Marshall Islands : Public Financial Management Project

Project Name

Public Financial Management Project

Project Number

50295-001

Country / Economy

• Marshall Islands

Project Status

Active

Project Type / Modality of Assistance

• Grant

Source of Funding / Amount

Grant 0547-RMI: Public Financial Management Project

Source	Amount
Asian Development Fund	US$ 2.00 million

Grant 0658-RMI: Public Financial Management Project (additional financing)

Source	Amount
Asian Development Fund	US$ 500,000.00

Grant 0795-RMI: Public Financial Management Project (Second Additional Financing)

Source	Amount
Asian Development Fund	US$ 2.00 million

Strategic Agendas

• Inclusive economic growth

Drivers of Change

• Gender Equity and Mainstreaming
• Governance and capacity development
• Knowledge solutions
• Partnerships

Sector / Subsector

• Public sector management / Public expenditure and fiscal management - Reforms of state owned enterprises

Gender

Some gender elements

Description

The project will enhance the institutional capacity of the Ministry of Finance (MOF) to effectively implement PFM and state-owned enterprise (SOE) reforms.

Project Rationale and Linkage to Country/Regional Strategy

The project is consistent with ADB's Pacific Approach 2016-2020 and supports (i) PFM improvements in order to achieve the outcome of greater resilience to external economic and financial shocks, and (ii) increased financial efficiency of SOEs in order to achieve the outcome of a more conducive environment for business. The project remains aligned with Pacific Approach 2021-2025, which serves as the current Country Partnership Strategy for the RMI, in prioritizing PFM improvements as a means to achieve a strategic objective of preparing for and responding to shocks, toward a broader goal of building resilience.

Impact

More effective governance achieved

Project Outcome

Description of Outcome

Public financial management improved

Progress Toward Outcome

The Reform Coordination Unit (RCU) remains fully staffed and operational. Progress on the project is satisfactory since the project started on 17 October 2017 and all project activities remain on track.

Implementation Progress

Description of Project Outputs

The MOF's institutional capacity to implement the PFM Reform Roadmap strengthened

MOF's institutional capacity to implement SOE reforms strengthened

Status of Implementation Progress (Outputs, Activities, and Issues)

Under Output 1, status as follows:

1. Draft legislation on contingent liabilities approved by the PFM Reform Steering Committee. Ongoing. Migration of account balances from 4gov to BISAN projected to finish by June 2024. This will help inform the design/development of the contingent liabilities legislation. Percentage of completion for the migration of account balances is approximately 80%.

2. At least 15 road map reforms implemented, as per updated Roadmap action plan. Ongoing, reform initiatives undertaken:

a. Recommended changes to the proposed Financial Management Act of 2023 and the RMI Procurement Code Act of 2023, approved by the Nitijela and took effect in April 2023 and October 2023, respectively.

b. Ongoing work on the RMI Financial Sector Development Plan in coordination with the RMI Banking Commission; this will be continued under the Amended Compact funding with the establishment of the Monetary Authority; facilitated and completed costing of National Strategic Plan in coordination with UNICEF and Chief Secretary's office, this analysis to be used as needed during upcoming Compact Infrastructure Sector estimates under the MRBIF; National Investment Policy Statement (Launched October 2023); updated the annual Economic Policy Statement for inclusion with the FY2024 Budget Submission and will prepare for FY25.

c. Ongoing work with line ministries and EPPSO to align ministry Strategic Plans linking annual budgets to NPS/FMIS and SDGs, critical to development of newly required Implementation Plans and Performance Reports as part of the new Fiscal Procedures Agreement (FPA) of the Agreement to Amend the Compact

d. Ongoing work primarily in the new FMIS to prepare for the implementation of a cash management system for the Treasury and Accounting Divisions for accurate cash projections.

e. Strengthened asset management and development of Fixed Asset Management Manual (to be revised once the FMIS Asset Management Module is in place).

f. Introduction of a performance-based management framework. Initial performance agreements signed with critical agencies. This will be reviewed and updated as part of the FPA and planning under the new compact FPA

g. Improved management of imprest accounts of all RMI embassies and procedures manual finalized (for revision in line with the new FMIS coding and processes). Trained the MOF and MOFAT Imprest Fund officers & staff.

h. Assists in the ongoing FY2022 audit and the closing of FY2023 financial books of the national government, including donor reporting requirements, to be done for the first time in the new FMIS (i.e., finalization of the subledgers, general ledgers and the trial balance; finalization of the GASB system mapping in order to generate financial statements from Bisan).

i. Debt Management training ongoing for MOF Management Team (ADB) with the goal of establishing a debt management unit under Improved Debt Management component. This is waiting further inputs from MOF

j. RCU continues to closely coordinate with the WB partners during all of their missions on the ongoing PFM and SOE reforms for potential further collaboration toward supporting reform implementation.

k. This FRDM Legislation is currently used for guidance in the annual budget process including updating the Economic Policy Statement (EPS); EPS updated annually.

l. Migration of balance sheet beginning balances from 4Gov to Bisan continues (about 80% completed) and is projected to finish by the end of the ADB PFM project (June 2024).

m. Completed three batches of reconciliation of the national government's $19million grants receivables (level as of end of FY2021), which is already affecting the liquidity of the government's General Fund. The reconciliations resulted in the regranting of $6.5million in expired grants, about half of which or $3million is considered receivables collected. This area still requires further work but will need additional technical personnel.

n. Currently advising and assisting in the annual and supplemental budget preparation for FY2024 and drafting of the Budget Circular for FY2025.

o. Currently reviewing the macro economic outlook and macro fiscal targets structure in close coordination with the MOF and the Office of the Chief Secretary

p. Advising the MOF and BCC on integrating new budgeting and reporting requirements under the newly amended Compact.

3. Draft tax administration legislation approved by PFM Reform Steering Committee. Tax reform analyses and reports completed as of January 31,2021. The Team Leader continues to work as part of a working group (ADB, PFTAC, World Bank, MOF) to discuss and continue to develop a roadmap for implementing part of the tax reform recommendations that have been made under this project. It has been agreed that Tax reforms will be a priority of the project additional financing, the work program is currently being developed.

4. Nontax revenue unit established in MOF to formulate policies and guidelines; develop databases and information systems; review and rebase current fees and charges, among others. Ongoing, GRMI/MOF reviewing with RCU. It has been agreed that to consider this with the additional financing for the project (July 2024), the work program is currently being developed

5. Gender-sensitive performance-based budgeting frameworks for local government units introduced. Ongoing, GRMI/MOF reviewing with RCU. RCU Team Leader and MOF to coordinate with MOCIA regarding local government budgeting processes and integration with national planning and budgeting as per the National Planning Framework, It has been agreed that to focus on this area as part of the additional financing for the project (July 2024), the work program is currently being developed.

6. Policy paper prepared on the management of contingent liabilities from SOEs. Work program to be completed once BISAN is fully implemented.

7. At least three training sessions per year provided by the RCU, with women comprising at least 35% of trainees.

a. When the new FMIS (Bisan) went live at the start of FY2023, the RCU Specialists were handling the training/coaching of all of the MOF staff by division or usually through hands-on, one-on-one training, almost on a daily basis especially during the first 7 months of going live. The RCU continues to actively monitor, document and report issues encountered in the production environment to the MOF management and to the Bisan team in Ramallah up to this day. The MOF commenced phase 2 of the system implementation in January 2024. The aim is to decentralize transaction entry functions from the MOF staff to the different ministries. This requires another series of training. RCU continues to provide guidance in this initiative particularly, in any required coordination with the Bisan team such as the implementation of necessary updates to the approval workflows in Bisan. An RCU Specialist also assisted in the workshops conducted on Majuro (Feb 5, 2024) and Ebeye (Apr 2-5, 2024) for the Purchase Requisition entry process. Entering of Travel Mission Vouchers, Contracts and Payroll Hours are included in the decentralization plan for 2024 where RCU is also expected to continue to assist. Due to RCU's heavy involvement in the new FMIS implementation, it has become the main point of contact for all FMIS-related queries/discussions/meetings within the national government, all its component units (i.e., SOEs and autonomous government agencies), and several development partners (e.g., World Bank consultants, other ADB consultants, Grad School USA consultants for GFS reporting and FMIS independent assessment as requested by the Office of the Auditor General, PFTAC for GFS reporting, KPMG for GCF accreditation, etc.).

b. Ongoing individual training: Trained the new Accounting Compact Officer in June 2023; Trained the new MOF Imprest Fund staff and MOFAT personnel from March 2024; Trained and assisted the Accounting, AP and Travel Desk staff in the new FMIS implementation; Trained and assisted the responsible staff in the preparation of the Automated Bank Reconciliations for all the bank accounts of the GRMI in the new FMIS.

c. Spearheaded the implementation of GASB Statement 87 (Leases) for the national government and all its 21 component units. GASBS 87 became effective for annual reporting periods after June 15, 2021, impacting GRMI starting FY2022 reporting. It was assessed as having a material effect on the financial statements of the GRMI. The RCU advised MOF management to allocate resources necessary to ensure compliance with GASBS 87 namely: (a) to reach out to partners such as Graduate School USA, upon suggestion of E&Y, for any readily available materials on the topic; a training was eventually conducted on July 11, 2023 with 50 participants where 18 or 36% of attendees were women; and (b) to hire two interns to assist in the time-consuming work of gathering lease agreements and doing preliminary mapping of the GRMI GL to the Lease Inventory. These interns were eventually hired by the MOF as permanent staff.

d. Improved debt management - Debt Management training ongoing for MOF Management Team (ADB) with the goal of establishing a debt management unit under Improved Debt Management component.

8. Shares of MOF male and female staff in position holding accounting, computer, or business administration degree and/or diploma increases.

Gender demographics (education): 7 Female Bachelor's Degree; 11 Female- AA Degree; 5 Male Bachelor's Degree; 35 Male AA Degree. MOF overall estimates are: Female 26, Male 68.

9. Share of women staff in MOF management positions (secretary, assistant secretary, division and/or section head) increased, subject to qualifications

MOF overall estimates are: Female 26, Male 68; 7 Female in management positions.

10. Revised fiscal responsibility bill approved by PFM Reform Steering Committee. Fiscal Responsibility and Debt Management Act and related regulations were enacted effective 8 June 2021. Legislation currently used for guidance in regard to the annual budget process including updating the Economic Policy Statement (EPS); EPS updated annually.

11. Prepare prioritized and updated action plan based on PFM Reform Roadmap by Q2 2018. PFM Roadmap matrix updated September 2023 and is currently in process of being updated.

Under Output 2, status as follows:

1.SOE monitoring unit established in MOF and staffedCurrently, there are 3 staff. 1 Assistant Secretary and 2 additional analysts.

2.Report prepared, identifying and assessing legitimacy and cost of CSOs for at least nine selected SOEs. Training to SOEMU (April 2024) on how to complete the FS from the trial balances and how to use the templates with GASB notes, all aiming to assist selected SOEs to complete FY23 soonest and as requested by the auditors, to provide more information, including draft FS and notes rather than just a reconciled trial balance.

Work completed (April 2024) on the Proposal for Amendments to the SOE Act and Regulations.

Ongoing support to SOEMU regarding following up on progress with each SOE relative to the status of their financial reporting and audits.

Multiple templates to assist SOEs in preparing planning and reporting documents. Assistance to selected SOEs with planning and reporting. Multiple training programs on compliance with the SOE Act delivered plus training on planning, governance and related topics. Several How to' user manuals on planning, governance, monitoring and CSOs, have been provided. Detailed work on identifying CSOs and first CSO agreement for MAWC. SOE Reform Roadmap prepared. SOE Performance Report and Forecasting Reports provided in draft (yet to be authorized and circulated). Draft SOE CSO report and draft SOE Diagnostic report to be reviewed. Reviewing of Ministry plans to align with the format of SOE plans (ongoing). Draft Shared Services Proposal for SOEs.

3.Share of women directors on SOE boards increased, subject to qualifications. There is a total of 84 board of directors for all SOEs. Out of the 84, 60 males (71%) and 24 females (29%). However, with a new government some SOE Boards have changed members and SOEMU is gathering the new updated disaggregated data.

4.Performance-based CSO contracts signed with at least four SOEs Detailed work on identifying CSOs and first CSO agreement for MAWC. Reviews, planning and discussion (April 2024) with MOF Minister, with MISC and within SOEMU regarding how to proceed with CSO arrangements with MISC and transport SOEs before end of FY24.

Geographical Location

Nation-wide

Safeguard Categories

Environment

C

Involuntary Resettlement

C

Indigenous Peoples

C

Summary of Environmental and Social Aspects

Environmental Aspects

There will be no environmental impacts.

Involuntary Resettlement

In the absence of any civil works, the project will not result in any involuntary resettlement impacts.

Indigenous Peoples

The dominant population of the RMI is indigenous to the islands, and project activities are designed for the entire economy, with no differentiation in benefits accruing to any group.

Stakeholder Communication, Participation, and Consultation

During Project Design

The ultimate beneficiaries are the people of the RMI. The project objectives are aligned with the NSP, which was consulted within the RMI.

During Project Implementation

Information will be shared with the public as appropriate, on the PFM reforms. The RMI is launching a website on SOEs, which will provide information. PFM reports (like the PEFA) will be shared, unless considered confidential.

Business Opportunities

Consulting Services

The project has mobilized the following consultants: an international Advisor to the Ministry of Finance; three financial management specialists; and two senior national consultants.

For state-owned enterprise reforms, the project an international State-Owned Enterprise and Community Service Obligations Expert.

Procurement

Not required.

Contact

Responsible ADB Officer

Narain, Ashish

Responsible ADB Department

Sectors Group

Responsible ADB Division

Public Sector Management and Governance Sector Office (SG-PSMG)

Executing Agencies

Ministry of Finance, Banking and Postal Services

Timetable

Concept Clearance

26 Apr 2017

Fact Finding

19 Jun 2017 to 21 Jun 2017

MRM

15 Aug 2017

Approval

13 Oct 2017

Last Review Mission

-

Last PDS Update

30 Aug 2024

Funding

Grant 0547-RMI

Grant 0658-RMI

Grant 0795-RMI