Fiscal Policy and Expenditure Management Program (FPEMP) Quarterly Report March – May 2016

The program is sponsored by the United States Agency for International Development (USAID) and is implemented by Development Alternatives, Inc. (DAI). The main counterpart for these activities is the Ministry of Finance (MOF) of El Salvador. The program has three main components: Component A, Enhanced Public Expenditure Management; Component B, Improved Revenue Mobilization; and Component C, Strengthened Private Sector Engagement. The program's goals are to build a modern and transparent public expenditure system that follows best international practices, to strengthen tax policy and administration, to improve revenue collection, and to facilitate private sector outreach. During the period of March 1, 2016 to May 31, 2016, the program continued to support the adoption of the International Public Sector Accounting Standards (IPSAS). Training was provided to a large number of Government of El Salvador (GOES) institutions on the accounting conceptual framework and the accounting conceptual model of IPSAS. Additionally, the program finished the development of the use cases of the new public accounting system and successfully began the development of the new system. By June 9, the program reached 40% development of the entire accounting system under IPSAS. Regarding treasury modernization, the program continues waiting for the National Directorate for Financial Administration (DINAFI) to submit the budget components that are prerequisites to continue developing the treasury subsystem. However, by the end of this reporting period, DINAFI never finished the development of the treasury components despite the fact that the program agreed with the Vice Minister of Finance on these matters. The development of the SAFI II system was also a focus area during this period. On December 2015, DINAFI requested that the project change the software development infrastructure. The program recommended the Vice Minister of Finance not to make the change because the proposed new tools were not mature enough to guarantee a sound and strong IT system. The program discussed the request with USAID and the decision was to continue with the software development infrastructure that was agreed with the MOF by April 2012. As a result of the decision, DINAFI and World Bank staff were not able to comply with the agreements, and while the program complied with the software development agenda, DINAFI was not able to honor the agreement. The SAFI II manager resigned, and at the writing of this report, DINAFI had not advanced in the development of the budget formulation module, nor had begun the development of the budget execution module. Due to these circumstances, the Minister and Vice Minister of Finance postponed the deployment of the SAFI II, implementation of the Result Oriented Budget (ROB), IPSAS, and the full Treasury Single Account (TSA) for January 2018. The program finished the fifth year with the treasury subsystem developed at a 41% and the public accounting subsystem developed at a 40%. The program's progress during this quarter is presented according to the program's three components: Component A, Public Expenditure Management; Component B, Tax Revenue Mobilization; and Component C, Private Sector Outreach.