this activity is USD 200,000 which will be confirmed

during further preparation.

15. The Bank team reviewed the updated estimates for the AF which was submitted on Nov 02,

2014. With the further review and suggestions from WB, PEFA coordinator has agreed to submit the

revised AF sheet by Dec 31, 2014. It was noticed that FCGO has not yet finalized Procurement Plan

for the existing project and additional financing as well. These will be submitted by Jan 15, 2015.

16. The project authorities have also included funding requirements for incremental IT staffing

through the AF. These consultants are currently developing, maintaining and supporting the system

and will continue to be deployed through the project extension. The earlier Mission had carried out

an in-depth review of the current IT staffing of the FCGO (Annex 2) and views that retention of key

IT staff and deploying of permanent IT staff of the government on critical positions is critical for the

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sustainability of the systems. The review team was informed that this proposal has been approved by

Ministry of Finance and will now go to Cabinet for final approval. A total of five positions have been

created (1 IT Director of the position of a Dy FCG, 2 engineers and 2 Computer operators) and for

which 6 other existing positions in FCGO have been surrendered. The review team was also informed

that after obtaining cabinet approval actual recruitment will take some time as it has go through the

normal bureaucratic channels. It was therefore agreed that FCGO will ensure that (i) necessary cabinet

approval for these 5 new positions is obtained by January 31, 2015 along with concomitant

deployment of the two engineers as consultants (1 hardware engineer and 1 software engineer) in the

FCGO team (appraisal condition).

17. Possible Results Framework under AF: Since the AF will finance existing scope of

activities in terms of PFM results, no revisions are proposed in the results framework (RF) of

component 1 to that extent. Results framework for component 2 and 3 would need to undergo certain

changes as detailed in previous aide memoire. Some suggestions were provided to the review team on

the results framework which are reflected below Since major parts of the AF are expected to flow into

IT infrastructure and for implementation of the RMIS/commitment module, following intermediate

results indicators can be possibly added to the result framework of the component one of the project:

Indicator Unit of

measure

Base-

line

Target values Frequency Data

Source

Responsibility

of data

collection

Description

2016 2017

Roll out of

RMIS at

districts and

paying

centers

No of

districts;

percentag

e of

overall

revenue

Nil 5 15 6 monthly Admin FCGO

RMIS will help

faster accurate

and reconciled

reports on

revenue side.

Rollout of

commitment

recording

across GoN

(Revision

from current

RF)

No of

districts;

percentag

e of

overall

expenditur

e above a

threshold

Nil

Implementat

ion initiated

across all 75

districts

Full

implementati

on along

with

complete

reporting

across all 75

districts

6 monthly admin FCGO

Commitment

information will

help managers

take appropriate

spending

decisions and

will help

improve

expenditure

efficiency

System

based

monitoring

of IT

networks

and devices

NA

Not

possible

Under

implementati

on

Possible 6 monthly

IT unit

of

FCGO

FCGO

Network

enhancement

will enable

remote

monitoring and

auto switching

Average

down time

of system in

last 6

months*

Hours

Xxxxx Xx Xx 6 monthly FMIS FCGO

Due to network

failures, the

system becomes

inaccessible to

the users. This

time should be

decreased or

eliminated.

Online

access of

real time

budget and

financial

information

to

departments

**

No

1 5 10 6 monthly FMIS FCGO

Online access

will help

improve the

decision making

at depts.

Annex 4

Page 5 of 6

Indicator Unit of

measure

Base-

line

Target values Frequency Data

Source

Responsibility

of data

collection

Description

2016 2017

Response

time of the

system at

sample

districts***

Seconds

XX XXX XXX 6 monthly FMIS FCGO

The improved

network will

improve the

response time of

the system

Number of

Calls from

DTCOs

regarding

system

failure,

troubleshooti

ng, ***

No

XX XXX XXX 6 monthly FMIS FCGO

Lower number

of calls means

better IT and

networking

systems in

operation

Audits

regarding

the Security

of IT

Infrastructur

e in FCGO

Third

party

audits

No

audits

Functional

audit carried

out

Full-fledged

IT audit

carried out

6 monthly FMIS FCGO

IT audits will

help make

environment and

landscape more

secure and

identify issues

that need

resolution

Rollout of

NPSAS

across Line

Ministries

No of

Ministries 2 depth

10

ministries.

26

ministries 6 monthly FMIS FCGO

Further rollout

across

Ministries

Capacity

building of

training

Institution

TBD

TBD TBD TBD TBD TBD TBD

TBD

Outcomes

from 3rd

component

(PEFA

Secretariat)

TBD

TBD TBD TBD TBD TBD TBD

TBD

IT Strategy,

organization

structure and

detailed plan

prepared and

implemented

IT strategy/

vision

document

prepared

Organization

structure

prepared and

adequate

staffing in

place

Proper

protocols for

IT

Infrastructur

e and assets

developed

and

implemented

TBD

TBD XX XXX 6 monthly Admin FCGO

FCGO needs to

have a proper

resourced IT

organization to

discharge its

functions

effectively and

efficiently

Annex 4

Page 6 of 6

Current Project Cost

18. Tentative allocation of project costs along with AF and reallocation: The AF will support

all components under the project (although majority will be allocated towards component 1) and The

closing date for existing project will also be extended up to June 30, 20117 to undertake all activities

as envisaged. The table below provides a comparison between original SPFM financing for the

project and the proposed financing after reallocation, extension of closing date and processing of AF

19. Based on the consultant reports and consultations, the tentative breakdown of AF is given below:

S No Description Project Cost US $ World Bank share @ 75%

1 Component 1 4,000,000 3,000,000

2 Component 2 200,000 150,000

3 Component 3 411,747 350,000

Total 4,611,747 3,500,000

Project Management under Additional Financing

Implementation Arrangements

20. Implementation arrangements will likely remain same as that of the original project with

project activities fully aligned with the existing government system. PEFA Secretariat will continue

to serve as the coordinator for the project with monitoring and reporting the implementation progress

of this project and the overall PFM reform program of GoN. TSA system implementation

(Component 1) will continued to be carried out by TSA unit/Treasury Section, separately established

within FCGO, which is coordinated by a Joint Financial Comptroller General. The Accounts

Strengthening Section of the FCGO will continue to be responsible for implementing Component 2

and the PEFA Secretariat will remain responsible for implementation of PFM related capacity

building program under Component 3. The PEFA Steering Committee will provide overall strategic

guidance and oversight. The PEFA secretariat under overall guidance of PFM Reform Steering

Committee and the PFM MDTF Program Coordination Committee will closely coordinate to have an

overall oversight of the PFM program.

Financial Management and Disbursement arrangements

21. The financial management arrangements remain unchanged. The current financial

management rating is “Satisfactory”. The implementing agency is maintaining financial management

system as per the government requirements and no changes are suggested to the current Financial

Management systems and processes. The ongoing review of the financial records reveals that the

procedures in place are considered adequate to ensure that the fiduciary risk is minimized. There are

no outstanding implementation progress reports (IPRs) and the audit reports. The disbursement will

continue to be report-based using the existing reporting formats. The intended funds flow and

Designated Account arrangements will remain the same as in the original project.

Procurement

22. The procurement arrangements will also remain same as that of the component 1 of the

original project. The TSA unit in conjunction with the IT unit will conduct the procurement of the

items under proposed additional financing. A procurement plan for existing project with 2 year

extension and for the additional financing will be prepared by January 7, 2014 and will be finalized

after complete detailed technical review of the proposed project has been completed.

Original Components Original Costs

(US$ million)

MDTF

Proposed restructuring Total

Updated

Cost (US$

million)

Revised Estimated Costs after

reallocation(US$ million)

MDTF

Additional Project Costs

(AF US$ million)

MDTF Component 1:

Implementation of TSA 2.80 3.30 3.00 6.30

Component 2: 0.17 0.17 0.00 0.17

Component 2 (b) 0.58 0.08 0.15 0.23

Component 3: 0.75 0.75 0.35 1.10

Total: 4.30 4.30 3.50 7.80

Annex 5

Page 1 of 2

SPFM Results Framework as of November 30, 2014

Indicator Unit of

Measure

Baseline

December

16, 2010

(*)

Year 2

Target

End-of-

Project

Target

Status as of November 30, 2014

PDO Level Results Indicators*

Percentage of overall

budget executed through

the DTCOs where the

TSA system has been

implemented

Percentage 7 85 98

100% of the budgeted expenditure

With effect from July 16, 2013. End-of-

project target already exceeded

Budget Execution

Reports and Financial

Statements produced by

the TSA system on a real

time basis

Number of

districts Nil 52 75

75 districts

End-of-project target already achieved

Preparation of

consolidated financial

statements for PILOT

Ministries in accordance

with Part 1, Cash IPSAS

;

Number Nil 1 2

IPSAS based financial statements prepared.

ICGFM has certified the statements on 2nd

December,2014

Numbers of research

studies into high priority

PFM areas completed

and disseminated

Number Nil 2 5

2 studies completed.

Other 4 contracts signed with the researchers

and study underway.

1 proposal under evaluation.

INTERMEDIATE RESULTS (Component 1)

Number of DTCOs

where TSA implemented No. 8 60 75

Implemented in all 75 districts.

End-of-project target already achieved

Number of Spending

Unit (SU) Bank

Accounts Closed

No. 1300 12000 14000

13717 bank accounts closed. Action plan

prepared and action started closing balance.

Number of FCGO , line

department and DTCO

staff trained or oriented;

and still deployed to

perform the functions

envisaged

No. 600 5000 5500

7026 staff have been trained and oriented.

End-of-project target already exceeded

Number of master

trainers trained (TSA and

IPSAS and working as

trainers under the project

No. 0 55 75

41 master trainers have been trained in TSA

Software redeveloped

after removing bugs as

reported in current

software;

-

Init

iate

d a

nd

Tes

ted

Fu

nct

ion

al Commitment recording system developed

and implemented from July16, 2014.

RMIS prepared enhancing cash

management/revenue management and

piloted in Kathmandu valley from July 16,

2014.

New features added in

software to meet and

additional feature such as

commitment accounting

- -

Init

iate

d

Fu

nct

ion

al Commitment recording system developed

and implementation started from July16,

2014.

Revenue Management

Information System developed and piloting

started from July 16, 2014.

INTERMEDIATE RESULTS (Component 2)

Preparation of

consolidated financial

statements for PILOT

Ministries in accordance

with Part 1, Cash IPSAS

Number - 1 2

Consolidated financial statements for

PILOT Ministries in accordance with Part 1,

Cash IPSAS is prepared and. They are

certified by ICGFM.

Annex 5

Page 2 of 2

Indicator Unit of

Measure

Baseline

December

16, 2010

(*)

Year 2

Target

End-of-

Project

Target

Status as of November 30, 2014

Listed SOEs prepare

accrual financial

statements in accordance

with IFRS

percentage 0 35% 100%

NFRS (based on IFRS) prepared, approved

and promulgated. Rollout promulgated by

ICAN. TOT provided by ASB in

collaboration with ASSOG.

Implementation of

commitment controls in

the budgetary entities of

GoN (within pilot

ministries)

- -

des

ign

ed

10

0%

of

bu

dg

etar

y

enti

ties

Commitment Control system developed and

implementation started from July 16, 2014.

Number of persons

trained in application of

new accounting

standards based on IFRS

No. - 225 225

20 people + TOT for 20 people

Number of GoN finance

and accounts staff trained

in application of Cash

based IPSAS and still

deployed to perform the

functions envisaged

No. 0 125 500

A workshop conducted with 60 participants

INTERMEDIATE RESULTS (Component 3)

Secretariat manual and

procedures prepared and

implemented

- -

Co

mp

lete

d

Imp

lem

ente

d Operations manual for PEFA secretariat has

been prepared in Nepali and approved by the

Secretariat. Is currently under

implementation

Number of National level

PEFA Steering

committee meetings

supported during the

project period

No. -

6

12

20 in total (16 during the project period)

Number of research

studies completed and

disseminated No. - 6 12

2 studies completed.

4 contracts have been made for conducting

studies.

1 proposal under evaluation.

Carried out repeat PEFA

assessment

-

Co

mp

lete

d

-

PEFA assessment Completed.

Report is going to be sent to the PEFA

Secretariat for final quality check.

Number of seminars &

workshops conducted for

raising PFM awareness

No. - 4 7

59 PFM orientation programs (9 central, 8

regional and 45 district level) conducted. A

high level ownership building program

conducted for the Secretaries of GON in

presence of Finance Minister.

PEFA journal published

and disseminated No.

- 3 volume of PEFA journal and 9th series of

newsletters have been published and

disseminated.

* - Baseline has been taken as the start of the retroactive financing i.e. December 16, 2010

Annex 6

Page 1 of 2

Commitment Accounting – Business process

1. The Gap analysis, done in early 2014, identified a number of issues, some of which have been

addressed. The Gap analysis identified procurement & commitment control as the main components

that are missing from the planned system. GON has received the funding from the World Bank to

address this issue.

2. During initial discussions with FCGO officers it was emphasized that the requirement was for

a simple system to record commitments in excess of a predetermined amount. Therefore a full

procurement system was not needed. The module which is developed is capable of documenting the

processes of:

a. Incurring the commitment (signing of a contract or issuing a purchase order)

b. The full or part clearance of the commitment on payment

3. The commitments are to be used in the calculation of the available budget. This will assist the

spending units in budget management and help to prevent any overspending. Commitments can be

documented for both the current budget year & future budget years. Future budget year commitments

can feed into both the annual budget process & MTEF to ensure that provision has been made.

4. Paying offices are already required to detail liabilities on the closure of each year. This is

documented on return OAG 18 & consists of payments they have been unable to make because the

release has been insufficient.

5. Spending Units are required to submit their cash requirements (OAG 20) for the fiscal year in

a monthly breakdown by economic item. In general, this has been achieved by dividing the annual

budget by twelve, rendering the exercise to be of little use. A commitment system for large items of

expenditure can be used to feed into the cash requirement forecast to give a more accurate picture.

6. Achievement of the main objective, to more realistically calculate the available budget

balance, depends on the creation of the commitment & its removal or reduction need to be

documented.

7. Paying offices currently document certificates of completion of service or delivery of goods.

Provision will also be made for capture of scans of these documents & scans of invoices. This will

more fully document the commitment process. It can be implemented at a later stage of development.

8. Commitment information can also feed into the monthly cash requirement (OAG 20),

submitted by paying offices.

Commitment Module System Flow

It has been decided that the system will be used for the contracts of value NPR 5 lakhs and above.

Spending units sends data to DTCOs after signing of the contract with all the details and payment

schedule. Payment schedule is month wise.

DTCO enters data, Project details, Contractor Details, Type of Service, Payment schedule and

contract details in Commitment Module of TSA.

As per the payment schedule and receipt of invoice, Spending units send request for payment to

DTCO and then it is processed for payment.

Commitment documentation is captured in a new table & is not incorporated into the transactions

table. With this it doesn’t impact on the existing operations of the database.

Annex 6

Page 2 of 2

The commitment data is fed into DTCO screen reports to show the available balances of

budget & release to ensure that no payment is authorized that would exceed these limits.Reporting is

currently being developed.

The main benefit of the commitment system is directed to Paying Offices and Line Ministries.

The system will enhance their ability to manage budget releases and increase the accuracy of the cash

requirement forecast (OAG 20). Therefore, the primary responsibility for documentation &

maintenance of commitments will be that of paying offices. The OAG 20 return is presently not

completed to a very high degree of accuracy. Once the commitment system is running satisfactorily

and with total rollout, this area can be revisited. Each Project Spending Unit has a procurement

section. They are responsible for the maintenance of contracts & issue of purchase orders.

DECS/TSA is maintained & operated at DTCO level; documentation of commitments will be

undertaken by DTCO officers on advice from each Paying Office. Each commitment should be

assigned a unique number. This will be paying office identification followed by a serially numbered

document within the paying office.

The current developed module of Commitment Recording doesn’t cover all expenditure item codes.

Only contracts & purchase orders in excess of a specific value NPR 5 lakhs and above) are

documented. The value is determined by analyzing expenditure transactions over previous years, with

the objective of capturing a predetermined percentage of irregular transactions. Provision has also

been made to capture previous years liabilities, currently advised on the OAG18 return. The

commitment table will document the following:

Commitment Identification (Spending Unit; Commitment Type; Serial number)

Supplier

Date of commitment

Estimated duration of the commitment in months

Estimate of amount payable in each specific month for the current year and totals for the next

two budget years.

Total agreement amount of commitment

Payment Schedule

Provision has not been made for capture of scans of: invoices, goods received notes &

completion of service certificates. Most paying offices do not have scanners & scanning at DTCOs

would increase the workload considerably. Payments made against commitments are advised to

DTCOs by paying offices. Required details to be advised are as follows:

Commitment identification

Paying office request for payment number

Date of request

Amount of payment

The commitments within DECSTSA are incorporated into the budget availability report.

Spending Units ensures that payment requests include cross referencing to any outstanding

commitment. The request does indicate if the commitment is part or full payment, in order that the

DTCO can delete or amend the commitment on authorizing the payment.

Paying Offices advise DTCOs of new commitments & existing commitment maintenance by Excel

spreadsheet in a prescribed format.

Annex 7

Page 1 of 4

Revenue Management Information System (RMIS) - Business process

Background

Bank branches are the government’s revenue collectors, but many are unable to supply timely

& accurate bank statements. This has delayed settlement & contributed to inaccuracies in determining

the weekly central treasury cash position. DTCOs & the FCGO are unable to reconcile the revenue

bank accounts. With the above it was proposed to develop a Revenue Management Information

System (RMIS) which would impose the correct recording of tax receipts on bank branches. Debtors

will be unable to discharge a debt with a paying office unless the receipt is correctly recorded in

RMIS. Bank statement transactions will be cross referenced to RMIS receipts, facilitating bank

reconciliation even if the statement is submitted late.RMIS will overcome long standing issues of

timeliness & accuracy of revenue collection.

Overview

1. The Revenue Management Information System (RMIS) is a module of the Integrated

Financial Management Information System (IFMIS). It is centralized web based system and access is

given to all revenue collecting bank branches.

2. It is managed by DTCOs with the assistance of a coordinating (Lead) bank for each District.

The RMIS system access is given to in DTCOs, Lead Banks and all revenue collecting bank branches

as well as FCGO & NRB to staff through login id and password.

3. Each deposit made by a taxpayer is documented in RMIS by the receiving bank and this

information is cross referenced to the deposit slip. This ensures reconciliation of bank statements with

RMIS data.

4. RMIS generates a unique ID. The taxpayer gets the services from paying office on

presentation of the deposit slip with the unique ID. This ensures that all taxpayer deposits are

documented within the system.

5. The DTCO will use RMIS to generate the daily revenue settlement amount for each bank.

This will later be reconciled with the bank branch statements.

6. The bank’s head office assists the DTCO to follow up any missing data or inaccuracies with

individual bank branches.

7. Revenue detail transaction data is accessible to FCGO. Additionally summary revenue data is

documented in FMIS.

8. Those Paying Offices responsible for revenue collection are connected to the RMIS system.

They verify that the bank deposit slip is genuine and update the transaction with the date of payment.

9. All of the following are connected to RMIS through Intranet/Internet:

DTCO & FCGO

NRB

LEAD BANKS

BANK BRANCHES & BANK HEAD OFFICES

REVENUE COLLECTING OFFICES (Also referred to as Paying Offices)

Annex 7

Page 2 of 4

RMIS System Flowchart

Bank

Paying Office

DTCO

Tax Payer fills out Deposit slip (2 copies)

Submits deposit slip to the bank along with

payment.

Bank stamps the slips and gives one to payee.

Bank enters the data in RMIS system which

generates a Unique ID for each transaction

Submits one stamped slip to the paying office

Paying office verifies the entry/record in the

RMIS system approves and give the services.

DTCO receives branch wise summary data

daily (electronic & hardcopy) from banks

DTCO Receives report from paying offices

monthly (electronic & hardcopy)

Reconciles Bank and Paying Office monthly

Connectivity is through Intranet for

Global Bank/Everest/RBB/NBL &

through Internet for NMB/NRB

Under pilot, 16 branches (80-85

counters) of above banks have

started using RMIS

Annex 7

Page 3 of 4

RMIS System Flow

Bank Branch

10. RMIS will document the following information entered by the receiving bank branch:

Unique ID of deposit slip

District and Sub District

Bank and Bank Branch

Paying Office

Payee details: name, address, telephone no. etc.

Payee VAT or PAN Number

Assessment Number

Account Code (Collecting Agency – Ministry & Department + Revenue indicator {1}).

Revenue Economic Code

Amount

Date of payment

Tax year

The revenue economic code must be created to make revenue data compatible with the format

for expenditure data. This will enable all transactions to be documented in a single table for analysis

at FCGO level.

11. RMIS system sequentially numbers each transaction within a bank branch and generates a

unique number referenced by Bank Branch Code – Transaction Number.

12. The bank branch should include the RMIS reference number on the deposit slip to ensure that

the bank statement can later be reconciled with RMIS data.

13. When data entry is complete, the two deposit slips are stamped & signed and one is given to

the payee. The bank voucher includes all data documented as in Paras 10 & 11, above.

14. The payee takes the stamped deposit slip to the relevant paying office.

Paying Offices

15. The paying office will receive the bank deposit slip from the payee and verify it is genuine by

reference to the unique ID in RMIS.

16. After verification the paying office updates the system with the date of submission of the

deposit slip by the payee. This may be some time after payment & may also be in a different

fiscal year to the date payment was made to the bank.

17. Paying offices only updates the submission date. They have read only access for all other data

relating to their paying office.

DTCO

18. The DTCO is responsible for data maintenance. He has sole responsibility for:

Resolving any queries through the bank head office and bank branch office and making

adjustment to RMIS. Reversal of entry if a cheque is referred to drawer. Authorising

daily settlement on close of DTCO business based on RMIS data. Bank reconciliation

when bank statement is received. Read the daily settlement for each bank branch.

Annex 7

Page 4 of 4

Bank Head Offices

19. Bank Head Offices have read only access to all data from their branches. The system

summaries the data into a daily settlement statement for each bank branch & the total to be

settled by NRB.

Nepal Rastra Bank NRB

20. NRB has read only access to all data.

21. The NRB report advises the daily settlement amount for each bank head office, which

summaries the settlement amounts for each of the main bank’s branches.

22. After agreeing the settlement amount with each bank head office, NRB make the settlement

transactions.